PROJECT PROPOSAL

FOR
FOOD OIL MANUFACTURING PLANT
IN
MEKELLE CITY

PROJECT PROMOTER- ATO HAGOS HADGU

SEP, 2017

MEKELLE

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 Table of Contents
1. Executive summery ............................................................................................................................... 3
2. Background Information ....................................................................................................................... 5
2.1. Background for the study area ..................................................................................................... 5
2.2. The Promoter ................................................................................................................................ 6
2.3. Importance and justification of the project .................................................................................. 7
3. Description of the Project ................................................................................................................... 10
3.1. Vision of the Project .................................................................................................................... 10
3.2. Objectives of the Project............................................................................................................. 10
3.3. Project strategy ........................................................................................................................... 11
4. Market Strategy and Demand Analysis ............................................................................................... 11
4.1. Overall market targeting and strategy for food oil product........................................................ 12
4.1.1. Marketing strategy .............................................................................................................. 12
4.1.2. Market targeting ................................................................................................................. 12
4.2. Past supply and present demand................................................................................................ 13
4.3. Projected Demand ...................................................................................................................... 14
4.4. Pricing and Distribution .............................................................................................................. 14
5. Technical Analysis ............................................................................................................................... 15
5.1. Machineries and Equipment ............................................................................................................ 15
5.2. Project Capacity and Program ......................................................................................................... 17
5.2.1. Project capacity ......................................................................................................................... 17
5.2.2. Production programmes ........................................................................................................... 17
5.3. Materials and inputs ........................................................................................................................ 17
5.3.1. Raw materials............................................................................................................................ 18
5.3.2. Utilities ...................................................................................................................................... 18
5.4. Technology and Engineering ............................................................................................................ 19
5.4.1. Production process ................................................................................................................... 19
5.4. 2. Source of Technology ............................................................................................................... 20

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 5.6. Land Availability ............................................................................................................................... 20
5.7. Building, civil work and engineering ................................................................................................ 20
5.8. Proposed Location ........................................................................................................................... 21
6. Organizational Structure and Man Power Requirement ........................................................................ 21
6.1. Organization ..................................................................................................................................... 21
6.2. Man Power ....................................................................................................................................... 22
6.3. Salary structure ................................................................................................................................ 22
6.4. Training and qualification requirement ........................................................................................... 23
7. Financial Analysis ................................................................................................................................ 24
7.1. Underlying Assumption ........................................................................................................... 24
7.2. Total initial investment cost........................................................................................................ 25
7.3. Operation cost ............................................................................................................................ 26
7.4. Source of financing ..................................................................................................................... 26
7.5. Project revenue ........................................................................................................................... 27
7.6. Financial evaluation .................................................................................................................... 27
8. Economic and social benefits .............................................................................................................. 28
8.1. Revenue generation .................................................................................................................... 28
8.2. Employment opportunity and labour productivity ..................................................................... 28
9. Environmentally impact assessment .................................................................................................. 29
10. Conclusion and recommendation ................................................................................................... 29
10.1. Conclusion ............................................................................................................................... 29
10.2. Recommendation .................................................................................................................... 30
ANNEXES ..................................................................................................................................................... 31

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 1. Executive summery

Ato Hagos Hadgu is a private business owner who participates in different types of golden
business activities widely in the overall the country. The business owner owns huge business
enterprises like HH Engineering which assembles modern vehicles in Addis Ababa City and
Gelan City in Oromia national Regional state. These manufacturing plants are nationally huge
and more competent plants in the country, which creates employment opportunity for more than
250 persons. In addition to this the investor is investing his wealth in other more successful
investment areas like import export of raw materials, import of vehicles and General
construction activities in Addis-Ababa City Administration & other areas of the country. More-
over the promoter is a successful business person who has different experiences & rewards as a
result of his wise business expansion and leader ship style in different business activities.
Currently, the promoter is also expanding his business experiences to install another huge
Vehicles assembly manufacturing plant in Mekelle City, in which it will be successful again in
the coming few years. As a result of this, Ato Hagos Hadgu wants to expand his business
activities in different other new investment areas especially in his own Region Capital City
(Tigray-Mekelle-City).One of his New born business areas is food oil manufacturing plant by
doing a pilot survey the high demand of the product in the overall the country.

This profile envisages the establishment of a plant for the production of oil manufacturing plants
(oil extracted Sesame seeds) with a capacity of 30,000 tons per annum. The country`s
requirement of food oil manufacturing plant is met through local production and import. The
present demand for the proposed product is estimated at 82,040 tons per annum. The demand is
expected to reach at 102,025 tons by the year 2028. The principal raw material required are oil
seeds (sesame seeds, Niger seeds, sea bean seeds, and other related seeds), sacks and other
inputs are locally available while the remaining raw materials have to be imported (metallic
drums).
The total investment cost of the project including working capital is estimated at Birr 500.1
million. From the total investment cost the highest share (Birr 449.6 million or 88.32%) is
accounted by fixed investment cost followed by initial working capital (Birr 42.3 million or
9.84%) and pre operation cost (Birr 8 million or 1.84%).

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The project is financially viable with an internal rate of return (IRR) of 20.55% and a net present
value (NPV) of Birr 45.9 million discounted at 20%. The project intends to employ more than
350 employees both permanent (300 persons) and temporary (50 persons) and compensate the
personnel well, so as to retain their invaluable expertise and to ensure job satisfaction and
enrichment through delegation of authority.

The establishment of such factory will have a foreign exchange saving effect to the country by
substituting the current imports i.e. the project will discourage import and encourage export.
The project will also create backward linkage with the manufacturing industry sub sector and
forward linkage with the agricultural sub sectors and also generates other income for the
government.

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 2. Background Information
2.1. Background for the study area

Mekelle city is located some 776 k.m North of Addis Ababa, the capital of Ethiopia, and lies
between 39028’ east and 13028’ north coordinates. Its altitude ranges from 2000-2270 meter
above sea level. It is estimated that the city has an area of 32000 hectare or 32 square
kilometers. Currently, based on the assessment made in 2007/08, the city has divided in to seven
sub-city administrations namely, Quiha, Hadnet, Semien, KedamayWeyane, Hawelti, Ayder and
Adi-Haqui. Dividing the city in such local administration expedites the implementation of
different development tasks directly by involving the community. This also helps to provide the
administrative and municipal tasks in decentralized way to public in their locality.

Generally the city administered by the city council system and the council has three crucial
bodies, the cities executive body, judicial body and representative’s body, and the Mayor is
directly accountable to the city council and regional head of state and is head of the city
administration as well as heads of executives. He is responsible to manage all the seven sub-city
and sector offices established in the city.

The climatic condition belongs to the Woinadega( medium high land) climatic zone. Rainy and
dry seasons are the two main seasons of the city. The average annual rainfall of the city ranges
from 300to 600 mm main rainy season of the city. Its annual rainfall is characterized as erratic,
unreliable nature and unevenly distributed. The average annual temperature of the city is 19oC
the hottest month is June with a mean maximum temperature of 27.20 C and the mean minimum
12.8oC the coldest month is December with average maximum temperature 22.400C and
average minimum 7.5oC.

According to the 2012/13 population projection the population of the city was 219816 with
104758(48.6%) male and 115338(51.4%) female. The population aged 0-14 comprises 32%, the
population aged 15-64 comprises 64.3% and population aged 65 and above comprises 3.7% of
the total. Poverty in the city is manifested in many ways, low asset level, low level of
expenditure, and low level of resiliency to shocks that they are vulnerable. The assessment made
by WFP in the Tigray selected urban areas reveals that significant number of the population in
Mekelle city are living below the poverty line.

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People living in Mekelle city have different means of subsistence. Many depend upon earned
incomes as a result of working for different governmental and non-governmental organizations,
private limited companies association and the like. There are people who are self employed in
many small scale businesses. Apart from this and the effort made by different stakeholders, there
are still segments of the community in the city that do not have jobs and hence suffer from
poverty, food insecurity and the like. At the moment there is high rate of unemployment in the
city. The youth unemployment is observed very high, and the unemployed includes all types of
categories in terms of education, illiterate, with certificate, diploma and first degree. The female
groups are more unemployed compared with males. Factors for unemployment among the youth
group in particular include: financial problem (poor economic background of parents), lack of
credit facilities from financial institutions and lack of adequate practical training program and
so on are among the major ones.

As to existing potential, the city is an ideal place for urban agriculture. There is a good potential
for food oil production in the city. The city administration has admitted that there is no progress
towards expanding this urban manufacturing products and this will be a good potential as
source of creating job opportunity to the unemployed youth that has to be given emphasis. In the
region there is no price stability especially in sugar and oil. Therefore, this manufacturing plant
is more feasible in the region particularly in the study area.

2.2. The Promoter

The initiator of this manufacturing of food oil investment project is Ato Hagos Hadgu who
participates in different types of golden business activities widely in the overall the country. The
business owner owns huge business enterprises like HH Engineering which assembles modern
vehicles in Addis Ababa City and Gelan City in Oromia national Regional state. These
manufacturing plants are nationally huge and more competent plants in the country,which
creates employment opportunity for more than 250 persons and has paying yearly an average
Birr 1,350,000 to the government in the form of profit tax and income tax from employees on the
behalf of the government annually. In addition to this the investor is investing his wealth in
other more successful investment areas like import export of raw materials, import of vehicles
and General construction activities in Addis-Ababa City Administration & other areas of the
country. More-over the promoter is a successful business person who has different experiences

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& rewards as a result of his wise business expansion and leader ship style in different business
activities. Currently, the promoter is also expanding his business experiences to install another
huge Vehicles assembly manufacturing plant in Mekelle City, in which it will be successful
again in the coming few years. As a result of this, Ato Hagos Hadgu wants to expand his
business activities in different other new investment areas especially in his own Region Capital
City (Tigray-Mekelle-City).One of his New born business areas is food oil manufacturing plant
by doing a pilot survey the high demand of the product in the overall the country.
Based on this business experience and activity the promoter has full capacity to engage in oil
food manufacturing plant. The present project for manufacturing oil food plant in Tigray region
is new and there is high potential demand. In the region there is no price stability especially in
sugar and oil. Therefore, this manufacturing plant is more feasible in the region particularly in
the study area.
Brief Description of the Project is describes as follows:-
❖ Name of the project:……………………………….Hagos Hadgu food Oil Manufacturing Plant
❖ Owner of the project:………………………………Ato Hagos Hadgu
❖ Nationality………………………………………… Ethiopian
❖ Office full address:………………………………..Mekelle City
❖ Proposed site:………………………………………Tigray Regional State, Mekelle City
❖ Types of business:…………………….……………Food Oil Processing Manufacturing Plant
❖ Total estimated capital:………………………….. Birr 500,100,100.00
❖ Requested land:…………………………………….100,000 m2
❖ Status of the project:………………………………. New
❖ Legal form of Business:-………………………….. Private/ Sole proprietorship
❖ Registering agency:………………………………..Mekelle Investment Office
❖ Contact person and address
❖ Name of the manager:…………………………..Ato Hagos Hadgu
▪ Address city:……………………………Mekelle
▪ Tel:...................................................09-11-23-37-23/20-77-05

2.3. Importance and justification of the project

The Ethiopian government has set the alleviation of poverty as its primary goals. Its development
strategy, therefore, must be one that facilitates that reduction poverty in the most effective way.
Agricultural Development Led Industrialization (ADLI), the government chosen growth strategy,
is expected to do just that. The objective of ADLI is to strengthen the interdependence between
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agriculture and industry by increasing the productivity of peasant farmers, expanding large
scale private commercial farms, and by reconstructing the manufacturing sector such as, away
that it can make use of the country’s natural and human resources. Agro-industries and other
modern manufacturing industries usually expand at the urban areas. Urban creates conducive
situations for adding values to agricultural products and natural resources by using them as
input to food industries there by facilitating national manufacturing industrial development.
Moreover, urban supply infrastructure, services facilities and skilled manpower required for
manufacturing industrial development. Vegetarian oil manufacturing plant takes in some
common considerations such as finance, environment, energy and other element. It is procured
privately or publicly utilizing various methodologies including hard price, traditional dealings,
management extracting.

Far from being a single activity, large scale manufacturing industry is an achievement of human
ability to put up several manufacturing edible oil products at the same time/different place which
is clearly evident in several cities of the world. Manufacturing industry in Ethiopia has also been
affording various job opportunities. It keeps employees working full time and thus, enables to
manufacturing industry. The manufacturing industry has important contributions to the
Ethiopian economy, as demonstrated by its share in the GDP. The manufacturing sector
contributed about 13 percent to GDP growth in 2009/10. The major manufacturing activities are
in the production of food, beverages, tobacco, textiles and garments, leather goods, paper,
metallic and non-metallic mineral products, cement and chemicals, vegetarian oil. The role of
the manufacturing industry in terms of creating employment opportunities especially in urban
areas is becoming visible. According to the Befkadu(2008), of the total employment persons in
the country which was estimated at around 25 million, 2.5 percent was estimated to be in the
manufacturing industry. The contribution of the industry in terms of creating employment has
slightly improved over the years. For instance, according to the 2004 E.C LFS, of the total
employed population in the country (31.4 million), 3.5 percent was estimated to be in the
manufacturing industry. In addition to this, the manufacturing industry also contributes to the
generation of revenue for the government. The rental income tax is one of the major revenue
sources within the contribution industry to the government. The rental income tax which was
Birr 250 million in 1997/98 E.C has increased to Birr 850 million in 2004/05 E.C .

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The oilseeds sector shows strong growth in Ethiopia, as domestic and world market demands are
expected to continue to increase. The sector contributes significantly to the overall growth and
development of the country. It supports the livelihoods of many small scale farmer and business
involved in trading, transporting and oil crushing, a source of employment and income
generation. Oil seeds are grown on over 3 million holdings (30% of all holdings) on 800,000
hectares (8% of total average) and account for 5% of the country is total production of grain
products (Wijnads, 2009). The main oil seeds crop are sesame, Niger seeds, sea beans, sun
flower and line seeds, which together account for 86% of the national oilseeds production. The
current annual of the domestic sesame and noug edible oil industry is estimated at Birr 3.6
billion. Although Ethiopia is a major producer and exporter of oilseeds, the country imports
about three quarters of its domestic edible oil consumption (ECRA, 2010). Imports have grown
five folds over the past 7 year years. Sesame and noug oil the major type of imported edible oil.
Ethiopian sesame seed, which accounts for 75 percent of its total oilseed exports, is well known
in the world market. Other oilseeds however, have not yet penetrated the international market.
For example, Ethiopia is the fifth world producer of linseed, but is negligible as exporter on the
world market17. Nevertheless, it has high potential since linseed and other oilseeds production
in Ethiopia are close to organic standards (Wijnands et al., 2007). This is expected to have a
positive impact on Ethiopian oilseeds to the European market. Increasing interest in and
attention to the oilseeds value chain by the Ethiopian government offers another opportunity for
the sub-sector to grow. The interest of the government is reflected by its intensified efforts to
come up with a master plan for the development of the sub-sector. Such attentions are due to the
sector’s contribution to the growing export earnings, sources of food, energy and ingredients of
animal feed. Generally, the edible oil and oilseeds value chain has a major role in the Ethiopian
economy with links to agriculture, agro industry, trade (import and export) and is interlinked to
the service economy.
In terms of edible oil, Ethiopia is highly dependent on foreign sources; either from aid or import
21% Palm oil from Malaysia, Singapore and the United Arab Emirates dominates import
markets (Wijnands et al., 2007). Edible oil supply from Ethiopia's oil factories is less than 20
percent of the total consumption of the country. The domestic edible oil production is
characterized by backward technology where most of the oilseeds are crushed locally without
any refining. More than 1,000 small crushers (mostly with Chinese/Indian machines) are
operational on village level. These local crushers have limited capacity with low hygiene

9
standards. Only a few larger crushing or refining companies seem to have adequate safety and
hygiene standards compared to European industry standards (Wijnands et al., 2007). Therefore,
there exists a huge potential to work on import substitute activities. Ethiopian government has
been providing various economic and social policies supporting various sectors of the economy
which would help the private sector to act competitively in the market. One of the economic
sectors is the manufacturing sector enjoying various policy supports in different areas.
• Firstly, full exemption from the payment of import duties and other tax levied on import is
granted to investors in various sectors to allow them to import capital goods- such as
plant, machinery, and equipment.
• Secondly, is government has been relentlessly providing training programs to various
sectors of the society particularly in manufacturing field which would in return help the
manufacturing sector of the nation.
• Thirdly, the government is providing accessibility to credit to private actors engaged in
the food oil manufacturing sectors and
• The fourthly, Recognizing the role that can be played by the private sector as an engine
of industrial development. Hence, identifying and removing obstacles that hamper the
role of the private sector is claimed to have caught due attention of the Government;

3. Description of the Project

3.1. Vision of the Project

The vision for this project is to make a grass root change in the surrounding by importing new
technology regarding food oil manufacturing plants and know –how to the region in particular
to the investment area. This project is going to contribute to the economy not only in the sense of
production, but also as a learning center where not only for the out growers who will work
together with the firm but also for the surrounding area that could come and learn how to
introduce new technology and increased productivity and efficiency.

3.2. Objectives of the Project

The objectives of the project is to contribute to the reduction of poverty and unemployment as
well as growth generation endeavor and provide detailed guidelines for the oil manufacturing
plant (sesame oil) in relation to site selection and controls on development of land affected by

10
existing operations and encourage private sector interest in essential oil sesame and noug crops
products in city administration. In addition to this The implementation of this project will
contribute to the attainment of the regional in particular to investment area goal of ensuring
sufficiency of industrial development’s and to undertake sustainable and profitable integrated
agricultural and manufacturing investment using new and high technology oil manufacturing
plant targeting both domestic and export quality products for foreign markets.

3.3. Project strategy

Companies in a competitive market environment must act differently to successfully achieve its strategy.
Any company without having any strategy doesn’t know where to go and where to reach. Thus, it is vital
for any company to be led by its own strategy. The same is true for any a company engaged in this
manufacturing plant sector. Thus, the envisaged company focuses on different approaches to successfully
achieve its strategies including: investor perspective on supply chain approach, improving manufacturing
partnership, economic supply chain approach, information technology and integration. At the same time,
the competitiveness of the food oil manufacturing plant depends on:
➢ The commitment of the market operators towards a better quality policy
➢ Sustainability development objectives
➢ Research and innovation activities
➢ Improved skills and qualifications of its workforce and management

4. Market Strategy and Demand Analysis

The demand for the proposed project is affected by a number of economic variables such as
income level, urbanization, population growth rate; price level for the product etc. because of
this fact, the demand for vegetable oil is quite high in Ethiopia. As cooking oil, sesame oil can be
used for domestic cooking especially for engagements such as birthday, burial ceremony, house
warming, thanksgiving services, wedding ceremony, etc. Because of its low cholesterol level,
sesame oil can be used as medicinal oil especially for cooking for patients with cholesterol-
related ailments. It is a natural antibacterial for common skin pathogens, such as staphylococcus
and streptococcus as well as common skin fungi, such as athlete’s foot fungus. It also has
antiviral properties. It is a natural anti inflammatory agent. With high profile of uses for sesame
oil, the potential market is very high. Sesame oil found in the Ethiopia market is imported. This
implies that there is great prospect for Sesame oil production and marketing in the country. The

11
price of sesame oil manufacturing products in the past few years is increasing from time to time
and this shows that, there are ample unsatisfied demand vegetable oil products in the country.

4.1. Overall market targeting and strategy for food oil product
4.1.1. Marketing strategy
Marketing strategy is the fundamental goal of increasing sales and achieving a sustainable
competitive advantage. Marketing strategy includes all basic short-term and long-term activities
in the field of marketing that deal with the analysis of the strategic initial situation of a company
and the formulation, evaluation and selection of market-oriented strategies and therefore
contributes to the goals of the company and its marketing objectives. Market analysis aims are
providing answer for the following two interrelated issues.
❖ What is the likely aggregate demand of the proposed products/services/ and
❖ What share of the market does this project enjoy?
To address the above questions adequately there is a need for and an in depth study of factors like
patterns of consumption and growth overtime income and price elasticity of demand, the composition of
the market efficiency and adequacy of distribution channels sale promotion strategy etc. there are many
different mechanisms that offer manufacturing food oil production services. Some will advertise their
service to the general public as well as their current customers. These mechanisms are marketing their
manufacturing of food oil plant products and are trying to derive a decent amount of revenue from their
service efficiency. The final products of the project go through the various distribution channels before
they end up at the consumer’s table.

4.1.2. Market targeting

Our marketing strategy will be based mainly on making our products available to the right
target customer. We will ensure that our products' prices take into consideration organizations
order-makers' budgets, and that these people appreciate the quality of our products, are aware
our exist products, and know where to order them. Our low production costs, which will
naturally be reflected in lower prices for our products, will ensure that we have very good
opportunities to win grocery and institution tenders for our products, besides obtaining orders
from all the other markets including wholesalers, informal traders and supermarkets we shall be
targeting. We realize the need to focus our marketing message and our product offerings. We
need to develop our message, communicate it, and make good on it. This shall be undertaken in
order to establish ourselves on the market and long-term relationship.

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 4.2. Past supply and present demand

Food (edible) oil is mainly produced from cotton seed, rape seed, lint seed, nigger seed, sesame
seed, palm and vegetables. In Ethiopia, the first two types are dominant in the market followed
by lint and nigger seed. Vegetable and palm oil are imported products while sesame oil is not
easily available in the market. Sesame is one of the major export earning oil seeds. Due to the
highest price offer in the international market as against the depressed price of domestic edible
oil, the manufacturing of edible oil is mainly processed from cotton seed and rape seed, which
have lesser prices against sesame and other oil seeds. Edible oil is part of everyday food
expenditure in urban areas as well as in most of the rural areas. Sesame oil is also used as an
input for industrial production of pharmaceuticals, soap and cosmetics. The supply of food oil is
met through domestic production and import. The import of food oil is made through commercial
means as well as part of humanitarian aid. Aid packages including edible oil were tendered for
sale to the public destabilizing domestic edible oil market and forcing most oil mills to close
down. After a government intervention, the domestic market for edible oil is somewhat reviving.
The domestic production and import of edible (food) oil is presented in table 4.2 below.

Table 4.2 Food Oil Supply (Sesame Oil) (in tons)

Year Domestic production import Total
2009 6,579 70,789 77,368
2010 6.637 24,785 31,421
2011 8,329 34,196 42,525
2012 7,993 22,283 30,276
2013 8,027 121,812 129,839
2014 6,931 80,614 88,945
Average 7,416 59,313 66,729
Source: Ethiopian Revenue & Customs Authority
As can be seen from Table 4.2 above, three-fourth of the total supply is covered by imported
products. The average food (edible) oil supply during the period 2009 – 2014 i.e. 66,729 tons is
assumed to approximate present demand. The supply of imported sesame oil from the total was
1.4%. Accordingly the current effective demand for sesame oil, taking the domestic supply into

13
consideration, is assumed to be 2% or 82,040 tons. To estimate the present demand the historical
growth rate of 2% has been applied by taking the imported quantity in 2014. Accordingly,
present demand (2016) is estimated at 82,040 tons.

4.3. Projected Demand

The demand for food oil (sesame oil) is directly related with the growth in population and
income. The demand for sesame oils, as a relatively expensive type of edible oil, is more
dependent on income than population. In addition to the income factor, raising the awareness of
consumers for differentiated sesame oil as against the common cotton seed and rape seed oil is
vital. By distinguishing the types of food oil through aggressive advertisement, it is possible to
attract and supply a new segment of the market. Thus, the demand for sesame oil is projected
based on the annual rate of 3.76% growth in real gross demotic production attained during the
period 2018-2028. The projected demand for food oil is presented in table 4.3.

Table 4.3 Projected Demand for Sesame Oil (tons)

Year Projected Demand
2018 83,681
2019 85,355
2020 87,062
2021 88,803
2022 90,579
2023 92,390
2024 94,238
2025 96,123
2026 98,045
2027 100,005
2028 102,005

4.4. Pricing and Distribution

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The prices of sesame oils vary considerably according to the type of plant source, contents and
concentration of the product. Assuming the envisaged plant to process essential of rose, which is
available in the country and based on the current international price of the product the factory
gate price is set at Birr 13,000 per ton. The product can be sold directly to the user industries
mainly food. For small quantity purchasers that may be found at dispersed places agents can be
appointed to handle the sales activity. i.e distribution of food oil products would be handled
through direct delivery to major brokers, whale seller and individual households whose orders
are in bulk and through the existing shops of business to small quantity purchasers.

5. Technical Analysis
Analysis of technical and business aspects is done continually when a project is being examined
and formulated. Investigation should be made on whether or not good choices have been, made
with respect to the location and site of envisaged plant, the plant capacity the processing
technology etc. moreover, one should also check whether the availability of raw materials,
power, water and other inputs have been established whether the plant machinery and equipment
chosen are the appropriate ones, whether provision has been made the treatment of effluents,
and such like. Other types of analysis are done closely dependent on this analysis. The purpose
of technical analysis is to ensure that the project is technically feasible in the sense that all the
inputs required to set up the project are available and, to facilitate the most optional formulation
of the project in terms of technology, size location, and so on.

5.1. Machineries and Equipment

The machinery and equipment required for the envisaged of by sesame oil plant consists
automatic oil press machine, HP black oil mill machine, Oil filter press, Expeller with kettle,
Mixing tank, Semiautomatic filling plant, , Conveyor belt, Storage tank, e.t.c. and other related
materials which are imported from abroad such as China and other European countries(see
table 5.1). These machineries are high quality and fit to the international standard. The food oil
manufacturing plant will be used once where their service reliability and all other factors to
their service will be studied deeply by professional technical experts in their country of regions
and significant costs will be incurred in their test before they come to Ethiopia. The following
table shows the description and the total cost of the machinery. However, it is assumed that there
will be tax exemption for them. Some of the machineries are listed below:

15
Table5.1. Machinery and Equipment Required and Costs
Sr. Description Unit of Quantity Unit price Total price (Birr)
No measu (Birr)
. res
1 6yL-180A automatic oil press Pcs 5 71,250,000
machine 14,250,150
2 HP black oil mill machine Pcs 5 8,495,500 42,477,500
3 oil filter machine Pcs 5 7,450,000 37,250,000
4 oil purification machine Pcs 1 4,570,000 22,850,000
5 sesame oil making machine set 5 11,750,000 58,750,000
6 100tons/day Sesame Oil set 2 82,800,000
Making Machine 41,400,000
7 Hot sale sesame seeds grinding set 5 5,287,500
machine 1,057,500
8 Hydraulic sesame oil press set 5 1,410,000 7,050,000
9 Generator 350KW Set 1 5,562,200 5,562,200

16
 10 Set 1 3,200,000
Transformer 3,200,000
11 Laboratory equipments Set 1 5,450,000 5,450,000

Subtotal of Machinery Pcs 341,827,200

8 pickup (double) Pcs 4 1,500,000 6,000,000
9 service (coaster) Pcs 3 3,108,415 9,325,245
service (minibus) pcs 4 550,000 2,200,000
10 load trucks (FSR) pcs 4 1,405,325 5,621,300
loader truck(Isuzu) Pcs 4 935,412 3,741,648
load trucker pcs 4 2,805,430 11,221,720
forklift Pcs 10 658,415 6,584,150
Sub total 44,694,063
11 Office equipment Pcs 8,325,135
Grand Total 394,846,398

5.2. Project Capacity and Program

5.2.1. Project capacity

Based on the unsatisfied demand forecast in the market study, capital requirement and minimum
economy of scale, the production capacity of the envisaged plant has annual production capacity
of 30,000 tones food oils from sesame seeds. Moreover, the type of potential customers and the
envisaged market characteristics and assumed working hours are also other determinant factors
in the service provision. The working hours for the project are assumed to be 24 (three shifts)
hours a day from Monday to Saturday and 296 days per annum.

5.2.2. Production Programmers’

The annual production program is formulated on the basis of the market forecast and selected
plant capacity. It is assumed that production will commence at 70% of the installed capacity
which will grow to 80% in the second year. Full production capacity will be attained in the third
year and onwards. Details of annual production program are shown in Table 5.2.1.
Table5.2.2. Annual production program
S/N description production year
year1 year2 Year 3 and above
1 Food oil production ( in tons ) 21,000 24,000 30,000

2 Capacity utilization rate 70 80 100

5.3. Materials and Inputs

17
 5.3.1. Raw Materials
The major raw materials needed for producing the food oil are sesame, soybean, and nug/nut
crops. These raw materials can be obtained partially from Western Tigray and the rest can be
procured from neighboring regional states of the country. In addition to this, food oil plant
requires auxiliary materials such as sacks, metallic drums, and other inputs. These raw
materials are imported by local traders, through long distribution channels, which contribute to
the inflation of the raw material price. Operators in the envisaged project would face problems
related to the raw material supplies especially in a continuous rising of price and in obtaining
quality raw material on time. The annual requirement for raw materials at full capacity
production of the plant along with the estimated costs is given in table 5.3.1 below.

Table5.3.1 Annual Estimated Cost of Materials

S/No description Quaintly(tons) Price per unit Total price
1 Oil seeds(sesame crops) 45,000 5,500 247,500,000
2 Caustic soda 1,650 550 907,500
3 Bleaching acid 750 1,500 1,125,000
4 phosphoric 150 12,000 1,800,000
5 Barrel(200 Lt) 900 600 540,000
6 Plastic containers 15,000,000 0.5 7,500,000
Total 259,372,500

5.3.2. Utilities
The inputs required by the project consists of electricity, water required for supplying power to
all production equipment, and also to power sockets, lighting system and other auxiliary
equipment of the plant. The annual utilities cost at full capacity operation of the proposed plant
is estimated about Birr 6 million. The required amount of utilities with perspective price is
shown in table 5.3.2 below in detail.

5.3.2. Annual utilities (suppliers) requirement at full capacity operation

S/N Description Unit Required Unit price Total price
measure quantity
1 Electricity KWH 1,200,000 0.65 780,000
2 Water M3 50,000 6.25 312,500
3 fuel oils Lt 250,000 19 4,750,000
4 Grease, lubricants, oils required Lump sum Lump sum 70,000
5 Telephone service required Lump sum Lump sum 50,000
Total 5,962,500

18
5.4. Technology and Engineering

5.4.1. Production process

There are two extraction technologies, one is mechanical pressing and the other is solvent
extraction. The most important factor in the choice of the processing plant, and the processing
sequence, is the seed to be worked, its yield, capacity and the quality of products to be achieved.
The minimum capacity recommended for solvent extraction process is 150-200 t /day feed stock.
In addition to the above restriction, mechanical presses has the advantage of reduced capital
cost, no danger of fire from combustible solvent, simpler process control and smaller number of
skilled staff over solvent extraction process. Therefore, screw press expulsion is recommended
for the envisaged plant. The production process flow requires: Pattern/Frames of the Product,
Cutting of leather, Skiving, Folding of edges, sticking of different parts, Stitching, Fixing of locks
and Accessories, Finishing quality check and at last packing. The seed requires a thorough
cleaning process to remove sand, stalk, plant debris and any foreign matters by rotary or table
sieves, usually with air aspiration by fans, and cyclones for dust removal from the air. Then, the
seed have to be prepared for efficient oil recovery. The stages involved in pre-treatment are:
▪ Size reduction of the seeds by breaking them, usually in fluted roller mills;
▪ Flaking of the seed particles in roller mills with smooth roller surfaces (0.2 -0.3
mm);
▪ Conditioning the seed by adjusting their moisture content and temperature, while
keeping the seed hot (say 90-950C) for periods that vary widely (30-60 minutes).
Then, extraction by using high pressure screw press follows.
The crude oil obtained from the press requires undergoing refining processes to produce a bland
tasting, light colored oil without dour or flavor. To obtain fully refined oil from crude oil, the
following steps are necessary: degumming, neutralizing, bleaching, Winterizing and
deodorizing. The refined oil is, then, packed and marketed. The main waste material from oil
manufacture is water and much attention should be given to the water treatment to avoid its
adverse effect in the environment. Biological treatment by aerating, activated sludge system,
addition of flocculating agent and filtration are used before the effluent is discharged.
Pattern/Frames Cutting of leather Skiving Folding of edges

Packing Quality Check Fixing of locks Stitching Sticking

19
 5.4. 2. Source of Technology
The machinery and equipment for the oil mill can be acquired from a Chinese company named:
FF-107, silver coin, shrenikpark Char Rasta, Akota, Baroda-390
Phone: + (91)-(265)-2352802
Fax: + (91)-(265)-2352802
Mobile: + (91)-9824083532/9824097599
E-mail:mitsunengineering@yahoo.com,mcpaid@indiamart.com

5.6. Land Availability

The total area of land required for the envisaged project, including provision for open space is
100,000 m2, out of which 69,290 m2 will be built – up area. Land value at the lease rate of Birr
0.75 per m2 per annum and 80 years of land holding is estimated to Birr 6,000,000 of which 20%
or Birr 1,200,000 will be paid in advance. The remaining Birr 4,800,000 will be paid in equal
installments within 30 years i.e. Birr 160,000 annually. Actual land availability of the project
has been decided by taking into account the dimensions of the building for the main process
considering the size of the machineries and equipment such as machine layout, store house,
office system and parking lot.

5.7. Building, Civil Work and Engineering

2
The overall site area for the proposed plant is envisaged to be 100,000 m . The production hall
2 2
and stores occupy 68,800 m . The administration building shall occupy 490 m .The floor will be
reinforced concrete, having a strong foundation. The Total building and engineering cost of the
proposed plant is estimated about Birr 48.5 million. The required amount of utilities with
perspective price is shown here below in detail in the table 5.7.
Table 5.7. Cost of Building construction and engineering

S/ Description Unit of Unit price Total cost

No measure
1 Machine layout(28,800 m2) M2 28,317,350 28,317,350
2 Toilet and shower (140 m2) M2 850,000 850,000
3 Input warehouse (20,000 m2 ) M2 3,123,000 3,123,000
4 Output warehouse (20,000 m2 ) M2 3,132,451 3,132,451
5 Office G+2 (250 m2) M2 5,255,000 5,255,000
6 guard house (100 m2) M2 195,000 195,000
7 parking (30, 710 m2) M2 7,600,457 7,600,457

20
 Total 48,473,258

5.8. Proposed Location

The manufacturing of food oil manufacturing project will be particularly located in Mekelle city
at industrial zone. As the business is a manufacturing of food oil output project provider to
clients at various places a head office at the capital city and other distributer agents in the
different area of the region.

6. Organizational Structure and Man Power Requirement

6.1. Organization

Setting well designed organizational structure for any project is indispensable. The
organizational structure of the project is set initially by the design and follow of the major
components of the project task. The manager of the manufacturing of food oil plant will be
responsible for all the activities which under taken by the firm such us planning, organizing,
controlling etc. each section head is responsible for specific technical and production operations
for the project. The owner of the business also will oversee the overall operation.
Organizational structure to a large extent depends on the nature and volume of the business.
Fig1. Project Organizational Structure and Man Power
Owner of the project

General Manger

Executive
secretary

Production Department
Human Resource and
Sales and Marketing
Finance Administration
Department

21
 Human Finance
Produc Technical Sales
Quality Marketing resource section
tion section section section
control section
service
section

6.2. Man Power

Man power profile and quality product service are positively linked in any
business career. If the project need to provide quality service it is therefore
mandatory to hire technical and administrative staffs having qualifies
competence. The manpower requirement of the project will be estimated at
350 persons for both permanent (300 persons) and temporary (50 persons). The
manpower requirement with their corresponding salary is represented below.

Table6.2. Manpower Requirement and their Monthly and Annually Salary

Sr.No Job description Number of Monthly Annual
required salary(Birr) salary(Birr)
1 General manager 1 30,000 360,000
2 production manager 1 12,006 144,072
3 quality control manager 1 12,006 144,072
4 supply manager 1 12,006 144,072
5 sales manger 1 12,006 144,072
6 finance manger 1 12,006 144,072
7 technical manager 1 12,006 144,072
8 human resource manger 1 12,006 144,072
9 operator 18 25,160 301,920
10 chemist 5 21,630 259,560
11 technician 4 14,536 174,432
12 Accountant 8 29,664 355,968
13 Sales and distributor 120 120,000 1,440,000
14 Clerk 11 13,838 166,056
15 Casher 5 15,165 181,980
16 Secretary 7 21,231 254,772
17 Mechanics 10 31,206 374,472
18 Store keeper 6 8,798 105,576
19 Guard 15 25,160 301,920

22
20 driver 8 21,596 259,152
21 Quality control 5 45,000 540,000
22 Forman 4 7,937 95,244
23 supervisor 14 136,250 1,635,000
24 electrician 4 13,768 165,216
25 cleaner 18 14,000 168,000
26 post man 7 7088 85,008
27 auto mechanic 6 15,203 182,436
28 personal 7 17,114 205,368
29 purchaser 4 7,250 87,000
30 medical and safety service 5 15,057 180,684
31 executive secretary 1 4,968 59,616
32 Laborers /temporary 50 50,000 60,000
Total 350 795,661 9,007,884
10% employees benefit 900,788
Grand total 9,908,672

6.3. Salary structure

Food oil business is more of skill and knowledge intensive and thus manpower is a
critical factor for success. The envisaged business particularly need highly skilled and
trained manpower. All these taking into account and considering the pay scale of
other similar plastic food oil factories and the planed educational level and experience
requirement a salary and benefit scale structure is constructed. The total monthly and
annually salary expense is estimated to be Birr 795,661 and Birr 9,908,672 respectively.

6.4. Training and Qualification Requirement

Imparting skill both on the supervisor and the operators who will be directly
involved in the food oil production is an essential task. Thus, on-job-training by
the machinery supplier for about two weeks should be given locally. The training
cost is estimated to be Birr 300,000. The qualification of manpower requirement
of the food oil manufacturing product is stated in the table below.
Table6.3. Manpower qualification
S.N Items Qualification
1 General manager BA degree in economics, management, agro-economics,
Accounting & other Related Activities
2 fiancé manager BA degree in accounting and related fields
3 production manager BA degree in
4 quality control manager BA degree in chemistry
5 supply manager BA degree in supply management
6 sales manger BA degree in economics

23
7 technical manager BA degree in Industrial engineering ,mechanical
8 human resource manger BA degree in Human resource
9 marketing BA in marketing management
10 technician Diploma in IT
11 chemist BA degree in chemistry
12 Purchasers diploma in marketing management
13 Accountant Diploma in accounting
14 Sales man Diploma in accounting and marketing
15 Clerk Diploma in accounting
16 Casher Diploma in accounting
17 General service production BAS degree construction management
18 Secretary Diploma in IT
19 mechanic operator Diploma automotive
20 Mechanics BAS degree automotive technology

7. Financial Analysis
7.1. Underlying Assumption

The financial analysis food oil manufacturing producing plant is based on the data provided in
the preceding Sections and the following assumptions.

A. Construction and Finance

Construction period Two years

Source of finance 75% loan and 25% equity
Tax holidays 2 years
Bank interest rate 10%
Discount for cash flow 20%
Value of land Based on lease rate of TNRS
Spare Parts ,Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%

24
 Vehicles 20%
Pre-production(amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30days

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

7.2. Total Initial Investment Cost

A feasibility study is a tool that helps the project to take a decision on the investment proposal.
To facilitate this decision, both investment and production costs have to be arranged clearly,
keeping in mind that the profitability of a project will ultimately depend on the size and structure
of investment and production costs and their timing. The total investment cost of the food oil
(sesame oil) is 500.1 million. Pre-production expenditure includes interest during construction
(Birr 8 million) and cost of registration, licensing and formation of the company including legal
fees, commissioning expenses, etc. The major breakdown of the total initial investment cost is
shown in table7.2
Table7.2. Initial investment cost
S/No Cost items Local cost Foreign cost Total cost % share
1 Fixed investment
1.1 Machinery and 0 341,827,200 341,827,200 65.62%
equipment
1.2 Building and civil work 48,473,258 0 48,473,258 10.38%
1.3 land lease 6,000,000 0 6,000,000 0.73%
1.4 Truckers and fright 14,000,000 30,694,063 44,694,063 9.47%
1.5 Office equipments 8,652,450 0 8,652,450 2.12%
Sub total 77,125,708 372,521,263 449,646,263 88.32%
2 Pre-operation
expenditure
2.1 Pre-operating cost 2,000,000 0 2,000,000 0.54%
2.2 Interest during the 6,000,000 0 6,000,000 1.30%

25
 construction
Sub total 8,000,000 0 8,000,000 1.84%
3 Working capital 42,453,837 0 42,453,837 9.84%
Grand total 127,578,837 372,521,263 500,100,100 100%

7.3. Operation Cost

The annual production cost at full operation capacity is estimated at Birr 352.9 million (see
Table7.3). The cost of raw material account for 73.50% of the production cost. The other major
components of the production cost are depreciation cost, maintenance and repair cost,
administrative cost, labor cost and utility cost which account for 13.65%, 3.82%, 2.83%, 2.81%
and 1.69% respectively. The remaining 1.7% is the share of cost of marketing and finance cost.
The following is the summery of annual operating cost by the expenditure.

Table 7.3 Annual OperationCcost

S.No items Total cost %
1 Cost of raw and auxiliary materials 259,372,500 73.50%
2 Labor cost/salary 9,908,672 2.81%
3 Utility cost 5,962,500 1.69%
4 administrative cost 10,000,000 2.83%
5 Maintenance and repair cost 13,489,388 3.82%
6 Cost of marketing and distribution 1,000,000 0.28%
Total operating cost 299,733,060 84.93%
7 Cost of finance 5,000,000 1.42%
8 Depreciation 48,160,441 13.65%
Total production cost 352,893,501 100%

7.4. Source of Financing

26
The total initial cost of the project is estimated Birr 500,100,000. This required capital of the
proposed project will be financed both by bank loans 75% and personal equity 25%.

7.5. Projected Revenue

The annual revenue to be generated from oil food project is estimated based on the optimum
capacity utilization and using the recommended price expenditure rate given in the market
analysis. One assumption given is that if the company wins a project in a year it will get an
optimum of Birr 414 million awards for it and this is considered as its revenue and the cost will
be 83% of it. The annual revenue is assumed to increase by 17% annually.

7.6. Financial Evaluation

A. Profitability
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will grow from Birr 40.8 million to Birr 88.1 million
during the life of the project. Moreover, at the end of the project life the accumulated net cash
flow amounts to Birr 891 million.
B. Ratios
In financial analysis, financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by revenue,
return on assets (operating income divided by assets), return on equity (net profit divided by
equity) and return on total investment (net profit plus interest divided by total investment) has
been carried out over the period of the project life and all the results are found to be
satisfactory.
C. Payback Period
The payback period, also called pay – off period is defined as the period required recovering the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered will be fully recovered within three years.
D. Internal Rate of Return(IRR)

27
The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal
rate of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of return
that could be earned by alternate investments or putting the money in a bank account.
Accordingly, the IRR of this project is computed to be 21.5% indicating the viability of the
project.
E. Net Present Value(NPV)
Net present value (NPV) is defined as the total present (discounted) value of a time series of cash
flows. NPV aggregates cash flows that occur during different periods of time during the life of a
project in to a common measuring unit i.e. present value. It is a standard method for using the
time value of money to appraise long-term projects. NPV is an indicator of how much value an
investment or project adds to the capital invested. In principle, a project is accepted if the NPV
is non-negative. Accordingly, the net present value of the project at 20% discount rate is found to
be Birr 45.9 million which is acceptable.

8. Economic and social benefits

8.1. Revenue generation

Similar to other economic activities, manufacturing of oil food industry generates tax revenues,
both for regional and federal governments. Revenues take different forms including corporate
income taxes from profit tax, capital gain tax and this industry employee’ income tax and sale
tax generated due to the direct and indirect employment effects of the industry.

8.2. Employment Opportunity and Labour Productivity

The project can create employment for 350 persons for both permanent (300 persons) and temporary (50
persons). In addition to supply of the domestic needs, the project will generate yearly average Birr 34.6
million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving
effect to the country by substituting the current imports. The project will also create backward linkage

28
with the manufacturing industry sub sector and forward linkage with the agricultural sub sectors and also
generates other income for the government.

9. Environmentally Impact Assessment

The firm is, from its inception, to comply with all environmentally impact related rules and regulations at
all levels. The activities are to be made supportive to land rehabilitation and environmental amelioration.
Moreover, the promoter is well aware of the globalization issues where organic products are becoming
highly demanded in the world market. The plant does not have any pollutant emitted from the production
process. Thus, the project is environment friendly.

10. Conclusion and recommendation

10.1. Conclusion

Manufacturing industry play a crucial role in the social and economic development of a country. It is
recognized that this sector provides not only employment opportunities to an increasing number of people
both in rural and urban areas in the country, but it is also an effective means of fighting poverty and
improving income inequality. In addition, essential goods and services are provided by this sector for
mass consumption using local resources. The study conducted by the Ministry of Planning and Economic
Development in 2010 indicated that the manufacturing sector output had a contribution about 3.15% to
the Gross Regional Domestic Production (GRDP) in the year 1997/8 and within the manufacturing
sector, Small scale and cottage industries (cement product and metal work) had a highest (84.8%)
contribution to the GRDP in the region. Sesame and noug seed is rich in fat, protein, carbohydrates, fiber
and some minerals. The aroma and taste of the seed are mild and delicious. It has a nut-like slightly sweet
flavor. It is used mainly as a food ingredient in whole, broken, crushed, shelled, powdered and paste
forms. Edible oil is mostly extracted from sesame, acholoni, noug and other oil seeds. Normally, the oil
constituent is from 50 to 60 percent. This king of oil seeds is renowned for its stability. It strongly resists
oxidative rancidity even after long exposure to air. Sesame and nougs are among the most important oil
seeds of mankind, and one of its oldest. There are very different kinds of sesame oil available, and some
knowledge about their culinary is required to make a competent choice. Sesame seeds are believed to be
one of the first condiments as well as one of the first plants to be used for edible oil. Oil obtained by
pressing such seeds contains besides true fats (lipids) several more constituents: Aroma compounds,
which make up for the culinary character of the oil, vitamins, trace elements and more. With respect to
lipids, in the plant kingdom nearly pure glycosides, one can further distinguish between saturated and
unsaturated fats.

29
 10.2. Recommendation
The project has the following recommendations.
• The project is technically and financially viable. The project is financially viable i.e
Internal Rate of Return (IRR) of 21.15% and Net Present Value (NPV) of Birr 45.9
million, discounted at 20% and the payback period is recovered not more than three
years.
• The total investment cost of the project including working capital is estimated Birr 500.1
million. It is projected that the average annual sales revenue before tax will be about Birr
413,500 million and its cash flow reaches up to more than Birr 891 million in ten years.
• The project intends to employ more than 350 individuals and compensate the personnel
well, so as to retain their invaluable expertise and to ensure job satisfaction and
enrichment through delegation of authority. i.e the project reduced un employment
problem in the city administration.
• The projected profit will generate a profit throughout its operation life. Annual net profit
after tax will grow from Birr 40.8 million to Birr 88.1 million during the life of the
project. Moreover, at the end of the project life the accumulated cash flow amounts to
Birr 891 million. The project will also generate Birr 34.6 million in terms of tax
revenue.

30
ANNEXES

31
 annex1 annual operating and production cost in Birr(000)
year
description 1 2 3 4 5 6 7 8 9 10
Cost of raw material 194,529 220,467 259,373 259,373 259,373 259,373 259,373 259,373 259,373 259,373
Utilities cost 4,472 5,068 5,963 5,963 5,963 5,963 5,963 5,963 5,963 5,963
maintenance and repair 10,117 11,466 13,489 13,489 13,489 13,489 13,489 13,489 13,489 13,489
Salary and wage 7,432 8,422 9,909 9,909 9,909 9,909 9,909 9,909 9,909 9,909
cost of marketing 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
administrative cost 7,500 8,500 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Total operating cost 225,050 254,923 299,733 299,733 299,733 299,733 299,733 299,733 299,733 299,733
Depreciation 48,170 43,353 39,018 35,116 31,605 28,444 25,600 23,040 20,736 18,662
cost of finance 0 5,000 4,500 4,050 3,645 3,281 2,952 2,657 2,391 0
Total production cost 273,220 303,276 343,251 338,899 334,983 331,458 328,286 325,430 322,861 318,395

annex2 Income Statements in Birr(000)

description year
1 2 3 4 5 6 7 8 9 10
sales revenue 315,000 360,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000
less variable cost 225,050 254,923 299,733 299,733 299,733 299,733 299,733 299,733 299,733 299,733
VARIABLE MARGIN 89,950 105,077 155,267 155,267 155,267 155,267 155,267 155,267 155,267 155,267
in % of sales revenue 0.285555556 0.291880556 0.34124615 0.34124615 0.3412462 0.34124615 0.341246154 0.3412462 0.34124615 0.3412462
Less fixed cost 49,170 44,353 40,018 36,116 32,605 29,444 26,600 24,040 21,736 19,662
OPERATIONAL MARGIN 40,780 60,724 115,249 119,151 122,662 125,823 128,667 131,227 133,531 135,605
in % of sales revenue 0.129460822 0.168676675 0.25329438 0.26186977 0.2695877 0.2765337 0.282784615 0.288411 0.29347473 0.2980321
financial cost 0 5,000 4,500 4,050 3,645 3,281 2,952 2,657 2,391 0
GROSS PROFIT 40,780 60,724 110,749 115,101 119,017 122,542 125,715 128,570 131,140 135,605
in % of sales revenue 0.129460822 0.168676675 0.24340427 0.25296867 0.2615767 0.26932381 0.276295714 0.282571 0.28821871 0.2980321
business tax 0 0 38,762 40,285 41,656 42,890 44,000 44,999 45,899 47,462
NET PROFIT 40,780 60,724 71,987 74,815 77,361 79,653 81,714 83,570 85,241 88,143
in % of sales revenue 0.129460822 0.168676675 0.15821277 0.16442964 0.1700249 0.17506048 0.179592214 0.1836711 0.18734216 0.1937209

annex3, Cash Flow for Financial Management in Birr(000)

year
description 1 2 3 4 5 6 7 8 9 10
TOTAL CASH INFLOW 690,075 360,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000 580,025
Inflow Funds 375,075 0 0 0 0 0 0 0 0 125,025
inflow operation 315,000 360,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000
Total Long Term Loan 0 0 0 0 0 0 0 0 0 0

32
TOTAL CASH OUTFLOW 644,879 305,692 405,202 365,193 366,022 366,767 367,439 368,043 367,777 366,948
fixed asset 375,075 0 0 0 0 0 0 0 0 0
INCREASE IN NET 25,000 26,015 42,453
0 0 0 0 0 0 0
WORKING CAPITAL
operating cost 225,050 254,923 299,733 299,733 299,733 299,733 299,733 299,733 299,733 299,733
marketing cost 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
business tax 0 0 38,762 40,285 41,656 42,890 44,000 44,999 45,899 47,462
financial cost 0 5,000 4,500 4,050 3,645 3,281 2,952 2,657 2,391 0
loan repayment 18,754 18,754 18,754 18,754 18,754 18,754 18,754 18,754 18,754 18,754
Surplus(Deficit) 45,196 54,308 49,798 89,807 88,978 88,233 87,561 86,957 87,223 213,077
Cumulative Cash
Balance 45,196 99,504 149,302 239,109 328,087 416,320 503,881 590,838 678,061 891,138

annex 4 Discounted Cash Flow-Total Capital Invested in Birr(000)

year
description 1 2 3 4 5 6 7 8 9 10
TOTAL CASH INFLOW 315,000 360,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000 580,025
Inflow Operation 315,000 360,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000 455,000
other income 0 0 0 0 0 0 0 0 0 125,025
TOTAL CASH OUTFLOW 626,125 281,938 381,948 341,018 342,389 343,623 344,733 345,732 346,632 348,195
Increase In Fixed Assets 375,075 0 0 0 0 0 0 0 0 0
increased net working 25,000 26,015 42,453
0 0 0 0 0 0 0
capital
operating cost 225,050 254,923 299,733 299,733 299,733 299,733 299,733 299,733 299,733 299,733
business tax 0 0 38,762 40,285 41,656 42,890 44,000 44,999 45,899 47,462
marketing cost 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
net cash flow -111,275 78,062 73,052 113,982 112,611 111,377 110,267 109,268 108,368 231,830
Cumulative net cash -111,275 -33,213 39,839 153,821 266,432 377,809 488,076 597,344 705,712 937,542
flow
NPV at 20% -99,353 42,506 31,450 88,600 92,242 88,619 72,121 63,707 61,136 104,965
cumulative NPV -99,353 -56,847 -25,397 63,203 155,445 244,064 316,185 379,892 441,028 545,993

NPV 45,892,900
IRR 21.15%
payback period 2.4 years

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Machine Layout for food oil Manufacturing Plant

Guard 100 m2 Entrance

Administr Office

250 m2

Parking Lot (30,710m2)

50 m Toilet and Shower

140 m2

Input Ware House Output Ware House

Machine Layout 28,800 m2 20,000 m2 30m 20, 000 m2

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