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AT TEXTILES Plc

Business Plan for:

GARMENT Manufacturing and Trade Business plan

OCTOBER, 2023
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Table of Contents
1 INTRODUCTION........................................................................................................................................................1
2 BACKGROUND..........................................................................................................................................................2
2.1 Legality............................................................................................................................................................2
2.2 Back Ground of the founders and owners..................................................................................................3
3 CORPORATE STRATEGY.............................................................................................................................................4
3.1 Corporate Mission and vision.......................................................................................................................4
3.2 Corporate Goals.............................................................................................................................................4
3.3 Core Competencies of the Company..........................................................................................................5
3.4 Evaluation of the Ethiopian Textile and Garment sector and its supply chain.......................................5
3.5 Business Model..............................................................................................................................................6
3.6 Strategies to be employed............................................................................................................................7
3.7 General Economy..........................................................................................................................................8
3.8 Demand Analysis for the Products..............................................................................................................9
3.9 Marketing Strategies....................................................................................................................................10
4 OPERATIONAL PLAN...............................................................................................................................................10
4.1 Revenue and cost projection......................................................................................................................10
4.2 Operating and Administrative Expenses...................................................................................................11
5 FINANCIAL PLAN.....................................................................................................................................................14
5.1 Financing Requirement...............................................................................................................................14
5.2 Sources of Finance......................................................................................................................................15
6 FINANCIAL ANALYSIS..............................................................................................................................................16
6.1 Income Statement (Annex I).......................................................................................................................16
6.2 The projected Cash Flow (Annex II)..........................................................................................................16
6.3 Project Appraisal.............................................................................................................................................17
7 CONCLUSION AND RECOMMENDATIONS...............................................................................................................19
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1 INTRODUCTION
Ethiopian economy had been consistently growing by over 10% in the past until it was disrupted by the
civil war in the country. The unprecedented economic development that was registered has resulted in
change in the people’s life style, consumptions, work culture, and the overall life style.

This growth in demand was mainly supplied by the import of goods. But after the war the country’s
foreign reserve has depleted and the import business was severely hurt. On top of this the government
gave priorities for manufacturing locally and imposes high tax on imported good causing a high price
on imported goods.

This creates a good opportunity for the local manufacturing business, which has created fertile ground
for business. Besides, the government’s unabated effort in establishing conducive business
environment, its effort to provide efficient public service and build development infrastructures are
major factors that affirms availability of brighter future for trade and investment in the country.

It is within this business and economic background that AT TEXTILES PLC is attracted to engage in
textile and related business by establishing its manufacturing in Addis Ababa.

The Company is owned and managed by two Ethiopians who are highly professional with
commendable business experience in the sector. The Company’s business is manufacturing and
distributing of high quality garments. The Company has good knowledge of the Ethiopian textile
sector, well established business relation with manufacturers and retailers. In order to exploit this
relationship and to capitalize on the sector’s weakness of inability to supply quality garment as
demanded by retailers both with respect to specification and quantity, the Company established a
garment factory that can produce high quality garments.

Therefore, its business model is receiving orders from retailers and delivers it as per the specification
and design of the customer.

The Company’s short-term plan is to manufacture and distribute garments that worth ETB 120.7
million annually and increase by 10% for the coming years. The plan indicated that the Company
needs to invest a total of ETB18.82million of which ETB16.86 million on working capital and ETB1.96
million for purchase of additional machineries at the beginning of 2016E.C fiscal year. This investment
helps the company to achieve the planned volume of operation.

Part of the fund, ETB13.41 million is expected to be obtained from banks and the remaining
ETB5.41million will be financed from the company equity.

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Hence, this business plan is prepared to clearly show to the bank; the Company’s back ground and
future plan so as to clearly demonstrate the business’s viability and the promoters’ credit worthiness as
follows:

2 BACKGROUND
2.1 Legality
At Textile plc was established in January 2012 with paid-up capital of Birr 1,000,000 mainly to engage
in the following business sectors:

● Manufacturing,

● Manufacture and distribute industrial produces,

● Agriculture,

● General import and export business,

● Others

The Company is founded by two Ethiopians; namely, Ato Asnake Worku and Ato Tadesse Regassa
contributing equal share in the company

1. Address:-Addis Ababa, Nifas silk Lafto sub city, woreda 02, House No. new, telephone
251930078382;
2. Company Registration- the Company is registered by the EFDR Ministry of Justice Authentication
and Registration Office on 24/012/2004 EC. Hence, the Company has a legal personality.
3. Commercial Registration Certificate- the Company is registered to trade in Ethiopia under
Commercial Registration No. MT/AA/2/0018491/2004 on 24/12/2004 E.C by the Ministry of Trade
with registered capital of Birr 1,204,000 engaging specifically in;
 Manufacturing.
 Whole Sale and retail Trade, Repair of Motor Vehicles, motor cycles, personal
and house hold goods, Hotels and restaurants, Import & Export,

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 Construction,
 Agriculture, Hunting, Forestry, and fishing,
 Financial Intermediation, Insurance, real Estate and Business Services others

4. Trade License- the Company is licensed to engage in Import of Household and office goods
including textile, textile fibers and yarn, apparel and clothing, footwear and leather goods, bags
and luggage under business license no. 14/670/205080/2006 issued by Ministry of Trade on
9/11/2006E.C.
a. Tax Payer Identification No.- The Company has obtained tax payer Identification No
0017090820 from the Ethiopian Revenue and Customs Authority on August 31,2012.
5. License to participate in Tenders floated by the government institutions.

2.2 Back Ground of the founders and owners

AT” represents the name of the two founders and owners of the Company, Ato Asnake Worku and Ato
Tadesse Regassa. The Company is owned and managed by individuals who have relevant
qualification in the field with rich business experience and deep knowledge of the Ethiopian textile and
garment supply chain.

The General Manager of the Company, Ato Asnake, is a textile Engineer by profession holding BSC
Degree in Textile Engineering and post graduate diploma in Mechanical Engineering. He has over 12
years relevant work experience as a production manager and General Manager in various private
textile factories and Textile Trading and designating International firms. Ato Tadesse is a manager by
profession and has been working in government institutions and running his own business for over 15
years.

The Company has been working as a coordinator and sales representative to a number of foreign-
based companies engaged in design and trade of textile and garment. The following are some:

1. Stars Design Group INC- a USA based company that has been importing textile using the AGOA
scheme to USA by sourcing the local textile and garment factories. The owners and founders of
AT textile has been performing the following activities in behalf of the Company from February
2009 to 2012:

a. Developing new products that suits the Ethiopian factories within the Company’s standard,
b. Selecting and negotiating with the right factory in the country(Ethiopia) for the order given by
the head office in USA

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c. Coordinating the import of raw materials and export of finished products from Ethiopia
d. Controlling the status of all goods that are bought and imported in the country by the Company
and monitoring proper utilization of it by the factories,
e. Monitoring proper delivery of orders given to local factories as per the agreed upon quality
standard with regard to quality finish, packing, and labeling.
2. Responsify AB- A Sweden based company that assists international companies with well developed
brand like H&M, Kappal, Standard textiles, Stadium AB etc to do business with the developing
African textile factories.

AT Textile has been assisting these companies by identifying products that can be manufactured in
Ethiopia as per their quality standards, selecting and negotiating with textile and garment factories,
monitoring order deliveries, and exporting the products as per the time frame, etc

Since February 2017 the company started manufacturing of garments for the local market, hence
hiring more people.

3 CORPORATE STRATEGY
3.1 Corporate Mission and vision
Mission- our mission at AT TEXTILES is to supply quality garments at a reasonable price by
employing state-of-the art technologies in absolutely collaborative and cooperative approach with
business partners and thereby generate adequate return to shareholders.

Vision- we foresee ourselves as a most valued and preferred corporate entity for quality garments
both domestically and in abroad that applies modern technologies, strong leadership, and quality
business processes.

3.2 Corporate Goals

In the coming three years we have determined to reach at the following targets;

● establishing our own modern textile denim weaving, printing and finishing factory,

● realizing a well-developed and recognized brand, name, for quality production and operating

system,

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● Establishing knowledge based modern factory management system.

3.3 Core Competencies of the Company

AT TEXTILES strong competitive edge is its knowledge of the textile and garment factories in the
country including their capacity, quality and management system as well as their sales and distribution
system. The Company has also considerable experience in sourcing production to different companies
so as to manufacture products at own specifications and quality. By working with the international
brand companies, especially Chinese, it has obtained substantial experiences in designing of products
and management of product sourcing. Now, the Company has obtained good understanding regarding
the distributors and garment factories in the country specially those who are based locally.

On top of these the company has strong management and leadership quality,

The Company has also strong business relation with the following suppliers and traders.

S.No. Raw Material Textile factories Whole salers

Suppliers (yarn, and
others)
1 Kanoria Africa

2 Chinese industrial
Zone

3.4 Evaluation of the Ethiopian Textile and Garment sector and its supply chain
In Ethiopia, there are a number of textile and garment factories who operate at different capacities. The
amount of investment in the sector is increasing and it is still deemed to increase both in quantity and
in quality. Yet, the country is still importing textile fabrics that reach over 38 thousands metric tons
annually investing about ETB 2 billion in foreign currency. Considering the value of domestic
production of ETB 1.1 billion, the country is almost covering some 50-60% of its demand from import.

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Moreover, following the growing economy, the country’s per capital fiber consumption is expected to
grow from less than one kg per annum (which is too low as compared to the African Average of 3.2 kg
and world average of 8.7 kg) that increase the volume of import unless the domestic production grows
rapidly.

On the other hand, domestic firms are said to operate below their capacity and are regarded as
inefficient owing to lack of market for local products among others. Close evaluation to the sector
however shows that the factories can produce better quality that is readily consumed by the local
market and even that can be exported if they apply supply chain management concept that requires
coordination and collaboration among the supply chain actors.

Coordination and collaboration is required for the sector since some factories have high quality
machinery but lack capacity to access quality raw material while others have these raw materials but
produce poor quality products owing to lack of skill and technology. If the factory with quality raw
material shares the finishing work with the factory with advanced technology in the area both factories
will yield quality product. The other factor for the poor performances of the factories is lack of
specialization and striving to do all things under a roof almost starting from ginning to finishing.
Although this strategy is to seek for economies of scale, the factories however eventually found
themselves inefficient, as they couldn’t specialize in any of the process. For instance, factories that
have end-to-end process specializing in cotton cannot flexibly shift to polyester at least some of their
processes as the factories are designed for cotton and not to interchangeably work. Even some of such
factories find themselves in difficulty to finish semi processed raw materials by other factories unless
the raw materials are processes as per their specification.

The distribution business is also less coordinated as the factories manufacture and supply to the few
wholesalers in Merkato that hold the products and charge high margin to retailers. The factories also
produce similar type of products in bulk that narrows option for customers and discourage consumption
of domestic products. Therefore, the distribution system is inefficient in that it fails to supply variety of
products in small quantities.

3.5 Business Model

A manufacturing business model involves the creation and production of physical goods using raw
materials, machines, and human labor. The process typically involves several stages, including product
design, procurement of raw materials, assembly or fabrication, quality control, packaging, and
distribution. The goal of a manufacturing business is to produce high-quality products at a reasonable
cost and to sell them at a profit. To achieve this, manufacturers must continually improve their

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processes and invest in equipment and technology that can increase efficiency and reduce waste.
Additionally, they must stay current with market trends and customer demands to ensure that their
products remain competitive in the marketplace. Successful manufacturers also prioritize safety and
environmental sustainability, taking steps to minimize their impact on the environment and protect the
health and well-being of their employees and customers.

The business model that we are engaged in is manufacturing, specifically garment.

Currently we set up our unit in Addis Ababa with 35 total stitching machines capable of producing 500
pieces of men’s trouser per day on an eight hour shift basis. The company is providing its products to
the local market. The products it is currently producing are men’s jeans trousers, women’s jeans
trousers, jeans Jackets and children clothes.

We are planning to expand the production capacity by getting a loan from bank. After securing the
bank loan, we will add additional machineries and man power to increase the production capacity to
800 pieces of men’s trouser per day.

3.6 Strategies to be employed

Based on the Company’s knowledge of the textile supply chain in the country, its management skills
and experience obtained in the sector, it will continue manufacturing and supplying quality jeans
products to the market. The Company has both the ability and resources to exploit in this regard, as it
has well established business relationship with a number of raw material manufacturing companies,
processing factories and retailing companies.

At this time our production capacity cannot satisfy our customers demand. We are only producing
around 60% of the orders. After the expansion we will have a chance to deliver more products to the
market and even add additional customers.

Process Flow Chart

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3.7 General Economy

The Ethiopian garment sector has been growing steadily in recent years, with the government
implementing various policies and incentives to promote the industry. The sector has attracted
significant foreign investment, particularly from China, India, Pakistan, Turkey and has created
employment opportunities for many Ethiopians.

However, the garment sector still faces a number of challenges. One of the main challenges is the
lack of a well-developed local textile industry. This means that many of the raw materials used in
garment production are imported, which can add to the cost of production. Additionally, the sector is
heavily reliant on foreign investment, which can be vulnerable to changes in global economic
conditions.

Another challenge is the lack of skilled labor in the sector. While the industry has created many jobs,
there is a shortage of workers with the necessary skills and experience to operate modern machinery
and carry out advanced production techniques. This can lead to lower productivity and quality, which
could hinder the industry's growth potential.

There have also been concerns about the working conditions in some garment factories in Ethiopia.
Reports have highlighted issues such as low wages, long working hours, and poor working conditions.
The government has taken steps to address these concerns, but there is still more work to be done to
ensure that workers in the sector are treated fairly and humanely.

Overall, while the Ethiopian garment sector has potential for growth and can provide significant
economic benefits, there are still some challenges that need to be addressed. With continued
investment and support from the government and other stakeholders, the sector could become a
major player in the global garment industry.

GDP growth data may vary depending on the source. There is, however, consensus among major
sources that the Ethiopian Economy has been performing rather well over the past decade. The GDP
of Ethiopia has been constantly increasing year over. Ethiopian economy registered average annual
growth rate of 10.1 percent during the GTP period of 2010/11-2013/14 1 that is making the country

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among the top performer in Sub-Saharan Africa with average growth of 5%-6% 2. According to the
report, Real GDP expanded by 10.3percent in2013/14, compared to the GTP target of 11.2 percent
for 2013/14. This economic growth has also been impressive compared with the 5.4 percent growth
estimated for Sub-Saharan Africa in 2014.

In Ethiopia, the growth-oriented economic policy of the government has created an attractive
atmosphere for local and foreign investors, providing them with a number of investment incentives. As
the center of the new development thinking is the belief that market forces more efficiently allocate
resources and that the private sector is the main economic driver, the government is concentrating on
developing infrastructures and providing a stable macro-economic environment.

Overall, government policies, strategies and regulations are becoming more transparent and
conducive for investors from time to time. Government offices including the Investment offices, City
Municipalities and others have also made great strides in their services. In general, the business
environment in the country is very conducive than ever before.

3.8 Demand Analysis for the Products

The demand for garments in Ethiopia has been increasing steadily in recent years, driven by factors
such as population growth, rising incomes, and changing consumer preferences. According to a report
by the World Bank, Ethiopia's apparel market was valued at around $150 million in 2016, and is
expected to grow to $300 million by 2025.

One of the main drivers of demand for garments in Ethiopia is the country's large and growing
population, which is currently estimated at over 110 million people. As the population continues to
grow, so does the market for clothing and other consumer goods.

In addition to population growth, rising incomes are also contributing to increased demand for
garments in Ethiopia. As more Ethiopians move into the middle class, they are able to afford higher-
quality clothing and are more likely to purchase fashion items for personal expression.

Another factor driving demand for garments in Ethiopia is the increasing trend of "fast fashion," where
consumers purchase inexpensive, trendy clothing items that are designed to be worn for a short

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period of time before being replaced. This trend has been particularly popular among young people in
Ethiopia's urban areas.

Overall, the demand for garments in Ethiopia is expected to continue growing in the coming years,
creating opportunities for local and international garment manufacturers to tap into this expanding
market.

3.9 Marketing Strategies

The country’s textile industry is characterized by industries that supply what they manufacture as per
their internal plans and quality specifications. The practice of market survey and producing what is
most wanted by the market is low. Even, sharing market demand information with retailers that are
closer to the end users is lower let alone undertaking market survey. As a result, the market supplies
more or less similar products. Besides, factories in the country manufacture products in bulk and are
not willing to supply in small quantities in search of scale of economies.

The Company’s strategy is therefore to supply products required by retailers at the quality and
quantity level they demanded. The Company can also compete on prices besides the flexibility and
quality factors as it will only manufacture on demand and hence can significantly reduce the stock
carrying costs.

4 OPERATIONAL PLAN
This operational plan is prepared based on the Company’s strategic goals and strategic business
model broadly discussed above.

The company’s operational plan is to manufacture and distribute quality jeans products to the local
and export market

The Company’s operational plan for the 1st year is to build the production capacity, achieves the
quality requirement and financial strength that the export market requires. In this period we supply for
the local market.

In the subsequent years we will start exporting at least 50% of our products.

4.1 Revenue and cost projection

The Company’s sales volume is forecasted based on the following assumptions:

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● The Company will sale 82% of its annual production in the same year and the rest will be held

as a minimum stock level in inventory for the next period sales;

● The Company expects 21% gross profit margin on all costs it incurred on import and

manufacturing. Such costs include purchase, freight & insurance, customs and bank charges,
processing fees.

4.2 Operating and Administrative Expenses

The Company’s operating and administrative expenses are estimated as follows:

● Salary expense- it is computed taking the following assumptions regarding the required

number of staff, basic salary, pension scheme and staff benefits;

Table 1- Staff Salary and benefits expenses-plan

Monthly Total Monthly

Qty Salary Salary Annual Salary

General Manager 1 16,000.00 16,000.00 192,000.00

Finance and Admin Manager 1 14,000.00 14,000.00 168,000.00

Secretary 1 5,000.00 5,000.00 60,000.00

Cutting Supervisor 1 5,000.00 5,000.00 60,000.00

production Superviser 1 11,000.00 11,000.00 132,000.00

Cutting Helpers 3 2,500.00 7,500.00 90,000.00

Machine operators 35 3,500.00 122,500.00 1,470,000.00

Helpers 5 2,500.00 12,500.00 150,000.00

Finishing supervisor 1 4,500.00 4,500.00 54,000.00

Finishing workers 4 3,000.00 12,000.00 144,000.00

Cleaners 1 2,500.00 2,500.00 30,000.00

Security Guard 1 2,500.00 30,000.00

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2,500.00
215,000.00 2,580,000.00

● This shows that the Company’s annual salary and benefit expense will be Birr 2,580,000.00

offering competitive salary and employing adequate staff.

● Rent Expenses- the company will pay office and store rent which is presented as follows:

Table 2- Rent expenses-plan

Description Rent Per Month Rent Per Annum

Ware House rent 60,000.00 720,000.00

● Selling expenses- Selling expenses comprise sales commissions and related expenses. The

Company will pay attractive commissions for sales men to penetrate the market. Total selling
expenses is estimated to be 1% of the annual; revenue.

● Loading un-loading- it will be significant cost element and it is expected to cost 1% of the

total cost of purchase.

● Administrative expenses- comprises stationery and printing, professional fees, license and

legal fees, travel and postage, per diem, telephone, electricity, water, bank charges, etc. It is
expected that administrative expenses amounts to 1% of annual sales.

● Interest Expenses: - It is planned that (based on the working capital requirement determined

below) the Company will obtain bank term loan of ETB13.41million to be repaid in 5 years as
shown in the table below. The loans are expected to be obtained at annual interest rate of
15.5%.

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Table 3- Loan Amortization Schedule

Enter values
$ $
Loan amount 13,406,222.22 Scheduled payment 975,565.53
Annual interest Scheduled number of
rate 15.50 % payments 20
Loan period in Actual number of
years 5 payments 20
Number of
payments per $
year 4 Total early payments -
Start date of $
loan 6/1/2023 Total interest 6,105,088.28
Optional extra
payments

Lender
name:

Pmt. Payment Beginning Scheduled Cumulative

Total Payment Principal Ending Balance
No. Date Balance Payment Interest

$ $ $ $ $ $
1 7/1/2023 13,406,222.22 975,565.53 975,565.53 456,074.41 12,950,147.81 519,491.11
$ $ $ $ $ $
2 10/1/2023 12,950,147.81 975,565.53 975,565.53 473,747.30 12,476,400.51 1,021,309.34
$ $ $ $ $ $
3 1/1/2024 12,476,400.51 975,565.53 975,565.53 492,105.01 11,984,295.51 1,504,769.86
$ $ $ $ $ $
4 4/1/2024 11,984,295.51 975,565.53 975,565.53 511,174.07 11,473,121.43 1,969,161.31
$ $ $ $ $ $
5 7/1/2024 11,473,121.43 975,565.53 975,565.53 530,982.07 10,942,139.36 2,413,744.76
$ $ $ $ $ $
6 10/1/2024 10,942,139.36 975,565.53 975,565.53 551,557.62 10,390,581.74 2,837,752.66
$ $ $ $ $ $
7 1/1/2025 10,390,581.74 975,565.53 975,565.53 572,930.48 9,817,651.25 3,240,387.71

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$ $ $ $ $ $
8 4/1/2025 9,817,651.25 975,565.53 975,565.53 595,131.54 9,222,519.71 3,620,821.69
$ $ $ $ $ $
9 7/1/2025 9,222,519.71 975,565.53 975,565.53 618,192.89 8,604,326.83 3,978,194.33
$ $ $ $ $ $
10 10/1/2025 8,604,326.83 975,565.53 975,565.53 642,147.86 7,962,178.97 4,311,612.00
$ $ $ $ $ $
11 1/1/2026 7,962,178.97 975,565.53 975,565.53 667,031.09 7,295,147.88 4,620,146.43
$ $ $ $ $ $
12 4/1/2026 7,295,147.88 975,565.53 975,565.53 692,878.54 6,602,269.33 4,902,833.41
$ $ $ $ $ $
13 7/1/2026 6,602,269.33 975,565.53 975,565.53 719,727.59 5,882,541.74 5,158,671.35
$ $ $ $ $ $
14 10/1/2026 5,882,541.74 975,565.53 975,565.53 747,617.03 5,134,924.71 5,386,619.84
$ $ $ $ $ $
15 1/1/2027 5,134,924.71 975,565.53 975,565.53 776,587.19 4,358,337.52 5,585,598.17
$ $ $ $ $ $
16 4/1/2027 4,358,337.52 975,565.53 975,565.53 806,679.95 3,551,657.57 5,754,483.75
$ $ $ $ $ $
17 7/1/2027 3,551,657.57 975,565.53 975,565.53 837,938.79 2,713,718.78 5,892,110.48
$ $ $ $ $ $
18 10/1/2027 2,713,718.78 975,565.53 975,565.53 870,408.92 1,843,309.86 5,997,267.09
$ $ $ $ $ $
19 1/1/2028 1,843,309.86 975,565.53 975,565.53 904,137.27 939,172.59 6,068,695.34
$ $ $ $ $ $
20 4/1/2028 939,172.59 975,565.53 939,172.59 902,779.65 - 6,105,088.28

o Profit tax- Annual profit tax is computed assuming effective tax rate of 30%. Income tax liability of
a fiscal year is assumed to be paid in the same year.

5 FINANCIAL PLAN
5.1 Financing Requirement
As indicated earlier, the Company is expected to invest a total of ETB18.82million for purchase of
raw materials, machinery and equipment, selling and administrative expense in the first year in order
to attain the planned volume business. Considering the cash flow lifecycle of the business that is
estimated to be two months as indicated below.

Table 6- Cash flow life cycle

Period cash is tied on working capital in months
Average delivery time for the fabric factory to
deliver 0.5
work in progress 1
Trade receivables 0.5
Total 2

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Table 7- Working capital requirement-estimation

Description Annual working capital Initial working capital

Cost of Purchase 86,257,333.33 14,376,222.22

Expenses 14,880,000.00 2,480,000.00

Working capital Requirement 101,137,333.33 ETB 16,856,222.22

Additional machines are also required to increase the productivity.

Table 8 Additional Machine Requirement

machine type Quantity Unit price ETB Total price ETB
Single needle lock Stich 6 45,000.00 270,000.00
55,60
Double Needle Chain stich 2 0.00 111,200.00
Bar Tack machine 1 210,000 210,000.00
51,00
5 thread over lock 3 0.00 153,000.00
Automatic waist band 1,210,800.00 1,210,800.00
attaching machine 1
Total 1,955,000.00

Hence, the Company is required to invest ETB16,856,222.22 as a working capital and ETB1,955,000 for
additional machineries to achieve the targeted sales volume. This is a total investment of ETB
18,811,222.22

5.2 Sources of Finance

The working capital is expected to be financed by equity and loans. As shown in the table below

Table 9 Financing Plan

Loans ETB 13,406,222.22

Equity ETB 5,405,000.00

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Birr 13.9 million is expected to be obtained from bank while the remaining will be financed by shareholders
equity and creditors.

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6 FINANCIAL ANALYSIS
6.1 Income Statement (Annex I)
As depicted on annex I, the Company’s aggregate annual net sales revenue will be
ETB120,705,827.06 in the first year and increase by about 10% annually.

The Company will generate average gross profit margin of 21%. After deducting all operating
expenses, interest expenses and profit tax the enterprise’s net profit will be ETB18,700,745.08 in the
fiscal year 2016 that will also steadily increase. Hence, it can be concluded that the business is
profitable.

6.2 The projected Cash Flow (Annex II)

The cash flow projection is made assuming that:

● The Company will obtain ETB13,406,222.22 loan finance at the beginning of operation,

● All purchases are on cash basis.

● 18% of the annual sales of the company will be collected in the consecutive year,

● Profit tax of the fiscal year will be paid in the same year.

Overall, the projected cash flow shows that the Company will generate series of surplus cash flows after
covering all operational and financial commitments that confirms its liquidity.

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6.3 Project Appraisal

project Appraisal

Annual net Profit (Average)

Return On Investment, ROI =
Total Capital Requirement

13861933.68
=
18700745.08

74%%

Return on Owner's Investment (ROOI)

Annual net ProfitX100

ROOI =
Owner's Investment

13,861,933.68/5,405,000.00
=

= 256.5%%
this looks very high because owner's investment is small portion of TOTAL

18700745.08
Payback Period =
13,861,933.68

= 1.35

= 1 Year and 4 Months

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Break even (BEP) Sales

Annual Fixed Costs x 100

BEP (Annual Sales) =
Annual Sales -Annual Variable Costs

Annual Fixed Costs include

indirect Labor Cost 312,000.00
Annual interest 612,125.95
Annual Overheads Costs 1,427,215.20
Marketing and Administrative Cost 762,400.00
TOTAL Fixed Cost 3,113,741.15

Annual Variable Costs

Raw Materials 3,390,000.00
Direct Labor 984,000.00
Total 4,374,000.00

Annual Sales 11,300,000.00

BEP (Annual Sales) = 44.96

45 Units

As the sales projection 16 units per month (195 Units annual)

The break-even(Where Costs Equal Revenues) happens at the third Month

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7 CONCLUSION AND RECOMMENDATIONS

It is found out that business environment for garment and related sector is conducive and the demand
for textile is growing in the country. AT TEXTILES Garment PLC is a Company envisioned to establish
a commendable firm which aims at substituting the import of textile and apparels. The Company is
owned and overseen by experienced professionals. The Company applies modern management and
business model of sourcing products and services to factories to supply the final product.

According to the plan, the Company’s profitability and liquidity will be highly improved and the
Company’s net worth will swiftly grow. During the plan period, the Company can generate adequate
equity to repay.

However, the company requires working capital of ETB16,856,222.22 and need to buy additional
machineries that is worth ETB1,955,000.00. As per the plan ETB13,406,222.22 is covered by bank
loan and the remaining is ETB5,405,000.00 is equity contribution of the company

Overall, it can be evidently concluded that the business is financially feasible and worth financing.

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ANNEXURE

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TOM TEX GARMENT P.L.C

TATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 7 JULY 2028
Year 1 Year 2 Year 3 Year 4 Year 5

Income 120,705,827.06 128,752,882.20 131,327,939.84 131,327,939.84 137,894,336.84

Cost of
operation 94,924,520.68 101,137,333.33 103,160,080.00 103,160,080.00 108,318,084.00

Gross profit 25,781,306.39 27,615,548.87 28,167,859.84 28,167,859.84 29,576,252.84

General and
administrative
expense

Salary 2,580,000.00 2,838,000.00 3,121,800.00 3,433,980.00 3,777,378.00

Rent 780,000.00 858,000.00 943,800.00 1,132,560.00 1,245,816.00

Interst 1,969,161.31 1,651,660.38 1,282,011.72 851,650.34 350,604.53

Deprecation 1,081,000.00 864,800.00 691,840.00 553,472.00 470,451.20

Stationery 225,600.00 282,000.00 338,400.00 406,080.00 487,296.00

License and gov
charge 33,800.00 33,800.00 34,476.00 41,371.20 49,645.44

Others 411,000.00 452,100.00 497,310.00 596,772.00 716,126.40

7,080,561.31 6,980,360.38 6,909,637.72 7,015,885.54 7,097,317.57

Profit (Loss) for

the year 18,700,745.08 20,635,188.48 21,258,222.13 21,151,974.30 22,478,935.27
Provision for
taxation 5,610,223.52 6,190,556.54 6,377,466.64 6,345,592.29 6,743,680.58
Profit (Loss)
after tax 13,090,521.55 14,444,631.94 14,880,755.49 14,806,382.01 15,735,254.69
Less: Transfer to
legal reserve 654,526.08 722,231.60 744,037.77 740,319.10 786,762.73
Total
comprehensive
profit (loss) for
the year 12,435,995.48 13,722,400.34 14,136,717.71 14,066,062.91 14,948,491.95

AT TEXTILES GARMENT P.L.C

STATEMENT OF FINANCIAL POSITION

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AS AT 7 JULY 2028

Assets YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Non-current
assets
Property, plant
and equipment 5,405,000.00 4,324,000.00 3,459,200.00 2,905,728.00 2,435,276.80
Total non-
current assets 5,405,000.00 4,324,000.00 3,459,200.00 2,905,728.00 2,435,276.80

Current assets

Inventory 14,456,222.22 16,913,780.00 19,789,122.60 23,153,273.44 27,089,329.93

Finsished
Goods 6,182,493.58 7,233,517.49 8,463,215.46 9,901,962.09 11,585,295.65
Cash and bank
balance 4,059,927.18 13,279,849.64 21,707,482.57 28,625,309.58 35,106,272.76
Total current
assets 24,698,642.99 37,427,147.13 49,959,820.64 61,680,545.12 73,780,898.33

Total assets 30,103,642.99 41,751,147.13 53,419,020.64 64,586,273.12 76,216,175.13

Equity and
liabilities
Equity

Capital 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00

Legal reseve 654,526.08 722,231.60 744,037.77 740,319.10 786,762.73

Retained
earnings 12,435,995.48 26,158,395.82 40,295,113.53 54,361,176.44 69,309,668.40

Total 18,090,521.55 31,880,627.41 46,039,151.31 60,101,495.54 75,096,431.13

Current
liabilities
Trade and
other payable 540,000.00 648,000.00 777,600.00 933,120.00 1,119,744.00

Loan-Bank 11,473,121.43 9,222,519.71 6,602,269.33 3,551,657.57 -

Total current
liabilities 12,013,121.43 9,870,519.71 7,379,869.33 4,484,777.57 1,119,744.00

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Total liabilities 12,013,121.43 9,870,519.71 7,379,869.33 4,484,777.57 1,119,744.00

Total equity
and liabilities 30,103,642.99 41,751,147.13 53,419,020.64 64,586,273.12 76,216,175.13
- - - - -

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