PROJECT PROMOTER: SEID MOHAMMED

ADDRESS: BATI, ETHIOPIA

MOBILE: 0935432129

PROJECT AREA/ Location: ANRS, BATI CITY /TOWN

ADMNISTRATION, 03 KEBELE KERSA

September 2019

Bati

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TABLE OF CONTENTS PAGES
1. EXCUTIVE SUMMARY………………………………………………………………...2
2. BACKGROUND INFORMATION……………………………………………………4

2.1. The Applicant4

2.2. The Project 5
2.3. Brief history of the Project
2.4 Opejective of the Project
2.5. Product Descripition
2.6. Capital Structure Of the Projrct
3. MAJOR SUCCESS AND RISK FACTORS
3.1 Key Success Factors
3.1.1 Macro Level Success Factors
3.1.2 Firm Level Success Factors
3.2 Firm Level Risks Factors
3.3. Risk mitigating measures
3.4 SWOT Analysis
4. MARKET STUDY
4.1 The Demand and Supply Prospects of candle
4.1.1 Demand Prospects
4.2 Marketing Area. Market Strategy and Price Of Project
4.2.1 Market Area Of the Project
4.2.2 Marketing Strategy
4.2.3 Price Of the Project
5. TECHNICAL ASPECT
5.1 Location and Site
5.2 Availability Of Utilities
5.3 Availability of Raw Material
5.4 Production Process
5.5 Investment Item Of the Project/Machinery and Equipment
5.6 Production Capacity
6. ORGANIZATION, MANAGEMENT AND MANPOWER
6.1 Organizational Structure Of the Project
6.2 Thecnical Capacity Of Management
6.3 Human Resource Requirement and Availability
6.3.1 Human Resource Requirement…………………………………………………………..24

6.3.2 Training Requirement………………………………………………………………….24

7. FINANCIAL ANALYSIS
7.2 Production Costs
7.3 Financial Evaluation
8. SOCIO ECONOMIC BENEFITS OF THE PROJECT
9. CONCLUSION AND RECOMMENDATION
9.1 Conclusion
9.2.
Recommendation………………………………………………………………………………………….

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 1. EXECUTIVE SUMMARY

Seid Candy Factory project is a new establishment conceived by the owner Ato Seid
Mohammed with total capital of Birr 2,000,000.00.The project is located in the Amahara
National Regional state, Oromo nation nationality Zone, Bati town, kebele 03 which is
around 64 kms from Dessie, and around 419 kms from the capital city Addis Ababa. The
project is planned to produce and provide quality candy.

This project has the production candy with a capacity of 100 tons per annum. The present
demand for the proposed product is estimated at 2000 tons per annum. The demand is
expected to reach at 2960 tones by the year 2022.

The project will secure 100 m2 shades on lease for a value of 1,000 for a lease period of 15
years starting from lease contract date. The lease amount is expected to be paid for 15
years with annual payment of birr 12000 starting from the date of contract signing.

The project is expected to start its operation at initial capacity of 55% in the first year, and
65% in the second year and it reaches capacity of 100% in year three and after.

The major raw material required for the candy project is mixtures of sugars and sorbitol,
both of which are highly hygroscopic. The major utilities required by candy project are
electricity and water. The project site is accessible with water and electricity.

The project is expected to have General Manager, project manager, Production, technical
and marketing Department Manager and Finance &Administration Manager. In addition
qualified, skilled and experienced employees will be hired and totally the project planned
to recruit 12 permanent employees.

The total financial requirement of the project is estimated to be birr 2,000,000.00.Out of

which birr 0.5 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 19 % and a net
present value (NPV) of Birr 578,170 discounted at 8.5%.

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The project is expected to contribute to employment creation, tax revenue generation to the
government and GDP Contribution, import substitution, technology transfer and it creates
back ward and forward linkage effects to other sectors.

Finally, considering the market, technical, financial, socio-economic and environmental

analysis results, and the candle project is found to be viable.

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 2. BACKGROUND
2.1 The Applicant
2.1.1 Name of the Applicant

A Name– Ato Seid Mohammed

B Name of General Manager (contact person) – Ato Seid Mohammed

C Legal form of Business: - soleproprietorship

2.1.2 Address
2.1.2.1 Applicant Address
Name: Ato Seid Mohammed
Region - Amhara
zone : Oromo nation nationality zone
town : Bati
kebele 02
Tel.No 09 35 43 21 29
2.1.3 Project Address
Name of the project: Seid Candy Project
Region: Amhara Regional state
Zone/sub city: Oromo Nation Nationality
Town : Bati
Kebele: 03
Tel.No 09 35 43 21 29

2.1.4 Marital Status: -Married

2.1.5 Type of Project: Candy Factory

2.1.6 Legal form of Business: - sole proprietorship

2.1.7 Status of the Project: - New project

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 2.1.8 Objective of the project- To produce quality Candy to local market

2.2 Brief History of the promoter/Project

2.2.1. The promoter

Name – Ato Seid Mohammed

Nationality: - Ethiopian

As per the private assessment currently, Ato Seid Mohammed has been engaged in his different
own businesses for above six years. Currently, he manages the project construction machinery
rent works and other trade activity of this project. He is experienced on his different private
businesses. He expands his business from small working to large candy factory; this indicates
that he is hard worker. He is easy to communicate and committed for his work. He has ability
to manage the project properly, but for the future, he will hire project manager as well as other
necessary technical staff.

2.2.2. The project

Legal form of Business: sole proprietorship

This candy factory is established by Ato Seid Mohammed. The project is located in the
Amhara National Regional State, Oromo Nation Nationality Zone, Kobo Bati town,
Kebele 03 which is around 64kms from Dessie, and around 419kms from the capital city
Addis Ababa. As per the private assessment Seid candy Factory project is a newly
established project with a registered capital of birr 2,000,000.00. The project wills 100m 2
shades from Bati Town industry and investment office.

2.3. Objective of the Project

The main business objective of the project is to produce quality Candy to local market.

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2.4 PRODUCT DESCRIPTION AND APPLICATION

The technology of candy making is based on the science and art of manipulating sugar , the
principal ingredient in candy, particularly to achieve special textural effects. This is
accomplished primarily by controlling the state of crystallization of the sugar and the sugar
– moisture ratio. While the confectioner has many ingredients besides sugar to modify his
confection, such as milk products, egg white, food acids, gums starches, fats emulsifiers,
flavors, nuts, fruits, chocolate, and others, all of these are secondary to sugar in
determining the attributes that characterize the major candy types and some of these
ingredients are chosen especially for their influence upon the chemical and physical
properties of sugar.

2.5 Capital Structure of the Project

The total capital of the project is Birr 2,000,000 which is sourced from the promoter’s
private business. In addition, as per private assessment, the promoter has planned to
contribute its equity by cash the source of which is cash at bank.

2.6 Past Performance of the Project

The Project is a new establishment and hence, it has no past operational and financial
performance.

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 3. KEY SUCCESS AND RISK FACTORS
3.1 Key success factors

These are the factors within the control of the operator and which should be followed in order
to be successful.

 Generic promotion of the candy.

 Automation of the industry: Increasing automation allows millers to optimize production and
reduce labour although this affects employment.
 Dedicated leaders and professional management.
3.1.1 Macro Level Sucess Factors
The macro level success factors can be emanated from:
 Changes in life style
 Demographic changes
 Urbanization
 Income growth: income growth, which affects the purchasing power of consumers, is one of the
most important factors that drive consumers to consume manufactured products such as Candy.
The macro level sucess factors for candy factory can be:
 Strong government policy that support agro-processing industries
 Large and growing number of population with respecting growing income
 Availability of Good qualityof raw materials.
 Availability of skilled ,semi skilled and un skilled labor.
3.1.2 Firm Level Success Factors
The project, like any other business establishment, has been evaluated using the 5 C’s to
determine its credit worthiness which reflects its chance of success.

Character
The General Manager Ato Seid Mohammed is easy to communicate and is committed for his
work. He has six years over all experience and is hard worker and he is performing different
business activities.

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 Capacity
The project is managed by Ato Seid Mohammed who has been engaged in his own other
businesses like construction machinery rent, trade shop and this indicates that he is hard worker
and he has 6 years experience in managing different businesses. So, considering his experience,
a project manager to be recruited and qualified employees, the project is expected to have a very
good management team.
Competence

The promoter has also a good knowledge of management experience as he aquired the skill from
his private busines experience. He has six years experance in managing his private businesses
effectively and easy to communicate and is committed for his work..

Capital
The project capital is 2,000,000 birr. In addition the promoter has planned to contribute its equity
by cash and the source of this equity is cash at bank and bank guarantee.

3.2 Firm Level Risk Factors

These are the factors that are outside of the control of an operator of the industry, but are likely
to have significant impact on a business. The performance of the candy factory is affected by
the following key sensitivities. The main raw material of the project is mixtures of sugars and
sorbitol.

 Raw material pricing: In consistency of Raw material pricing

 Production technology: Lack of Availability of well trained personnel in the Production
technology.
 Final product demand: The project may face problem of Final product demand by the
consumer

3.3 Risk Mitigation Technique

The Project relays mainly on the local supply and supply of raw sugars and sorbitol imported
and hence, So, in order to alleviate these risks and to become successful the project can apply
the following mitigation techniques.

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  The project can see alternatives of availability, quality and prices of different classes of sugars
and sorbitol:
 The project can apply automation of the factory: Increasing automation allows millers to
optimize production
 The project can apply generic promotion of the advantages of candy and other similar
techniques.

3.4 SWOT Analysis of the Project

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for
the development of marketing plans. It accomplishes this by assessing an organizations strengths
(what an organization can do) and weaknesses (what an organization cannot do) in addition to
opportunities (potential favorable conditions for an organization) and threats (potential
unfavorable conditions for an organization).

The SWOT analysis provides information that is helpful in matching the project's resources and
capabilities to the competitive environment in which it operates. A project should not necessarily
pursue the more lucrative opportunities. Rather, it may have a better chance at developing a
competitive advantage by identifying a fit between the firm's strengths and upcoming
opportunities.

3.4.1 Strength
 Competent Manager and his engagement in different business activities
As per private assessment,considering Ato Seid Mohammed relevant and sufficient
experience aquired during six years, the proposed general manager of the project is
believed to be the main strength of the project as he has better communication,
engagement in different business activities and is hard worker.

 Individual Business
The project’s form of business is sole proprietorship which is fully owned by Ato Seid
Mohammed, this can prevent the occurrence of unfavourable conflicts which are
expected to happen in other business form of organizations.

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3.4.1 Weakness
The project has minimal paid up capital.

3.4.2 Opportunity
 Large and growing number of population with respecting growing income.
 High and growing local demand due to urbanization.
 Availability of Large favorable manufactural output for raw material (sugars and
sorbitol) production at national level.
 Availability of good quality of raw material.

 Conducive business environment with facilitated institutional support

 The policy of the government is favorable for agro-processing industries

 Infrastructure Development
The government’s continuous and huge investment in infrastructural development; especially
the development of asphalted roads and electricity, gives a rise to good marketing strategy.
Hence, this enables the project to adress candy demand to its target market easily.

 Peace and Security

The relative peace and security of the project’s targeted markets is one of the major
opportunities.

 Being Priority Sector of Government

The government has given great focus for manufaturing sector in order to achieve the 5 years
GTP strategy.

3.4.3 Threats
 Market Competition
Eventhough there is one newly established project other than this project in the town
there is no other existing Candy Factories in the target market area.

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 Fluctuation of raw material Price
Due to seasonal nature of the raw material availabiity, the firm may face shortage as well
as inflation of the price of raw material.

 Problem of Final product demand

The project may face problem of Final product demand by the consumer.

 Electric power interruption

The table below shows some of the project’s strength, weakness, opportunities and threats
discussed.

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Strength Opportunity

 Competent Manager and his  Large and growing number of population with respecting
engagement in different growing income.
business activities  High and growing local demand due to urbanization.
 Individual Business  Availability of Large favorable manufacturing output for
raw material (sugars and sorbitol) production at national
level.
 Availability of good quality of raw material.
 Conducive business environment with facilitated
institutional support
 The policy of the government is favorable for agro-
processing industries
 Infrastructure Development
 Peace and Security
 Being Priority Sector of Government

Weakness Threats

 The project has minimal  Market Competition

paid up capital  Fluctuation of raw material Price
 Problem of Final product demand
 Electric power interruption

3.5 Mitigation Mechanisms for threats and weaknesses

The threats can be successfully averted using the following means of mitigating measures:

 The promoter should store the raw material at the production season to mitigate the risk
of raw material pricing variablity.
 The Project should produce quality and competative products to win the market. It
should produce quality candle product and advert through different medias as well as
selling the product at competitive price for the purpose of mitigating the risk which is
occured by problem of final demand by the consumer. That is the project should follow
best promotion/advertizement mechanisms around the targeted areas.

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  The promoter should procure or rent generator as a back up means for electric power
inturruption problem
 In addition to the threats of the project the promoter should raise its paid up capital in
order to cover the working capital requirement of the project.

4. MARKET STUDY OF CANDY

It is obvious that candy is necessary item that is used in a recreation and joying of every rural
and urban people, which implies that the product is highly demanded. The demand for candy is

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met through both domestic production and imports in Ethiopia. The fact is the products are
widely consumed by both rural and urban population of the country.

Sugar candy, a unique mouth freshener with a specific flavor is a part of the Rs 100-crore Parle
brand umbrella, which is ranked among Parle top performing ten products, is being extended to
new variants. There are so many flavors available in the market i.e. orange, pineapple, mango,
mint, pan, strawberry, grapes etc. and are having good demand among the children. Similar to
the existing variants, the new flavors are also being made available in pillow packs priced at 50
paisa a unit. In addition, the candies are also being retailed in jars of 250 and 500 units each,
besides refill packs. The roll out of the new flavors has been initiated in a few select markets,
and will be extended nationally.

1. Past Supply and Present Demand

The market for candy is the domestic market: The candy demand at domestic market emanates
from individual consumers. The demand for candy from this segment of the market is projected
based on the per capita consumption observed.

Since the project has planned to sell its candy products in Afar region, North Wollo, North
Shewa and South Wollo as the immediate destination markets, these areas are considered as the
target market for the project under discussion.

The source of supply of candy is both domestic production and imports. Candy that is
supplied to the Ethiopia market from domestic production and import is given in Table 1.

Table 1
IMPORT OF CANDY

Year Qty Value

( Tons) ( ‘000 Birr)
2000 32.2 154.0

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 2001 386.7 1,503.1
2002 77.3 370.0
2003 457.4 1,964.4
2004 299.1 1431.0
2005 3354.8 14,301.3
2006 310.6 1,603.3
2007 245.6 1,633.0
2008 23,719.6 141,087.8
2009 368.9 2,928.8
2010 460.4 4,884.0
2011 310.5 3,469.2
Source: - Ethiopian Revenues and Customs Authority.

2 Future Demand Projection for the Target Market

One of the uses of candy is for food and recreation in areas. In addition, candy are used in
traditional and religious ceremonies, hotels, restaurants and the like for illuminating
occasions. Hence, its demand will exist even if other types of candy are available whether
in rural or urban areas. The past supply trend also reveals that consumption has been
increasing in the past few years. By associating with population and the service sector on
annual average growth rate of 4% is taken to forecast the future demand (See Table 2).

Table 3
PROJECTED DEMAND FOR CANDY (TONS)

Year Projected

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 Demand
2013 440
2014 484
2015 532
2016 586
2017 644
2018 695
2019 765
2020 841
2021 925
2022 1,018
2023 1,120

4.1 Marketing area and market strategy and prices of the project

4.1.1 Market area of the project

The project has identified Oromo zone, Afar region, North Wollo, and South Wollo as major
marketing areas. The target customers of the products of the project will be individual
consumers, whole sellers and retailers.

4.1.2 Marketing Strategy

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The promoter has planned to sell the candy to whole seller, retailers and individual consumers
with reasonable price. It plans to produce better quality products to compete with other
homogeneous factories.

The strategy of the project is to produce and sell high quality Candy with high value. The project
in its marketing strategy will work to establish niche in candy market. The niche will come from
promoting the product in the following ways.

 Better quality : many consumers prefer candy with high value. This is done by
acquiring quality raw materials with a modern production system.
 Short distribution channels: the project will promote and reach to the whole seller
and retailers with out any brokers.
 Perceived quality: there is a significant sector of the economy that is attracted to the
idea of buying high quality products from small processors who control their quality
and create an image of high quality. Consumers are likely to pay a premium for this
perceived quality.

Therefore, the candy project planned use different advertisement mechanisms and sell its
products at reasonable price to its target market such as, South Wollo, North Wollo, North
Shoa, and Afar Region.

4.1.3 Pricing and Distribution

The average producer's price per ton of candy during 2004/05 is Birr 21,275. Allowing for
cost increase Birr 18,516 per ton is taken for sales revenue projection. The product will
find its market outlet through the existing general merchandize wholesalers.

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 5. TECHNICAL ASPECT
5.1 Location and Site

Seid Candy Factory Project is located in the Amhara National Regional State, Oromo
Nation Nationality Zone, kebele 02 which is around 64kms from Dessie, and around
419kms from the capital city Addis Ababa.

It has good access to raw materials and market out let and it is accessible at any time.
Considering factors like proximity to market/end users, availability of raw materials and
infrastructure the project is established on appropriate location.

5.2 Materials and Inputs

A. Raw & Auxiliary Materials

The major raw materials used in candy making are sugars and sorbitol, both of which are
highly hygroscopic all the other raw materials have to be imported. It is believed that sugar
can be easily obtained from refineries in the neighboring Sudan.

Table 2
ANNUAL RAW MATERIAL REQUIREMENT &COST

Sr.No. Cost in '000 Birr

Item Qty. FC LC TC

1 Sugar(tons) 900 - 4,500 4,500

2 sorbitol (kg) 600 12 - 12

3 Packing Materials (Polypropylene 12,000 12 120 120

sacks-50kg)

Total Cost 12 4,620 4,632

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 5.3 Plant Capacity and Production Programme

1. Plant Capacity

The proposed annual processing capacity of the envisaged plant only taking a share of 5.6
% to the forecasted demand of the year 2008 is 100 tones candy, based on 300 working
days a year and a single shift of 8 hours per day. The capacity can be increased by
increasing the number of working hours per day.

2. Production Programme

The production programme is indicated in Table 3. Therefore, in the first and second year of
production, the capacity utilization rate will be 55% and 65%, respectively. In third year and
thereafter, full capacity (100%) production shall be attained.

Table 3
PRODUCTION PROGRAMME

Sr.
Product Production Year
No.
2012 2013 2014-2021

1.
candy (tones) 55 65 100

2.
Capacity utilization (%) 55 65 100

B. Availability of Utilities

The major utilities of the envisaged project are electricity and water. The project site is
accessible with water and there is adequate water for the project. From Ethiopian Electric power
Utility Bati District, The amount of kilowatt required by the project is 25KW. On the other hand,
as per the private assessment the supply of electricity is sufficient to run the project.
The annual consumption and cost of utilities is indicated in Table 4 the total annual cost of
utilities is estimated at Birr 14,466.

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 Table 4
ANNUAL UTILITIES REQUIREMENT AND COST

Sr. No Utility Unit of Measure Qty. Unit cost Total cost

1 Electricity kWh 24,000 0.4736 11,366

2 Water m3 1,000 3.1 3,100

Total 14,466

5.3. Technology and Engineering

A. Technology

1. Production Process

The Process involve the cooking of Sugar in the stainless steel steam jacketed cooing pan
then cooling of syrup on cooling table. After that add all ingredient in the vacuum batch
cooker including color and flavor etc. then mixture subject to batch roller then three stage
rope sizer then subject to sweet forming machine then subject to three way cooling
conveyor then in the end candy wrapping machine to pack the Sugar candy.

2 Environmental Impact Assessment

The only adverse impact associated with the production of candy from corn is sulfur
dioxide emission. This can be controlled by selecting a seamless technology. The other by
products to be produced by this process such as gluten, fibber and ash are used as animal
feed and does not have an adverse impact on environment. Minimum height of shed will be
maintained with exhaust fans for removing decongestion, proper ventilation, removal of
cokes fumes etc.

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 B. Engineering

1. Machinery and Equipment

The list of machinery and equipment required by the plant is given in Table 5

Table 5
LIST OF MACHINERY AND EQUIPMENT

Sr. Item Qty.

No.
Vacuum Batch Cooker Cap.
1 1
Sugar Batch Kneader cap.50 Kg., with side
2 plate 1
Candy Forming 12” Plast-O-Plast machine with
Batch former , three stage rope sizer , three way
conveyor, motor , panel &other die
3 1
Die 12” POP Machine with Brass Punches
4 5
Candy Wrapping machine double twist style
5 Speed 300 Pcs./Min 1
6 Heater cum Blower for Candy Wrapping 1
7 Die Carrier 1
8 Working table with S.S./Aluminum top 1
9 Weighing Balance platform type 1
Aluminum vessels, Mats, cups, Mugs, ladle,
spoons, gloves, etc. and misc. equipt.
10
11 Electrification & Installation Charges @ 10%
Cost of Office Equipment and other production
equipment etc.
12

2. Shade and Installation works

2
The total shade requirement of the project is about 100m , out of which installation area is
2 2
75m . The lease value of shade, at the rate of 10 Birr / m , and for 15 years of shade
holding, is Birr 180,000.

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 6. ORGANIZATION AND MANAGEMENT

6.1 Organizational Structure of the Project

The project has simple organizational set up. There is a general manager at the top of the
organizational set up which passes major decisions. The general manager of the project
will supervise all the activities of the project. Under the General manager there exist a
project manager which manages the activities of the project. Different department
managers like Production, Technical and marketing Department Manager and Finance &
Administration Manager are also under the project manager.With in these department
managers there are different skilled , semi skilled as well as un skilled workers.

6.2. Technical Capacity of Management of the Project

The general manager of the project will supervise the overall activities of the project. The
owner manager Ato Seid Mohammed is the manager of the proposed candle project. As
per the Private assessment, the General Manager Ato Seid Mohammed has been engaged
in his own business and expands his business from construction machinery rent to large
candy factory; this indicates that he is hard worker. He has work experience of 6 years.
Hence, it is believed that he can manage the planned candy manufacturing project
successfully. But for the future, he will hire project manager as well as other necessary
technical staffs so that it is possible to form a competent management team in the project.

6.3. Human Resource Requirement and Availability

6.3.1. Human Resource Requirement

The candy production project requires both production and adminstrative man power.The
project is expected to recruit 12 permanent workers to perform the activities of the project
smoothly. A detail of man power and estimated annual salary expenditure is given in table
6.

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 Table 6
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr. Description Req. No. Monthly Annual Salary

No. Salary (Birr) (Birr)

1 General Manager 1 1,200 14,400

2 Accountant 1 750 9,000
3 Salesman 2 900 21,600
4 Peon/watchman 1 1200 14,400
5 Sweeper 1 300 3,600
6 Skilled Worker 2 600 14,400
7 Semi Skilled Worker 2 300 7,200
8 Helper/ Packers 2 300 7,200
Sub-Total 12 91,800
Benefits (20% BS) 18,360
Grand Total 12 110,160
Source: commodity study and own computation

B. Training Requirement

The training of chemist will take place for about two weeks during the supplier and
erection. Laborers shall be trained by in-house staff during commissioning. The cost of
training is estimated at Birr 20,000.

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 7. FINANCIAL ANALYSIS

The total financial requirement of the project is birr 2,000,000.00/one million three hundred
thousand birr. Out of the total financial investment birr 770,000/38.5%/ is fixed investment
and birr 123,000.00/61.5%/ is working capital.

Table 7Total financial investment of the project

Investment items Amount Percentage

Fixed Investment 770,000 38.5%
Working Capital 123,000.00 61.5%

Total 2,000,000 100%

The financial analysis of the candle project is based on the data presented in the previous
chapters and the following assumptions:-
Construction period 0 years
Source of finance 30 % equity & 70 loan
Tax holidays 3 years
Bank interest 10%
Discount cash flow 10%
Accounts receivable 30 days
Raw material local 30 days
Raw material imported 120 days
Work in progress 1 day
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 5% of machinery cost

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A TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 2
million, of which 49 per cent will be required in foreign currency.

B PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 1.82 million (see
Table 8). The material and utility cost accounts for 85 per cent, while repair and
maintenance take 2.74 per cent of the production cost.

Table 8
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %

Raw Material and Inputs 1,537.68 84.22

Utilities 14.47 0.79

Maintenance and repair 50 2.74

Labour direct 31.32 1.72

Factory overheads 10.44 0.57

Administration Costs 20.88 1.14

Total Operating Costs 1,664.79 91.19

Depreciation 90.5 4.96

Cost of Finance 70.43 3.86

Total Production Cost 1,825.72 100

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B FINANCIAL EVALUATION

1. Profitability

According to the projected income statement, the project will start generating profit in the
first year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is
viable.

2. Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at
full capacity (year 3) is estimated by using income statement projection.

BE = Fixed Cost = 28%

Sales – Variable Cost

3 Pay Back Period

The investment cost and income statement projection are used to project the pay-back
period. The project’s initial investment will be fully recovered within 5 years.

4 Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 19 % and the net
present value at 8.5% discount rate is Birr 678,170.

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D. ECONOMIC BENEFITS

The project can create employment for 12 persons. In addition to supply of the domestic
needs, the project will generate Birr 473,020 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.

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 8. SOCIO ECONOMIC BENEFITS OF THE PROJECT

In a country like Ethiopia, where manufacturing is play the main role of the economy,
candy industry plays a vital role in economic development and can be said to be a driving
engine.

The establishment and operation of this candy Factory project has many socio-economic
benefits which includes, among these;

 Creates Employment Opportunity: The sub sector is one of the highly employing sub
sectors of the manufacturing sector. The project is expected to create new permanent
employees for about a total 12 skilled, semi-skilled and unskilled workers.
 Contribution to GDP: The establishment of the project will contribute to the GDP by
increasing the country’s gross production and enhance income of the workers employed
and the owner too.
 Generate Revenue for Government: Moreover, the sector has been the potential revenue
sources for the government in the form of taxes. The project will generate substantial
revenue to the government in the form of taxes.
 Import Substitution: The project planned to produce quality candy that can substitute the
imported candy demand of the government.
 Linkage effects: This candle manufacturing project has back ward as well as forward
linkages with the manufacturing and other sectors.
 Contribution to the government’s plan: This candy project is an manufacturing
processing project which can assist the growth and transformation plan/GTP/ of the
government which aims manufacturing based industrialization.

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 9. CONCLUSION AND RECOMMENDATION
9.1. Conclusion

Seid Candy factory project is a new project established in the Amahara National Regional
state, Oromo nation nationality Zone, Bati town, kebele 02 with a total area of 100 m2
shade. The project is planned to produce and provide quality Candy.

The market assessment made for the project shows that there is an excess demand for the
project’s projection period. The demand- supply gap of candle shows the existence of
unsatisfied demand in the target area. Moreover, the promoter has planned to sell the
Candy to whole seller, retailers and individual consumers with reasonable price.

The project is expected to start its operation at initial capacity of 55%, and 65% in the
second year it reaches capacity of 100% in the third year and after. The major raw material
required for the Candy project is sugar and packing material.

The project is expected to have General Manager, project manager Production, Technical
and marketing Department Manager and Finance & Administration Manager and is going
to employ 12 permanent workers. The total financial requirement of the project is
estimated to be birr 2, 000, 000.00. Out of which birr 1,220,000.00 (45%) is working
capital.

The project is expected to contribute to employment creation, tax revenue generation to the
government and GDP Contribution, import substitution, technology transfer and it creates
back ward and forward linkage effects to other sectors.

Considering the technical, socio-economic, environmental and the financial analysis

results, the Candy project is found to be viable.

9.2. Recommendation

The different projections conducted shows that the project is financially viable, socio-
economically beneficial and enviromntally friendly.

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