Investment Office ANRS

Project Profile on the Establishment of Tin

Containers Making Plant

Development Studies Associates

(DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary..................................................................................1
2. Product Description and Application....................................................1
3. Market Study, Plant Capacity and Production Program...................2
3.1 Market Study.......................................................................................................2
3.1.1 Present Demand and Supply........................................................................2
3.1.2 Projected Demand........................................................................................2
3.1.3 Pricing and Distribution...............................................................................3
3.2 Plant Capacity......................................................................................................3
3.3 Production Program.............................................................................................3
4. Raw Materials and Utilities....................................................................3
4.1 Availability and Source of Raw materials...........................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................3
5 Location and Site.....................................................................................4
6 Technology and Engineering.................................................................4
6.1 Production Process...............................................................................................4
6.2 Machinery and Equipment...................................................................................5
6.3 Civil Engineering Cost........................................................................................7
7 Human Resource and Training Requirement......................................7
7.1 Human Resource..................................................................................................7
7.2 Training Requirement..........................................................................................8
8 Financial Analysis...................................................................................8
8.1 Underlying Assumption.......................................................................................8
8.2 Investment..........................................................................................................10
8.3 Production Costs................................................................................................10
8.4 Financial evaluation...........................................................................................11
9 Economic and Social Benefit and Justification..................................12
ANNEXES....................................................................................................14
 1. Executive Summary
This project profile deals with the establishment of Tin Containers Making Plant in Amhara
National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for tin containers is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 5 million tin containers
annually. The total investment cost of the project including working capital is estimated at Birr
6.25 million and creates 24 jobs.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 18.23% of capacity utilization and it will
payback fully the initial investment less working capital in three years. The result further shows
that the calculated IRR of the project is 33.98%. The NPV at 18% annual discount rate is about
Birr 3.9 million.

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

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

2. Product Description and Application

Packaging is the most essential part in the distribution of goods from the producers to the
consumers. Tin containers have been one of the most important media in packaging. Various
products like oils, processed fruits, various milk products, biscuits, talcum powder, etc, are
packed in tin containers. These are some basic advantages of using tin containers. These are:-
saving space by putting the cans on top of the other, can be reused, have better guarantee against
seepage, can withstand high temperature unlike plastic containers.

1
 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

There is only one factory i.e. Ethiopian Crown Cork which produce tin can containers. Some
factories have small tin can making units attached to the main factory. Apart from this, there are
no factories that produce tin can for the various industries which use tin cans for packing their
products. Such factories include the paints factories, the fruits and vegetable processing and
canning plants, fish and meat canning factories, and other assorted industries. As industry
develops in the country, more tin containers using factories will be built. This will require
additional tin cans for packing purposes. This implies that more tin can producing plants should
be established in the country. In the Amhara Region, there are two meat and fishing canning
factories. Other tin can using factories are to be established in the Region in the near feature.
For the existing industries as well as for those to be established, there will be increasing demand
for tin cans. The current regional demand is estimated at 10 million containers.

3.1.2 Projected Demand

The demand projection assumes a 5% annual increase in the demand for tin containers in the
region. Table 1 depicts the projected regional demand for tin containers. Note that the market for
the proposed plant in confined to region; however, the proposed capacity is below the regional
demand.
Table 1: Projected Demand for Tin Containers
Projected Demand for
Tin Container
Year (in million ps)
2009 10.50
2010 11.03
2011 11.58
2012 12.16
2013 12.76
2014 13.40
2015 14.07
2016 14.77
2017 15.51
2018 16.29

2
 3.1.3 Pricing and Distribution

The prices of tin containers vary according to their volume and quality. The market survey
prevails that the average retail price of 1 liter tin container sales about Birr 1.25. Deducting 25%
for distributors, the factory price is set at, on average, Birr 0.95.

Most customers are producers and therefore, it is assumed that they will purchase directly fro the
factory.

3.2 Plant Capacity

The proposed plant has a capacity of producing 5 million tin containers of various sizes in year,
when it produces at full capacity. The capacity can be doubles by increasing the shifts.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 75 percent capacity and then it grows to 85
percent in the 2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This
consideration is developed based on the assumption that market and logistics barriers would take
place for the first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials

Nearly eighty percent of the raw materials should be imported, preferably, from Indonesia.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant
are listed in Table 2 hereunder.

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 Table 2: Raw Material Requirement at Full Capacity

Amount Cost (in Birr)

sheets
Material (ton) Local Foreign
Tin plate    
Body (0.32mm x 927mm x 711mm) 10 90,000 360,000
End (0.32mm x 518 mm x 771mm) 5 43,000 172,000
Clip (0.32mm x 508mm x 711 mm) 3 25,800 103,200
Cap (0.32mm x 508mm x 711 mm) 3 25,200 100,800
  - -
Wire (dia. 4 mm galvanized) 1 3,000 12,000
Solder (60% tin, 40% lead) 1 11,200 44,800
198,200 792,800

The annual electricity requirement is estimated to amount 148,775 kwh, and it is estimated to
cost Birr 81,826. The annual water need is estimated at 7,150 m 3 and it is estimated to cost Birr
16,948. Therefore, the total utility cost is estimated at Birr 100,774.

5 Location and Site

The appropriate locations for the envisaged project in view of the availability of input,
infrastructure as well as market for the output are Bahir Dar and Combolcha.

6 Technology and Engineering

6.1 Production Process

Tin containers are made from tin coated sheets. The manufacturing of tin containers needs only
limited operation. The sequence of operation is:

(a) Cutting of sheets, folding and rolling;

(b) Seaming and flanging; and
(c) Screen printing.

Main machinery include testing tank, wire cutting machine, auto lock 2m folding and side
seaming work, inclinable power press 10 tons capacity, hand operated wire forming machine,

4
soldering equipments, paneling press for embossing, side folding and flanging, air compressor,
paneling press for body banks cutting and corner cutting and fully automatic tin seaming
machine.

Alternative technology
There are many high-tech options. Automation is an expensive, capital intensive technology.

6.2 Machinery and Equipment

The required machineries and equipments are shown in Table 3. The estimated cost of
machineries and equipments, excluding the auxiliaries, is Birr 2.3 million.

5
 Table 3: Required Machineries and Equipments
Can Body Line
Automatic can body maker (Roller cable automatic feeder 1 set
1 slitter)
2 Automatic double squrerer 1 ""
3 Automatic double scanner (for ton and bottom end) 2 ""
4 Electric controlled panel 1 ""
5 Connecting conveyors 3 ""
6 Automatic soldering machine (for top and bottom sean) 1 ""
7 Automatic soldering machine (for side seam) 1 ""
8 Automatic can washer 1 ""
9 Multiple pin hole tester 1 ""
10 Drying oven 1 ""
11 Connecting conveyors 5 ""
12 Automatic binding machine 1 ""
13 Automatic palletizing machine 1 ""
14 Connecting conveyors 2 ""

End Line
1 Sheet feeder 1 set
2 Single slitter 1 ""
3 Automatic press 1 ""
4 Blank lifter 1 ""
5 Transfer press 1 ""

Cap and Clip

1 Sheet feeder 1 set
2 Single slitter 1 ""
3 Press (for cap and clip) 2 ""

Wire Handle
1 Automatic wire straightener and cutter 1 set
2 Automatic wire handle former 1 ""
3 Wire handle spot welder 3 ""

Estimated Cost 2,300,000

Auxiliary Equipment
1 1.5 ton forklift 1
2 Hand forklift 3
3 Transfer car (for top and bottom end) 10

6
Supplier addresses
Company Name: Guangzhou D.G.H. Electrical Appliance Co., Ltd.
Address: No.61,XIYI IND.Road, Dashi Town,
Panyu, Guangzhou, Guangdong Province, China
http://www.dghfty.com
Tel: (86) 20-34504099
Fax: (86) 20-34504057

Company Name: Hebei Superstar Pneumatic Nails Co., Ltd.

Company Address: #402 Jincheng Commerce, 486 Zhongshan Road, Shijiazhuang, Hebei,
China City/Town: Shijiazhuang Province/State: Hebei
Country/Region: China
Zip/Postal Code: 05000

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 3300 m 2 where 1500 m2 is allocated
to the production place. The land lease is estimated at Birr 198,000 and the civil engineering I
estimated to cost Birr 3,000,000.

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is stated in Table 4 below.

7
 Table 4: Human Resource Requirements
Salary/Wage (Birr)

  Job Title No. Monthly Annual

1 General Manager 1 4,000 48,000
2 Engineer 1 3,000 36,000
3 Skilled labourers 5 850 51,000
4 Unskilled labourers 5 500 30,000
5 Secretary 1 900 10,800
6 Accountant 1 1,500 18,000
7 Marketing Officer 1 1,500 18,000
8 Casher 1 800 9,600
9 Security 3 400 14,400
10 Clerks 2 700 16,800
11 Genitors 3 400 14,400
  Total 24   267,000
Employment Benefits 20% of Annual
  Salary     53,400
        320,400

7.2 Training Requirement

Training of key personnel shall be conducted. Annual training budget of Birr 32,000 for this
purpose and included in the working capital

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of tin containers making plant is based on the data provided in the
preceding chapters and the following assumptions.

8
 A. Construction and Finance

Construction period 2 year

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

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

C. Working Capital (Minimum Days of Coverage)

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

8.2 Investment

9
The total investment cost of the project including working capital is estimated at Birr 6.25
million as shown in Table 5 below. The Owner shall contribute 40% of the finance in the form of
equity while the remaining 60% is to be financed by bank loan.

Table 5: Total Initial Investment & Working Capital

Total Initial Investment

Item Cost
Land 9,900.00
Building and civil works 3,000,000.00
Office equipment 75,000.00
Vehicles  
Plant machinery & equipment 2,300,000.00
Total Fixed Investment 5,384,900.00
Pre production capital expenditure 269,245.00
Total Initial Investment 5,654,145.00
Working capital at full capacity 598,208.05
Total 6,252,353.05
*Pre-production capital expenditure includes - all expenses for pre-investment
studies, consultancy fee during construction and expenses for company‘s
establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr ……million as detailed in
table 6 below.

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 Table 6: Production Cost at Full Capacity
Items Cost (Birr)
1. Raw materials 991,000.00
2. Utilities 100,773.75
3. Wages and Salaries 320,400.00
4. Spares and Maintenance 161,547.00
Factory costs 1,573,720.75
5. Depreciation 441,349.00
6. Financial costs 450,169.42
  Total Production Cost 2,465,239.17

8.4 Financial evaluation

I. Profitability

According to the projected income statement attached in the annex part the project will generate
profit beginning from the first year of operation. Ratios such as the percentage of net profit to
total sales, return on equity and return on total investment are 27.63%, 27.63%, and 32.58% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 18.23% of capacity utilization.

III. Payback Period

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

11
 IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 32.6%.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
33.98% and the net present value at 18 % discount is Birr 3.91.

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This result is accompanied by IRR value of 28.91% and total profit of Birr 14.61
million.

9 Economic and Social Benefit and Justification

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

A. Profit Generation

The project is found to be financially viable and earns Birr 18 million within the project life.
Such result induces the project promoters to reinvest the profit which, therefore, increases the
investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about Birr 6.5 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

12
 C. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of US Dollar
4,560,000 will be saved as a result of the proposed project. This will create room for the saved
hard currency to be allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create24 jobs.

E. Diversification and Inter-Sectoral linkage

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

13
ANNEXES

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

Capacity Utilization (%) 0 0 75% 85% 100% 100%

1. Total Inventory 0 0 689,875 781,858 919,833 919,833

Raw Materials in Stock- Total 0 0 275,678 312,435 367,571 367,571

Raw Material-Local 0 0 16,216 18,379 21,622 21,622

Raw Material-Foreign 0 0 259,462 294,057 345,949 345,949

Factory Supplies in Stock 0 0 1,649 1,869 2,198 2,198

Spare Parts in Stock and Maintenance 0 0 13,217 14,980 17,623 17,623

Work in Progress 0 0 41,217 46,713 54,956 54,956

Finished Products 0 0 82,435 93,426 109,913 109,913

2. Accounts Receivable 0 0 388,636 440,455 518,182 518,182

3. Cash in Hand 0 0 34,460 39,054 45,946 45,946

CURRENT ASSETS 0 0 837,292 948,931 1,116,390 1,116,390

4. Current Liabilities 0 0 388,636 440,455 518,182 518,182

Accounts Payable 0 0 388,636 440,455 518,182 518,182

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 448,656 508,477 598,208 598,208

INCREASE IN NET WORKING CAPITAL 0 0 448,656 59,821 89,731 0

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

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

1. Total Inventory 919,833 919,833 919,833 919,833 919,833 919,833

Raw Materials in Stock-Total 367,571 367,571 367,571 367,571 367,571 367,571

Raw Material-Local 21,622 21,622 21,622 21,622 21,622 21,622

Raw Material-Foreign 345,949 345,949 345,949 345,949 345,949 345,949

Factory Supplies in Stock 2,198 2,198 2,198 2,198 2,198 2,198

Spare Parts in Stock and Maintenance 17,623 17,623 17,623 17,623 17,623 17,623

Work in Progress 54,956 54,956 54,956 54,956 54,956 54,956

Finished Products 109,913 109,913 109,913 109,913 109,913 109,913

2. Accounts Receivable 518,182 518,182 518,182 518,182 518,182 518,182

3. Cash in Hand 45,946 45,946 45,946 45,946 45,946 45,946

CURRENT ASSETS 1,116,390 1,116,390 1,116,390 1,116,390 1,116,390 1,116,390

4. Current Liabilities 518,182 518,182 518,182 518,182 518,182 518,182

Accounts Payable 518,182 518,182 518,182 518,182 518,182 518,182

TOTAL NET WORKING CAPITAL REQUIREMENTS 598,208 598,208 598,208 598,208 598,208 598,208

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 2,827,073 3,425,281 3,951,136 4,089,318 4,827,727 4,750,000
1. Inflow Funds 2,827,073 3,425,281 388,636 51,818 77,727 0
Total Equity 1,130,829 1,370,112 0 0 0 0
Total Long Term Loan 1,696,244 2,055,168 0 0 0 0
Total Short Term Finances 0 0 388,636 51,818 77,727 0
2. Inflow Operation 0 0 3,562,500 4,037,500 4,750,000 4,750,000
Sales Revenue 0 0 3,562,500 4,037,500 4,750,000 4,750,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 2,827,073 2,827,073 2,974,034 2,463,071 3,391,501 3,171,523
4. Increase In Fixed Assets 2,827,073 2,827,073 0 0 0 0
Fixed Investments 2,692,450 2,692,450 0 0 0 0
Pre-production Expenditures 134,623 134,623 0 0 0 0
5. Increase in Current Assets 0 0 837,292 111,639 167,458 0
6. Operating Costs 0 0 1,132,795 1,276,027 1,490,876 1,490,876
7. Corporate Tax Paid 0 0 0 0 732,790 755,299
8. Interest Paid 0 0 1,003,947 450,169 375,141 300,113
9.Loan Repayments 0 0 0 625,235 625,235 625,235
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 598,208 977,102 1,626,247 1,436,226 1,578,477
Cumulative Cash Balance 0 598,208 1,575,310 3,201,557 4,637,784 6,216,261

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000
Sales Revenue 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 3,119,003 3,082,638 3,030,118 2,352,363 2,352,363 2,352,363
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 1,490,876 1,490,876 1,490,876 1,490,876 1,490,876 1,490,876
7. Corporate Tax Paid 777,807 816,470 838,979 861,487 861,487 861,487
8. Interest Paid 225,085 150,056 75,028 0 0 0
9. Loan Repayments 625,235 625,235 625,235 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 1,630,997 1,667,362 1,719,882 2,397,637 2,397,637 2,397,637
Cumulative Cash Balance 7,847,258 9,514,620 11,234,501 13,632,138 16,029,775 18,427,412

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 3,562,500 4,037,500 4,750,000 4,750,000

1. Inflow Operation 0 0 3,562,500 4,037,500 4,750,000 4,750,000

Sales Revenue 0 0 3,562,500 4,037,500 4,750,000 4,750,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,827,073 2,827,073 1,581,451 1,335,848 2,313,397 2,246,175

3. Increase in Fixed Assets 2,827,073 2,827,073 0 0 0 0

Fixed Investments 2,692,450 2,692,450 0 0 0 0

Pre-production Expenditures 134,623 134,623 0 0 0 0

4. Increase in Net Working Capital 0 0 448,656 59,821 89,731 0

5. Operating Costs 0 0 1,132,795 1,276,027 1,490,876 1,490,876

6. Corporate Tax Paid 0 0 0 0 732,790 755,299

NET CASH FLOW -2,827,073 -2,827,073 1,981,049 2,701,652 2,436,603 2,503,825

CUMULATIVE NET CASH FLOW -2,827,073 -5,654,145 -3,673,096 -971,444 1,465,159 3,968,984

Net Present Value (at 18%) -2,827,073 -2,395,824 1,422,759 1,644,309 1,256,773 1,094,445

Cumulative Net present Value -2,827,073 -5,222,897 -3,800,138 -2,155,829 -899,057 195,388

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000

1. Inflow Operation 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000

Sales Revenue 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,268,683 2,307,346 2,329,855 2,352,363 2,352,363 2,352,363

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

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 1,490,876 1,490,876 1,490,876 1,490,876 1,490,876 1,490,876

6. Corporate Tax Paid 777,807 816,470 838,979 861,487 861,487 861,487

NET CASH FLOW 2,481,317 2,442,654 2,420,145 2,397,637 2,397,637 2,397,637

CUMULATIVE NET CASH FLOW 6,450,301 8,892,955 11,313,100 13,710,737 16,108,374 18,506,011

Net Present Value (at 18%) 919,158 766,810 643,851 540,562 458,103 388,223

Cumulative Net present Value 1,114,547 1,881,357 2,525,208 3,065,769 3,523,873 3,912,096

Net Present Value (at 18%) 3,912,095.75

Internal Rate of Return 34.0%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 3,562,500 4,037,500 4,750,000 4,750,000 4,750,000

Sales Revenue 3,562,500 4,037,500 4,750,000 4,750,000 4,750,000
Other Income 0 0 0 0 0
2. Less Variable Cost 978,123 1,108,540 1,304,164 1,304,164 1,304,164
VARIABLE MARGIN 2,584,377 2,928,960 3,445,836 3,445,836 3,445,836
(In % of Total Income) 72.54 72.54 72.54 72.54 72.54
3. Less Fixed Costs 596,021 608,837 628,061 628,061 628,061
OPERATIONAL MARGIN 1,988,356 2,320,124 2,817,775 2,817,775 2,817,775
(In % of Total Income) 55.81 57.46 59.32 59.32 59.32
4. Less Cost of Finance 1,003,947 450,169 375,141 300,113 225,085
5. GROSS PROFIT 984,409 1,869,954 2,442,634 2,517,662 2,592,690
6. Income (Corporate) Tax 0 0 732,790 755,299 777,807
7. NET PROFIT 984,409 1,869,954 1,709,844 1,762,363 1,814,883
RATIOS (%)  
Gross Profit/Sales 27.63% 46.31% 51.42% 53.00% 54.58%
Net Profit After Tax/Sales 27.63% 46.31% 36.00% 37.10% 38.21%
Return on Investment 32.58% 37.65% 33.35% 32.99% 32.63%
Return on Equity 39.36% 74.77% 68.37% 70.47% 72.57%

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

1. Total Income 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000

Sales Revenue 4,750,000 4,750,000 4,750,000 4,750,000 4,750,000
Other Income 0 0 0 0 0
2. Less Variable Cost 1,304,164 1,304,164 1,304,164 1,304,164 1,304,164
VARIABLE MARGIN 3,445,836 3,445,836 3,445,836 3,445,836 3,445,836
(In % of Total Income) 72.54 72.54 72.54 72.54 72.54
3. Less Fixed Costs 574,212 574,212 574,212 574,212 574,212
OPERATIONAL MARGIN 2,871,624 2,871,624 2,871,624 2,871,624 2,871,624
(In % of Total Income) 60.46 60.46 60.46 60.46 60.46
4. Less Cost of Finance 150,056 75,028 0 0 0
5. GROSS PROFIT 2,721,568 2,796,596 2,871,624 2,871,624 2,871,624
6. Income (Corporate) Tax 816,470 838,979 861,487 861,487 861,487
7. NET PROFIT 1,905,097 1,957,617 2,010,137 2,010,137 2,010,137
RATIOS (%)  
Gross Profit/Sales 57.30% 58.88% 60.46% 60.46% 60.46%
Net Profit After Tax/Sales 40.11% 41.21% 42.32% 42.32% 42.32%
Return on Investment 32.87% 32.51% 32.15% 32.15% 32.15%
Return on Equity 76.18% 78.28% 80.38% 80.38% 80.38%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 2,827,073 6,252,353 7,625,399 8,921,936 10,084,271 11,221,400
1. Total Current Assets 0 598,208 2,412,603 4,150,489 5,754,173 7,332,651
Inventory on Materials and Supplies 0 0 290,544 329,284 387,392 387,392
Work in Progress 0 0 41,217 46,713 54,956 54,956
Finished Products in Stock 0 0 82,435 93,426 109,913 109,913
Accounts Receivable 0 0 388,636 440,455 518,182 518,182
Cash in Hand 0 0 34,460 39,054 45,946 45,946
Cash Surplus, Finance Available 0 598,208 1,575,310 3,201,557 4,637,784 6,216,261
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 2,827,073 5,654,145 5,212,796 4,771,447 4,330,098 3,888,749
Fixed Investment 0 2,692,450 5,384,900 5,384,900 5,384,900 5,384,900
Construction in Progress 2,692,450 2,692,450 0 0 0 0
Pre-Production Expenditure 134,623 269,245 269,245 269,245 269,245 269,245
Less Accumulated Depreciation 0 0 441,349 882,698 1,324,047 1,765,396
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 2,827,073 6,252,353 7,625,399 8,921,936 10,084,271 11,221,400
5. Total Current Liabilities 0 0 388,636 440,455 518,182 518,182
Accounts Payable 0 0 388,636 440,455 518,182 518,182
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1,696,244 3,751,412 3,751,412 3,126,177 2,500,941 1,875,706
Loan A 1,696,244 3,751,412 3,751,412 3,126,177 2,500,941 1,875,706
Loan B 0 0 0 0 0 0
7. Total Equity Capital 1,130,829 2,500,941 2,500,941 2,500,941 2,500,941 2,500,941
Ordinary Capital 1,130,829 2,500,941 2,500,941 2,500,941 2,500,941 2,500,941
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 984,409 2,854,363 4,564,207
9.Net Profit After Tax 0 0 984,409 1,869,954 1,709,844 1,762,363
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 984,409 1,869,954 1,709,844 1,762,363

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 12,411,048 13,690,910 15,023,291 17,033,428 19,043,565 21,053,702
1. Total Current Assets 8,963,648 10,631,010 12,350,891 14,748,528 17,146,165 19,543,802
Inventory on Materials and Supplies 387,392 387,392 387,392 387,392 387,392 387,392
Work in Progress 54,956 54,956 54,956 54,956 54,956 54,956
Finished Products in Stock 109,913 109,913 109,913 109,913 109,913 109,913
Accounts Receivable 518,182 518,182 518,182 518,182 518,182 518,182
Cash in Hand 45,946 45,946 45,946 45,946 45,946 45,946
Cash Surplus, Finance Available 7,847,258 9,514,620 11,234,501 13,632,138 16,029,775 18,427,412
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 3,447,400 3,059,900 2,672,400 2,284,900 1,897,400 1,509,900
Fixed Investment 5,384,900 5,384,900 5,384,900 5,384,900 5,384,900 5,384,900
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 269,245 269,245 269,245 269,245 269,245 269,245
Less Accumulated Depreciation 2,206,745 2,594,245 2,981,745 3,369,245 3,756,745 4,144,245
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 12,411,048 13,690,910 15,023,291 17,033,428 19,043,565 21,053,702
5. Total Current Liabilities 518,182 518,182 518,182 518,182 518,182 518,182
Accounts Payable 518,182 518,182 518,182 518,182 518,182 518,182
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1,250,471 625,235 0 0 0 0
Loan A 1,250,471 625,235 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2,500,941 2,500,941 2,500,941 2,500,941 2,500,941 2,500,941
Ordinary Capital 2,500,941 2,500,941 2,500,941 2,500,941 2,500,941 2,500,941
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 6,326,571 8,141,454 10,046,551 12,004,168 14,014,305 16,024,442
9. Net Profit After Tax 1,814,883 1,905,097 1,957,617 2,010,137 2,010,137 2,010,137
Dividends Payable 0 0 0 0 0 0
Retained Profits 1,814,883 1,905,097 1,957,617 2,010,137 2,010,137 2,010,137

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