BASIC INFORMATION

 Name of the Promoter: YESHAMBEL KASIE JEMBERIE

 Contact Address: 0918543100/34237719
 Type of the Project: PLYWOOD MANUFACTURING INDUSTRY
 Type of Business: Sole proprietor ship
 Project Location: Awi Zone, Banja Woreda,
 Project capital: The total investment capital of the project is estimated at birr 100,000,000
of which:-
 Birr 65,000,000 (65%) is for fixed investment cost
 Birr 35,000,000 (35%) will be assign for working capital
 Source of finance: The total investment capital of the project is to be financed from the
promoter’s equity and bank loan.
 Birr 30,000,000(30%) is contributed by the promoter
(YESHAMBEL KASIE JEMBERIE)
 Birr 70,000,000 (70%) is to be financed by local banks.
 Man power requirement: 165 employees will be benefited within this project, out of which 102

permanent (45 skilled & 57 unskilled 8th grade) a n d t e m p o r a r i l y 6 3 workers during

construction phase. From the total permanent 102 employees 51 males and 51 female employees
will be benefited and from the temporary 63 employees 32 male and 31 female employees will
be benefited. Generally, out of the total permanent and temporarily 165 employees, 83 will be
male and the rest 82 employees will be female, who are expected to be benefited from this
project.
 Land requirement: The total area of 10,000 m2 of land is required for the project.
 Raw material requirement: 95% of raw material use in our country.
 Product distribution: 55% of the product material will be exported.

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 EXECUTIVE SUMMARY
The project feasibility study proposed on Plywood Manufacturing Industry investments. It has been
promoted by Yeshambel Kasie Jemberie in Amhara region, Awi Zone, Injibara town which is a fast
growing districted, social and economic center and the capital of Awi. The promoter incorporates Banja
woreda as investment area. The town and its surrounding have suit air condition and comfort for every
human living. It is surrounded by longest eucalyptus and natural forest. Moreover to go Grand
Ethiopian Dam, it is the turn gateway, and it is straight forward for the road of Bahir Dar and Addis
Ababa.
This project profile deals with the establishment of plywood making plant in it with the following
presents the main findings of the study Demand projection reveals that the domestic demand for
plywood is substantial and is increasing with time. The planned plant is set to produce 10,000 tons
plywood annually. The total investment cost of the project including working capital is estimated at Birr
100 million and creates 165 jobs.
The financial result indicates that the project will generate profit beginning from the first year of
operation. The project will break even at 8.10% of capacity utilization and it will payback fully the
initial investment less working capital in one years. The result further shows that the calculated IRR of
the project is 88.2% and the NPV at 18% annual discount rate is about Birr 172 million.
Profitability: The financial analysis of the envisaged project is carried out for the following ten years.
Based on the 10 years financial projections using the income statement, cash flow statement and
financial internal rate of return, the following results are obtained.
Income statement: According to the projected income statement, the project will generate profit
beginning from the first year of operation. Based on the ten (10) years financial projections the projects
average annual net profit after payment of bank interest, depreciation and tax amounts will be to birr
102,024,160(39.76%).
Cash flow statement: The cash flow statement also shows a substantial amount of cash surplus right
from the first year of project operation life. The cash balance grows from birr 109,447,085 in the first

year to cumulative balance of birr 1,024,094,018 during the 10th year of operation indicating the
capacity of the project to finance itself and generate cash surplus for further investments.
Financial Internal Rate of Return (FIRR) Computation: The computation of the project FIRR shows
that the project will profitably generate reasonable return on investment. Before tax financial internal
rate of return is calculated to be 46.1%. This indicates the project is financially viable with an internal rate of
return (IRR) of 46.1 % and net present value (NPV) 131.54 million at discount rate 35 %.

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Socio economic benefits: The socio economic benefit of the project is also very high. The project will
provide: - 102 permanent employs, Generate revenue to government in the form of taxes, Facilitate and
give a good service for local and international tourists. 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
Conclusion and recommendation: The Project is found to be operationally profitable, viable & has
significant socio-economic benefits. I recommended that according to this attractive financial and
economic benefit of the project all concerned offices & financial institutions should give their support to
facilitate the implementation of this plan.
Moreover, the project has to make the following activities;
 Raw materials: it will use 95% of raw materials locally in our country.
 Production: it will export 55% of the project’s product.
SWOT ANALYSIS
Strengths Weaknesses
1. This company would have the capacity to supply a
high quality of finished furniture 1. The financial capability of this
2. This company will recruit highly trained and company for promotion and
experienced carpenters to offer extraordinary market competition with large
furniture to attract hotel, office, private, and public companies.
furniture customers. 2. Lack of experience, cost control,
3. Local clients do not have to pay for delivery costs, and risk management.
which will increase market growth.
Opportunities Threats
1. It has to compete against many
1. Workers would work as a team to develop a market
large national and multinational
in AMHARA.
furniture manufacturing
2. Select business location to become market leader
companies.
within ten years.
2. Global financial downturn.

1. INTRODUCTION
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 1.1. Investment in Ethiopia

Ethiopia is now becoming more and more investment friendly country. The Government is creating
favorable condition that would highly encourage the private Sector to be engaged in almost all areas
of the economy. The country with population of come 110 million offers significant domestic market
for locally for locally produced goods and service the country is also a member of the common
Market for eastern and southern Africa Comesa offering huge benefit of Exporting commodities in
preferential tariff rates to a wider regional market.
Privet investment should be encouraged to increase form year to year and Investment constraints
have to be alleviated in order to pave development ways so that investment s e c t o r happens to be
determinant about factor of economic development of the country like Ethiopia.
It is usually considered as the engine of the economy. Both private and government Bodies in
many ways have commonly agreed this idea. Economic development in any case needs both
efforts of the privet as well as the public sector. There are Investments that could not be undertaken
by privet sector due to its difficult nature I .e high initial capital and long gestation period.
However, the passed command economy system and the lack of experience between both sides
have made it so hard for a private sector to flourish.
But now a day as Ethiopia follows free market economy the roll of private sector for the
achievement of the economy policy. Accordingly, the Ethiopia federal democratic government is
encouraging investors to invest their records to contribute to the development of the country in all
sectors by avoiding all barriers and facilitating all the resources for the investment. There are only
twenty (20) plywood manufacturers but they more import rather than export.

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1.2 Investment in Amhara

Amhara State Investment Bureau is preparing a ten-year investment plan in a bid to create more jobs and
facilitate technology transfer in agro-processing, agriculture, and infrastructures as well as power
supply. To sustain results and create more conducive investment environment, investment sectors
requiring incentives have been identified by the research and made to use the incentives as desired. In
this regard, the regional government is giving special attention for agro-processing and manufacturing
industries
The Amhara region comprises about 170,752 km2 or about 15.5% of Ethiopia’s total area, including
significant parts of the Ethiopian highlands and Lake Tana, such that 46% of the Amhara region
discharges into the Blue Nile. Rugged mountains, valleys and gorges characterize the landscape with
elevations ranging from 700 to 4600 meters above sea level (masl).
The land use of the region is classified as 28% arable land, 30% pastureland, 2.1% forested land, 12.6%
bush land, 7.2% settlement, 3.8% water bodies and 16.2% marginal land (BoA, 1999). The agro-climatic
zones include cold (above 2300 masl), humid and semi-humid (2300-1500 masl) and arid and semi-arid
(below 1500 masl) (Adenew and Abdi, 2005). The mean annual rainfall recorded in the region is in the
range of 770 mm to 1660 mm (Bewket and Conway, 2007).
According to the regional investment office, 174,400 hectors of land in Amhara have been leased for
different types of agricultural activities, including unspecified crop production, oil seeds, agro-industry,
vegetables and fruits, forestry, special seeds, livestock and animal feed production, horticulture, and
cotton production.
Of the 960 land leases in the Amhara region, only three are to foreign investors (covering 25% of the
total area leased), while the remainder is to diaspora or domestic investors. Ninety nine percent of the
investment projects (all domestic or diaspora) have a size of less than 1000 ha, and 63% of the
investment projects have a size less than, or equal to, 100 ha. A Saudi and an Indian investor hold the
three biggest investment projects.
This shows that domestic investors are less participated more over in the region plywood manufacturer’s
only one (DEBREBIRHAN).

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1.3 Banja woreda and its investment

Banja woreda was one of the 105 woredas in the Amhara Region of Ethiopia. It was named after a
significant mountain located in the woreda, Mount Banja, where Fasil crushed a revolt of the Agaw in
the late 18th century.[1] Part of the Agew Awi Zone, Banja was bordered on the south by Ankesha, on
the west by Guangua, on the north by Faggeta Lekoma, and on the east by the Mirab Gojjam Zone.
Towns in Banja included Injibara, Kessa, Kosober and Tilili. Other high points included Mount Faddi.
Bodies of water in this woreda included the Zengena crater lake. Banja was separated for Banja
Shekudad and Guagusa Shekudad woredas. The woreda administration announced that by 22 March 2009,
Banja had achieved 100% coverage of sanitation facilities, an increase from 0.03% in the 1990s, and 61% as
recently as 2005. Through an innovative program which focused on education of every resident of the woreda, the
local Health Desk was able to convince the inhabitants of all 26 kebeles to construct enough latrines to ensure
each household was no further than 6 meters from a latrine, as well as building one common latrine in every
village. In addition, there are now public latrines for passers-by and boys who stay and sleep in the field herding
cattle and sheep. However, only 28% of inhabitants currently have access to safe water.

1.4 Promoter Background

The promoter, Yeshambel kassie Jemberie has a work experience in different areas and management
business activities. During this time, the promoter gained a vast knowledge and skill with this
reliable experience. Yeshambel kassie Jemberie knows how to manage and lead any organization to
profit and also know how to handle different challenges in the working environment. Moreover,
Yeshambel kassie Jemberie has a very good reputation with contractor. He has constructed different
governmental organizations buildings in different woredas (two governmental offices, one secondary
school, and one health center in Sekela woreda), Yezelaka secondary school in Demebecha woreda.
Now, he has been constructing Abay water drainage building in 20,000,000 million.
He has also donated for government and society in kind and money such as for Red Cross, corona virus,
seasonal governmental affairs, and others. Now he owns G+ 3 hotels in Finoteselam towon, and G+1 in
Sekela woreda. Today he has a power of knowledge, and capital to invest in plywood manufacturing
industry.
Forestry development: The district has a variety of home and office furniture production and a natural
forest 1,526.85 hectares, artificial and mixed forest 17,274 hectares with a total of 18,800.85 hectares of
forest resources. And the project can get inputs from Awi zone since it has more than 84 percent
coverage of total lands. The investment of the woreda is depended on small enterprises, and there is no
large investment /industry. So, the investor has an eager to invest in it.

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1.5 Project Objective

The main objective of the project is aimed at to maximize the return on invested capital in the form of
profit for the promoter. However, its implementation will benefit the employee, the consumer society
and the government at different levels. In this respect the project is aimed to promote the following
objectives:-
 To maximize the return on invested capital through manufacturing furniture.
 To raise the significance and importance of the sector and thereby raising its contribution to
the national economic development
 To give quality and standard furniture
 Effectively use local inputs and strengthening the linkage between agriculture(forestry) and
other sectors of the economy
 To provide gainful employment to a large segment of the population of the project area and
augment earning capacity at the grassroots level,
 Increase government revenue through the different forms of taxes, which in turn used to
facilitate social and economic development.
In general, the project is believed to have significant social and economic benefits that accrue to
the society, the region and the country beyond the financial returns to its owner.

1.6 Mission and goal

1.6.1 Mission

 Mission of the particular project is to expand the standard plywood manufacturing industry and
to give quality goods.
 To prove to other people that struggle for a better life and economic independences can do
business and bring change and can make a difference if opportunities are given.
 To become financially liquid and guaranteed more than ever.

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1.6.2 Goal

Objectives are the goals toward which activities of the business are directed and one of the most
important functions the business owner must perform setting objectives. important aims of sole
proprietorship business among others include the following highly interrelated general goals with each
other.
 To create employment opportunities for 102 permanent and 63 temporary workers.
 To achieve export rather than import to get more dollar.

2. PRODUCT DESCRIPTION AND APPLICATION

Plywood is a popular interior material for housing, ships, vehicles, and furniture. It is an economical,
factory-produced sheet of wood with precise a dimension that does not warp or crack with changes in
atmospheric moisture. Ply is an engineered wood product made from three or more ‘plies’ or thin sheets
of wood. These are glued together to form a thicker, flat sheet.
Plywood has the structural strength of the wood it is made from. This is in addition to the properties
obtained from its laminated design. Broadly, there are three types of plywood according to usage. These
are structural plywood, external plywood, internal plywood, and marine plywood. Plywood
manufacturing is a profitable venture for new entrepreneurs.
The word plywood designates a wood panel of three or more layers or veneers (plies) bonded together
usually with the grains of adjacent veneers running at right angles to each other. The advantage of
plywood over solid wood is its near uniform distribution of strength properties along the length and
width of the panel. Plywood is used in the construction and furniture industries. It is widely used in
cabinet making, decorative wall paneling and partition wall and as door skins or cover. A product
obtained as result of several even numbered boards together is called plywood. Plywood thus produced
has the particular features of being a wood with the least defects, wide size, high length and strength
mechanically or physically. It is used for general construction purposes as interior materials for housing,
ships, vehicles and furniture.
2.1 Plywood Manufacturing as a Business Profitable

The demand for plywood is directly related to the growth of the housing construction sector, household
and office furniture, vehicles assembly, and repair services. The industry is highly fragmented.
However, a major chunk of production comes from small manufacturers. Plywood has various uses in
housing construction for floors, roofs, walls, and doors. Inside a house, one can use plywood in a variety
of furnishings, including cabinetry, shelves, tables, and wall paneling. The demand for these items, in

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turn, will depend on income, population growth, urbanization, and the manufacturing sector.

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3. MARKET STUDY, PLANT CAPACITY AND PRODUCTION
PROGRAM
3.1 Market Study

3.1.1 Present Demand and Supply

Though it is difficult to quantify the plywood consumption in the Amhara Region, informed judgment
indicates about the existence of a demand which can absorb the production of a small size plywood
making plant. The current consumption of the product especially in the furniture and joinery industries is
quite substantial. The small furniture and joinery units scattered throughout the Region use plywood and
this plywood is brought from Addis Ababa, most of it imported from abroad. With increasing
urbanization and its concomitant expansion of the furniture industry, the demand for plywood will
increase in the coming years.

3.1.2 Projected Demand

The countrywide demand for plywood was estimated to be 33,672.6 in the year 2021 and 36,366.4 in the
year 2022 (IPS estimate). The future demand is estimated by assuming an 8 percent annual increase in
the demand for plywood.

Table 1: Projected Demand for Plywood

Year Projected Demand for Plywood (tons)

2008 12,381

2009 13,001

2010 14,041

2011 15,164

2012 16,377

2013 17,687

2014 19,102

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2015 20,630

2016 22,281

2017 24,063

2018 25,988

2019 28,869

2020 31,178

2021 33,673

2022 36,366

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3.1.3 Pricing and Distribution

The average retail price of plywood is about Birr 32,000 per ton. Allowing a more than 25% margin for
distributors, the factory price of the produce of the envisaged plan is set at Birr 25,000 per ton.

3.2 Plant Capacity

Thus, given the technology discussed below, the envisaged plant is set to produce 10,000 tons of
plywood annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days, where
the remaining days will be holidays and for maintenance. During the first year of operation the plant will
operate at 80 percent capacity and then it grows to 90 percent in the 2 nd year. The capacity will grow to
100 percent starting from the 3rd 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
Major raw materials are available in the local market of each 33 Kebeles of Banja and its neighbor
woreda. Although some forms of arrangements might be required with the forestry department of
Agriculture Bureau and Commercial forestry firms. In this project profile even the forestry raw materials
are assumed to be imported partially. Some raw materials are wood like eucalyptus, Gum, Urea resin
and Ammonium chloride etc.

The chemical inputs should be imported, preferably from India or china.

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 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 Tables 2 and 3 here under.

Table 2: Annual Raw Material Requirement at Full Capacity

Cost (Birr)
No
. Material Qty Local Foreign Total

1 Logs suitable for plywood in m3 57,876 71,284,712 17,821,178 89,105,890

2 Gum tape for veneer lathe and

patching in 000m 1,638 1,260,932 1,891,398 3,152,332

3 Urea resin (ton) 2 38,490 57,736 96,226

4 Ammonium chloride (ton) 0 1,478 2,218 3,696

Total 59,516 19,772,528 19,772,528

Table 3: Annual Utility Requirement at Full Capacity

Item  Qty Cost (Birr)

Electricity (kwh) 535,080 294,294

Water (m3) 10,920 28,938

Furnace oil (lts) 24,000 92,376

76,980

Lubricants (lits) 4,000 153,760

Total   646,348

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 4.3 Location and Site
The appropriate location for the envisaged project will be in view of the availability of infrastructure in
Injibara town.

The town and the woreda industry and investment offices have located more than 100 hectors of
industry sights.

5 TECHNOLOGY AND ENGINEERING

5.1 Production Process
The manufacturing of plywood comprises of three major steps. These are:

 Preparation of logs
 Veneer manufacturing from logs
 Plywood manufacturing from veneer
Although each process step indicated above is the main sub-section of the overall manufacturing
activity, an attempt is made to briefly describe each of them.

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 5.1.1. Preparation of logs

This section consists of two major log treatment operations. In the first one, logs are cut by chain saw to
a desired length and fed to the lathe to make veneer sheets, while in the second high- density logs are
cooked in cooking vats or steam chambers to facilitate the cutting operation.

5.1.2. Veneer manufacturing from logs

Under this process step, several physical actions such as cutting, clipping, drying, joining etc. are
conducted on the log obtained from the 1st section in order to prepare good quality veneer suitable for
plywood making.

To show steps: - Manufacturing Process of Wood Veneer

The manufacturing of wood veneer includes all the processes from the time when the tree log enters the
yard to the time when veneer sheets are packed and ready to be transported. The image below explains
the entire manufacturing process of wood veneer in a simplified manner.

15
 Step 1 – Log Yard:
Step 2 – Debarking: The next step is debarking. Taking great care not to damage the tree log the
bark is peeled off with evenness.

Step 3 – Soaking of Logs: The next step involves soaking the log to soften the fiber. It is necessary for
uniform slicing. The logs are put into steamers and completely submerged at temperatures ranging from
80°C to 100°C for a period of 18 to 72 hours. For maximum efficiency, the tree log should be cut within
an hour after soaking.

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Step 4 – Cutting the Logs: The key operation of how and where a tree log should be cut depends on the
slicing method used to produce veneer. Each log, already identified has its own barcode. This enables
the various cuts to be identified any time. For peeling, the tree log will be cut in half or quarters part.
These logs are called peeler blocks or peeler billets.

Step 5 – Peeling:
Ensure that the veneer logs of the same tree are not separate tags corresponding to logs barcode are
carefully attached and verified at each step. In this step, the tree logs are sliced to veneer sheets.

There are distinct methods to slice a veneer from hardwood logs.

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Let’s take a look at each method:

(a) Flat Slicing: It is the most common veneer cutting method. The half log is placed with the heart

Side against the flitch table. Slicing is parallel to a line through its center. This cut produces a light
multicolored and a distinctive pattern. The slices obtained by this method are always uniform.

(b) Rotary Cut: The log is centrally mounted on the lathe and turned against a sharp blade, just like
unwinding a roll of paper. The cut follows the logs annual growth rings.  A bold multicolored grain
marking is produced. The veneer sheets produce exceptionally wide.

(c) Quarter Slicing: This method produces a series of straight lines. The quarter log is mounted on the
flitch table such that the logs growth rigs hit the blade at the right angle.

(d) Rift Slicing: In this veneer cutting method, the rotation speed of the tree log is determined by the log
size, particular features of the species of wood, its natural shape, and the thickness of the veneer. The cut
is done at a slide angle from the position of the quarter log. This method results in a comb or rift grain
effect.

(e) Half Round Slicing: This cut is a variation of rotary cut. The grain effect produced by this cut has
characteristics of both rift cut and flat slice veneer. The cut slightly crosses the annual growth rings.
Step 6 – Drying:
The veneer sheets always remain in the natural order as they emerge such that all parts of the original
log are kept together. One by one the slices of veneer carefully enter the dryer, where they are dried
evenly within a few minutes. Air temperature of up to 320°F at high velocity is blasted on the surface.
The veneer must be dried in such a way that it has at least 8-12% of moisture content.
Step 7 – Quality Check:
As veneer slices leave the dryer, they are again reassembled to reconstruct the log which never
separates. The identification is subjected to several verifications. It involves examining and classifying
the wood veneer. An expert carefully inspects each log to make sure customers receive quality veneers
having strict standards.
Step 8 – Clipping:
It is the initial step in the splicing process. They are cut with clipper to obtain sheets that are even in
length. A similar clipping or cutting process is performed to acquire sheets of a proper width. The
quality of the veneer panel depends on the precision and angle of the cut. Panels are then headed to the
glue machine, which bonds the edges of the veneer sheets.

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Step 9 – Splicing:
Here the veneer sheets are assembled to produce a match. The pressure exerted and the heat used
ensures a solid, consistent match. A wide range of veneer matching available as follows:
 Book match
 Slip Match
 Reverse Slip Match
 Running Match
 Balance Match
 Random Match
 End Match
Step 10 – Packing:
The veneer sheets are finally measured, packed and labels are stuck with an indication of length, width,
etc. Ready flinches are put into pallets. Each pallet is packed into protective polyethylene and is
tightened with a packing tape. They are now ready to be transported.
5.1.3. Plywood manufacturing from veneer
In plywood making, the initial operation is the preparation of glue for the process. The proceeding step
is the spreading of glue on the ore veneer sheets and the final is the pre-pressing of the stacked sheets by
the cold press.

After pre-pressing, the obtained plywood is fed to hot-press machine, where it is subjected to a pressure
at a specified temperature. Then, the plywood is cut to a pre-determined size by cutting machine and
stored for delivery.

5.1.4. Alternative technology

Timber is received from the forests in the form of logs. The logs are put under water in a pond if
possible or they are kept wet by water spray, to prevent decay and splitting and to keep them in a
condition suitable for peeling.

The logs are cross cut into bolts of suitable length and then graded according to their quality and are
ready for peeling. Veneer cutting may be done by peeling, slicing or sawing. The wet veneers are fed to
the clipping machines to be cut to the desired width and also to remove such defects as knots, wormudes
and discolorations. The remaining processes are drying, preparation of veneer, gluing, pressing and
finishing. Machinery include cross cut saw, veneer rotary lathe, veneer knife grinder, veneer drier,
electric hoist, veneer slicer, wet veneer clipper, dry veneer clipper, veneer joiner, glue mixer, hydraulic
hot press, drum sander, glue sprader.

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 6. Machinery and Equipment
The machineries and equipment required for producing plywood is detailed in Table 4 below.

Table 4: Required Machineries and Equipments

Item Description Qty.

1 Peeler 1

2 Veneer router 1

3 Veneer Clipper 1

4 Veneer Drying machine 1

5 Veneer Splinter 1

6 Veneer splicer 1

7 Gluing machine 1

8 Conveyor (roller) 1

9 Pressing machine 1

10 Drying press 1

11 Plywood edger 1

12 Sanding machine (Scraper belt, drum) 1

13 Boiler with its accessories 1

14 Polishing 1

The total cost of machinery and equipment including freight insurance and bank cost is estimated to be
about Birr 30.8 million.

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 Main
plant

Veneer rotary

Lathe

Veneer knife grinder

21
Electric hoist

Veneer slicer

Other equipments should be listed in machine layout.

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23
 6.1. Civil Engineering Cost
The total site area for the envisaged plant is estimated to be 10,000m 2 where this area is allocated to the
production, office buildings, facilities and others. Areas for store of raw materials 3,000m 2, for
processing area 1000m2, for production output area is 3,000 m2, for office 1,000 m2.for toilet 200m2, for
roads, cafés and green areas 1800 m2. . The land lease cost is estimated at Birr 276,100; the building and
civil works are estimated at Birr 20.6 million.

100m

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 100m

25
26
7. HUMAN RESOURCE AND TRAINING REQUIREMENT
7.1. Human Resource
The human resource requirement is depicted in Table 5 below.

Table 5: Human Resource Requirement

Salary/Wage (Birr)

  Job Title No. Monthly Annual

1 General Manager 1 10,264 123,168

2 Supervisor 1 7,698 92,376

3 Engineers 10 5,132 615,840

4 Skilled Workers 50 2,181 1,308,600

5 Unskilled Workers 90 1,026 1,108,512

6 Personnel Head 1 3,849 46,188

7 Secretary 1 2,181 26,172

8 Accountant 1 3,849 46,188

9 Casher 1 2181 26,172

1
0 Security 3 1,026 36,936

1
1 Clerks 3 1,283 46,188

1
2 Genitors 3 1,026 36,936

  Total 165   3,513,367

Employment Benefits 20% of Annual

  Salary     702,673

        4,216,040

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 7.2. Training Requirement
Training of key personnel is indispensable. The training should primarily focuses on the production
technology and machinery maintenance and trouble shooting. Birr 100,000 is allocated in the working
capital as training expense.

8. FINANCIAL ANALYSIS
8.1. Underlying Assumption
The financial analysis of plywood producing plant is based on the data provided in the preceding
chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

Source of finance 30% equity and 70% 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

28
 Accounts Receivable 30

Cash in Hand 30

Accounts Payable
30
8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 45.22 million as
shown in Table 6 below. The Owner shall contribute 30% of the finance in the form of equity while the
remaining 70% is to be financed by bank loan.
A proclamation 721/2011 provides for lease holding of Urban lands ,the period of urban land lease shall
vary depending on the level of urban development and sector of development activity shall have the
ceiling of 80(eighty) years industry. The value of lease of industry for injibara is 27.61 birr per m2.
Table 6: Total Initial Investment & Working Capital
Total Initial Investment

Item Cost

Land 276,100.00

Building and civil works 20,600,000.00

Office equipment 205,280.00

Vehicles 1,026,400.00

Plant machinery & equipment 30,792,000.00

Total Fixed Investment 52,899,780.00

Pre-production capital expenditure 2,116,309.00

Total Initial Investment 55,016,089.00

Working capital at full capacity 35,000,000

Total 90,016,089

*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.

29
 8.3 Production Costs
The total production cost at full capacity operation is estimated at Birr 23.58 million as detailed in Table
7 below.

Table 7: Production Costs at Full Capacity

Total Production Cost at Full Capacity

Items Cost

1.      Raw materials 46,179,070.32

2.      Utilities 161,616.00

3.      Wages and Salaries 4,216,040.00

4.      Spares and Maintenance 1,269,785.00

Factory costs 52,079,602.72

5.      Depreciation 4,241,470.00

6.      Financial costs 4,178,082.47

  Total Production Cost 60,499,145.89

8.4 Financial evaluation

8.4.1 Profitability
According to the projected income statement attached in the annex part (see annex 3) the project will
generate profit beginning from the first year of operation. Gross Profit/Sales is 46.54%, Net Profit after
Tax/Sales - 46.54%, Return on Investment 102.80% and Return on Equity 205.78% in the first year
and are gradually rising. Furthermore, the income statement and other profitability indicators show that
the project is viable.

30
 8.4.2 Breakeven Analysis
The breakeven point of the project is estimated by using income statement projection.

Accordingly, the project will break even at 8.10% of capacity utilization.

8.4.3 Payback Period

The projects will pay back the initial investment less working capital in one year.

8.4.4 Simple Rate of Return

For the envisaged plant the simple rate of return equals to 88.2%.

8.4.5 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 87.3% and
the net present value at 18 % discount is Birr 171.9 million.

8.4.6 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.

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

9.1Profit Generation
The project is found to be financially viable and earns Birr 507.56 million within the project life. Such
result induces the project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.

9.2Tax Revenue
In the project life under consideration, the region will collect about Birr 171.9 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.

A. Import Substitution and Foreign Exchange Saving

31
Based on the projected figure we learn that in the project life an estimated amount of Birr 1,024,094,018
billion will be saved as a result of the proposed project. These are the Cash Surplus and Finance
Available. This will create room for the saved hard currency to be allocated on other vital and strategic
sectors

B. Employment and Income Generation

The proposed project is expected to create 165 jobs. This is one of the commendable accomplishments
of the project.

C. Diversification and Inter Sectorial linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the ANRS as well as the country as a whole. It also has a potential to strengthen the
linkage between the manufacturing and the trade sub-sectors.

10. ENVIRONMENTAL IMPACT ASSESSMENT

The project will seriously involve itself protecting conserving and developing the natural and flora of the
project area in line with the millennium development goal. To this to will play a vital role in
participating the varies organization and the community around the project area to from an
environmental commute in charge of all environmental issues to be handled in accordance to varies
environmental and water policies of 97/99 and Proclamation 299/2002. And it will do accordance with
Environmental Impact Assessment of the Amhara National Regional State Proclamation No. 181/2011.
The owner of the project believes to undertake several environmental issues for the conservation
development and creation of sustainable environmental around the project area.

11. IMPLEMENTATION SCHEDULE

The actual implementation of the plywood manufacturing industry is planned to begin on the June 2023
G.C. The major activities envisaged are processing of land preparation, construction and delivery,
installation and commissioning of the factory line. Undertaking of civil design works and execution of
construction works which will be carried out by side which opening and processing of Letter of credit
(L/C) will take 3 months. The free on board delivery of plant machinery and equipment will take 4
months. Allowing additional one month for sea freight and clearing, the delivery of plant of project site
and thus commencement of installation work requires 5 month. Plant installation and commissioning
will take place for 4 months.

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The provision of infrastructural facilities such as Electric Power and water will be carried out in the
course of project implementation schedule. Other activities such us man power recruitment and training,
system development, and procurement of raw and other supplies will also be duty performed to ensure
that everything is in place by the time the plant is ready for operation. All in all the project is expected to
take 12 months for completion as per the below detailed implementation schedule.

Table.8. Implementation schedule

(Months) in Gregorian Calendar

Description 7 8 910 11 12 1 2 3 4 5 6
X x
Project proposal and feasibility study
Acquisition of Investment Land x
(September 2022)
Opening & Processing of L/C x
Building Construction x x xX x
Delivery of Plant machinery and xX X X
Clearing
Installation and Commissioning x x x X
Recruitment of man power X X x x x X
arranging for other works
Customers, timely availability all the week including week end days, customer care, and quick response
to the feedback from clients.

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 12. Annexes
Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
Capacity Utilization (%) 0 0 80% 90% 100% 100%
1. Total Inventory 0 0 34,167,188 38,438,090 42,708,986 42,708,986
Raw Materials in Stock- Total 0 0 13,237,152 14,891,796 16,546,440 16,546,440
Raw Material-Local 0 0 6,334,746 7,126,588 7,918,430 7,918,430
Raw Material-Foreign 0 0 6,902,412 7,765,208 8,628,011 8,628,011
Factory Supplies in Stock 0 0 98,303 110,595 122,881 122,881
Spare Parts in Stock and
Maintenance 0 0 221,636 249,338 277,046 277,046
Work in Progress 0 0 2,457,648 2,764,854 3,072,056 3,072,056
Finished Products 0 0 4,915,292 5,529,704 6,144,118 6,144,118
2. Accounts Receivable 0 0 22,394,180 25,193,456 27,992,724 27,992,724
3. Cash in Hand 0 0 808,275 909,308 1,010,347 1,010,347
CURRENT ASSETS 0 0 44,132,496 49,649,056 55,165,618 55,165,618
4. Current Liabilities 0 0 22,394,180 25,193,456 27,992,724 27,992,724
Accounts Payable 0 0 22,394,180 25,193,456 27,992,724 27,992,724
Total Net Working Capital
Requirements 0 0 21,738,310 24,455,602 27,172,888 27,172,888
INCREASE IN NET WORKING
CAPITAL 0 0 21,738,310 2,717,292 2,717,291 0
42,708,98
1. Total Inventory 42,708,986 6 42,708,986 42,708,986 42,708,986 42,708,986
16,546,44
Raw Materials in Stock-Total 16,546,440 0 16,546,440 16,546,440 16,546,440 16,546,440
Raw Material-Local 7,918,430 7,918,430 7,918,430 7,918,430 7,918,430 7,918,430
Raw Material-Foreign 8,628,011 8,628,011 8,628,011 8,628,011 8,628,011 8,628,011
Factory Supplies in Stock 122,881 122,881 122,881 122,881 122,881 122,881
Spare Parts in Stock and
Maintenance 277,046 277,046 277,046 277,046 277,046 277,046
Work in Progress 3,072,056 3,072,056 3,072,056 3,072,056 3,072,056 3,072,056
Finished Products 6,144,118 6,144,118 6,144,118 6,144,118 6,144,118 6,144,118
27,992,72
2. Accounts Receivable 27,992,724 4 27,992,724 27,992,724 27,992,724 27,992,724

34
3. Cash in Hand 1,010,347 1,010,347 1,010,347 1,010,347 1,010,347 1,010,347
55,165,61
CURRENT ASSETS 55,165,618 8 55,165,618 55,165,618 55,165,618 55,165,618
27,992,72
4. Current Liabilities 27,992,724 4 27,992,724 27,992,724 27,992,724 27,992,724
27,992,72
Accounts Payable 27,992,724 4 27,992,724 27,992,724 27,992,724 27,992,724
Total Net Working Capital 27,172,88
Requirements 27,172,888 8 27,172,888 27,172,888 27,172,888 27,172,888
Increase In Net Working Capital 0 0 0 0 0 0

35
 Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION PRODUCTION

Year 1 Year 2 1 2 3 4

TOTAL CASH
INFLOW 44,442,478 71,615,366 227,674,180 233,739,276 259,399,276 256,600,000

1. Inflow Funds 44,442,478 71,615,366 22,394,180 2,799,276 2,799,276 0

Total Equity 17,776,992 28,646,146 0 0 0 0

Total Long Term Loan 26,665,488 42,969,220 0 0 0 0

Total Short Term

Finances 0 0 22,394,180 2,799,276 2,799,276 0

2. Inflow Operation 0 0 205,280,000 230,940,000 256,600,000 256,600,000

Sales Revenue 0 0 205,280,000 230,940,000 256,600,000 256,600,000

Interest on Securities 0 0 0 0 0 0

3. Other Income 0 0 0 0 0 0

Total Cash Outflow 44,442,478 44,442,478 145,399,988 118,833,050 168,972,296 162,480,850

4. Increase In Fixed
Assets 44,442,478 44,442,478 0 0 0 0

Fixed Investments 42,326,170 42,326,170 0 0 0 0

Pre-production
Expenditures 2,116,308 2,116,308 0 0 0 0

5. Increase in Current
Assets 0 0 44,132,496 5,516,562 5,516,562 0

6. Operating Costs 0 0 83,079,936 93,354,538 103,629,146 103,629,146

7. Corporate Tax Paid 0 0 0 0 41,257,334 41,675,140

8. Interest Paid 0 0 18,187,562 8,356,164 6,963,472 5,570,776

9.Loan Repayments 0 0 0 11,605,788 11,605,788 11,605,788

10.Dividends Paid 0 0 0 0 0 0

Surplus (Deficit) 0 27,172,888 82,274,192 114,906,220 90,426,980 94,119,150

Cumulative Cash Balance 0 27,172,888 109,447,084 224,353,304 314,780,284 408,899,434

36
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION PRODUCTION

  Year 1 Year 2 1 2 3 4

TOTAL CASH
INFLOW 0 0 205,280,000 230,940,000 256,600,000 256,600,000

1. Inflow Operation 0 0 205,280,000 230,940,000 256,600,000 256,600,000

Sales Revenue 0 0 205,280,000 230,940,000 256,600,000 256,600,000

Interest on
Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH
OUTFLOW 44,442,479 44,442,479 104,818,247 96,071,830 147,603,767 145,304,287

3. Increase in Fixed
Assets 44,442,479 44,442,479 0 0 0 0

Fixed Investments 42,326,170 42,326,170 0 0 0 0

Pre-production
Expenditures 2,116,309 2,116,309 0 0 0 0

4. Increase in Net
Working Capital 0 0 21,738,310 2,717,291 2,717,291 0

5. Operating Costs 0 0 83,079,936 93,354,539 103,629,147 103,629,147

6. Corporate Tax Paid 0 0 0 0 41,257,334 41,675,140

- -
NET CASH FLOW 44,442,479 44,442,479 100,461,753 134,868,170 108,996,233 111,295,713

CUMULATIVE - -
NET CASH FLOW 44,442,479 88,884,957 11,576,796 146,444,966 255,441,200 366,736,913

Net Present Value - -

(at 18%) 44,442,479 37,663,117 72,150,070 82,084,934 56,219,043 48,648,383

Cumulative Net - -
present Value 44,442,479 82,105,595 -9,955,526 72,129,403 128,348,446 176,996,830

37
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION

  5 6 7 8 9 10

TOTAL CASH INFLOW 256,600,000 256,600,000 256,600,000 256,600,000 256,600,000 256,600,000

1. Inflow Operation 256,600,000 256,600,000 256,600,000 256,600,000 256,600,000 256,600,000

Sales Revenue 256,600,000 256,600,000 256,600,000 256,600,000 256,600,000 256,600,000

Interest on
Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

Total Cash Outflow 145,722,093 146,517,030 146,934,836 147,352,648 147,352,648 147,352,648

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 103,629,147 103,629,147 103,629,147 103,629,147 103,629,147 103,629,147

6. Corporate Tax Paid 42,092,951 42,887,883 43,305,689 43,723,501 43,723,501 43,723,501

NET CASH FLOW 110,877,907 110,082,970 109,665,164 109,247,353 109,247,353 109,247,353

Cumulative Net Cash

Flow 477,614,820 587,697,790 697,362,954 806,610,307 915,857,664 1,025,105,017

Net Present Value (at

18%) 41,072,674 34,557,800 29,175,117 24,630,480 20,873,286 17,689,229

Cumulative Net present

Value 218,069,503 252,627,303 281,802,421 306,432,900 327,306,192 344,995,416

Net Present Value18%) 344,995,416

Internal Rate of Return 87.3%

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 Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION

  1 2 3 4 5

Capacity Utilization
(%) 80% 90% 100% 100% 100%

230,940,00 256,600,00 256,600,00 256,600,00

1. Total Income 205,280,000 0 0 0 0

Sales Revenue 34,000,000 51,000,000 68,000,000 68,000,000 68,000,000

Other Income 0 0 0 0 0

2. Less Variable Cost 19,982,459 29,973,688 39,964,917 39,964,917 39,964,917

VARIABLE MARGIN 14,017,541 21,026,312 28,035,083 28,035,083 28,035,083

(In % of Total Income) 82 82 82 82 82

3. Less Fixed Costs 5,948,654 6,076,526 6,204,398 6,204,398 6,204,398

OPERATIONAL
MARGIN 8,068,887 14,949,786 21,830,685 21,830,685 21,830,685

(In % of Total Income) 47 59 64 64 64

4. Less Cost of Finance 10,640,767 4,909,210 4,091,008 3,272,806 2,454,605

5. GROSS PROFIT -2,571,879 10,040,576 17,739,677 18,557,878 19,376,080

6. Income (Corporate)
Tax 0 0 5,321,903 5,567,363 5,812,824

7. NET PROFIT -2,571,879 10,040,576 12,417,774 12,990,515 13,563,256

RATIOS (%)  

Gross Profit/Sales 46.54% 52.28% 53.59% 54.14% 54.68%

Net Profit After

Tax/Sales 46.54% 52.28% 37.52% 37.90% 38.28%

Return on Investment 102.80% 113.91% 88.95% 88.59% 88.23%

Return on Equity 205.78% 260.10% 207.37% 209.47% 211.57%

39
 Annex 4: NET INCOME STATEMENT (in Birr): Continued

PRODUCTION

  6 7 8 9 10

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

1. Total Income 205,280,000 230,940,000 256,600,000 256,600,000 256,600,000

Sales Revenue 34,000,000 51,000,000 68,000,000 68,000,000 68,000,000

Other Income 0 0 0 0 0

2. Less Variable Cost 19,982,459 29,973,688 39,964,917 39,964,917 39,964,917

VARIABLE MARGIN 14,017,541 21,026,312 28,035,083 28,035,083 28,035,083

(In % of Total Income) 82 82 82 82 82

3. Less Fixed Costs 5,948,654 6,076,526 6,204,398 6,204,398 6,204,398

OPERATIONAL MARGIN 8,068,887 14,949,786 21,830,685 21,830,685 21,830,685

(In % of Total Income) 47 59 64 64 64

4. Less Cost of Finance 10,640,767 4,909,210 4,091,008 3,272,806 2,454,605

5. GROSS PROFIT -2,571,879 10,040,576 17,739,677 18,557,878 19,376,080

6. Income (Corporate) Tax 0 0 5,321,903 5,567,363 5,812,824

7. NET PROFIT 205,280,000 230,940,000 256,600,000 256,600,000 256,600,000

RATIOS (%)  

Gross Profit/Sales 55.71% 56.26% 56.80% 56.80% 56.80%

Net Profit After Tax/Sales 39.00% 39.38% 39.76% 39.76% 39.76%

Return on Investment 88.63% 88.27% 87.91% 87.91% 87.91%

40
Return on Equity 215.56% 217.66% 219.76% 219.76% 219.76%

Table of Contents
BASIC INFORMATION............................................................................................................1
EXECUTIVE SUMMARY.........................................................................................................2
SWOT ANALYSIS...................................................................................................................3
1. INTRODUCTION..............................................................................................................4
1.1. Investment in Ethiopia....................................................................................................4
1.2 Investment in Amhara..................................................................................................5
1.3 Banja woreda and its investment..................................................................................6
1.4 Promoter Background...................................................................................................6
1.5 Project Objective...........................................................................................................7
1.6 Mission and goal..........................................................................................................7
1.6.1 Mission..................................................................................................................7
1.6.2 Goal.......................................................................................................................8
2. PRODUCT DESCRIPTION AND APPLICATION...............................................................8
2.1 Plywood Manufacturing as a Business Profitable..........................................................8
3. MARKET STUDY, PLANT CAPACITY AND PRODUCTION PROGRAM...........................9
3.1 Market Study...............................................................................................................9
3.1.1 Present Demand and Supply..................................................................................9
3.1.2 Projected Demand..................................................................................................9
3.1.3 Pricing and Distribution.......................................................................................11
3.2 Plant Capacity............................................................................................................11
3.3 Production Program....................................................................................................11
4. RAW MATERIALS AND UTILITIES...............................................................................11
4.1 Availability and Source of Raw Materials..........................................................................11
4.2 Annual Requirement and Cost of Raw Materials and Utilities..................................................12
4.3 Location and Site.........................................................................................................13
5 TECHNOLOGY AND ENGINEERING...............................................................................13
5.1 Production Process.......................................................................................................13
5.1.1. Preparation of logs.................................................................................................14
5.1.2. Veneer manufacturing from logs...............................................................................14
5.1.3. Plywood manufacturing from veneer..........................................................................18
5.1.4. Alternative technology............................................................................................18
6. Machinery and Equipment.......................................................................................19
6.1. Civil Engineering Cost..................................................................................................23
7. HUMAN RESOURCE AND TRAINING REQUIREMENT.....................................................26
7.1. Human Resource.........................................................................................................26

41
 7.2. Training Requirement...................................................................................................26
8. FINANCIAL ANALYSIS...................................................................................................27
8.1. Underlying Assumption.................................................................................................27
8.2 Investment......................................................................................................................28
8.3 Production Costs.........................................................................................................29
8.4 Financial evaluation.....................................................................................................29
8.4.1 Profitability.........................................................................................................29
8.4.2 Breakeven Analysis...............................................................................................29
8.4.3 Payback Period.....................................................................................................30
8.4.4 Simple Rate of Return............................................................................................30
8.4.5 Internal Rate of Return and Net Present Value...............................................................30
8.4.6 Sensitivity Analysis...............................................................................................30
9. ECONOMIC AND SOCIAL BENEFIT AND JUSTIFICATION...............................................30
9.1 Profit Generation.........................................................................................................30
9.2 Tax Revenue..............................................................................................................30
10. ENVIRONMENTAL IMPACT ASSESSMENT..................................................................31
11. IMPLEMENTATION SCHEDULE..................................................................................31
12. Annexes.......................................................................................................................33

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 Wer

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