Base General Agro-Processing Industry Final

2013
ENY
DAIRY PROCESSING, FEED

FARM AND ANIMAL FEED
PROCESSING PROJECT
BASE GENERAL AGRO-PROCESSING

INDUSTRY PLC
DEC, 2014
Eniy General Business PLC Page 1
DAIRY PROCESSING 2
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY ............................................................................................................................................................... 6
2. THE CO MPANY ............................................................................................................................................................................. 8
2.1 THE CO MPANY ............................................................................................................................................................................. 8
3. PRODUCT DESCRIPTION AND APPLICATION…………………………………………..…………………………………….………….…………10
3.1 PRODUCT DESCRIPTION ........................................................................................................................................................... 10
4. DAIRY PROCESSING MARKET STUDY ..................................................................................................................................... 13
4.1 GENERAL REVIEW ...................................................................................................................................................................... 13
4.2 DEMAND SIDE ............................................................................................................................................................................ 15
4.3 SUPPLIED SIDE............................................................................................................................................................................ 22
4.4 MAJOR COMPETITORS OF ETHIOPIAN DAIRY PRODUCTS IN THE LOCAL MARKETS ..................................................... 28
4.5 MARKETING STRATEGY OF THE COMPANY .......................................................................................................................... 29
5. DAIRY PRODUCTS PRODUCTION PROCESS ........................................................................................................................... 30
5.1 PLANT LAY O UTS .................................................................................................................................................................. 30
5.2 PRODUCT MIX....................................................................................................................................................................... 30
5.3 PRODUCTION PRO GRAM.................................................................................................................................................... 31
5.4 CAPACITY UTILIZATION ....................................................................................................................................................... 32
5.5 PRODUCTION PROCESS ....................................................................................................................................................... 33
5.5.1 DAIRY PROCESSING.............................................................................................................................................................. 33
6. ANIMAL FEED MARKET S TUDY................................................................................................................................................ 43
6.1 GENERAL REVIEW ...................................................................................................................................................................... 43
6.2 DEMAND ANALYSIS ................................................................................................................................................................... 44
6.2.1 VOLUME AND VALUE OF DEMAND ............................................................................................................................. 44
6.2.2 DEMAND FORECASTING ................................................................................................................................................ 46
6.3 SUPPLY ANALYSIS ...................................................................................................................................................................... 48
6.4 DEMAND SUPPLY GAP .............................................................................................................................................................. 49
6.5 PRICE ANALYSIS ......................................................................................................................................................................... 49
6.6 MARKETING CHANNEL ............................................................................................................................................................. 50
7. ANIMAL FEED PROCESSING TECHNICAL STUDY................................................................................................................... 51
7.1 FARM TECHNOLOGY AND ENGINEERING .............................................................................................................................. 51
7.1.1 PRODUCTION PROCESS ................................................................................................................................................. 51
7.1.2 MATERIAL FOR USE (INPUT) ......................................................................................................................................... 52
7.2 ANIMAL FEED FARM TECHNICAL STUDY ............................................................................................................................... 53
7.2.1 LABOUR ............................................................................................................................................................................ 53
Base General Agro-Processing Industry PLC Page 2

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7.2.2 IRRIGATION INFRASTRUCTURE .................................................................................................................................... 54

7.2.3 MATERIALS INPUT .......................................................................................................................................................... 54
8. THE PRO JECT .............................................................................................................................................................................. 55
8.1 THE PRO JECT SITE...................................................................................................................................................................... 55
8.2 SOURCE OF TECHNO LOGY ....................................................................................................................................................... 55
8.3 LAND, BUILDING AND CIVIL WORKS ...................................................................................................................................... 56
8.4 PROJECT MACHINERY AND EQUIPMENT REQUIREMENT .................................................................................................. 56
8.5 PROJECT VEHICLES .................................................................................................................................................................... 57
8.6 OFFICE FURNITURE AND EQUIPMENT................................................................................................................................... 58
8.7 UTILITIES ..................................................................................................................................................................................... 58
8.8 PACKAGING ................................................................................................................................................................................ 58
8.9 AUXILIARY UNITS ....................................................................................................................................................................... 60
8.10 PROJECT IMPLEMENTATION SCHEDULE .......................................................................................................................... 60
9. ORGANIZATION AND MANAGEMENT.................................................................................................................................... 61
9.1 MANAGEMENT .......................................................................................................................................................................... 63
9.2 EMPLO YEE BENEFITS ................................................................................................................................................................ 64
9.3 RECRUITING AND TRAINING PLAN ......................................................................................................................................... 64
10. FINANCIAL ANALYSIS ................................................................................................................................................................ 65
10.1 INVESTMENT COSTS AND SO URCES OF FINANCE .......................................................................................................... 65
10.2 PROJECTED FINANCIAL STATEMENTS .............................................................................................................................. 66
10.3 FEASIBILITY ANALYSIS.......................................................................................................................................................... 67
ANNEX .................................................................................................................................................................................................... 68

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LIST OF FIGURES
FIGURE 1 : PROJECTED GDP GROWTH OF ETHIOPIA ......................................................................................................................17
FIGURE 2 : ETHIOPIA GDP PER CAPITA..............................................................................................................................................18
FIGURE 3 : IMPORT TREND FOR DAIRY PRODUCT DURING 2008-2012 ......................................................................................19
FIGURE 4 : PROJECT DEMAND ............................................................................................................................................................26
Figure 5: FLOW DIAGRAM FOR PROCESSES MILK PROCESS .........................................................................................................34
FIGURE 6 : FLOW DIAGRAM OF BUTTER MAKI NG ..........................................................................................................................40
FIGURE 7 : FLOW DIAGRAM OF CHEESE MAKING ...........................................................................................................................41
FIGURE 8 : ETHIOPIA LIVESTOCK HOLDERS USING DIFFERENT KINDS OF ANIMAL FEED .........................................................44
FIGURE 9 : ANIMAL FEED MARKETING CHANNEL ...........................................................................................................................50
FIGURE 10 PRODUCTION FLOW OF ANIMAL FEED PROCESSING PLANT ...................................................................................52
FIGURE 12: ORGANIZATIONAL STRUCTURE OF THE COMPANY ..................................................................................................62

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LIST OF TABLES
TABLE 3: IMPORT TREND FO R DAIRY PRODUCT DURING 2008-2012 ........................................................................................19
TABLE 4: LOCAL DAIRY PRODUCTION...............................................................................................................................................20
TABLE 5: EXPORT TREND FOR DAIRY PRODUCT DURING 2008-2012 .........................................................................................21
TABLE 6: ETHIOPIA DAIRY PRODUCT EXPORT BY DESTINATION DURING 2008 -2012 (KG) ....................................................21
TABLE 7: MAJOR PRIVATE DAIRY ENTERPRISE................................................................................................................................23
TABLE 8: PROJECTS LICENSED BY FEDERAL AS WELL AS REGIONAL INVESTMENT OFFICES ...................................................24
TABLE 9 PROJECTS LICENSED BY FEDERAL AND REGIONAL INVESTMENT AUTHORITY OF ETHIOPIA ..................................24
TABLE 10: TO TAL SUPPLY....................................................................................................................................................................25
TABLE 11: PROJECT DEMAND ............................................................................................................................................................26
Table 12: project demand ..................................................................................................................................................................27
Table 13: Dairy product price ............................................................................................................................................................27
TABLE 14: ASSUMPTION .....................................................................................................................................................................31
TABLE 15: FULL PRODUCTION CAPACITY OF DAIRY PROCESSING PRODUCTS ..........................................................................32
TABLE 16: CAPACITY UTILIZATION ....................................................................................................................................................32
Table 17: Cultivated and grazing land Use Area (hectares)..........................................................................................................45
Table 18: Livestock population in the country (000’) ....................................................................................................................47
TABLE 19: PROJECTED ANIMAL FEED DEMAND AT COUNTRY LEVEL (TO NS) ...........................................................................47
TABLE 20: ANIMAL FEED INDUSTRIES ESTABLISHMENTS AND QUANTITY PRODUCED IN TO NS ..........................................48
Table 21: ESTIMATED EXISTING COST BUILDING AND CO NSTRUCTION ....................................................................................56
Table 22: COST OF MACHINERY AND EQUIPMENT........................................................................................................................56
TABLE 23: TO TAL INITIAL INVESTMENT ...........................................................................................................................................65
TABLE 24: SOURCE OF FINANCING ...................................................................................................................................................66
Table 25: SUMMARY OF PROFIT AND LOSS STATEMENT .............................................................................................................67

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1 1. EXECUTIVE SUMMARY
Base General Agro-Processing Industry PLC incorporated under the Ethiopian law in 2014. As
part its strategic planning the company is planning to establish dairy processing, animal feed
processing and Dairy farm project its compound located at Finfine Surrounding Orimia
Special zone Bereke Woreda.
The rationale behind establishing dairy processing and animal feed processing is Ethiopia
holds large livestock population, the favorable climate for improved, high yielding animal
breeds and the relative disease free environment for livestock make in Ethiopia to have a
significant potential for dairy development. Considering the important prospective for
smallholder income generation and employment opportunity from the high value dairy
products, the development of the dairy sector can contribute immensely to poverty alleviation
and improved nutrition in the country.
The market study reveals unsatisfied demand and an ever growing market as a result of the
expected economic growth in the country. The market driver for dairy products and animal
feeds is basis for the growth of the overall Ethiopian economy. Ethiopian economy witnessed
sustainable growth over the past eight years owing to the large scale efforts undertaken by
the government in the frontiers of infrastructure, agriculture, rural development and poverty
alleviation programs and investments. Ethiopia is currently enjoying an 11.4% growth in
gross domestic product (GDP). In addition, the five-year Growth and Transformation Plan
(2009/10- 2014/15) under implementation is expected to further develop the economy and
plans to grow the GDP by 14.9% in its high case scenario and 11.4% in its low case scenario.
The total investment required for the project is estimated to be approximately birr
133,461,822. The cost covers initial investment costs, working capital requirements and pre -
operating expenses. Out of the total estimated initial costs, birr 9,745,000 will be for civil and
construction works, approximately birr16,157,059 for machinery and equipment, birr

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5,854,528 will be for vehicles, birr 82,373,499 will be working capital. The rest of the
investment cost is allocated for office equipment and furniture, pre -production expenditure.
The sources of finance for the total investment will be equity capital and long-term loan
obtained from Bank loan. The company will capitalize its owners a total of Birr 40 million
(30%) and the remaining balance for the envisage project Birr 93.4 million or 70 percent of
total investment will be obtained from loan.
Finally, the project will generate a net profit of Birr 27,879,833, Birr 29,953,838, Birr
34,954,193, Birr 44,827,101 and Birr 63,777,816 during the first, second, third ,fourth years
and fifth year, respectively, during which profit tax payments are exempted. During the six
year of operation, the net profit will be Birr 54,246,623 during which the company will pay
Birr 23,248,553 in corporate profit tax.

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2 2. THE COMPANY
2.1 THE COMPANY

Base General Agro-Processing Industry PLC incorporated under the Ethiopian law in 2014
and the company has a plan to steadily grown up and prove to become one of the major multi-
business companies in the country.
2.2 VISION OF THE COMPANY

The vision of the company is to be the leading business establishment and investment activity
in Africa.
2.3 BACKGROUND INFORMATION

 BUSINESS NAME – Base General Agro-Processing Industry PLC
 LEGAL FORM OF BUSINESS - Private Limited Company (P.L.C)
 NATIONALITY - Ethiopian
 BUSINESS ADDRESS - Oromia, Finfine Surrounding Special zone, Berek Woreda
 PROJECT ADDRESS – Oromia, Finfine Surrounding Special zone, Berek Woreda
 TYPE OF BUSINESS – Dairy processing, Feed farm and Animal feed processing.
 STATUS OF BUSINESS – New
2.4 PROJECT DESCRIPTION AND RATIONALE

Ethiopia holds large livestock population, the favorable climate for improved, high yielding
animal breeds and the relative disease free environment for livestock make in Ethiopia to
have a significant potential for dairy development. Considering the important prospective for

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products, the development of the dairy sector can contribute immensely to poverty
alleviation and improved nutrition in the country.
The rationale of behind establishing the project is that a huge demand for dairy product and
animal feeds as mentioned above with providing quality products and will contribute to
poverty alleviation and improved nutrition in the country.

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3. PRODUCT DESCRIPTION AND APPLICATION

3
3.1 PRODUCT DESCRIPTION
Base General Agro-Processing Industry PLC has a plan to established integrated dairy
processing, animal feed processing and animal feed farm. The detailed descriptions for each
project are discussed below.
3.1.1. DIARY PROCESSING
A dairy processing is a business enterprise established for the harvesting of animal milk –
mostly from cows or goats, but also from buffalo, sheep, horses or camels – for human
consumption. A dairy is typically located on a dedicated dairy farm or section of a multi-
purpose farm that is concerned with the harvesting of milk.
3.1.1.1. MILK
Milk is an opaque white liquid produced by the mammary glands of mammals. It provides the
primary source of nutrition for young mammals before they are able to digest other types of
food. The exact components of raw milk vary by species, but it contains significant amounts of
saturated fat, protein and calcium as well as vitamin C. the animals provide milk used by
humans for dairy products are cow, camel, donkey, goat, sheep, horse, buffalo and etc. But
this study only concern on cow milk only. Cow's milk has a pH ranging from 6.4 to 6.8, making
it slightly acidic.
A. MILK PRODUCT
Cow’s milk has been processed into different dairy products, which are:
 Pasteurized milk: the process that the unwanted bacteria and enzymes are killed by
raising the temperature of milk for a short time and then cooling for storage. Milk is
heated to 162º F for 15 seconds. This kills unwanted bacteria and enzymes. So that
milk called Pasteurized milk.

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 Powdered milk is a manufactured dairy product made by evaporating milk to

dryness. One purpose of drying milk is to preserve it; milk powder has a far longer
shelf life than liquid milk and does not need to be refrigerated, due to its low moisture
content. Another purpose is to reduce its bulk for economy of transportation.
 Condensed milk, also known as sweetened condensed milk, is cow's milk from which
water has been removed and to which sugar has been added, yielding a very thick,
sweet product that can last for years without refrigeration if unopened. The two terms,
condensed milk and sweetened condensed milk, have become synonymous; though
there have been unsweetened condensed milk products, today these are uncommon.
 Scalded milk: is milk that has been heated to 82°C/180°F. At this temperature,
bacteria and enzymes in the milk are destroyed. Since most milk sold today is
pasteurized, which accomplishes both of these goals, milk is typically scalded simply to
increase its temperature.
 Evaporated milk: also known as dehydrated milk is a shelf-stable canned milk

product with about 60% of the water removed from fresh milk. It differs from
sweetened condensed milk, which contains added sugar. Sweetened condensed milk
requires less processing since the added sugar inhibits bacterial growth.
 Cheese: Cheese consists of proteins and fat from milk, usually the milk of cows,
buffalo, goats, or sheep. It is produced by coagulation of the milk protein casein.
Typically, the milk is acidified and addition of the enzyme rennet causes coagulation.
The solids are separated and pressed into final form. Cheese is pr oduced throughout
the world in wide-ranging flavors, textures, and forms.
 Yoghurt: is a dairy product produced by bacterial fermentation of milk. Fermentation

of lactose produces lactic acid, which acts on milk protein to give yoghurt its texture
and its characteristic tang. Yogurt is made by the natural bacterial fermentation of
milk.
 Butter: is a dairy product made by churning fresh or fermented cream or milk. It is

generally used as a spread and a condiment, as well as in cooking applications such as

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baking, sauce making, and frying. Butter consists of butterfat, water and milk proteins.
Butter is an emulsion which remains a solid when refrigerated, but softens to a spread
able consistency at room temperature, and melts to a thin liquid consistency at 32 –
35 °C (90–95 °F). It generally has a pale yellow color, but varies from deep yellow to
nearly white. Its color is dependent on the animal's feed and is commonly manipulated
with food colorings in the commercial manufacturing process.
 Cream: is a dairy product that is composed of the higher-butterfat layer skimmed from
the top of milk before homogenization. In un-homogenized milk, over time, the lighter
fat rises to the top. In the industrial production of cream this process is accelerated by
using centrifuges called "separators. Cream skimmed from milk may be called "sweet
cream" to distinguish it from whey cream skimmed from whey, a by-product of cheese-
making. Whey cream has a lower fat content and tastes more salty, tangy and “cheesy”.
3.1.2. ANIMAL FEED PROCESSING
Animal feed is a mixture of feedstuffs produced by feed processing plant. It contains

proteins, minerals, and other nutrients which are useful for beef and milk production
and survival of the animals. The mixture would be produced from oil seed cake,
molasses, sodium hydroxide (NaOH), lye-traremanet of straw stock. Such mix may be
varied over a wide range of composition, determined by nutritional values required

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4 4. DAIRY PROCESSING MARKET STUDY
4.1 GENERAL REVIEW

Dairy processing occurs world-wide; however the structure of the industry varies from
country to country. In less developed countries, milk is generally sold directly to the public,
but in major milk producing countries most milk is sold on a wholesale basis. In Ireland and
Australia, for example, many of the large-scale processors are owned by the farmers as co-
operatives, while in the United States individual contracts are agreed between farmers and
processors.
Dairy processing industries in the major dairy producing countries have under gone
rationalization, with a trend towards fewer but larger plants operated by fewer people. As a
result, in the United States, Europe,
Australia and New Zealand most dairy processing plants are quite large. Plants producing
market milk and products with short shelf life, such as yogurts, creams and soft cheeses, tend
to be located on the fringe of urban centers close to consumer markets. Plants manufacturing
items with longer shelf life, such as butter, milk powders, cheese and whey powders, tend to
be located in rural areas closer to the milk supply.
The general tendency world-wide, is towards large processing plants specializing in a limited
range of products. There are exceptions, however. In Eastern Europe for example, due to the
former supply-driven concept of the market, it is still very common for ‘city’ processing plants
to be large multi-product plants producing a wide range of products.
The general trend towards large processing plants has provided companies with the
opportunity to acquire bigger, more automated and more efficient equipment. This
technological development has, however, tended to increase environmental loadings in some
areas due to the requirement for long-distance distribution.

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Basic dairy processes have changed little in the past decade. Specialized processes such as
ultra filtration (UF), and modern drying processes, have increased the opportunity for the
recovery of milk solids that were formerly discharged. In addition, all processes have become
much more energy efficient and the use of electronic control systems has allowed improved
processing effectiveness and cost savings.
Ethiopia is one of the largest livestock populations in Africa. According to the 2012 report of
the CSA the cattle population 52 million. The indigenous breeds accounted for 98.9 percent,
while the hybrids and pure exotic breed were represented by 0.93 percent and 0.12prcent,
respectively. From the total cattle population 44.43 percent are male and 55.57 percent are
female. This indicates the importance of male cattle particularly oxen for draft power.
However, in the crop/livestock mixed farming system, oxen work for a maximum of 100 days
in a year. This means that for the rest of the year oxen work compete for the meager feed
resource though unproductive. An appropriate alternative strategy needs therefore to be put
in place to reserve the feed for dairy cows that produce not only milk but also replacement
stock.
In spite such a substantial potential, the dairy sector is not developed to the expected level.
The annual growth rate in milk production of 1.2 percent falls behind the annual human
production growth estimated at 3 percent (GRM International BV, 2010). The low productive
of the country’s livestock production system in general and the traditional sector in particular
is mainly attributed to shortage of crossbreed dairy cows, lack of capital by dairy producers,
inadequate animal feed resource both in terms of quality and quantity, unimproved animal
husbandry systems, inefficient and inadequate milk processing materials and methods, low
milk production and supply to milk processing centers and poor marketing and market
information systems.
Generally, the large livestock population, the favorable climate for improved, high yielding
animal breeds and the relative disease free environment for livestock make in Ethiopia to
have a significant potential for dairy development. Considering the important prospective for

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products, the development of the dairy sector can contribute immensely to poverty alleviation
and improved nutrition in the country. With the present trend characterized by transition
towards a market-oriented economy, the dairy sector appears to be moving towards a take off
stage. Liberalized markets, involvement of the private sector and promotion of small holder
dairy are the main features of this stage.
4.2 DEMAND SIDE

4.1.1. FACTOR THAT AFFECTING THE DEMAND FOR MILK PRODUCT
The demand for dairy products is determined by a number of factors such as changes in
population, incomes and prices, population seems to be the most important factor which
determines the demand for dairy products in Ethiopia. This is because population growth
tends to increase the potential demand for milk and milk products
This rapidly increasing population size with expanding rural population and growing urban
population will create even greater markets and growth of demand for dairy products. This
increase in demand for milk and dairy products affords greater opportunities and potentials
for milk producers and for development of the milk production and processing industry.
The demand for manufactured dairy products in particular is affected by the increasing urban
population as well as disposable income. Urbanization can be expected to boost the demand
for domestic and imported dairy products, provided that incomes increase.
Ethiopia's low income level and low levels of urbanization are the major factors that hold back
the demand for dairy products. The high sales price of processed milk compared to
unprocessed milk supplied by the informal market also leads to low consumption of
processed milk.
Economic theory states that demand for a particular product is inversely related to its price.
Demand also depends on the price of a substitute good, income of the consumer, and other
socioeconomic and demographic factors. Thus, dairy products’ demand is expected to be
inversely related to their price. In the real world, however, small changes in price usu ally have
little bearing on consumption of dairy products (e.g., fluid milk and cheese). In addition, it is

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difficult to isolate close substitutes for many dairy products. While margarine is clearly a close
substitute for butter, there is no obvious substitute for cheese and fluid milk. The major
factors that affect the demand for dairy products are discussed below.
A. POPULATION GROWTH
Central Statistical Agency projected the population size of Ethiopia for the year 2012 to be
84,320,987 of which 42,556,999 are males and 41,763,988 are females.
Urban areas refer to all capitals of regions, zones and Woredas, and it also includes localities
with urban kebeles whose inhabitants are primarily engaged in non-agricultural activities the
average population growth is 2.6%, while urban population growth is about 4%.
As per the census result, the distribution of the national population by broad age groups
shows that the proportion of young population under age 15 is about 45% while the
proportion of the working age group 15 – 64 is estimated to be 50.2 %. Elder persons (65+)
composition accounts 3.4% of the total population being the lowest. This shows that the
younger population, which needs dairy processing products like milk, yogurt and cheese. In
the coming years a lot of dairy processing products are need by the societies.
B. URBANIZATION
Urban areas refer to all capitals of regions, zones and Woredas, and it also includes localities
with urban kebeles whose inhabitants are primarily engaged in non-agricultural activities.
As in most Sub-Saharan African countries, more and more of the rapidly growing Ethiopian
population is becoming concentrated in and around large towns/cities. The trend shows that
as much as cities are expanded.
Ethiopian cities are also the fastest growing units in the country, adding 4.2 percent to the
overall population per annum. The urban population in 2008 was 17% of the total population
and the rate of urbanization is 4.3% annual rate of change. This rapid expansion of
urbanization and growth of urban population has too often exceeded the capacity to provide
dairy products like pasteurized milk, butter and cheese.

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C. ECONOMIC GROWTH
Ethiopian economy witnessed sustainable growth over the past eight years owing to the large
scale efforts undertaken by the government in the frontiers of infrastructure, agriculture,
rural development and poverty alleviation programs and investments. Ethiopia is currently
enjoying an 11.4% growth in gross domestic product (GDP). In addition, the five -year Growth
and Transformation Plan (2009/10- 2014/15) under implementation is expected to further
develop the economy and plans to grow the GDP by 14.9% in its high case scenario and 11.4%
in its low case scenario.
FIGURE 1: PROJECTED GDP GROWTH OF ETHIOPIA
25
20
Growth Rate (%)
15 Agriculture & allied Activities

Industry
10 Services
Real GDP
5
0
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
SOURCE: GTP
The growth and transformation plan is designed to revolutionize the Ethiopian economy,
which is dominated by agriculture employing more than 80% of the country's population and
contributing about 41% to the GDP, to industry led economy. During the GTP period, industry
is expected to grow by 20% per annum while agriculture and service are expected to grow by
8.6% and 11% respectively. Dairy processing, as part of the Agriculture sector, is expected to
grow with the same rate easing the burden on imports and saving foreign currency.
As the economic grow, the per capita income, living standard of the society and urbanization
is improved; it will be inevitable which will boost the demand for dairy processing products.

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D. GDP PER CAPITA
The GDP per capita in Ethiopia was last reported at 231.63 USD in 2011, according to a World
Bank report published in 2012.GDP per capita is gross domestic product divided by midyear
population. Ethiopia has been one of the fast growing non-oil dependant countries in Africa.
FIGURE 2: ETHIOPIA GDP PER CAPITA
Source: http://www.tradingeconomics.com
As shown in the figure above the GDP per capita are increased from time to time. Ethiopia
GDP per capita is increased on averaged by 7% for the last 10 years. In 2011 Ethiopia GDP per
capita reached 231.63 USD, increased by 5% as compared to the previous year.
Generally, as the GDP per capita are increased in one country the need for better food by the
society are also increased this lead to increase the demand for dairy processing products.
4.1.2. VOLUME AND VALUE OF DEMAND
1.5.1.1 VALUE AND VOLUME IMPORT
As per the information obtained from Ethiopian Customs and Revenue Authority, there is
import of dairy products to fulfill the unfulfilled demand in the domestic markets. For the last
five years (2008 to 2012), the country has spent 931 million birr for dairy products. Table 3
illustrate that the import trend for dairy product for the last 5 years.

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TABLE 1: IMPORT TREND FOR DAIRY PRODUCT DURING 2008-2012
QUANTITY IN GROWTH IN % CIF VALUE GROWTH IN

TON %
2008 1,901 86,096,270
2009 2,063 9% 98,362,643 14%
2010 4,175 102% 252,201,979 156%
2011 1,694 -59% 162,147,453 -36%
2012 1,866 10% 177,243,250 9%
Average growth 2,340 15% 155,210,319 36%
SOURCE: ERCA
As shown in the figure below, import trend for dairy products are increased from time to time
due to increase the demand of dairy products by the societies. During year 2008, the import
volumes of dairy product were 1,901 tons and increased to 2,063 thousand tons in year 2009.
In 2010 the import volume of dairy product are increased by 102% as compared to the
previous years.
Generally the import volume and value of the dairy product are increased on average by 15%
and 36%, respectively during 2008-2012.This shows that there is ample demand in the local
market for dairy products.
FIGURE 3: IMPORT TREND FOR DAIRY PRODUCT DURING 2008-2012
SOURCE: ERCA

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2.5.1.1 LOCAL PRODUCTION
Having abundant livestock resource the country lags behind in diary production and the
country could not obtain the absolute benefit from the sector. This is mainly because of the
limited dairy farms and processing plants in turn the sector is dominated by small & medium
scale farmers which only produce milk for home and nearby towns’ consumption. Although
no clearly defined dairy development policy existed, it was envisaged that the current
investment policy would move increasingly towards private sector -led development. Several
private investors have now established milk-processing plants to supply fresh milk.
The milk supply sources of towns and cities are intra-and pre- urban dairy farms, Dairy
processing industries and Imports in various forms. The bulk of milk markete d in cities
comes from Intra-urban Farms, they directly sell their produce to consumers, suppliers and
itinerant trades.
Milk processing industries like Dairy development Enterprise (DDE), Sebeta Dairy Agro -
Industry Private and Lemma Dairy collect milk from small holders, processes different dairy
products and distributes to various outlets in the country. According to the information
released by Central Statistics Authority (CSA) in its 2012 report on large and medium scale
manufacturing industries, the number of diary processing industry establishments is
increasing by 14% new industries every year starting from year 1999 E.C.
TABLE 2: LOCAL DAIRY PRODUCTION
NAME OF PRODUCT
Year E.C MILK Growth % BUTTER AND Growth % CHEESE TON Growth TOTAL DAIRY
PASTEURIZED GHEE (TON) % PRODUCT IN
(H.L) TONS
1999 134,617 354 480 14,295.70
2000 146,291 9% 365 3% 236 -51% 15,230.10
2001 160,927 10% 611 67% 270 14% 16,937.70
2002 242,564 51% 982 61% 185 -31% 25,423.40
2003 220,350 -9% 252 -74% 160 -14% 22,447.00
Average growth 15% 14% -20%
N. b 1 hl=100 kg
SOURCE: CSA, 2012, LARGE AND MEDIUM SCALE MANUFACTURING INDUSTRIES

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As indicated in the table above, amount of pasteurized milk produced by the Diary processing
industries increase from 134,617 to 220,350 hector litters (HE) with an average growth of
15% for the period covering from 1999 E.C to 2003E.C.
3.5.1.1 EXPORT
Ethiopia is not known to export dairy products. However some insignificant quantities of milk
and butter are exported to a few countries. Butter is mainly exported to Djibouti and Somali ,
while milk is solely exported to Somalia from South Eastern region of the country and small
quantities of cream are exported to Djibouti from Dire Dawa.
TABLE 3: EXPORT TREND FOR DAIRY PRODUCT DURING 2008-2012
Quantity in ton Growth % CIF value in Birr' Growth %

000
2008 1,017.0 946.5
2009 1,274.4 25% 1,431.1 51%
2010 2,594.6 104% 4,266.7 198%
2011 1,979.3 -24% 4,543.6 6%
2012 2,196.5 11% 6,498.5 43%
Average growth % 29% 75%
SOURCE: ERCA
Export markets of dairy products are dominated by East Africa with a share of 99% of the
total volume of exports. The exports are mainly destined to Somali with a share of 99% of the
total volume of exports where as Djibouti had a share of only below one percent of the total
volume of exports from the year 2008 – 2012.
TABLE 4: ETHIOPIA DAIRY PRODUCT EXPORT BY DESTINATION DURING 2008 -2012 (KG)
YEAR
IMPORTER 2008 2009 2010 2011 2012 Average Market
share
SOMALI 1,014,062.0 1,271,434.0 2,582,942.0 1,936,682.0 2,174,435.00 1,795,911 99%
DJIBOUTI 1,180.0 1,108.0 1,436.0 1,376.0 1735 1,367.0 0%
SOUTH 1,000.0 782.0 3,600.0 2,090.0 - 1,494.4 0%
AFRICA
REST OF THE 731.0 1,045.0 6,644.0 39,146.0 20,292.3 16,429,673.0 1%
WORLD
SOURCE: ERCA

DAIRY PROCESSING 22
4.5.1.1 Milk CONSUMPTION
Ethiopia has one of the lowest levels of per capita dairy consumption in the world. FAO and
other studies invariably revealed that the per capital milk consumption in Ethiopia is around
18 k.g per annum. This figure is by far lower than the basic daily average milk requirement of
the world which runs to 83k.g. per annum. This depicts that the market for milk is positive
owing to inadequate supply of milk. Given the rapidly growing Urban Population it is likely
that market for milk will remain in under supply situation in the foreseeable future.
According to the survey report released by Central Statistics Authority (CSA), in urban areas,
where manufactured dairy products are totally consumed, the per capita consumption of
pasteurized milk, butter & ghee, cheese, yogurt and milk & cream in solid forms are 1.087lt,
0.038 kg, 0.023 kg; 0.109kg and 0.003kg respectively.
Despite these low levels of per capita consumption, the consumptions of most dairy products
have shown positive growth trends over the past five years. Between 2004 and 2009, per
capita consumption of pasteurized milk, the largest product locally produced and marketed in
urban areas, has increased by 20 percent yearly. The countries low income level and low
levels of urbanization are the major factors that hold back the demand for dairy products. The
high sales price of processed milk compared to unprocessed milk supplied by the informal
market also leads to low consumption of processed milk.
In general, consequently up on the information presented above, the existence of excess

demand both in local and export market is obvious. Thus, it is with this case in point that Base
General Agro-Processing Industry PLC extremely encourages investing in the Diary farm and
processing sector.
4.3 SUPPLIED SIDE

There are various players (from individual to the institution) in the dairy sector player’s
sundry roles at different levels. These include: farm input suppliers, producers of different
scales cooperatives and unions, extension services providers, traders, processers, distributors
industry facilitator, development partner and consumers.

DAIRY PROCESSING 23
4.3.1. MAJOR LOCAL SUPPLIERS
There are more than 22 private sector that engaged in providing farm inputs (feed and
veterinary drugs), animal health care and milk processing and storage equipment and serves
as an important market outlet for milk and milk products with nine of them are operating in
Addis Ababa and the rest in other major regional cities. The major private dairy enterprises
are listed below in table below.
TABLE 5: MAJOR PRIVATE DAIRY ENTERPRISE
DAIRY ENTERPRISE LOCATION YEAR DAIRY PROCESSING

ESTABLISHMENT CAPACITY
1 SEBETA AGRO INDUSTRY ( MAMA DAIRY) SEBETA 1998 35,000
2 LAME DAIRY PROCESSING ( FORMER DDE) ADDIS ABABA 2008 60,000
3 DIREDAWA DAIRY PROCESSING ENTERPRISE DIRE DAWA 1972 20,000
4 MB PLC ( FAMILY MILK) ADDIS ABABA 2003 15,000
5 YADENI DAIRY FARM ADDIS ABABA 2008 15,000
6 ADA’A DAIRY COOPERATIVE DEBER ZIET 1998 15,000
7 LEMA DAIRY DEBER ZIET 10,000
8 BERTA AND FAMILY PLC ADDIS ABABA 9,000
9 GENESIS FARM DEBER ZIET 4,000
10 HOLLAND DAIRY DEBER ZIET 4,000
11 ALMI TIKU WETET (ALEMI FRESH MILK) HAWASSA 4,000
12 RUTH AND HIRUT DAIRY FARM ADDIS ABABA 4,000
13 ABAY FANA AWASH AGRO INDUSTRY ADAMA 3,500
14 CHUYE MILK AND MILK PRODUCTS PROCESSING ADDIS ABABA 3,000
15 FANTU AND FAMILY DAIRY FARM ADDIS ABABA 2,500
16 ZEMEN MILK MEKELLE 2,000
17 PINGUIN INTERNATIONAL BUSINESS PLC ADDIS ABABA 1,800
(CHESSES WORLD)
18 LIFE MILK PROCESSING ENTERPRISE SULULTA 1,500
19 SEMIT AGRO INDUSTRY/ENAT MILK MOJJO
20 BERAL MILK ADDIS ABABA 1991
21 HARMONISE AGRO INDUSTRY ADAMA
22 JANTEKEL DAIRY UNION ( FACIL MILK) GONDOR 1,200
FAO, 2011

DAIRY PROCESSING 24
4.3.2. NEW ENTRY
As per the information obtained from Ethiopian investment Authority, total number of
investment projects (dairy farming and milk processing) licensed since 1992 to January 2013
together with their investment status and capital (birr) is indicated in the table below.
TABLE 6: PROJECTS LICENSED BY FEDERAL AS WELL AS REGIONAL INVESTMENT OFFICES
Status Number of Capital

projects
1 Pre-implementation 131 90,100,447
2 implementation 37 3,429,656
3 Operation 11 65,441
Total 179 93,595,544
SOURCE: ETHIOPIA INVESTMENT AGENCY (EIA)
Out of the total number of 179 dairy projects, most of the projects were licensed by the
federal investment authority. The status, type of ownership and the number of projects
licensed by the federal investment authority and regional investment office of the country are
shown in the table 10 below.
TABLE 7 PROJECTS LICENSED BY FEDERAL AND REGIONAL INVESTMENT AUTHORITY OF ETHIOPIA
STATUS TYPE OF OWNERSHIP NUMBER OF PROJECTS

1 PRE-IMPLEMENTATION Private 90
PLC 41
2 IMPLEMENTATION Private 21
PLC 19
3 OPERATION Private 6
PLC 5
Total 179
SOURCE: ETHIOPIA INVESTMENT AGENCY (EIA)
4.3.3. TOTAL SUPPLY (APPARENT CONSUMPTION)
The apparent consumption or total supply of dairy processing product in Ethiopia is

composed of domestic production and import minus export. Table 10 summarizes the
structure of supply and apparent consumption of dairy processing products during the period
2008 - 2012.

DAIRY PROCESSING 25
TABLE 8: TOTAL SUPPLY
Local Import Export Apparent Growth of

production consumption apparent
consumption
2008 15,230 1,901 1,017 16,114
2009 16,974 2,063 1,274 17,762 10%
2010 25,423 4,175 2,595 27,004 52%
2011 22,447 1,694 1,979 22,162 -18%
2012 23,935 1,866 2,196 23,605 7%
104,009 11,700 106,648 13%
Apparent consumption or total supply of dairy processing products, exhibited an increasing

trend. Total supply of the product was increasing at an average annual growth rate of about
13percent.
The total supply or apparent consumption which was 16,114 tons in year 2008, increased to a
level of 27,004 tons in year 2010 then decrease to 22,162 tons and increased to 23,605 tons
in year 2011 and 2012, respectively.
4.1.3. DEMAND PRJECTION
The demand for dairy product in the local market is projected based on th e following two
methods:
Historical Growth method

End user consumption.
A. Historical growth method (time series analysis): this method assumes that the past
supply trend will continue in the future. The historical supply is fitted to a polynomial
equation to project the future demand for all items.

DAIRY PROCESSING 26
FIGURE 4: PROJECT DEMAND
40,000.0
35,000.0 y = 1938.1x + 15515

30,000.0
R² = 0.674
25,000.0
20,000.0
15,000.0
10,000.0
5,000.0
-
2008 2009 2010 2011 2012
TABLE 9: PROJECT DEMAND
Demand Growth %
project in Ton
2013 27,143.6
2014 29,081.7 7%
2015 31,019.8 7%
2016 32,957.9 6%
2017 34,896.0 6%
2018 36,834.1 6%
B. End user consumption method: In this method, the demand for dairy processing
products is depend on end users such as population growth, Economic growth, per capita
income and Urbanization etc.
Thus, demand for dairy processing products is projected based on the following assumptions;
The numbers of Ethiopian population are expecting to grow by 2.6%.

The urbanization rates are expecting to grow by 4.3% for the future.
Ethiopia real GDP growth rate and per capita income are also expected growing on
average by 11% and 7% respectively.

DAIRY PROCESSING 27
Based on the above assumption, the demand for dairy processing products is expecting to
grow by 6.2% in the local markets.
Table 10: project demand
Project demand Growth rate

in tons
2013 25,069
2014 26,623 6%
2015 28,273 6%
2016 30,026 6%
2017 31,888 6%
2018 33,865 6%
4.1.4. PRICE ANALYSIS
According to CSA, the price for dairy products is different from time to time. As shown in the
table below, the retail price for pasteurized milk is ranged from Birr 16.07 to 22.77 during
2012 to 2013. The detailed price for dairy products during 2012 to 2013 is listed in table
below.
Table 11: Dairy product price
Dairy Product
Cow milk Cow milk Powdered Yoghurt Cheese Butter
(unpasteurized) (pasteurized Milk (Unrefined)
2012 April 11.26 16.07 100 13.3 42.33
May 12 18.39 102.65 13.2 57.59 150.26
June 12.07 18.55 104.29 17 49.44 151
July 10.6 22.77 117.72 17.83 45 120.73
Aug
Sep 10.87 21.21 118.25 18.17 27.15 125.7
Oct
2013 Jan 14.07 18.53 104.9 14.7 53.67 139.28
Feb 14.07 18.75 101.8 15.28 53.73 134.62
March 12.07 22.35 118.67 19.77 30.26 122.41
April 12.09 22.39 117.7 18.99 27.34 123.82

DAIRY PROCESSING 28
4.4 MAJOR COMPETITORS OF ETHIOPIAN DAIRY PRODUCTS IN THE LOCAL

MARKETS
Sebeta agro industry (mama Dairy), Lame Dairy processing , Dire Dawa Dairy Processing
Enterprise and MB plc (Family Milk) are the major Dairy processing Suppliers in the local
market. Most of these suppliers supply different types of dairy products to local markets . All
these Suppliers are therefore the major competitors of the envisage projects.
Competitive strategy
1. Cost leadership: In cost leadership, a firm sets out to become the low cost producer in
its industry. The sources of cost advantage are varied and depend on the structure of
the industry. They may include the pursuit of economies of scale, proprietary
technology, preferential access to raw materials and other factors.
As such in the dairy processing market, the producers can reduce the cost by using
resources efficiently and efficiently by using advanced technologies and since they
have access to raw material, it is easier for local producers to inter the domestic
market with lower cost as compared to other suppliers.
2. Differentiation: In a differentiation strategy a firm seeks to be unique in its industry

along some dimensions that are widely valued by buyers. It selects one or more
attributes that many buyers in an industry perceive as important, and uniquely
positions it to meet those needs. It is rewarded for its uniqueness with a premium
price.
This strategy greatly applies to the Dairy processing products suppliers. They can have
a strategy of differentiating the products via advertising, packaging, brand etc, so that
they will be competitive in the market.
3. Focus: combination of the above two. The generic strategy of focus rests on the c hoice
of a narrow competitive scope within an industry. The focuser selects a segment or
group of segments in the industry and tailors its strategy to serving them to the
exclusion of others.

DAIRY PROCESSING 29
In this case identification of the target markets and gives them a differentiated product
with lower cost so that it can be highly competitive in the market.
4.5 MARKETING STRATEGY OF THE COMPANY
To compete with the above major local competitors and effectively sell its products the
company planned to implement the following marketing strategies;
Developing a well-organized and proper product distribution system by signing a

memorandum of agreement with the responsible bodies that regulate the distribution
of the products.
Certifying the production process as well as the quality of the product
Creating some form of joint venture in its marketing operation with those effective
wholesalers in the target markets.

DAIRY PROCESSING 30
5 5. DAIRY PRODUCTS PRODUCTION PROCESS
5.1 PLANT LAY OUTS

One needs to develop a factory layout plan to decide on location of each facility like raw
material, storage, individual machines, packaging, finished goods storage and quality control
unit and work out the space for each. The distance between one facility and another or one
machine and another should meet technical requirements. Usually, the flows of production
process and space requirements for material handling and manpower determine the layout.
In order to facilitate the production process, minimize overall production time, for employee
convenience, safety & comfort, Flexibility of manufacturing operations and arrangements,
effective utilization of men, equipment and space, and to minimize materials handling and
cost the company will arrange machinery and equipment properly by considering
configuration of departments, work centers, equipment in the conversion process and
physical facilities. Accordingly the company utilizes a combination of process and product
layouts that arranges facilities and grouped together according to their functions and
machines and auxiliary services are located according to the processing sequence of the
product.
5.2 PRODUCT MIX

In order to maximize the existing market share and penetrate local market, Base General
Agro-Processing Industry PLC utilized diversification strategy by broadening the range of
product and Service. In doing so, the company will utilize the available resources and
capability efficiently. Currently Base planned to produce the following list of products:
 Pasteurized milk
 Different types of cheese
 Yogurt and
 Butter.

DAIRY PROCESSING 31
5.3 PRODUCTION PROGRAM

Production program helps the company to achieve uninterrupted flow of materials through
production line by making available the materials at right time and required quantity. The
production program of the plant shows the desire and workable target production level of the
machinery by considering the obvious constraint.
Design of the production system involves planning for the inputs, conversion process and
outputs of production operation. The effective management of capacity is the most important
responsibility of production management. The objective of capacity management (i.e.
planning and control of capacity) is to match the level of operations to the level of demand.
Parameter like potential product market size, capacity of the plant machinery to be installed,
operational hours and other factors are taken in to account in drawing the potential plant
capacity. Therefore, the following assumption has been used to reach at plant capacity of the
project.
TABLE 12: ASSUMPTION
Working days per month 25 Days
Working days 300 per annum

Year 1 1 per day
Number of shifts Year 2 1 per day
> Year 3 1 per day
Working hours 8 per shift
Year 1 2,400 / annum
Working hours/ Annum Year 2 2,400 / annum
> Year 3 2,400 / annum
The existing production line has a production capacity of pro ducing 21,040 liter of dairy
processing per shift .The production capacity with the respective product has been depicted
in the following table below.

DAIRY PROCESSING 32
TABLE 13: FULL PRODUCTION CAPACITY OF DAIRY PROCESSING PRODUCTS
Dairy processing 21,040 liter per shift tons per shift
5.4 CAPACITY UTILIZATION

Accordingly, it is expected that the envisage project plant will initially operate at 80% and
95% of its full capacity during first year in one shift per day respectively (considering the
novelty of the technology to the work force, maintenance activity and efficient way of
production) and increase production capacity by an annual growth rate of at least 5% in the
following years until achievement of maximum capacity utilization rate of 95% for envisage
project It is also expected that the plant attain the optimum level through the process of
learning by doing and subsequent acquisition of managerial and technical efficiency and of
course increase in demand for the product. Based on this the total output for consecutive year
presented as follows.
TABLE 14: CAPACITY UTILIZATION
Year 5
Description Year 1 Year 2 Year 3 Year 4
onwards
Production capacity 80% 85% 90% 95% 95%
Pasteurized milk 5,049,600 5,365,200 5,680,800 5,996,400 5,996,400
By product 184,310 195,830 207,349 218,869 218,869

DAIRY PROCESSING 33
5.5 PRODUCTION PROCESS

5.5.1 DAIRY PROCESSING
5.5.1.1 MILKING PROCESSING
Transportation of raw milk from farm to processing area is performed by

refrigeration track but if the farm and processing area is at the same place ,the
simplest way is by using pumps that are connected to central refrigeration, and
also with a combination of airflow and mechanical pump to a central storage vat or
bulk tank. over all milk processing includes temporary preservation(raw milk
handling) ,filtration/clarification of raw milk, separation of all or part of the milk fat
,production of cream and butter ,pasteurization, homogenization(if re quired),
deodorization(if required), further product-specific processing and distribution of
final products. To make a consumable liquid a portion of cream is returned to the
skim milk to make low fat milk (semi-skimmed) for human consumption.
Raw milk contains around 4 percent fat. In order to produce non-fat milk, the cream
must first be separated. Here, a differentiation is made between warm milk
separation at temperatures between 50 and 60 °C and cold milk separation which
takes place at temperatures between 4 and 30 °C.
Heat treatment is used to ensure the safety of milk for human consumption in order
to lengthen its shelf-life and for dehydration of dairy products such as butter, hard
cheese and milk powders. Skimmed milk has so many consumers because of low
content of cholesterol. Once milk passes through a separator it is recovered in two
fractions, the high-fat cream fraction and the low-fat skim milk. Assuming negligible
loss of fat in the separator, the amount of fat entering the separator with the whole
milk will be collected at the other side of the separator in either the cream or the
skim milk. Inspection is important in every processing of the milk. Figure is a flow
diagram outlining the basic steps in the production of whole milk, semi-skimmed
milk and skimmed milk, cream, butter and yogurt.

DAIRY PROCESSING 34
Figure 5: Flow diagram for processes Milk process
Milk receipt, filtration and clarification
Storage
Separation and
standardization
Pasteurization
Homogenization Homogenization
Deodorization Butter
churning
Storage
Butter and
Packaging and cold storage freezing
Distribution
A. CLARIFICATION
The clarification process removes impurities like blood cells from the milk that will
be sold as whole milk (milk containing all of its butterfat). Removed of solid
impurities from milk before go to pasteurization. Separation and clarification can be
done at the same time in one centrifuge. Particles, which are denser than the
continuous milk phase, are thrown back to the perimeter. The solids that collect in
the centrifuge consist of dirt, epithelial cells, leucocytes, corpuscles, bacteria
sediment and sludge. The amount of solids that collect will vary; however, it must be
removed from the centrifuge.

DAIRY PROCESSING 35
More modern centrifuges are self-cleaning allowing a continuous clarification

process. This type of centrifuge consists of a specially constructed basin with
peripheral discharge gaps. These gaps are kept closed under pressure. With a
momentary release of pressure, for about 0.15 s, the contents of sediment space are
evacuated. This can mean anywhere from 8 to 25 L are ejected at intervals of 60
min.
B. FILTRATION
Milk should always be filtered before it reaches the cooling system. Warm milk,
within the temperature range of 36°–38°C (98°–100°F), can be filtered very
efficiently as the milk fat can pass readily through the milk filter. Milk fat in cold
milk can block up disposable milk filters as it cannot pass easily through the filter.
This causes the milk flow through the filtering unit to be reduced to unacceptable
level. Milk is filtered mechanically, physically, electrically and soon. Filtration is an
effective method of removing dirt and other particles from the raw milk; it does not
remove bacteria or other material that may have dissolved in the milk. Milk
continues to flow across any sediment trapped in the milk filter and this can
dislodge bacteria that may be stuck to the particles, po tentially increasing the
bacterial count of the bulk milk. After filtration deodorization is essential in order to
test the raw milk.
C. SEPARATION AND STANDARDIZATION
Centrifuges can be used to separate the cream from the skim milk. Under the
influence of centrifugal force the fat globules (cream), which are less dense than the
skim milk, move inwards through the separation channels toward the axis of
rotation. The skim milk will move outwards and leaves through a separate outlet.
The streams of skim and cream after separation must be recombined to a specified
fat content. This can be done by adjusting the throttling valve (valve controlling the
flow) of the cream outlet. If the valve is completely closed, all milk will be
discharged through the skim milk outlet. As the valve is progressively opened, larger
amounts of cream with diminishing fat contents are discharged from the cream

DAIRY PROCESSING 36
outlet. With direct standardization the cream and skim are automatically remixed at
the separator to provide the desired fat content.
D. HOMOGENIZATION
Milk homogenization is accomplished by forcing the milk at high pressure through

small holes. Another method of homogenization uses extruders, hammer mills, or
colloid mills to mill (grind) solids and soon. Homogenization technology is based on
the use of pressure on liquids to subdivide particles or droplets present in fluids
into the very smallest sizes (submicron) and create a stable dispersion ideal for
further processing. The passage of the product at very high pressure through a
specially designed valve with an adjustable gap (homogenizing valve) is able to
micro size dispersed particles down to the order of magnitude of micrometers and
nanometers.
PRESERVATION METHODS
The four main methods of preservation operation are:
• Cooling - to extend the shelf life of fresh milk by a day or two.

• Heating - (pasteurization, sterilization or concentration) to destroy
enzymes and microorganisms.
• Acidification - to inhibit spoilage or food poisoning bacteria from growing
and also change the physical characteristics of milk.
• Separation - of the milk components
i. COOLING
Cooling does not destroy bacteria or enzymes but it slows down their activity.
Cooled raw milk keeps its quality for a few days before it is processed. Milk products
such as yoghurt, cheese, butter and pasteurized milk are also cooled to ensure the
required shelf life for distribution. Finished products should be stored in a separate
dispatch at 4oC +/- 2oC .frozen milk and ice cream was stored below -18oC. Cooling
equipment is often essential to maintain the quality of raw milk before Processing

DAIRY PROCESSING 37
and to cool processed products such as yoghurt, cheese, butter and pasteurized Milk
for temporary storage before distribution.
ii. HEATING
Milk should be heated to 63°C for 30 minutes to adequately pasteurize it or, if in

bottles, to 121°C for 15-20 minutes to adequately sterilize it. Pasteurization can be
done in open pans with continuous stirring, then filling the milk into pasteurized
bottles (100°C for ten minutes in steam or water) and sealing immediately.
Sterilization requires the use of a pressure cooker to achieve 121°C at 104 kPa (15
psi) which increases the capital cost of processing. Milk is filled into bottles which
are then sealed and Dairy placed in the pressure cooker. The tempe rature and
pressure are gradually raised and lowered to give the correct processing time.
Sterilized milk has a shelf life of several weeks/months if unopened but extreme
care is needed to ensure adequate heating in order to prevent food poisoning
iii. ACIDIFYING
Acid is produced in milk by the growth of certain types of harmless bacteria 'lactic
acid Bacteria'. They are normally present in milk and are also used as starter in the
production of yoghurt .Lactic acid bacteria convert milk sugar (lactose) into lactic
acid, which increases the acidity of the milk and prevents the growth of harmful
bacteria.
The removal of lactose means that these products can be eaten by people who suffer
from lactose intolerance. The acid also creates the characteristic curd of yog hurt.
The shelf life is extended by several days and the changes in flavor and texture make
this as a popular product. The technology involved can be very simple e.g.
inoculating milk, in a loosely covered pan, with some of yesterday's batch and
allowing it to ferment at room temperature for several hours.
iv. SEPARATION
Separating milk fat from the watery part of milk produces cream. This can be made
as a product for sale, but care is needed because there is a greater risk of cream

DAIRY PROCESSING 38
causing food poisoning. Cream is also used to make butter which has lower moisture
contents. When butter is prepared and stored correctly, it can have a shelf life of
several months. Clarified butter also has a shelf life of several months. In cheese -
making a curd is produced and the watery part of milk is separated as ‘whey’.
Another process is boiling milk to evaporate water and produce a brownish gel that
is eaten as a snack food or sweet. The product has a shelf life of a few weeks and
may have ingredients such as sugar, color, spices, fruits or nuts added to give a
variety of products.
Milk contains fat and a complex mixture of water, proteins and vitamins/minerals.
By separating the fat from the watery part it is possible to obtain cream. By
churning cream it is changed to butter which, if prepared and stored correctly, can
have a shelf life of several weeks. Clarified butter has a shelf life of several months.
Both are high value products for which there is often a ready market. Cheese, cream
and pasteurized milk requires greater care. Sterilized milk requires considerable
care and experience to produce a safe, high quality product.
6.5.1.1 BUTTER
The butter-making process, whether by batch or continuous methods, consists of

the following steps:
 Preparation of the cream.

 Destabilization and breakdown of the fat and water emulsion.
 Aggregation and concentration of the fat particles.
 Formation of a stable emulation.
 Packaging and storage.
 Distribution.
The initial steps (filtration/clarification, separation and pasteurization of the milk).
Milk destined for butter making must not be homogenized, because the cream must
remain in a separate phase.

DAIRY PROCESSING 39
After separation, cream to be used for butter making is heat treated and cooled
under conditions that facilitate good whipping and churning. It may then be ripened
with a culture that increases the content of diacetyl, the compound responsible for
the flavor of butter. Alternatively, culture inoculation may take place during
churning. Butter which is flavors enhanced using this process is termed lactic
ripened or cultured butter. Although the product is claimed to have a superior
flavor, the storage life is limited. Butter made without the addition of a culture is
called sweet cream butter.
Both cultured and sweet cream butter can be produced with or without the addition
salt. The presence of salt affects both the flavor and the keeping quality.
Butter is usually packaged in Bulk quantities (25Kg) for long term storage and then
re-packed into marketable portions (Usually 250 g or 500g, and single -serve packs
of 10-15).

DAIRY PROCESSING 40
FIGURE 6: FLOW DIAGRAM OF BUTTER MAKING
Raw milk, pre-treatment and separation
Cream
Pasteurization
Cooling
Ageing
Churning and working
Butter Buttermilk
Packaging
Freezing, storage
Thawing (soften)
Consumer packaging
Retail distribution
Chill storage

DAIRY PROCESSING 41
CHEESE
Virtually all cheese is made by coagulating milk protein (casein) in a manner that
traps milk solids and milk fat into a curd matrix. This curd matrix is then
consolidated to express the liquid fraction; cheese whey. Cheese whey contains
those milk solids which are not held in the curd mass, in particular most of the milk
sugar (lactose) and a number of soluble proteins.Cheese is another product made
from milk. Milk is coagulated by the addition of starter. So the liquid mike changes
to thick and solid state. Whole milk is reacted to form curds that can be compressed,
processed and stored to form cheese. Whey is also the byproduct of this process.
Yogurt making is a process similar to cheese making; only the process is arrested
before the curd becomes very hard.
FIGURE 7: FLOW DIAGRAM OF CHEESE MAKING

DAIRY PROCESSING 42
Raw milk, pre-treatment and
Standardization
Cheese milk
Pasteurization
Coagulation
Cheese whey
Extraction of whey
Cutting and cooking of curd Whey treatment

plant
Salting
Ripening
Packaging
Distribution

ANIMAL FEED PROCESSING MARKET STUDY 43
6. ANIMAL FEED PROCESSING MARKET STUDY

7
6.1 GENERAL REVIEW
The world population is projected to grow close to 7.3 billion by the year 2015 up from 6.1
million in 2000 necessitate more food to be produced. This increase of 1.2 billion of 19% in
15 years is a higher absolute increment than that of the last 15 years. As the world
population continues to grow geometrically, great pressure is being placed on arable land,
water, and energy resources to provide an adequate supply of food while maintaining the
integrity of the ecosystem. What matters most is whether the world will be able to produce
enough food for every one's need. Developing countries are still on a high demographic
growth path and will account the majority of the additional world population in the
projected period.
Ethiopia has the largest livestock population in Africa and the tenth largest in the world with
32 million cattle and 42 million sheep and goats which however is below Optimum
Utilization. This livestock sector has been contributing considerable portion to the economy
of the country, and still promising to rally round the economic development of the country. It
is eminent that livestock products and by-products in the form of meat, milk, honey, eggs,
cheese, and butter supply the needed animal protein that contribute to the improvement of
the nutritional status of the people. Livestock also plays an important role in providing
export commodities, such as live animals, hides, and skins to earn foreign exchanges to the
country.
Despite its abundant resources the country lags behind benefiting from the sector both in
terms of live animal and livestock products export due to the fact that animal husbandry is
mostly being carried out under traditional pasturing systems which in turn affect the
productivity, disease resistance and quality of the livestock products. Hence to ensure the
healthy growth and productivity of animals, it is necessary to provide them concentrate feed
with adequate energy, protein, vitamin and minerals.
Taking into account the growing livestock related products demand in the Middle East
market, backward linkage of the sector through supplying standardized and quality animal
feed becomes indispensable. Base General Agro-Processing Industry PLC is planning to
ENIY GENERAL BUSINESS PLC Page 43

develop in the cattle feed processing industry through producing standardized and quality
animal feed so as to enhance its livestock product output and features and supply the rest to
the market.
6.2 DEMAND ANALYSIS
6.2.1 VOLUME AND VALUE OF DEMAND

The demand for processed improved animal feed emanates directly from the demand for the
country’s livestock and livestock products. As the country is located to nearby Middle East
market export of live animals and meat is increasing at enormous rate despite the export
ban from the importing countries due to health and quality related problems originated from
lack of livestock improved feed, medicine, management etc.
As figure 12 indicates the feed usage experiences of the rural area of the country relay on
green fodder or grazing being the major type of feed accounting about 39 percent followed
by crop residue that is about 33 percent. Hay and by-products were also used as animal
feeds that comprise about 12 and 3 percent of the total feeds, respectively where as a very
small amount of improved feed only less than 1 percent was used as animal feed. In terms
number of holders about 13.0 million holders have used green fodder or grazing to feed
their animals while about 201 thousand holders used improved feed during the reporting
year 201/12.
FIGURE 8: ETHIOPIA LIVESTOCK HOLDERS USING DIFFERENT KINDS OF ANIMAL FEED

NO. of Holders
others By-product Hay Improved Crops residue Green

seeds Fodder
2011/12 4,187,532 1,046,053 4,045,779 201,243 11,124,702 13,012,645
2010/11 3,632,505 806,919 4,373,819 178,567 11,073,996 13,158,864
2009/10 3,548,044 903,056 4,048,369 162,750 10,569,128 12,294,191
2006/07 3,035,792 996,864 3,044,388 61,123 9,060,330 10,837,215
Source: CSA, Livestock survey report

Most farmers have small land holdings on which most of the livestock population is
concentrated. The smallholders' priority is to grow cereal grains for human consumption,
but these also provide crop resides like straw and Stover for their animals, which is low in
protein and energy. The major feed resources in the country are natural pasture and crop
residues, with agro industrial by-products and manufactured feed contributing much less.
Utilization of natural pasture is gradually declining because of the expansion of crop

production into grazing lands, redistribution of common lands to the landless and land
degradation. During the year 2010/11, the total cultivated land covered by the private
holdings reached around 13.4 million hectares showing an average growth of 3 percent per
annum from 10.9 million of hectares in year 2004/05.
Table 15: Cultivated and grazing land Use Area (hectares)
COUNTRY LEVEL
YEAR
Cultivated Grazing
2004/05 10,887,953 844,626
2005/06 11,292,572 NA
2006/07 11,787,775 987,415
2007/08 12,382,434 1,529,603
2008/09 12,896,910 1,383,839
2009/10 12,953,636 1,396,048
2010/11 13,358,881 1,708,624
Source: CSA
On the other hand, the utilization of grazing land is declining from year 2007/08 to 2008/09
owing to expansion of crop land into grazing lands. In order to find out the accurate demand
for processed animal feed identifying the capacity of dairy farms, cattle fattening industries
and poultry farms has paramount advantage.
Identifying the project target markets
Improved animal feeds are purchased by different types of users who deal with livestock and
poultry activities. These are subsistent and market-oriented rural farmers, urban dairy
producers and fatteners, commercial poultry producers, livestock and poultry traders,
abattoirs and live animal exporters.
Subsistent farmers: Some subsistent farmers purchase industrial processed
improved feed for their oxen and other preferred animals. This is the time when

availability of natural pasture and crop residues become very low. Subsistent farmers
who do not produce enough own crop residues and have limited grazing land a lso
buy process animal feed although in limited amount.
Market-oriented rural farmers: These farmers are involved in fattening and dairy
production. Fattening is extensively exercised by farmers residing in rural low land
areas while dairying is also undertaken in rural peasant associations and by
individual farmers.
Urban commercial farmers: Urban dairy is practiced in almost all study towns of
the country in different degrees.
Livestock traders: Livestock traders buy feed for their animals during trekking or
until they sell the animals.
Dairy and poultry farms: Existing as well as new commercial dairy and poultry
farms will be the major customers of the products.
Abattoirs/meat processors: Export abattoirs quarantine animals for more than 15
days before slaughtering. During this time, the abattoirs feed the animals improved
feeds.
Live animal exporters: Live animal exporters buy feed to provide for animals during
holding time and quarantine period.
National Disaster Prevention and Preparedness Commission (DPPC): The
scarcity of natural pasture and crop residue during the periods of rainfall shortage
and droughts satisfied by DPPC from supply of processed animal feed so as to prevent
consecutive effects followed by the livestock loss.
Export market: As observed from the performances of animal feed processing
industries in the country the industries have been exporting processed animal feed to
Djibouti market.
6.2.2 DEMAND FORECASTING
The demand for processed animal feed appears to be increasing in Ethiopia becaus e of the
increase in market-oriented livestock production activity. As indicated earlier the demand is
highly influenced by the size of the livestock population, awareness of farmers towards the
importance of the product and establishment of modern commercial livestock farms.
As table 18 indicated the livestock population of the country has been growing with an
average 4%, 7% and 6% for cattle, shoat and poultry respectively. At the same time the

demand for live animals, meat, and poultry products is increasing at much higher rate for the
past five years.
Table 16: Livestock population in the country (000’)
Cattle Sheep Goat
Year Number % growth Number % growth Number % growth

2004/05 38,749 18,076 14,859
2005/06 40,281 4% 20,722 15% 16,249 9%
2006/07 43,125 7% 23,633 14% 18,560 14%
2007/08 47,571 10% 26,117 11% 21,709 17%
2008/09 49,298 4% 16,962 -35% 21,799 0%
2009/10 50,884 3% 25,980 53% 22,345 3%
2010/11 53,382 5% 25,509 -2% 22,786 2%
2011/12 52,129 -2% 24,221 -5% 22,613 -1%
Average growth 4% 7% 6%
SOURCE: CSA
Considering conditional limiting factor such as product adaptability and awareness and
income of farmers and the like, only 10% of the cattle population are assumed to be fed with
industrially processed cattle feed initially. Thus demand for processed animal feed is
projected taking into account the livestock population growth indicated in the above table
and using the standardized annual livestock feed intake of 52.5 Kg and 20 Kg for cattle and
shoats respectively.
TABLE 17: PROJECTED ANIMAL FEED DEMAND AT COUNTRY LEVEL (TONS)
Cattle % Sheep % Goat %

Growth Growth Growth
2012/13 54,417.70 - 25,966.53 - 24,056.27
2013/14 56,806.87 4% 27,837.86 7% 25,591.65 6%
2014/15 59,300.95 4% 29,844.04 7% 27,225.03 6%
2015/16 61,904.53 4% 31,994.81 7% 28,962.65 6%
2016/17 64,622.41 4% 34,300.57 7% 30,811.18 6%
2017/18 67,459.62 4% 36,772.50 7% 32,777.70 6%
2018/19 70,421.40 4% 39,422.58 7% 34,869.72 6%
2019/20 73,513.21 4% 42,263.64 7% 37,095.27 6%
2020/21 76,740.77 4% 45,309.44 7% 39,462.86 6%
Source: Own calculation
The projected total demand for processed animal feed expected to reach 76,740 tons for
cattle fattening and 84,772 tons for shoat (sheep & goat) in 2020.

6.3 SUPPLY ANALYSIS

There are five animal feed mixers and millers in the country as observed during the study
period. The mixers and millers produce feed mixes for poultry, dairy and beef, in that order
of importance based on volume. As table below shows volume of animal feed produced by
these industries has shown an average growth of 15 percent per annum for the period
covering 2002/03 to 2006/07 and the maximum production of animal feeding industries
reached 13,218 tons during period 2005/06.
TABLE 18: ANIMAL FEED INDUSTRIES ESTABLISHMENTS AND QUANTITY PRODUCED IN TONS
QUANTITY
YEAR NO ESTABLISHMENTS
PRODUCED (TONS)
2002/03 3 6,567
2003/04 4 5,800
2004/05 5 10,501
2005/06 5 13,218
2006/07 1 8,392
2007/08 3 5,533
2008/09 14 16,779
2009/10 7 19,392
2010/11 11 19,563
Source: CSA, 2012
Profile of the major animal feed processing companies examine as follows.
 Mojo Animal Feed Mixer and Miller PLC, located in the town of Mojo, manufactures
feed for beef, dairy, poultry, sheep, and goats. The plant has a capacity to produce 40
quintals per hour. The manufactured feeds are sold to urban and rural farmers in beef
and dairy production, including fatteners residing in Adama town. The plant caters
mainly for fatteners followed by dairy and poultry farmers. The plant also exports
feeds to Djibouti. The plant uses corn, wheat screening, fine and coarse wheat bran,
linseed cake, noug seed cake, limestone, salt and premixes (vitamins and minerals) as
input for formulating the feeds.
 Bora Animal and Poultry Feed Processing PLC, located at Bishoftu town,
manufactures poultry, dairy, fattening, shoat and pig feeds. The factory sells the feeds
mostly to governmental poultry farms and also sells to associations and the National
Disaster Prevention and Preparedness Commission (DPPC).

 The Kality Feed Mixer and Miller PLC, located in Addis Ababa city was established
in 1976 by the Ethiopian Government and now owned by private investor. It
manufactures poultry, dairy, beef; sheep, goat and swine feed mixes. Most of its
produce is poultry and dairy feed mixes. The types of poultry feeds produced are
starter, layer, grower and broiler feed mixes, while the cattle feeds formulated are
dairy, heifer, calves, bulls and beef feed mixes. For sheep, goat and swine the factory
manufactures mother, kid, and fattener feeds. About 50% of dairy and poultry feed
mixes are sold to government institutions. Small farms also buy feed from the plant.
The factory has stable demand for dairy and poultry feed throughout the year.
6.4 DEMAND SUPPLY GAP
The increasing demand for animal feed is directly affected by the demand for livestock
related products. As the market for livestock related products is expanding both at local and
export market especially in the Middle East countries, maintaining quality of these products
becomes compulsory. The reservation from the importing countries is directly revealed by
various bans imposed on the country’s live animal and meat export. However with all these
problems the export of livestock related products is growing at enormous rate. Thus the
expansion of improved animal feed processing industries has a vital role for developing
sustainable livestock market so that the sector can attain the deserving return for the
products.
The animal feed supply of the country can’t satisfy the existing demand, since the supply is
almost nil compared to the abundant demand for the product. This gap between s upply and
demand is likely to increase with the expansion of market-oriented livestock production and
the gap will also results in rising feed costs to livestock producers. Therefore, there is a huge
unsatisfied demand gap which is expected to grow at higher rate.
6.5 PRICE ANALYSIS

The selling price of improved animal feed shown an enormous growth during the past years
due to the rise in price of raw materials. Whereas feed prices tend to be higher during the
dry and wet seasons and lower during the harvest seasons as a result of fluctuation on raw
material price.

Provided that the company is situated around Bereke area of Sednafa the unit price of the
products will depend on the location of the market. The price in central markets like Addis
Ababa will be higher because of the raw material transportation cost. However, this increase
in price is compensated by the large supply of inputs at lower cost in the region.
6.6 MARKETING CHANNEL

Compound animal feed is used in all class of livestock throughout the year that the demand
never gets affected with seasons so the proposed project can be started at any time of the
year. At the commencement of the project, it is important to have good knowledge the target
clients for a manufacturer of processed feed i.e. commercial da iry farms, cattle & shoat
fattening industries, poultry farms and market oriented urban and rural farmers.
Apart from the huge feed demand in the country, one of the major reasons to set up the
animal feed processing plant and the farm is to integrate the dairy farm and dairy processing
operation of Base General Agro-Processing Industry PLC. Besides, the marketing pattern
should be structured as follows.
FIGURE 9: ANIMAL FEED MARKETING CHANNEL
Manufacturer
Commercial dairy farms, Distribution outlets Urban and rural

Dairy processing farmers

ANIMAL FEED PROCESSING TECHNICAL STUDY 51
7 7. ANIMAL FEED PROCESSING TECHNICAL STUDY
7.1 FARM TECHNOLOGY AND ENGINEERING
7.1.1 PRODUCTION PROCESS
Animal feed mill preparation is an agro-based project in which locally available feed
resources taken from the farm which are rich in protein and carbohydrate are mixed
according to nutritional formula in order to raise the livestock in such a manner that when
fed to livestock, they get nutritionally balanced feed according to their body needs. The
process is done through semi mechanized and with/ without manual handling of different
feedstuffs.
The following steps are the major activities compound feed preparation stages.
Basic raw material, like maize, wheat bran, seed cake, limestone, rape seed, vitamins
and minerals are crashed to the size of coarse needed depending on the final product.
The raw materials are conveyed to the interim storage for accurate and precise
weighing.
Proportioning of correct materials takes place to ensure the output are properly
mixed
The coarse are then fed to the mixing section in accordance with pre calculated
quantity and composition,
The output of the mill is classified into different sizes by magnetic separators where
over size is sent back to the mill while the right size is fed to blending bin.
The final step is packaging the final output with 100 Kg PP bags then after proceed to
storage and then marketing stages.

FIGURE 10 PRODUCTION FLOW OF ANIMAL FEED PROCESSING PLANT
Raw materials Acceptance of feed Separators

collection ingredients And conveyors
Conditioning Mixing Crushing by

Hammer mill
Packaging Exit and storage
7.1.2 MATERIAL FOR USE (INPUT)
Maize
The supply of maize is consistent thorough out the year since it is the major crop grown in
the surrounding areas. Besides, the company will have its own farm on around 100 hectares
of land so as to supply its animal feed processing plant.
Wheat bran
There are three types of wheat bran supplied in the country fine, coarse and mixed. Mixed
bran is produced by some factories that do not sieve out the coarse bran. Wheat bran is also
differentiated based on the type of wheat. Good quality wheat bran is the one which has
good proportion of flour and husks, has not developed mould, is not solidified, is whitish in
color, is not adulterated with foreign materials and does not have bad odor and density is a
good indicator of quality for grind mill by-products the higher the density, the better the
quality.
There are flour mill industries and brewery industries in the country as source of wheat
bran and brewery grain. Besides the company’s farm will have its own contribution to
supply wheat.

SEED CAKES
The type of extraction method oil mill factories creates quality diffe rences. Modern and big
edible oil mills use organic solvent extraction method which squeezes most of the oil and the
resultant seed cakes are considered poorer in quality. The other extraction method is
mechanical pressing method, which is not efficient in oil extraction. The cake produced from
this method is considered of better quality. Seed cakes should contain some oil lest they
become very tough for the animals to feed on. Number of extractions also affects quality of
cakes. For example, seed cake obtained from second round extraction is preferred to the
cake obtained from the first round extraction since the latter has too high oil content.
The seed cakes supplied in the project site are from surrounding cities have medium and
small scale oil processing industries which will be the main seed cake supply for the project.
Moreover Gondar town is among the largest seed cake producer in the country, perhaps due
to its proximity to some of the major sesame and seed cake production areas in the country.
Salt
The project site is located near to the major salt producer Afar regional state will be
beneficiary from abundant supply.
Lime stone
Though only a small amount of lime stone is required as an input for the plan, there is
abundant Lime stone is available around the project site.
Vitamins and Minerals
Applying vitamin premix and mineral to animal feed compounding will enhance the ability of
the animals to resist multiple diseases and result in improved productivity and quality of the
livestock products. The project will import best quality vitamin and minerals from supplier
known in for its quality product.
7.2 ANIMAL FEED FARM TECHNICAL STUDY
7.2.1 LABOUR
Without the availability of manpower and good management the successes of the project is
very difficult. The project is near and easily accessible to few villages where unemployment

is high. Therefore, it will be good opportunity for the people living nearby to make a
difference in their lives through employment in the project.
7.2.2 IRRIGATION INFRASTRUCTURE
Benefits from year-round production using irrigation technique include year -round income,
retention of old customers, gain in new customers, and higher prices at times of the year
when other seasonal growers do not have produce. Other potential benefits of season
extension technologies are higher yields and better quality. In addition, with year -round
production you can provide or extended year-round employment for employees whom you
might otherwise lose to other jobs at the end of the growing season.
The main water source of the project will be river located nearby the project site. Besides the
project will have its own water well utilized as alternate source of irrigation.
7.2.3 MATERIALS INPUT
SEED
Improved seed verities will be applied for used for planting the selected maize and cotton
because they have the ability to resist multiple diseases and result superior yield. In this
instance improved seeds have above 90 percent germination capacity as compared to that of
ordinary one and the yield achieved from this seeds is 3 to 4 times more than to the ordinary
seeds.
Besides the company planned to develop nursery for its own future production and intended
for providing surrounding farmers so that they can produce an improved and similar quality
products with the company. This has advantages for both the company and farmers. The
farmers can benefit from sales of their product at the reasonable price and the company on
the other hand benefit from the continuous supply of the product in the exporting market so
that it can develop its own reputation the lives of the farmers.
FERTILIZER AND CHEMICALS
Appropriate quality and quantity of fertilizer plays a great role in the production and quality
of products. In this case, fertilization should be done at the soil bed preparation stage and
the second fertilization after 3 weeks interval the third after 6 weeks and finally during the
harvesting period.

THE PROJECT 55
8 8. THE PROJECT
8.1 THE PROJECT SITE

Selecting an optimum location for an investment is a critical issue in all industries,
regardless of the size of the company, or the type of operation that it is planning to establish.
Being in the right location is important as machinery, or any other project specifics.
When the project considers the existing project location the following factors has been taken
in to account. Access and closeness to market, nearness to the raw material source,
availability of labor, access to inputs and services, transportation facility, cost of acquiring
new land and other different factor has analyzed and consid ered in to account.
The envisage project is located in Oromia Region, Finfine Surrounding Special Zone, Berek
Woreda. As a result the project site location will not face shortage of labor, in addition there
are schools and the project can get skilled manpower easily.
The project town blessed with all infrastructures that are necessary for the project as well as
for work force. The project area has schools, markets place, electricity, tap water, river and
telephone and internet service as well as all the necessary public service.
Due to these facts the Existing location provides a competitive advantage compared to
competitors.
8.2 SOURCE OF TECHNOLOGY

The main parameter for selection of technology and country of origin for machinery supply
is based on the objective, which is to produce and supply quality of dairy products at
competitive price. Therefore, plant layout for better quality and civil construction cost,
machinery price, machineries capacity and efficiency, spare part status, operating cost,
process integrity and compatibility, product storage and handling, waste water and solid
waste management, guarantee, and so on are thoroughly to be evaluated.

56
8.3 LAND, BUILDING AND CIVIL WORKS

The Existing building and construction consists of production buildings, different stores,
office and service buildings, workshops and different infrastructure. The total area of these
building and construction is 8,335 m2 with estimated cost of Birr 9,745,000. The following
table shows the detail type of buildings and their respective value.
Table 19: ESTIMATED EXISTING COST BUILDING AND CONSTRUCTION
item Area (M2) Cost/M2 Total value (Birr)

Store 300 2,000 600,000
Shade for Cattle 3,000 1,500 4,500,000
Barn and feed lot 1,000 1,500 1,500,000
Guard House 20 1,500 30,000
Office 500 2,500 1,250,000
Fence and site work 400 100 40,000
Farm road 15 10,000 150,000
Animal feed processing and packing plant 500 1,700 850,000
Land clearing and development (Hectares) 100 2,000 200,000
Irrigation tunnel 2,500 250 625,000
Total 8,335 9,745,000
Based on the specification of the envisage plant machinery and projects internal
requirements, the planned project will undertakes different building and civil works such as
land clearing and leveling, sub-structure & super-structure of production hall and support
facility.
8.4 PROJECT MACHINERY AND EQUIPMENT REQUIREMENT

The machinery and equipment required for dairy processing and animal feed processing are
shown in table below. Dairy processing and animal feed processing has a capacity to
processing 2,630 liter per hour and 4,200 tons annum respectively.
Table 20 : COST OF MACHINERY AND EQUIPMENT
Qty Unit Price Total value (Birr)

(Birr)
FARM MACHINERY & EQUIPMENTS
Water pump 2 323,000 646,000
Tractor (75 HP) 1 1,600,000 1,600,000
MB plough 3 furrow plain 1 180,000 180,000
24 disc semi harrow 1 400,000 400,000
3 bottom disc plough Reverse 1 240,000 240,000
3 bottom disc plough plain 1 160,000 160,000

57
17 T inter cultivating spring 1 120,000 120,000

Duck foot cultivator 1 138,906 138,906
Welding machine 1 14,910 14,910
Major Farm Tools & Implement bulk 100,000 100,000
Generator 1 1,115,500 1,115,500
FEED PROCESSING MACHINES & EQUIPMENT - -
Animal feed processing plant 1 1,810,420 1,810,420
DAIRY PROCESSING MACHINERY AND EQUIPMENTS -
Water chiller 2 1,076,697 2,153,394
Air compressor 2 76,063 152,126
Cooling plate/Evaporator 2 807,523 1,615,045
Cream separator 2 1,023,859 2,047,718
Homogenizer 1 565,266 565,266
Packing tankers 2 94,709 189,419
Filling and packing machines 3 111,657 334,972
Automatic filling and packing machines 1 167,153 167,153
Cold room 1 412,181 412,181
LABORATORY ITEMS -
ACS system Electrical scale/Digital balance 2 6,480 12,960
Analyzer of milk quality 2 12,070 24,140
Dairy equipment 3 1,728 5,184
Refrigerator 1 30,000 30,000
Sub - total 14,235,294
LC Cost (3% of FOB Cost) 427,059
Freight (2.5% of FOB Cost) 355,882
Insurance (1% of FOB Cost) 142,353
Port Handling (1.5% of FOB Cost) 213,529
Inland Transport (1.5% of FOB Cost) 213,529
Installation (4% of FOB Cost) 569,412
Total 16,157,059
8.5 PROJECT VEHICLES

For the envisage project purpose the company intends to purchase three Van Mini Bus, Two
motor cycle, one automobile and one Cold Trucks and one field pickups and the total cost of
vehicles is estimated to be Birr 5,854,528. The main intention and purpose for the purchase
of these vehicles is presented as follows.

58
DOUBLE CABIN PICK UP - Continuous follow up and management is important to solve

problems at their beginning. Thus, the general manager and the site managers will use FWD
pick up daily for this purpose. In some emergency cases in the working area like accidents,
illness and others to be happened on employees; it will serve as an immediate means of
transportation to get emergency services.
8.6 OFFICE FURNITURE AND EQUIPMENT

To facilitate and speed up the office operation and to maintain motivated employee having
appropriate place of work and office furniture & equipment is inevitable. Beside q uality
service and product, having appropriate place of work and office furniture & equipment will
create good image on customers and stakeholders.
8.7 UTILITIES
Electricity and water are the predominant utilities required for any industry. The utilities
required and the corresponding cost is given in the annex.
As stated earlier the plant is going to be established in site that has the necessary
infrastructures like electricity, telephone, water, etc. are available in the town.
The utilities that are required for the textile industry are water, electric power and so on.
WATER: the municipality waters as well as the river water in the factory site will service as
source of water.
TELEPHONE AND EMAIL: The existing telephone line and internet connection is enough for
the envisage project.
8.8 PACKAGING
The paper and paper based products form an excellent packaging material for milk and milk
products. The papers are used in the form of boxes, bags, wrappers, cartons, cups etc. The
advantage of using paper is that it is weightless, capability for printing on the surface, low
cost and easy disposability. The disadvantages include low wet and tear strength. Packaging
is chosen to provide a barrier to moisture, oxygen and light. Bags generally consist of several
layers. As a criterion for packaging requirements for pasteurized milk in general, a shelf life
of several days at a temperature below 10°C can be assumed.

59
In any case, the empty packages are feed down conveyor belt to filling machinery, which is a
supply of the processed milk form bulk storage tank. The processed milk should be filled in
sterilized metal or glass bottles, cans to avoid fungus problems. Capped bottles should be
labeled properly. The label should give precise information about the milk ingre dients, date
of preparation and producer’s details. Then, packaging is performed automatically or
manually but the special (preferential) one is automatically. The packaging materials include
paper and paper based products (coated or lined), glass, tin pla te, aluminum foil, timber
(wood), plastics and laminates and so on.
ADVANTAGE AND DISADVANTAGE OF PACKAGING MATERIALS
 The papers are used in the form of boxes, bags, wrappers, cartons, cups etc. The
advantage of using paper is that it is weightless, capability for printing on the
surface, low cost and easy disposability. The disadvantages include low wet and
tear strength.
 The glass may be transparent or opaque. Glass is used in the form of bottles,
tumblers, jars, jugs etc. The advantages cited for glass as a packaging material
include its strength, rigidity, ability to have a barrier for water and gas and
inertness to chemical substances. The disadvantage is its heavy weight, and
weakness.
 It may be made up of a thin sheet (0.025 mm thick) of mild steel co ated on both
sides with a layer of pure tin. It is desirable to have an internally lacquered can,
which provides better resistance to corrosion. The advantages cited for tin
containers as a packaging material are their good strength and excellent barrier
properties. The disadvantages are their high cost, heavy weight, difficulty in closing
the lid of the container, and disposal. The containers are mostly used in the form of
can.
 The common thickness of the foil used is 0.012 – 0.015 mm. To increase corrosion
resistance, it may be lacquered (coated with lacquer) or a thin big screen of plastic
can be applied for packing dairy products. The advantages of these containers are
good barrier properties, grease proof, non-absorption, shrink proof, odorless,
tasteless, hygienic, non toxic, opaque to light, bright in appearance etc. The
disadvantage is its low tear strength, susceptibility to strong acids and alkalis.

60
 The merits of rigid plastic containers are its low cost and ease of fabrication. The
Disadvantages mentioned are lack of product compatibility, low barrier properties,
plastic deterioration, lack of resistance to high heat and fragility at lower
temperatures.
8.9 AUXILIARY UNITS

Central cooling (central refrigeration) consist of several different cooling s ystems operating
as an integrated system. Chemical refrigeration Sodium or potassium nitrate, when added to
water, lowered the water temperature and created a sort of refrigeration bath for cooling
substances. Non-cyclic refrigeration uses to extend the shelf life of processed milk. The first
step in the VSV (vacuum steam vacuum) process is the application of a vacuum to remove air
and moisture from the surface of the food. In the second step, steam is applied for a short
period of time to kill off pathogenic bacteria. The final step includes the application of a
vacuum to remove condensed steam and to cool the surface.
8.10 PROJECT IMPLEMENTATION SCHEDULE

It is estimated that around one year required for full operational of the project
implementation. The implementation schedule assumes that an efficient project
management team would be assigned from the very start of operation to implement the
project. The major activists of the project implementations includes credit application,
building construction & land development, procurement of machinery & equipment,
recruitment & training of manpower and sales of products.

ORGANIZATION AND MANAGEMENT 61
9. ORGANIZATION AND MANAGEMENT

9
The organization structure shows that the company will undertake corporate management
structure. There are the managerial department of administration and finance, operation
and logistic and marketing departments. There will be research, planning and IT service,
legal and audit services that assists the manager or the project coordinator. A project
coordinator assisted by a deputy or assistant project coordinator manages the coordinating
office.
It is understood that for successful and sustainable dairy products and animal feed
processing production in particular need to join minds and efforts and put in appro priate
place with modern management as well as market oriented technologies to be effective in
the local market computation.
The proposed project is structured to have a general manager who is responsible to plan,
organize, coordinate and supervise overall activities of the project. It will have seven
functionally related departments namely, Dairy processing, animal feed processing, Dairy
Farm, Administration and personnel, Marketing and sales, and property and administration
department. The heads of these departments are accountable to the General Manager of the
project.
The organizational structure of the envisaged project depicting the various relationships of
departments and sections is given below.

FIGURE 11: ORGANIZATIONAL STRUCTURE OF THE COMPANY

9.1 MANAGEMENT
The availability of managerial staff and skilled labor is a critical factor for success of a
project. A manager or supervisor of any firm should be equipped with the appropriate
qualification & experience for the success of an organization under his supervision.
The top planning and implementing body of the enterprise is the management te am
composed of General Manager, Finance Manager, and Marketing Manager
GENERAL MANAGER
The top managing organ of the Enterprise is the owner assisted by executive advisor and
General Manager and other management body respectively.
Some of the duties and responsibilities of the managing director and his assistant are:
To set business plan of the company on yearly basis,

To search for reputable customers and conclude contracts of export and imports
To appoint a General manager and Central Manager and follow – up his performance
on regular basis
To approve and sign payments
To conduct meeting of the management team this includes the Branch
representatives and regular basis.
To maintain contract with banks with associations and other relevant government
and non – government organization
Open new business
AVAILABILITY OF MANPOWER
Even though the core operation of the company require having knowledge, skill and
experience on the part of employees it could be fulfill by having on job training by people
from other Dairy processing, feed farm and animal feed processing factories. In addition,
the envisaged factory is to be established in area where there is potentially enough
manpower nearby. Hence, whether during implementation or operational phases, there
would be abundant skilled and semi-skilled job seekers in the labor market who will be
willing to join the company.

Base General Agro-Processing Industry PLC has planned to procure about 116 workers
including management & supervision personnel skilled & unskilled workers.
9.2 EMPLOYEE BENEFITS
As part of its initiatives to have a motivated and capable work force at all times, the company
extends to its employees the following employee benefits package starting from the
implementation phase:
Provident fund,
Medical service,
Insurance,
Uniform and safety devices,
Loan facilities depending up on the financial position of the company,
Canteen subsidy, etc.
On top of this, there is a plan to introduce Performance Incentive Scheme for core staff of the
company that undoubtedly benefits both parties in terms of uniting their objectives towards
meeting organizational goals and objectives.
9.3 RECRUITING AND TRAINING PLAN
Once the task of supply, erection and commissioning of the Factory’s machinery and
equipments is completed, hiring of both managerial and technical personnel shall follow suit
based on its pre-designed staffing plan.
In the training dimension, an arrangement is to be made with the supplier of the required
machineries to train the factory’s Technical Personnel on the process as well as on machine
utilization during the commissioning process. With respect to other staff, the company shall
allot adequate budget for Capacity Building Programs at the start of operation.

FINANCIAL ANALYSIS 65
10 10. FINANCIAL ANALYSIS
Financial Feasibility analysis provides a basis for a decision as to whether to proceed or not
with the establishment of the project. The basic assumption for financia l analysis of the
project is presented in key assumption part of this study. The financial study of the project is
conducted by taking into account the current changes price, technology and systems of
productions.
10.1 INVESTMENT COSTS AND SOURCES OF FINANCE
As shown in table below the total investment required for the project is estimated to be
approximately birr 133,461,822. The cost covers initial investment costs, working capital
requirements and pre-operating expenses. Out of the total estimated initial co sts, birr
9,745,000 will be for civil and construction works, approximately birr 16,157,059 for
machinery and equipment, birr 5,854,528 will be for vehicles, birr 82,373,499 will be
working capital. The rest of the investment cost is allocated for office eq uipment and
furniture, pre-production expenditure.
TABLE 21: TOTAL INITIAL INVESTMENT
DESCRIPTION TOTAL
Civil and construction work 9,745,000

Machinery and equipment 16,157,059
Motor Vehicles 5,854,528

Furniture and Fixtures 217,000
Subtotal Fixed investment 31,973,587
Pre-operating expense 19,114,736

Total Fixed investment required 51,088,323
working capital 82,373,499
Total investment required 133,461,822
The sources of finance for the total investment will be equity capital and long-term loan
obtained from Bank loan. The company will capitalize its owners a total of Birr 40 million
(30%) and the remaining balance for the envisage project Birr 93.4 million or 70 percent of
total investment will be obtained from loan.

TABLE 22: SOURCE OF FINANCING
SOURCE TOTAL VALUE PERCENTAGE

Capital contribution 40,038,546 30%
Loan 93,423,275 70%
Total initial investment 133,461,822 100
10.2 PROJECTED FINANCIAL STATEMENTS
Projections are made based on assumptions. Based on these assumptions, a complete set of
financial projections are provided in this section. These projections include profit/loss
statement, and statement of cash flow and balance sheets. The projections are prepared on
an annual basis.
According to projected annual revenue from sales of dairy processing product, animal feed
and culling the envisaged project will generate birr 119,860,465 during its first year of
operation and raises to birr 138,873,393 after the second year until it reach birr
205,434357 at the fifteen year of operation. The costs of sales are also projected to grow
from birr 67,125,772 during the first year to birr115,307,557 during the fifteen year.
It is projected that principal and interest on the loan will be paid over ten years , the
principal payment starts from the four year forwards of project implementation and
starting from the first year of operation the project will pay approximately birr 5 million in
interest on the long-term loan during the first year of operation.
Finally, the project will generate a net profit of Birr 27,879,833, Birr 29,953,838, Birr
34,954,193, Birr 44,827,101 and Birr 63,777,816 during the first, second, third ,fourth years
and fifth year, respectively, during which profit tax payments are exempted. During the six
year of operation, the net profit will be Birr 54,246,623 during which the company will pay
Birr 23,248,553 in corporate profit tax.

Table 23: SUMMARY OF PROFIT AND LOSS STATEMENT
Operating costs Project Year

1 2 3 4 5
Sales Revenue 119,860,465 138,873,393 162,436,064 187,436,064 205,434,357
Costs of Goods Sold (CGS) 67,125,772 83,030,322 101,461,897 116,373,501 115,307,557
EBIT 37,579,318 39,923,508 44,221,921 53,331,295 71,451,476
Interest payment 9,699,485 9,969,670 9,267,729 8,504,194 7,673,660
EBT 27,879,833 29,953,838 34,954,193 44,827,101 63,777,816
Depreciation & Amortization 7,104,209 7,104,209 7,104,209 7,104,209 7,104,209
Income Tax
EAT 27,879,833 29,953,838 34,954,193 44,827,101 63,777,816
10.3 FEASIBILITY ANALYSIS
Financial return analysis indicates that the project will generate an acceptable internal rate
of return. The internal rate of return (IRR) after tax for the pro ject is 31 percent. The net
present value (NPV) at a discount rate of 10 % is nearly Birr 267,200,531.
The results of the feasibility study conducted indicate that Base General Agro-Processing
Industry PLC has strong potential to be a successful enterprise if there are necessary
assistant from different organizations. The market for dairy products and animal feeds is
projected to grow at rapidly in the coming years at domestic markets. The products will be
supplied to high demanding domestic and save foreign currency to the country and improve
the lives of the local community through employment creation. Further, the company has a
plan to help the surrounding community by providing the required knowhow and
employment.
Accordingly, from the total investment requirement of the project, the company requests a
loan of Birr 93.4 million from Bank..

ANNEX 68
11. ANNEX

ANNEX 69
KEY ASSMUMPTIONS
Fact sheet
Number of shifts 1 per day
Working hours 8 hour per shift
Employees benefit 3% of wage and salaries

Traveling expense 10% of AS & SMS wage & salary
Professional Expense(Legal, Audit, consultancy etc) 150,000 Birr/annum
Land lease expenses 450,000 Birr/annum
Stationary & P.T.T 100,000 Birr/annum
Miscellaneous Expense 250,000 Birr/annum
Dividend 30% of net income
Promotional Expense 1% of annual revenue
Electric charge 0.6943 Birr/kwh + 134 service charge

Water charge 11.6 Birr/M3
Diesel 19.40 Birr/litter
Fuel cost Regular 18.78 Birr/litter
Oil & lubricant 10% of fuel cost
fire, lightening & floud 1.5% of building & machinery cost

Insurance rate
Vehicle 4% of vehicle cost
5% For Building
10% For machinery & equipment
Depreciation & amortization rate 20% For vehicle & pre-production
25% For computer and accessories
20% For furniture & fixture
2% For building & furniture

Repair & maintainace
1% For furniture & fixture
10% For vehicle

Spare parts
5% For vehicle
19.0185 Birr/USD
Exchange rate as of July 1st
24.7469 Birr/Euro
20.1318 Birr/CHF
Fuel And Lubricants 1.1

Raw Material 1.1
Yearly Increase in Expenses
Labor Salary 1.1
General Increase in Costs & revenue 1.1
Forex Depr. 1
Tax Rate 30%
Average inflation 17.7%
Discount Rate 10%
Grace Period On Repayment of Loan 3 year(s)
Interest rate on long term loan 8.5%
Loan repayment year 11 year(s)
Stationary and P.T.T 20,000 Birr/Year

Travel and Perdium 60,000 Birr/Year
Legal and audit fee 5,000 Birr/Year
Miscellaneous Expenses 100,000 Birr/Year

ANNEX 70
Assumptions for Dairy processing 21040

6,312,000
Fact sheet
Number of shifts 1 per day
Working hours 8 hour per shift
Attainable capacity production 2630 liter per hour
Year 1 80% /capacity
Capacity utilization
> Year 5 95% /capacity
Product mix
Product mix Unit Fat content

Pasteurized milk liters 0.35%
Mozzarella cheese Kgs 22%
Fontina cheese Kgs 45%
Provolone cheese Kgs 24%
Ricotta cheese Kgs 5%
Feta cheese Kgs 22%
Cream Kgs 30%
Butter Kgs 80%
Total
Selling price
Product mix Unit selling price (Birr)

Pasteurized milk liters 20
Mozzarella cheese Kgs 55
Fontina cheese Kgs 55
Provolone cheese Kgs 55
Ricotta cheese Kgs 55
Feta cheese Kgs 55
Cream Kgs 65
Butter Kgs 160
Yoghurt liters 18
Raw milk purchasing price 9 birr/litter

Packing material requiremnt and cost
Amount needed per

Unit of Amount needed per litter of
Discription Kg of youghert, cheese Unit cost (Birr)
measurement milk
and butter
Low density printed polythlen Kg 0.005 58.3
Printed parchment paper Kg 0.02 159.0
Chemicals requiremnt and cost
Unit of
Chemicals and starter cultures Amount needed per annum Unit price (Birr)
measurement
Soidum nitrate Kg 136 39.5
Calcium chloride Kg 141 25.5
Rennet powder Kg 190 2,050
Lactic acid gm 7,679 55

ANNEX 71
Animal feed processing plant Assumptions
Fact sheet
Working days per month 25
Number of shifts 1 shift
Working hours 8 hours/shift
Theoretical Processing capacity of Animal feed 14,000 Kilogram/shift
Attainable capacity of the plant 4,200,000 kg per annum
Capacity utilization
Calves 4% of total capacity
Haifers 23% of total capacity
Dairy cows 70% of total capacity
Product mix of animal feed Bulls 3% of total capacity
cattle fattening 0% of total capacity
Ewe 0% of total capacity
sheep fattening 0% of total capacity
inter farm use 80% of production
Market segmentation
local market 20% of production
Local market 100% of production
Market segementation for fattening
inter farm use 0% of production
Calves 2.2 Birr/Kg
Haifers 2.3 Birr/Kg
Dairy cows 2 Birr/Kg
Animal feeds selling price Bulls 2.4 Birr/Kg
Cattle fattening 1.9 Birr/Kg
Ewe 2.5 Birr/Kg
sheep fattening 2.5 Birr/Kg
Raw material mix
Calves Haifers Dairy cows Bulls cattle fattening Ewe sheep fattening
Maize 5% 3% 3% 10% 6% 15% 5%
Wheat bran 35% 30% 0% 30% 10% 4% 30%
Wheat bran flour 30% 39% 9% 25% 0% 6% 37%
Mixed wheat barn 0% 0% 59% 0% 50% 25% 0%
Nugo seed 20% 24% 22% 22% 24% 49% 27%
salt 2% 2% 2% 2% 1% 1% 1%
Lime stone 3% 3% 5% 4% 4% 0% 1%
Rape seed 6% 0% 0% 0% 4% 0% 0%
Aquri ater 0% 0% 0% 7% 1% 0% 0%
vitamins (pre mix) 0.0% 0.0% 0.3% 0.0% 0.0% 0.0% 0.0%
Total 100% 100% 100% 100% 100% 100% 100%
Maize
5.0 Birr/kg
Wheat bran 9.0 Birr/kg
Wheat bran flour 9.0 Birr/kg
Mixed wheat barn 9.0 Birr/kg
Raw material purchasing price Nugo seed 8.0 Birr/kg
salt 4.0 Birr/kg
Lime stone 5.5 Birr/kg
Rape seed 11.0 Birr/kg
Aquri ater 10.0 Birr/kg
vitamins (pre mix) 31.8 Birr/kg
Packing material requirement PP Bag 42,000 Pcs of PP bag
Packing material Purchasing price PP bag 13 Birr/pcs

ANNEX 72
DAIRY FARM ASSUMPTIONS
Fact sheet
Number of Breeding cows 400 pcs
Purchasing price 30,000 Pcs
Productive life 7.5 Years old
Gestation period 9.5 months
Lactation period 305 Days
Calving Interval 365 Days
Male calves wil be transfered between 0-4
Months after birth to cattlefatening
Yield per cow 30 liters
Milk wasage from milk produced 0.50%
Calving rate 80%
Mortality Rate
Cows 2%
Hiefers 2-3 Years 3%
Male Calves 5%
Female Calves 10%
Culling Rate
Cows 10%
Hiefers 1-2 years 0%
Male Calves 100%
Female Calves 0%

ANNEX 73
Feed requirement
Description Unit of Measure Daily Intake Lengh of Feeding Days Total Requirements
Male Calves (0-15days)
Colostrum lit 0.75 4 3
Whole milk lit 0.23 11 2.5
concentrate kg 0.12 7 0.84
Hay kg 0.15 7 1.05
Female Calves (0-6 Months)
Colostrum lit 0.75 4 3
Whole milk lit 3 70 210
concentrate kg 1.05 110 115
Hay kg 1.3 110 143
Female Calves (6-12 Months)
Concentrate kg 1.09 180 197
Hay Mixture kg 1.36 180 245
Hiefers 1-2 Years
Concentrate kg 1.8 365 657
Hay Mixture kg 4.2 365 1533
Hiefers 2-3 Years
Concentrate kg 2.7 365 985.5
Hay Mixture kg 6.3 365 2299.5
Milking Cows
Concentrate kg 6 285 1710
Roughage kg 10 285 2850
Pregnant Cows 0
Hay kg 7 75 525
Dry Cows 0
Purchasing price
Colostrum Inter farm use
Whole milk Inter farm use
concentrate kg Inter farm use
Hay kg Inter farm use
Hay mixture kg Inter farm use
Roughage kg 10 birr/kg
Selling price for culling 2,000 Birr/pc

Selling price for cow culling 2,000 Birr/pc
Selling price for hiefers 1,500 Birr/pc

ANNEX 74
PROJECT BASICS
HUMAN RESOURCE REQUIREMENT
Year 1 Year 2 Year 3 Year 4 Year 5

Direct labor 933,000 # 1,026,300 # # 1,128,930 1,241,823 1,366,005
Selling and distribution 672,000 # 739,200 # # 813,120 894,432 983,875
General and Administration 1,369,200 # 1,506,120 # # 1,656,732 1,822,405 2,004,646
Total 2,974,200 3,271,620 3,598,782 3,958,660 4,354,526
UTILITIES
Elecricity & water
Machinery power
Description Annual reqirement Unit cost Total cost
installed (KW)
Elecricity Consumption (Kw)

Dairy processing 200 480,000 0.69 333,264
Animal feed processing 100 240,000 0.69 165,600
Auxilary machine 25 168,750 0.69 117,163
Water (m3/hr) 12 81,000 11.60 939,600
Total 1,555,627
Fuel, Oil and Lubricants
Total Fuel
Description Quantity KM,Hr/Year Lt / Km,Lt/Hr Total Cost
Requirements (Liters)
Production purpose machinery,vehicles & generator
Motor cycle 3 15000 0.07 3000 58,200

Cold Trucks 1 45,000 0.125 5,625 109,125
GENERATOR (90-135 KVA) 1 1,200 10.0 12,000 232,800
Van 5 90,000 0.1 45,000 873,000
Oil & Lubricant (10%) 127,313
Total 1,400,438
Adminstrative purpose vehicles
4 SEAT AUTOMOBILE 1 56,000 0.14 8,000 150,240

Oil & Lubricant (10%) 15,024
Total 2,907,939

ANNEX 75
INSURANCE
Description Total cost Cost of Insurance
Fixed Assets 26,119,059 391,786

Vehicles 5,854,528 234,181
Total 625,967
REPAIR & MAINTAINACE
Description Total cost Cost of Rep & maintain
Building and construction 9,745,000 194,900

Machinery & Equipment 16,157,059 807,853
Vehicle 5,854,528 1,170,906
Office Furniture & Equipment 217,000 43,400
Total (Birr) 2,217,059
SPAREPARTS
Description Total cost Cost of spareparts
Machinery & Equipment 16,157,059 1,615,706

Vehicle 5,854,528 292,726
Total (Birr) 1,908,432
DEPRECIATION & AMORTIZATION
Description Total cost Cost of D & A
Building and Civil Work 9,745,000 487,250

Machineries and Equipment 16,157,059 1,615,706
Vehicles 5,854,528 1,170,906
Office Furniture and Equipment 217,000 43,400
Pre-production expence 19,114,736 3,822,947
Total (birr) 51,088,323 7,140,209

ANNEX 76
Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales Revenue 119,860,465 138,873,393 162,470,822 187,436,064 205,434,357 225,258,293 246,732,755 270,051,001 295,408,906 322,885,255
Dairy processing 114,257,465 133,538,412 155,532,974 180,591,064 198,650,170 218,515,187 240,366,706 264,403,377 290,843,714 319,928,086
Culling sell 384,000 371,712 364,783 527,094 680,332 826,061 1,038,086 1,316,303 1,649,121 2,070,381
Feed processing 5,219,000 4,963,270 6,573,065 6,317,907 6,103,856 5,917,046 5,327,963 4,331,321 2,916,071 886,788
Plant capacity 85% 90% 95% 95% 95% 95% 95% 95% 95% 95%
Direct Labour 933,000 1,026,300 1,128,930 1,241,823 1,366,005 1,502,606 1,652,866 1,818,153 1,999,968 2,199,965
Raw Material and packing material cost 59,111,216 74,214,311 91,764,285 105,706,128 103,573,446 112,194,250 119,823,774 126,778,578 133,751,793 140,006,277
Local Raw material 56,847,006 71,477,236 88,482,415 101,797,875 99,177,707 # 107,358,937 114,504,929 # 120,927,849 # 127,315,991 # 132,926,894
Imported Raw material - - - - - - - - - -
Packing material 2,264,210 2,737,074 3,281,869 3,908,253 4,395,739 4,835,313 5,318,845 5,850,729 6,435,802 7,079,382
Labor and staff 933,000 1,026,300 1,128,930 1,241,823 1,366,005 1,502,606 1,652,866 1,818,153 1,999,968 2,199,965
Labor and staff benefit - - - - - - - - - -
Plant Overhead Costs 7,081,555 7,789,711 8,568,682 9,425,550 10,368,105 11,404,916 12,545,408 13,799,948 15,179,943 16,697,937
overhead materials- spare parts & maint.

Repair & maintainace 2,217,059 2,438,764 2,682,641 2,950,905 3,245,995 3,570,595 3,927,654 4,320,420 4,752,462 5,227,708
Spare parts 1,908,432 2,099,276 2,309,203 2,540,123 2,794,136 3,073,549 3,380,904 3,718,995 4,090,894 4,499,984
Utilities 1,555,627 1,711,189.8 1,882,308.8 2,070,539.7 2,277,593.7 2,505,353.0 2,755,888.3 3,031,477.2 3,334,624.9 3,668,087.4
Production Purpose Fuel & lubricant 1,400,438 1,540,481 1,694,529 1,863,982 2,050,381 2,255,419 2,480,960 2,729,057 3,001,962 3,302,158
Plant Cost (CGS) 67,125,772 83,030,322 101,461,897 116,373,501 115,307,557 125,101,772 134,022,047 142,396,679 150,931,705 158,904,179
Administration & Selling Expenses 8,015,167 8,779,355 9,646,795 10,591,060 11,535,116 12,573,837 13,713,111 14,963,276 16,335,535 17,840,843
administration expenses 5,644,182 6,101,004 6,603,507 7,156,261 7,764,291 8,433,124 9,168,841 9,978,129 10,868,346 11,847,580
Professional Expense 150,000 165,000 181,500 199,650 219,615 241,577 265,734 292,308 321,538 353,692
Stationary & P.T.T 100,000 110,000 121,000 133,100 146,410 161,051 177,156 194,872 214,359 235,795
Land lease expenses 450,000 450,000 450,000 450,000 450,000 450,000 450,000 450,000 450,000 450,000
Insurance 625,967 625,967 625,967 625,967 625,967 625,967 625,967 625,967 625,967 625,967
Admin. & selling purpose fuel & lubricant 2,907,939 3,198,733 3,518,606 3,870,467 4,257,513 4,683,265 5,151,591 5,666,750 6,233,426 6,856,768
Adminstrative staff Salary 1,369,200 1,506,120 1,656,732 1,822,405 2,004,646 2,205,110 2,425,621 2,668,183 2,935,002 3,228,502
Adminstrative staff Benfit 41,076 45,184 49,702 54,672 60,139 66,153 72,769 80,046 88,050 96,855
selling expenses 2,120,985 2,403,352 2,740,788 3,102,048 3,404,800 3,738,085 4,101,380 4,497,968 4,931,293 5,403,776
Promotional Expense 1,198,605 1,388,734 1,624,708 1,874,361 2,054,344 2,252,583 2,467,328 2,700,510 2,954,089 3,228,853
Traveling Expense 230,220 253,242 278,566 306,423 337,065 370,772 407,849 448,634 493,497 542,847
Selling staff Salary 672,000 739,200 813,120 894,432 983,875 1,082,263 1,190,489 1,309,538 1,440,492 1,584,541
Selling staff Benfit 20,160 22,176 24,394 26,833 29,516 32,468 35,715 39,286 43,215 47,536
Miscellaneous Expense 250,000 275,000 302,500 332,750 366,025 402,628 442,890 487,179 535,897 589,487
Operating Costs 8,015,167 8,779,355 9,646,795 10,591,060 11,535,116 12,573,837 13,713,111 14,963,276 16,335,535 17,840,843
Depreciation 7,140,209 7,140,209 7,140,209 7,140,209 7,140,209 3,317,262 3,317,262 3,317,262 3,317,262 3,317,262
Total Production Cost 82,281,147 98,949,886 118,248,901 134,104,770 133,982,882 140,992,870 151,052,420 160,677,217 170,584,502 180,062,284
EBIT 37,579,318 39,923,508 44,221,921 53,331,295 71,451,476 84,265,424 95,680,335 109,373,785 124,824,405 142,822,971
Interest 9,699,485 9,969,670 9,267,729 8,504,194 7,673,660 6,770,248 5,787,564 4,718,652 3,555,944 2,291,211
EBT 27,879,833 29,953,838 34,954,193 44,827,101 63,777,816 77,495,175 89,892,771 104,655,133 121,268,461 140,531,760
Income tax (30%) 23,248,553 26,967,831 31,396,540 36,380,538 42,159,528
EAT 27,879,833 29,953,838 34,954,193 44,827,101 63,777,816 54,246,623 62,924,940 73,258,593 84,887,922 98,372,232

ANNEX 77
Cash Flow Statement
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
CASH INFLOWS
Owner's Equity 40,038,546
Bank Loan 93,423,275
Net Profit 27,879,833 29,953,838 34,954,193 44,827,101 63,777,816 54,246,623 62,924,940 73,258,593 84,887,922 98,372,232
Depreciation & amortization 7,140,209 7,140,209 7,140,209 7,140,209 7,140,209 3,317,262 3,317,262 3,317,262 3,317,262 3,317,262
Total Cash Inflows 133,461,822 35,020,041 37,094,046 42,094,401 51,967,310 70,918,025 57,563,884 66,242,201 76,575,855 88,205,184 101,689,493
Cash Outflows
Inv'ment on Fix. Assets (31,973,587)
Working Capital (82,373,499) - (16,658,798) (19,284,991) (15,871,469) 21,505 (7,160,313) (10,118,299) (9,697,324) (9,990,745) (9,577,339)
Pre-production Cost
(19,114,736)
& interest
Replacement (6,071,528)
Loan Repayment 18,814,704 (8,701,458) (9,464,993) (10,295,527) (11,198,939) (12,181,623) (13,250,535) (14,413,243) (32,731,661) -
Dividend (30%) - (8,363,950) (8,986,151) (10,486,258) (13,448,130) (19,133,345) (16,273,987) (18,877,482) (21,977,578) (25,466,377)
Total Cash Outflows (133,461,822) 18,814,704 (33,724,206) (37,736,136) (36,653,253) (30,697,092) (38,475,281) (39,642,821) (42,988,049) (64,699,984) (35,043,716)
Net Cash Flow - 53,834,745 3,369,840 4,358,265 15,314,056 40,220,933 19,088,603 26,599,380 33,587,806 23,505,200 66,645,777
Cum. Cash Balance - 53,834,745 57,204,586 61,562,851 76,876,907 117,097,840 136,186,444 162,785,823 196,373,629 219,878,829 286,524,606

ANNEX 78
Projected Balance Sheet
Inv't Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
ASSETS
CURRENT ASSETS
Cash Balance 53,834,745 57,204,586 61,562,851 76,876,907 117,097,840 136,186,444 162,785,823 196,373,629 219,878,829 286,524,606
Current assets 85,618,090 85,618,090 103,098,320 123,337,550 139,959,224 139,803,657 147,431,137 157,960,354 168,029,817 178,392,301 188,299,883
Total Current Assets 85,618,090 139,452,835 160,302,906 184,900,401 216,836,131 256,901,497 283,617,580 320,746,177 364,403,447 398,271,130 474,824,489
FIXED ASSETS
Building and construction 9,745,000 9,257,750 8,770,500 8,283,250 7,796,000 7,308,750 6,821,500 6,334,250 5,847,000 5,359,750 4,872,500
Machineries and Equipment 16,157,059 14,541,353 12,925,647 11,309,941 9,694,236 8,078,530 6,462,824 4,847,118 3,231,412 1,615,706 (0)
Vehicles 5,854,528 4,683,622 3,512,717 2,341,811 1,170,906 5,854,528 4,683,622 3,512,717 2,341,811 1,170,906 -
Office Furniture and Equipment 217,000 173,600 130,200 86,800 43,400 217,000 173,600 130,200 86,800 43,400 -
Total Fixed Assets 31,973,587 28,656,326 25,339,064 22,021,803 18,704,541 21,458,808 18,141,546 14,824,285 11,507,023 8,189,762 4,872,500
Pre-Production Cost & Interest 19,114,736 15,291,788 11,468,841 7,645,894 3,822,947 -
Total Assets 136,706,412 183,400,949 197,110,811 214,568,098 239,363,620 278,360,305 301,759,126 335,570,462 375,910,470 406,460,891 479,696,989
LIABILITIES & Capital
LIABILITIES:
Current liablities 3,244,591 3,244,591 4,066,024 5,020,262 5,770,467 5,636,406 6,103,572 6,514,490 6,886,629 7,258,368 7,588,610
Dividend Payable 8,363,950 8,986,151 10,486,258 13,448,130 19,133,345 16,273,987 18,877,482 21,977,578 25,466,377 29,511,670
Long term loan
Bank Loan 93,423,275 112,237,979 103,536,521 94,071,528 83,776,001 72,577,062 60,395,439 47,144,904 32,731,661
Sub Total 96,667,866 123,846,520 116,588,696 109,578,048 102,994,598 97,346,812 82,772,998 72,536,876 61,595,868 32,724,744 37,100,280
CAPITAL:
Owner's Equity 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546 40,038,546
Retained Earnings 19,515,883 40,483,569 64,951,504 96,330,475 140,974,946 178,947,582 222,995,040 274,276,055 333,697,601 402,558,163
Sub total 40,038,546 59,554,429 80,522,116 104,990,050 136,369,021 181,013,493 218,986,128 263,033,586 314,314,601 373,736,147 442,596,709
Total Liabil.& Capital 136,706,412 183,400,949 197,110,811 214,568,098 239,363,620 278,360,305 301,759,126 335,570,462 375,910,470 406,460,891 479,696,989

ANNEX 79
Working capital requirement

Coverage Inv't Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
CURRENT ASSETS
Accounts Receivable 10 2,087,248 2,087,248 # # 2,550,269 3,086,353 3,526,793 3,523,408 # # 3,824,322 # # 4,103,754 # # 4,371,110 # # 4,646,312 # # 4,909,584
Inventory 3,053,705 3,053,705 3,818,077 4,705,714 5,413,958 5,319,592 5,764,126 6,160,446 6,524,514 6,891,135 7,223,616
Raw Material
local raw material 15 2,368,625 2,368,625 # # 2,978,218 3,686,767 4,241,578 4,132,404 # # 4,473,289 # # 4,771,039 # # 5,038,660 # # 5,304,833 # # 5,538,621
imported raw material 0 - - - - - - - - - - -
Packing material 15 94,342 94,342 # # 114,045 136,745 162,844 183,156 # # 201,471 # # 221,619 # # 243,780 # # 268,158 # # 294,974
Work-in-progress 1 186,460 186,460 230,640 281,839 323,260 320,299 347,505 372,283 395,546 419,255 441,400
Finished Products 2 404,278 404,278 495,174 600,363 686,276 683,732 741,861 795,505 846,527 898,889 948,621
Spare parts 15 79,518 79,518 87,470 96,217 105,838 116,422 128,065 140,871 154,958 170,454 187,499
Cash in hand(Petty cash) 10 80,397,618 80,397,618 96,642,505 115,449,267 130,912,634 130,844,236 137,714,624 147,555,283 156,979,236 166,684,399 175,979,183
Total Current Assets 85,618,090 85,618,090 103,098,320 123,337,550 139,959,224 139,803,657 147,431,137 157,960,354 168,029,817 178,392,301 188,299,883
Increase in current Assets 17,480,231 20,239,230 16,621,674 (155,567) 7,627,479 10,529,218 10,069,463 10,362,484 9,907,582
CURRENT LIABILITIES
Accounts Payable 20 3,244,591 3,244,591 0 0 4,066,024 5,020,262 5,770,467 5,636,406 # 0 6,103,572 # 0 6,514,490 # 0 6,886,629 # 0 7,258,368 # 0 7,588,610
Increase in current liabilities 821,433 954,239 750,205 (134,062) 467,166 410,918 372,139 371,738 330,243
WORKING CAPITAL
Net working Capital 82,373,499 82,373,499 99,032,297 118,317,288 134,188,757 134,167,252 141,327,565 151,445,864 161,143,188 171,133,933 180,711,273
Increase in working capital 82,373,499 - 16,658,798 19,284,991 15,871,469 (21,505) 7,160,313 10,118,299 9,697,324 9,990,745 9,577,339

ANNEX 80

ANNEX 81
Human Resource Requirment

No. of Salary
Job Title Employees per month Yearly salary
General Manager 1 40,000 480,000

D/General manager 1 15,000 180,000
Secretary 1 3,000 36,000
Total 3 516,000
Production Department
Dairy processing
Head of Dairy processing 1 3,500 42,000
Head of Paurization 1 2,800 33,600
Head of cheese making 1 1,200 14,400
Assistant Pasturization
Quality control head 2 2,200 52,800
Multi purpose worker 3 800 28,800
Multipurpose assistant 3 800 28,800
Laberatory technicianes 1 2,800 33,600
Assitant laboratory 4 2,000 96,000
Veternary 2 4,500 108,000
Animal feed processing and Feed Farm
Farm manger 1 2,500 30,000
Feed processing plant manager 1 550 6,600
Operator 3 500 18,000
Tractor operator 2 750 18,000
Dairy Farm
Farm Manager 1 2,500 30,000
Thecnical Assistant 1 2,500 30,000
Milkers 2 2,400 57,600
Feeders 10 1,100 132,000
Cleaner 12 1,200 172,800
Total 51 933,000
Administration and personnel Department
Personnel head 1 3500 42000
Personnel clerk 3 1500 54000

Filling Clerk 2 1500 36000
Drivers 5 1500 90000
Guards 10 700 84000
Janitor 6 600 43200
Total 27 349,200
Marketing Study, promotion and Sales manager
Marketing officer 6 4,000 288,000

Milk distributor 6 2,000 144,000
Sales persons 8 2,500 240,000
Total 20 672,000
Property Administration and procurement manager
Purchaser 2 4,000 96,000

Delivery supervisor 1 4,000 48,000
Spare parts and supplies store keeper 3 1,500 54,000
6 198,000
Finance Department
Finance Manager 1 6,000 72,000
Accountants 5 3,000 180,000
Data entry clerks 3 1,500 54,000
9 306,000
Total 116 2,974,200

ANNEX 82
Liquidity Ratios
Current Ratio 10.16 10.53 10.34 9.68 8.48
Quick Ratio 9.89 10.24 10.03 9.40 8.27
Net Working Capital Ratio 0.58 0.63 0.67 0.70 0.67
Current Liabilities to Inventory Ratio 3.80 3.42 3.30 3.55 4.66
Cash Ratio 4.64 4.38 3.97 4.00 4.73
Asset Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Inventory Turnover Ratio 39.25 36.37 34.53 34.62 38.62
Fixed Assets Turnover Ratio 4.18 5.48 7.38 10.02 10.15
Total Assets Ratio 0.65 0.70 0.76 0.78 0.74
Asset to Equity Ratio 3.08 2.45 2.04 1.76 1.53
Solvency ratios
Total Debt Ratio 0.68 0.59 0.51 0.43 0.35
Interest Coverage Ratio 3.87 4.00 4.77 6.27 9.31
Solvency ratios 1.48 1.69 1.96 2.32 2.85
Debt/Equity Ratio 2.08 1.45 1.04 0.76 0.54
Profitability Ratios
Earnings per Share 0.70 0.75 0.87 1.12 1.59
(EPS) Ratio
Basic Earnings Power Ratio 0.20 0.20 0.21 0.22 0.26
Price to Earnings Ratio(15X) 21.54 20.05 17.18 13.40 9.42
Price to Cash Flow Ratio 11.16 10.50 9.76 7.81 5.13
Payout Ratio 0.30 0.30 0.30 0.30 0.30
Gross Profit margin 0.44 0.40 0.38 0.38 0.44
Net profit margin 23% 22% 22% 24% 31%
ROI 70% 75% 87% 112% 159%

Return on Investment
ROA 15% 15% 16% 19% 23%
ROCE
Return on Capital Employed 57% 67% 81% 100% 107%
Return on Assets Ratio 0.15 0.15 0.16 0.19 0.23
Return on Equity Ratio 0.40 0.32 0.29 0.28 0.32

ANNEX 83
Major Inputs
Investment Structure
Total Investment 133,461,821.58 100% 25
40,038,546.47 30%
93,423,275.10 70%
Average Inflation 18%

Discount Rate 10%
Interest rate -
Long term loan 9%
Deposit 0%
Loan Repayment period 8 years
Total investment
8
NPV 267,200,531
IRR 31%
Debt Equity
NPV 303,599,210
IRR 43%
Owner's Equity
NPV 181,530,831
IRR 71%

ANNEX 84
Investment detail
17
žBuilding and Civil Works
Area (M2) Cost/M2 Total value (Birr)

Store 300 2,000 600,000
Shade for Cattle,goats & sheep 3,000 1,500 4,500,000
Barn and feed lot 1,000 1,500 1,500,000
Guard House 20 1,500 30,000
Office 500 2,500 1,250,000
Fence and site work 400 100 40,000
Farm road 15 10,000 150,000
Animal feed processing and packing plant 500 1,700 850,000
Land clearing and development (Hectars) 100 2,000 200,000
Irrigation tunnel 2,500 250 625,000
Total 8,335 9,745,000
žMachinery and equipment
Qty Unit Price (Birr) Total value (Birr)

Farm machinery & equipments
Water pump 2 323,000 646,000
Tractor (75 HP) 1 1,600,000 1,600,000
MB plough 3 furrow plain 1 180,000 180,000
24 disc semi harrow 1 400,000 400,000
3 bottom disc plough Reverse 1 240,000 240,000
3 bottom disc plough plain 1 160,000 160,000
17 T inter culitivating spring 1 120,000 120,000
Duck foot culitvator 1 138,906 138,906
Welding machine 1 14,910 14,910
Major Farm Tools & Implement bulk 100,000 100,000
Generator 1 1,115,500 1,115,500
Feed processing mahcines & equipment - -
Animal feed processing plant 1 1,810,420 1,810,420
Dairy processing machinery and equipments -
Water chiller 2 1,076,697 2,153,394
Air compressor 2 76,063 152,126
Cooling plate/Evaporator 2 807,523 1,615,045
Cream separator 2 1,023,859 2,047,718
Homogenizer 1 565,266 565,266
Packing tankers 2 94,709 189,419
Filling and packing machines 3 111,657 334,972
Automatic filling and packing machines 1 167,153 167,153
Cold room 1 412,181 412,181
Laboratory items -
ACS system Electrical scale/Digital balance 2 6,480 12,960
Analyzer of milk quality 2 12,070 24,140
Dairy equipment 3 1,728 5,184
Refrigrator 1 30,000 30,000
Sub - total 14,235,294
LC Cost (3% of FOB Cost) 427,059
Freight (2.5% of FOB Cost) 355,882
Insurance (1% of FOB Cost) 142,353
Port Handling (1.5% of FOB Cost) 213,529
Inland Transport (1.5% of FOB Cost) 213,529
Installation (4% of FOB Cost) 569,412
Total 16,157,059
žVehicles
Qty Unit price Total value (Birr)

Motor cycles 2 29,764 59,528
Cold Trucks 1 850,000 850,000
Van 5 750,000 3,750,000
4 seat automobile 1 650,000 650,000
Field pick up 1 545,000 545,000
Total 5,854,528
žOffice and fixture
Qty Unit Price Total value (USD)

Executive Table 4 10,000 40,000
Swivel chair 4 2,200 8,800
Secretarial Table 4 2,200 8,800
Swivel chair for Secretary 4 1,800 7,200
Office Table 4 2,000 8,000
Guest Chair 15 2,000 30,000
Computer 10 8,000 80,000
Printer 2 4,000 8,000
Fax machine 2 2,000 4,000
Office Shelves 6 2,150 12,900
Filing Cabinet 6 1,550 9,300
Total 217,000

ANNEX 85

ANNEX 86
Operating and net profit

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2013

DAIRY PROCESSING, FEED

BASE GENERAL AGRO-PROCESSING

Base General Agro-Processing Industry PLC Page 2

7.2.2 IRRIGATION INFRASTRUCTURE .................................................................................................................................... 54

Base General Agro-Processing Industry PLC Page 3

FIGURE 1 : PROJECTED GDP GROWTH OF ETHIOPIA ......................................................................................................................17

FIGURE 2 : ETHIOPIA GDP PER CAPITA..............................................................................................................................................18

FIGURE 3 : IMPORT TREND FOR DAIRY PRODUCT DURING 2008-2012 ......................................................................................19

FIGURE 4 : PROJECT DEMAND ............................................................................................................................................................26

Figure 5: FLOW DIAGRAM FOR PROCESSES MILK PROCESS .........................................................................................................34

FIGURE 6 : FLOW DIAGRAM OF BUTTER MAKI NG ..........................................................................................................................40

FIGURE 7 : FLOW DIAGRAM OF CHEESE MAKING ...........................................................................................................................41

FIGURE 9 : ANIMAL FEED MARKETING CHANNEL ...........................................................................................................................50

FIGURE 10 PRODUCTION FLOW OF ANIMAL FEED PROCESSING PLANT ...................................................................................52

FIGURE 12: ORGANIZATIONAL STRUCTURE OF THE COMPANY ..................................................................................................62

Base General Agro-Processing Industry PLC Page 4

TABLE 4: LOCAL DAIRY PRODUCTION...............................................................................................................................................20

TABLE 5: EXPORT TREND FOR DAIRY PRODUCT DURING 2008-2012 .........................................................................................21

TABLE 7: MAJOR PRIVATE DAIRY ENTERPRISE................................................................................................................................23

TABLE 8: PROJECTS LICENSED BY FEDERAL AS WELL AS REGIONAL INVESTMENT OFFICES ...................................................24

TABLE 10: TO TAL SUPPLY....................................................................................................................................................................25

TABLE 11: PROJECT DEMAND ............................................................................................................................................................26

Table 12: project demand ..................................................................................................................................................................27

Table 13: Dairy product price ............................................................................................................................................................27

TABLE 14: ASSUMPTION .....................................................................................................................................................................31

TABLE 15: FULL PRODUCTION CAPACITY OF DAIRY PROCESSING PRODUCTS ..........................................................................32

TABLE 16: CAPACITY UTILIZATION ....................................................................................................................................................32

Table 17: Cultivated and grazing land Use Area (hectares)..........................................................................................................45

Table 18: Livestock population in the country (000’) ....................................................................................................................47

Table 21: ESTIMATED EXISTING COST BUILDING AND CO NSTRUCTION ....................................................................................56

Table 22: COST OF MACHINERY AND EQUIPMENT........................................................................................................................56

TABLE 23: TO TAL INITIAL INVESTMENT ...........................................................................................................................................65

TABLE 24: SOURCE OF FINANCING ...................................................................................................................................................66

Table 25: SUMMARY OF PROFIT AND LOSS STATEMENT .............................................................................................................67

Base General Agro-Processing Industry PLC Page 5

Base General Agro-Processing Industry PLC Page 6

Base General Agro-Processing Industry PLC Page 7

2.1 THE COMPANY

2.2 VISION OF THE COMPANY

2.3 BACKGROUND INFORMATION

 LEGAL FORM OF BUSINESS - Private Limited Company (P.L.C)

 BUSINESS ADDRESS - Oromia, Finfine Surrounding Special zone, Berek Woreda

 PROJECT ADDRESS – Oromia, Finfine Surrounding Special zone, Berek Woreda

 STATUS OF BUSINESS – New

2.4 PROJECT DESCRIPTION AND RATIONALE

Base General Agro-Processing Industry PLC Page 8

Base General Agro-Processing Industry PLC Page 9

3. PRODUCT DESCRIPTION AND APPLICATION

3.1.1. DIARY PROCESSING

Base General Agro-Processing Industry PLC Page 10

 Powdered milk is a manufactured dairy product made by evaporating milk to

 Evaporated milk: also known as dehydrated milk is a shelf-stable canned milk

 Yoghurt: is a dairy product produced by bacterial fermentation of milk. Fermentation

 Butter: is a dairy product made by churning fresh or fermented cream or milk. It is

Base General Agro-Processing Industry PLC Page 11

3.1.2. ANIMAL FEED PROCESSING

Animal feed is a mixture of feedstuffs produced by feed processing plant. It contains

Base General Agro-Processing Industry PLC Page 12

4 4. DAIRY PROCESSING MARKET STUDY

4.1 GENERAL REVIEW

Base General Agro-Processing Industry PLC Page 13

Base General Agro-Processing Industry PLC Page 14

4.2 DEMAND SIDE