Oromia Pipe Factory Plc.

General Over View, Current Status

&
Major Challenges
The Oromia Pipe factory
A joint venture of Oromia Water Works Construction, a government owned
enterprise, and a Golden Trade Company of foreign Nationals

Is located in Finfinnee, Akaki Kaliti sub-city

Total capital investment and shareholders capital

 Oromia Water Works Enterprise (OWWE) Birr 53.9 mill. 70 %;

 Golden Trade Company (American & Egyptian) Birr 23.1 mil. 30 %;

Total area of 20,700m2

Machinery: Production line-one/line-seven with varying extrusion capacities

 Introduction
• The Oromia Pipe Factory (OPF) is
one of Plastic Pipe factories
operating in the country since
November 2007.
Tremendous opportunities for business expansion!
Economic Reform Agenda of the
country + Demand growth for
domestic food supply
Critical need for irrigated agriculture
(direct production inputs Pipes &
pumps)
OPF has a role to help current
economy while making benefits
3
 … Introduction
1.1) Establishment
Established in accordance with CCE, b/n OCC(Gov’t owned)
& GTC (Foreign partner) with a share of 70 % : 30 %(Ref.
MoA & AoA No.10 & 25)
OPF Plc was emerged as one of the few manufacturer of
plastic pipes in Ethiopia since Nov. 2007 to manufacture Geo-
synthetic products with special attention to uPVC pipes.
Initiated to fill the supply gap of ‘development corridors’
projects.
Start of OPF
Oromia Plastic Pipe factory is established in accordance with the
commercial law of Ethiopia and as per the MoA and AoA No. 10
OPF = A joint venture
and 25 made between OWWCE & GTC (Foreign partner) with a
share of 70% & 30% to undertake the manufacturing of uPVC
between OWWCE (Oromia
pipes, geo-membrane and other related plastic products.

OPFOPF
Water
= Aisjoint
now ventureWorks
planning Construction)
to expandOWWCE
between its business so as toWater
(Oromia adjustWorks
itself
with the changing/growing business environment and aspires to
& GTC
Construction)
manufacture &highly (Golden
GTC demanded
(Golden Trade Trade
Company)
products of HDPE pipes and
fittings.
Company)
With this also, greater emphasis is given to establish a pipe
assembly plant that will permit greater opportunity for the factory
and the country as well.
 ..
Started production in the year 2007
Registered & paid up Capital = 77 Mil. Birr
• OCC= 53.9 Mil. Birr & GTC = 23.1 Mil. birr];
Certified & implemented ISO 9001: 2015 QMS.
Organized with manpower having different skills & experience in different
fields of specialization.
 G.M ; 2 DGMs; 6 department managers.
 Current man power=178 (176 permanent & 2 contract)

Asset valuation & IFRS was conducted.

The10 years SPM was prepared
 1.2) Objectives
To manufacture & deliver high quality uPVC pipes which were
desperately required for supporting National & Regional development
activities.
Import substitution
Technology transfer
Foreign currency saving
Job creation
Revenue generation
• Delivered uPVC pipes for different development projects
• Saved millions of hard currency to import the same product.
1.3) Strategic Goals & Areas

• Strategic To be the leading & branded quality diversified plastic products

Goal => manufacturer for the growing demand of drinking water supply &
irrigation development, both in local & foreign markets

1) Product diversification (HDPE, Geo-membrane,

fittings & Water pump)
• Strategic 2) Renovation of existing uPVC production lines,
Area => laboratory & utility equipment
3) Conduct Market survey (Foreign & local)
4) Involving potential share holders (Exporters;
Financial Institutions…) for mutual benefit
 2) The Current Status of OPF
2.1) Production Capacity
OPF has 5 uPVC and 2 HDPE production lines
 5 ‘uPVC Extrusion lines Ø(50-630)mm full production capacity 30
tons/day with different pressure ranges
 2 ‘HDPE’ Extrusion lines Ø(16-400)mm production capacity 24 ton/ days
(October 2021)
• Fully managed & operated by indigenous staff.
 Production System & Clients
The production system of the factory is a demand
oriented: production of various diameter and
length of pipes is based on the customers design
and specification.
The company’s financial management is strictly
aligned with the Public Finance Management and
complies with the financial framework and tax
regulation policy of the country.
Regular Clients:
Water development institutions
• Oromia Water and Energy Resource Development
Bureau, Addis Ababa Water and sewerage Authority, etc
Agricultural development programs
institutions
• Oromia Agricultural and Natural Resource Bureau for
irrigation and related activities
Different civil construction works
 Housing program, drainage & sewerage construction
systems etc. such as Oromia Construction Corporation
and Oromia Engineering Corporation
Housing Development Administration
Agency
• for mega project under constructions like sugar cane
farming, horticulture, flower farming & others
 …
• The production system
 Demand oriented as per the customer order & requirements.
• Major & Regular clients :-
OWERDB,
OCC and ECO
Oromia Agr. & Natural R/ Bureau
Municipalities & urban water supply offices
A.A Water & Sewerage Authority,
Southern WWCE,
Somali WWCE, etc.
Housing Development Agency ;
Sugar Corporation
Stakeholders
Board of
Directors

Shareholders Management
Internal

OPF The
Stakeholders Regional
Internal
Employee
Stakeholders
Government

External

Internal Stakeholders
Stakeholder
Private
Banks,
Insurance
CBE , NBE, Companies
Ethiopian Ministry of
Internal Insurance Revenue
Companies

OPF The Federal

Stakeholders Government External Suppliers,
Institutions Stakeholders Transistors
Customers
External

External Stakeholders
Vision, Mission, Values and Principles

• OPF aspires to be the most

Vision preferred manufacturer of high-
quality plastic products in the
Country and East Africa by 2030
 • Production based on a mix of old with
Mission new technology with a gradual shift to
Statement the new HDPE production line based
on the demand created.
Values
• OPF sets up high standards of
performance and ethical behaviors.
• Is committed to contribute its level
best to the country and Region’s
development effort.
• To be a Progressive, Responsible,
Innovative and Performance driven
company.
Identification of Strategic Issues

Wear and tear of the

production and utility
Shortage of foreign Power interruption, Lack
machines and requiring
currency, Lack of working of workshop for
rehabilitation/and
capital maintenance services
replacement of the
machines

Shifting of market demand

from uPVC pipe to HDPE High turnover of Lack of ownership right
pipe Increasing professional and over factory buildings to
competition by other pipe experienced employee facilitate bank loan
producers in the country
 Suggested core
No O utput O utcome impact
strategy
1. Critical Issue – Shortage of foreign currency
Shortage of foreign currency is a critical issue for the factory as long as the factory imports all raw materials and
machine spare parts from abroad to run its production process

1.1. Engage in Export  Conduct market study in
market to earn foreign neighboring African
currency countries; Kenya, Somalia,
Sudan, south Sudan, Eretria
and Djibouti
 Operates at optimal
capacity
 Maintaining product quality  Shareholder value will
 Export to same countries
1.2 Engage stakeholders  Factory side- Supply plastic  Efficiency of exportable
who are engaged in products required for
exporting agricultural irrigation
commodities as a
 Stakeholders side-Imported
shareholder Plastic raw materials
 Will be regular supplier to
these countries
 Foreign currency demand
will be fulfilled
 Profit will be doubled
 More jobs, additional
workers will be hired
double
 additional wealth will be
created
agricultural production
through consistent and
reliable supply of plastic
products
 More wealth
 Business expansion
 More jobs
 Improved income to its
workers
 Reliable source of supply
both for Export and
domestic market
 shortages of foreign
exchange for
importation of plastic
raw materials resolved;
 Smooth operation and
sound business
operation
No Suggested core Output Outcome impact
strategy
1. Critical Issue – Shortage of foreign currency
Shortage of foreign currency is a critical issue for the factory as long as the factory imports all raw materials and machine spare parts from abroad to
run its production process
No Suggested core Output Outcome impact
strategy
1.3 Build good working · Secure the required foreign currency; · Consistent and reliable supply · More wealth
relations with · Un interrupted production of water pipes to government · Business expansion
government to be water works projects and · More jobs
contained in high organizations · Improved income to its workers
priority list to · Strong compliance to
secure foreign contractual agreements
currency
1.4 Create working · Open Bank accounts with client banks · Secure the required foreign  Smooth business operation
relations with and depositing sufficient local currency currency;  Business expansion
 More Revenue
government and · Building strong business relationship · Sustained raw material supply
private banks · Optimum production

1.5 Examine our · Giving first priority for the projects run · Alignment of Factory policy · Improved potable water supply
collaboration how by the gov’t with government objectives; coverage of the public;
best we serve the · Criteria is set to fulfill the demands of · Assist timely completion of · Large coverage of irrigated
government the government when there is short public water development agriculture ensuring Increased
supply of pipes projects; agricultural production and food
self-sufficiency
No Suggested core strategy Output Outcome Impact
2- Critical issue : Shortage of working Capital loan from banks, both for ope ration and to ope n
L/C; Critical financial proble m

2.1 Setup a revolving fund by  Financial challenges  Healthy business  Revenue growth
shareholders contribution for smooth operation operation;  Increased
resolved  Capacity utilization shareholder values
to be retained from their
 uninterrupted  Consistent
dividend payment and on production process production of pipes
time collection of
receivables
Create ownership right  Ownership right on  Working capital  Optimum
2.2 over factory buildings to Factory building and loans available as production,
compound premises required,  Higher revenues
allow collateral for bank
for collateral  Smooth business  Increased income
loans operation
No Sugge ste d core O utput O utco m e Im pact
strate gy
3- Critical issue : O ld and in-e fficie nt facto ry m achine rie s, lo w pro ductio n and pro ductivity due to facto ry
do wn tim e co uple d with fre que nt powe r inte rruptio n critical o pe ratio nal pro ble m

3.1 Renovation of existing  Full scale maintenance of  The optimum revenue  Efficiency of machinery will
machineries; the plant facilities and generation will be increased
renovating the machine increased  Sustainability uPVC pipe in
Replacement of old
parts with necessary latest  The optimum Profit gain a competitive environment
machineries and a technology also will be increased  Customer Satisfaction,
standby generator  Purchasing one New stand  Downtime due to power  Retention of staff
by generator will be interruption will be
purchased minimized,
 Replacing of the old belling  Unit Costs of production
machines, Laboratory will decrease, which will
equipment, chiller units, result in price
and recycling machines; competitiveness
No Suggested core O utput O utcome Impact
strategy
4- Critical issue : Shift o f custo m e rs de m and fro m uPVC pipe s to HDPE pipe s and dive rsificatio n o f pro ducts

4.1 Product Diversification HDPE production lines,  O ptimum re ve nue will be  Business expansion,-capacity
Geo-membrane, Fittings, and generated for re-investing from Net
others installed  O ptimum profit will be income
obtained  High return to investment
 Q ualified professionals
 Maximization of Profit
recruited
5- Critical issue : Mainte nance wo rksho p

5.1 Establish workshop W ell organized and equipped  Modification and/or  Improved revenue, saving
facility and employ mechanical and electrical fabrication of worn out and costs of maintenance
workshop will installed damaged machine parts will  Satisfaction of technical
technical crew that run
be undertaken within the workers and customers
the workshop factory  Improved production
 Re-winding of burnt motor efficiency;
coils will be maintained  Reduced Factory down
internally within the factory time
5.2 Establish W ater pump Full fledged water pump Locally available water  Increased and sustainable
assembly plant assembly facility  pumps that reach many end agricultural production and
users exportable commodities
Strategic Area

Product diversification: setting

Renovation of existing uPVC
up HDPE lines, Geo-membrane,
production lines, laboratory
fittings and supply of factory
and utility equipment
assembled Water pump

In the short, for immediate

Conduct Market survey in
solution involve stakeholders
Foreign Market and strengthen
engaged in export of
customer relations in local
agricultural commodities as a
market
shareholder for mutual benefit
 Investment Capital to implement the strategies
(Tentative to be re planned)
No Suggested Strategic Plan years, ‘000 Birr
Strategies 1 2 3 4 5 6 7 8 9 10 Total

uPVC 110,000
1 machineries 50,000 30,000 30,000
renovation
HDPE 95,600
2 95,600
Production lines
Geo-membrane
& fittings
3 200,000 200,000
manufacturing
plants and other
4 Spare parts 5,000 5,000 5,000 15,000
Workshop 50,000 50,000
5
establishment
Pump
6
Assembly*1
Total Investment 145,600 285,000 30,000 5,000 0 5,000 0 470,600
Cost
152,675
Working capital 140000 100000 192000 140000 111750 131000 151500 171000 188750 200750
Yearly
Summary of Capital required
for the strategic plan years
Share
Govern holders
ment

Working Capital; Loan

152675; 26%
from
Capital Investment
Working Capital
Banks
Capital In-
vestment,
470,600, 76%

Source of Finance
 Plastic Pipe Manufactures in the Country
List of Plastic Pipe Manufactures and Production Capacity
Description of Oromia Amhara HAKAMMAZ
S/n Geosyncthet
measuring Parameter Pipe TANA Water Concord Pipe Excle AZIZA Cosmetics &
ic Industrial MWA AZ PIPE
Factory Drilling Fit Industry Factrory Plastic PLC Plastic Fitsum
Works (GIW)
(OPF Plc) (APF) Factory Tenaye
Finfinn Finfinn
1 Location of the factory Finfinne Finfinne Finfinne Sebbata Bahirdar Finfinne Finfinne Finfinne Finfinne Bishan
e e Guracha

uPVC Pipe Production (

2 Max. outer diameter of 630mm 400mm No 630mm No 250mm 400mm 250mm 630mm 280mm 400mm no
Pipe in mm)

HDPE Pipe Production

3 (Max. outer diameter of 400mm 400mm 400mm 400mm 400mm 400mm 630mm 630mm 180mm 63mm 160mm 400mm
Pipe in mm)

8.1m length 8.1m

length &
4 Geo membrane (L X W) No & 5mm no No No no 5mm
no no no no no
thichness thichness
Have Pipe
5 PIPE Fitting No No No No No No Fitting no no no no no
Plant
OPF Plc, Estimated Current Market Position
Company Name Market Description %age Share

(80-86) % Customers are Governmental

Sales Perfomance history in past two and (20-15)% Private Customers
years

OPF Company (75-80)% uPVc and HDPE pipe market

demand of the Oromia region estimated
Estimated Regional Market Share to be supplied by OPF

(20-25)% uPVC and HDPE pipe

national market demand is estimated to
Estimated National Market Share be supplied by OPF
 Financial position of OPF Plc (The past 15 years track record)
Total Revenue & profit before tax Analysis
450.0
(The
past 15 years track record)
400.0
410
Financial position of OPF
350.0
344.6 plc for the last 15 year

300.0

264.7
250.0
222.6
195.4 199.0
Mil.Birr

200.0
176.8 172.7 172.4
150.0 144.6 156.8 156.5
133.1 120.0
115.0
100.0 83.1
52.9 52.9 35.1 29.6 23.1 35.2
50.0
30.8 33.8
25.6 10.4 15.9 6.7
0.0 2.1 2.2

Budget year
TOTAL SALES (Mil.Birr) PROFIT BEFORE TAXATION
 Economic Reform Agenda of the
country + Demand growth for
domestic food supply

Critical need for irrigated agriculture

• Opportunities for (direct production inputs Pipes &
business pumps)
expansion!

OPF has a role to help current

economy while making benefits
 4) Major Challenges
1) Working Capital (Local & Foreign currency);
2) Frequent power interruption at peak production seasons
3) Receivable collection challenges from major clients
4) Low PVC line performance due to depreciation
 High maintenance & other overhead costs.
 Product type shift (from uPVC to HDPE)
5) Price escalation (Domestic & Global) ;
 Turnover of professional & experienced employee (Life expense -vs- payment).
6) Lack of proper & timely maintenance for factory buld.& compound
premises
 Solutions & Recommendations
• Building strong business relationship with stakeholders
(Banks, Exporters, Local suppliers & others) to ensure
sustainable supply of raw materials
• Pursuing Government support to get hard currency and
refundable loan for working capital
• Frequently dealing with potential stakeholders to ensure a
normal & sustainable business environment of the company.
• Strategically & timely acting on the future business
sustainability of the company.
• Conducting need based capacity building trainings for
employees.
Identifying & collecting Long standing & damaged uPVC pipes at different project sites

32
Transported to Factory Compound
uPVC Scrap under crusher

34
Quality uPVC pipes reproduced from scrap
 Advantages (Economic, Social & Environmental)
Efficient utilization public resources
Re-utilization of unused & lost resources
Confronting ineffectiveness
Income generation
Means of getting working capital
 Hard currency saving /for raw material import/
Environmental protection from undecomposed plastic scraps &
residuals
Temporary job creation/ loading, unloading & transporting/
Never give up !!