Investment Office ANRS
Project Profile on the Establishment
of Corn flakes producing plant
Development Studies Associates (DSA)
October 2008
Addis Ababa
Table of Contents
1. Executive Summary ........................................................................................... 1
2. Product Description and Application .............................................................. 1
3. Market Study, Plant Capacity and Production Program .............................. 2
3.1
Market Study................................................................................................................... 2
3.1.1
Present Supply and Demand ................................................................................... 2
3.1.2
Projected Demand ................................................................................................... 3
3.1.3
Pricing and Distribution .......................................................................................... 4
3.2
Plant Capacity ................................................................................................................. 4
3.3
Production Program ........................................................................................................ 4
4. Raw Materials and Utilities .............................................................................. 5
4.1
4.2
Availability and Source of Raw Materials ...................................................................... 5
Annual Requirement and Cost of Raw Materials and Utilities....................................... 5
5. Location and Site ............................................................................................... 6
6. Technology and Engineering ............................................................................ 6
6.1
6.2
6.3
Production Process .......................................................................................................... 6
Machinery and Equipment .............................................................................................. 7
Civil Engineering Cost .................................................................................................... 8
7. Human Resource and Training Requirement ................................................ 8
7.1
7.2
Human Resource ............................................................................................................. 8
Training Requirement ..................................................................................................... 9
8. Financial Analysis .............................................................................................. 9
8.1
8.2
8.3
8.4
Underlying Assumption .................................................................................................. 9
Investment ..................................................................................................................... 10
Production Costs ........................................................................................................... 11
Financial Evaluation ..................................................................................................... 12
9. Economic and Social Benefits and Justification ........................................... 13
ANNEXES............................................................................................................... 15
1. Executive Summary
This project profile deals with corn flakes producing plant in Amhara National Regional State.
The following presents the main findings of the study.
There is ample demand for corn flakes if prices are set at a reasonable point and the envisaged
plant is set to produce 1,000 tons of corn flakes annually. The total investment cost of the
project including working capital is estimated at Birr 8.01 million. Relatedly, The envisaged
plant will creates 35 jobs and Birr 458.64 thousand of income.
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 19.2% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years. The result further shows that
the calculated IRR of the project is 34.5% and with NPV discounted at 18% of Birr 4,870,535.69
In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution.
Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.
2. Product Description and Application
Corn flakes are food made by combining corn with sugar, vitamins and minerals to make them as
nutritious as possible. For producing the fancy flakes specially designed flaker will be used. At
present, corn flakes are popularly known as breakfast food in the world at large and generally
taken with milk. Maize is the major raw material used for the manufacture of corn flakes.
3. Market Study, Plant Capacity and Production Program
3.1
Market Study
3.1.1 Present Supply and Demand
Currently, there is only one recently established private company in the country engaged in the
manufacture of corn flakes. The planned annual production capacity of this new company is 288
tons. The ingredients of the product of this company are corn flour, chocolate powder and
chocolate color. Data on actual production of this plant could not be obtained. Moreover, corn
flakes are also imported from abroad. Assuming that the domestic plant produces at its full
capacity, the total effective demand of corn flakes in the country is presented in table 1 below
Table 1: Domestic Production and Import of Cornflakes (in tons)
Year
Domestic
Production
Import
Effective
Demand
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
0
0
0
0
0
0
0
0
288
288
29
31
24
69
71
75
72
78
84
112
29
31
24
69
71
75
72
78
372
400
Source: Customs Authority (various years)
The above table reveals that in 2006/07 alone a little less than half of the total demand is met
through import. A report by UNIDO in 2003 pointed out that there is a worthwhile demand of
corn flakes in the capital city, Addis Ababa alone mainly by the international community, but
also to a great extent by the affluent population due to its ease and fast preparation. However, the
fact that the price of imported corn flakes is relatively high, being 50 times the price of maize
utilized to produce it, the demand for the product is likely to increase substantially if production
takes place locally at a reasonable price.
3.1.2 Projected Demand
Currently corn flakes is consumed by the international community, and a portion of middle and
upper income groups of the urban population. The effective demand could increase to a greater
extent if the price of the product is reduced together with proper promotional activities.
The 2006 statistical abstract confirm that there are 12.2 million people living in the urban places
of Ethiopia. With average family size of 5, this represents roughly 2.5 million families. If we
conservatively assume that only 2.5 percent of these families are able to demand the product, the
number of families with potential demand will be 62,500 families. With further conservative
assumption of 1 kilogram of cornflakes consumed per a family per week with the reduced price,
the annual demand would be 3000 tons of corn flakes. This demand analysis increases when the
international community and demand of hotels, restaurants and cafes is added in the
computation. Moreover, the advancement of modernization in the urban places is likely to boost
the demand for the product under study. Thus, taking a conservative consideration of 4 percent
growth of urbanization per annum, the future demand of corn flakes with reasonable price is
indicated in the following table.
Table 2: Projected Demand for Corn Flakes (in ton)
Year
Projected Demand
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
3,120
3,245
3,375
3,510
3,650
3,796
3,948
4,106
4,270
4,441
4,618
4,803
According to table 2, forecasted demand reaches 3,375 tons by 2009/10 and increases by 42.3%
within 10 years (2018/19)
3.1.3 Pricing and Distribution
Market research conducted in various super markets in Addis Ababa revealed the following
average retail price of imported cornflakes.
Table 3: Retail Price of Imported Corn Flakes
Weight (in gram)
Price (in Birr)
300
36
350
40
500
55
700
67
In other words the retail price of corn flakes on average is about Birr 100 per kilogram. This is
very expensive judged by any standard. The product is sold through wholesalers and retailers.
Based on the market research result and the capacity of the envisaged plant, the selling price of
corn flakes has been estimated at 10,000 Birr/ton (i.e. Birr 10 per kg). In relation to the import
price, the price set for the envisaged plant is substantially lower mainly due to the availability of
maize and sugar locally at reasonable price. The product has got ample shelf life and thus, the
existing retail and wholesale network shall be used by the envisaged plant.
3.2
Plant Capacity
The demand projection obtained in the previous section indicates the presence of ample demand
for the product when prices are relatively reasonable and proper promotion is performed.
Accordingly, given this demand and the planned technology, the envisaged plant is set to
produce 1,000 tons of corn flakes annually.
3.3
Production Program
The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 2 shifts, where the remaining days will be holidays and for plant and machinery
maintenance. During the first year of operation the plant will operate at 70 percent capacity and
4
then at 80 percent in the 2nd year and at 90 percent in the 3rd year. The capacity will grow to 100
percent starting from the 4th year. This consideration is developed based on the assumption that
market and logistics barriers would take place for the first two to three years of operation.
4. Raw Materials and Utilities
4.1
Availability and Source of Raw Materials
The major raw material used for the manufacture of corn flakes is maize (hybrid yellow and
white corns). In Ethiopia, maize is widely produced in all parts of the country where in 2005/06,
alone 33.4 million quintals were produced throughout the country. In the same year Amhara
region produced 35% of the total cereal production in the country which roughly implies that
11.7 million quintals of maize is the share of the region. The varieties grown are mixtures of
white, yellow and purple seeds where it is largely produced by the private farms. The fact that
corn does not constitute one of the staple foods in the Amhara Region points the presence of
ample maize (corn) for the envisaged plant.
Sugar is another raw material used for the manufacture of corn flakes. There are three large-scale
sugar establishments in the country. These establishments have a production capacity 280,000
tons of sugar annually. White sugar, which is used in the manufacture of corn flakes, is mainly
exported to the neighboring countries such as Djibouti, Kenya and Yemen in quantities ranging
between 30,000 to 50,000 tons per annum.
In addition to the existing cane sugar establishments, new sugar projects are currently under
construction. After the completion of these new sugar projects, the annual production of cane
sugar in the country may reach about 1.4 million tons. This exhibits the presence of ample raw
material. Other ingredients including cocoa powder and flavors are imported from abroad.
4.2
Annual Requirement and Cost of Raw Materials and Utilities
The annual requirement of raw materials and utilities at full capacity of production is presented
in table 4 below.
Table 4: Annual Requirement and Cost of Materials and Utilities
Material and Input
Corn
Sugar
Cocoa Powder
Flavors
Packing Material
Total Material Cost
Quantity
800 ton
110 ton
30 ton
5 ton
300 rolls
L.C.
Total Cost
F.C.
2,000,000
880,000
2,800,000
600,000
650,000
250,000
1,500,000
195,800
700,000
25,500
921,300
3,721,300
1,500,000
Utility
Electricity
Furnace Oil
Water
Total Utility Cost
Total Material and Utility
356,000 kwh
100,000 lit
10,000m3
* LC = local cost and FC = foreign cost
The annual total raw material and utility requirement at full capacity of operation is estimated to
be Birr 5,221,300.
5. Location and Site
The appropriate locations for the envisaged project are any of the urban centers near major corn
growing areas. This mainly refers to Bahir Dar.
6. Technology and Engineering
6.1
Production Process
The milling process removes the corn kernels from the cobs and turns them into flaking sized
'grits'. Malted barley can be added to enhance the flavor of the Corn Flakes. The corn grits are
cooked in steam pressure cookers, at temperatures exceeding 100C. This cooking process lasts
for an hour and softens the hard grits. During cooking additional water is incorporated in the
form of steam which condenses and the water content in the batch rises to 30-35%. Then the hot
grits are transported from the cookers to large driers via the network of pipes. The grits spend
several hours in the hot-air driers in order to reduce their moisture content. The corn grits are
milled using rollers, which squeeze the grits flat.
The flakes are then tumble toasted in huge cylindrical ovens. The air in the ovens is heated by
600C0 gas flames and the flakes are tossed around in a rotating drum. The drum is angled so that
the flakes whirl around and pass through it quite quickly, and stops them spending too long in the
fierce heat. The flakes are then coated with chocolate on demand and also sprayed with flavors,
minerals to make them as nutritious as possible. The Corn flakes are then bagged up with the
help of a bagging machine, which uses rolls of polythene.
The alternative technology is related to the volume of production. That is, for a large quantity of
production (such as 600-800kg/hr) the alternative option is more appropriate. This choice
requires a fully automated system at all steps-in production, packaging and boxing. It is suitable
to the largest volume markets that may require exporting to neighboring countries. Nonetheless,
for a capacity of production envisaged by the plant under study, such choice of technology is not
feasible.
6.2
Machinery and Equipment
The machineries and equipment required for producing corn flakes is detailed in table 5 below.
Table 5: Required Machineries and Equipment
Machinery and Equipment
Storage (Silo)
Mixer
Extruder Cooker
Coating Machine
Storage Bin
Packaging Machine
Fuel Storage tank
Laboratory Equipment
Quantity
2
1
1
1
1
1
1
1 set
The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 3,000,000.
The following are some of the machineries suppliers address for the envisaged project
Jinan Saibainuo Technology Development Co., Ltd
No.18 Central Street Tianqiao Industrial Garden Jinan China,
Jinan, Shandong, China 250032
Tel: 86-134-6593-5419
Fax: 0086-531-8576-2891
Jinan Shan Extrusion Machinery Co, Ltd
Post Code 250021, China
Tel: +86-531-88269073
Email: foodextruder@gmail.com
Website: http://www.semachinery.net
6.3
Civil Engineering Cost
The total site area for the envisaged plant is estimated to be 1,200m2 of which 600m2 is allocated
to the production area and the remaining space is left for stores (350m2), office buildings and
facilities (250m2).
7. Human Resource and Training Requirement
7.1
Human Resource
The required manpower for the envisaged plant is stated in table 6 below.
Table 6: Human Resource Required and Compensation
Position
Manager
Administrator/Finance Head
Accountant
Secretary
Sales clerk
supervisor
Technician
Operator
Laborers
Store keeper
Driver
Cleaner
Messenger
Guards
20% Benefit
Grand Total
No. Required
1
1
1
1
2
2
2
10
4
2
1
3
1
4
35
Monthly
Salary
5,000
3000
1200
850
800
1500
1000
800
400
800
800
400
400
400
Total Annual
Salary
60000
36000
14400
10200
19200
36000
24000
96000
19200
19200
9600
14400
4800
19200
76440
458640
The envisaged plant therefore, creates 35 jobs and about Birr 458.64 of income. The
professionals for the envisaged plant shall be recruited from the Amhara region.
7.2
Training Requirement
Training of key personnel shall be conducted in collaboration with the suppliers of the plant
machineries. The training should primarily focus on the production technology and machinery
maintenance and trouble shooting. Birr 50,000 will be allocated as training expense.
8. Financial Analysis
8.1
Underlying Assumption
The financial analysis of corn flakes producing plant is based on the data provided in the
preceding sections and the following assumptions.
A. Construction and Finance
Construction period
Source of finance
Tax holidays
Bank interest rate
2 years
40% equity and 60% loan
2 years
12%
Discount for cash flow
Value of land
Spare Parts, Repair & Maintenance
18%
Based on lease rate of ANRS
1% of fixed investment
B. Depreciation
Building
Machinery and equipment
Office furniture
Vehicles
Pre-production (amortization)
5%
10%
10%
20%
20%
C. Working Capital (Minimum Days of Coverage)
8.2
Raw Material-Local
30
Raw Material-Foreign
Factory Supplies in Stock
Spare Parts in Stock and Maintenance
Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable
120
30
30
10
15
30
30
30
Investment
The total investment cost of the project including working capital is estimated at Birr 8.01
million as detailed in table 7 below.
10
Table 7: Total initial investment
Items
L.C
1. Land
2. Building and civil works
3. Office equipment
4. Vehicles
5. Plant machinery & equipment
Total fixed investment cost
6. Pre production capital expenditure*
Total Initial Investment
7. Working capital at full capacity
Total
F.C
Total
3,600
3,600
2,400,000
2,400,000
50,000
50,000
600,000
600,000
500,000
2,500,000
3,000,000
3,553,600
2,500,000
6,053,600
302,680
302,680
3,856,280
2,500,000
6,356,280
1,001,947
654,545
1,656,493
4,858,227
3,154,545
8,012,773
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.
The foreign component of the project accounts 39.4% of the total investment cost.
8.3
Production Costs
The total production cost at full capacity operation is estimated at Birr 6.92 million as detailed in
table 8 hereunder.
Table 8: Production Cost
Items
1.
2.
3.
4.
Raw materials
Utilities
Wages and Salaries
Spares and Maintenance
Factory costs
5. Depreciation
6. Financial costs
Total Production Cost
Cost
4,300,000
921,300
458,640
60,536
5,740,476
605,536
576,920
6,922,932
11
8.4
Financial Evaluation
I.
Profitability
According to the projected income statement attached in the annex part (see annex 4), the project
will generate profit beginning from the first year of operation. Relevant ratios such as the
percentage of net profit to total sales, return on equity and return on total investment are 15%,
33% and 31% respectively in the first year and are gradually rising. The income statement and
other profitability indicators show that the project is viable.
II.
Breakeven Analysis
The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 19.2% of capacity utilization.
III.
Payback Period
Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in 2 years time.
IV.
Simple Rate of Return
For the envisaged plant this equals to 32.4%.
V.
Internal Rate of Return and Net Present Value
Based on cash flow statement attached in the annex, the calculated IRR of the project is 34.5%
and the net present value at 18% discount is Birr 4,870,535.69
VI.
Sensitivity Analysis
The project is attractively profitable even with 10% increase in the cost of production considered
in the analysis. That is, the envisaged plant earns profit starting from the first year and pays back
within 2 years and four months.
12
9. Economic and Social Benefits and Justification
The envisaged project possesses wide range of benefits that promote the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. It boosts inter
sectorial linkage between the agricultural and industrial sector. At the same time, therefore, it
helps diversify the economic activity of the region. The other major benefits are listed as
follows:
A. Profit Generation
The project is found to be financially viable and earns a profit of Birr 22.6 million within the
project life. Such result induces the project promoters to reinvest the profit which, therefore,
increases the investment magnitude in the region. At the same time, the commencement of the
plant stimulates production of corn and increases income of corn farmers, while introducing new
diet to the region.
B. Tax Revenue
With an increase in profit, both tax revenue and the tax base of the region improves.
Accordingly, the region will collect about Birr 8.32 million from corporate tax payment alone
(i.e. excluding income tax, sales tax and VAT) within the project life used in the analysis. Such
result creates additional fund for the regional government that will be used in expanding social
and other basic services in the regional state.
C. Import Substitution and Foreign Exchange Saving
Based on the current demand and price of imported corn flakes, we learn that in the project life
an estimated amount of US Dollar 9.4 million will be saved as a result of the proposed project.
This will create room for the saved hard currency to be used in other vital and strategic sectors.
13
D. Employment and Income Generation
The proposed project is expected to create employment opportunity for 35 professionals as well
as support stuffs. Consequently the project creates income of Birr 458.64 thousand per year. This
would be one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.
14
ANNEXES
15
Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
70%
80%
90%
100%
0.00
0.00
1726167.71
1972763.09
2219358.48
2465953.87
0.00
0.00
672000.00
768000.00
864000.00
960000.00
Raw Material-Local
0.00
0.00
213818.18
244363.64
274909.09
305454.55
Raw Material-Foreign
0.00
0.00
458181.82
523636.36
589090.91
654545.45
Factory Supplies in Stock
0.00
0.00
4846.05
5538.34
6230.63
6922.92
Spare Parts in Stock and Maintenance
0.00
0.00
13868.25
15849.43
17830.60
19811.78
Work in Progress
0.00
0.00
121151.14
138458.44
155765.75
173073.05
Finished Products
0.00
0.00
242302.28
276916.89
311531.50
346146.11
2. Accounts Receivable
0.00
0.00
763636.36
872727.27
981818.18
1090909.09
3. Cash in Hand
0.00
0.00
105377.24
120431.13
135485.02
150538.91
0.00
0.00
1923181.31
2197921.49
2472661.68
2747401.87
4. Current Liabilities
0.00
0.00
763636.36
872727.27
981818.18
1090909.09
Accounts Payable
0.00
0.00
763636.36
872727.27
981818.18
1090909.09
TOTAL NET WORKING CAPITAL REQUIREMENTS
0.00
0.00
1159544.94
1325194.22
1490843.50
1656492.78
INCREASE IN NET WORKING CAPITAL
0.00
0.00
1159544.94
165649.28
165649.28
165649.28
Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock- Total
CURRENT ASSETS
Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
5
10
100%
100%
100%
100%
100%
100%
2465953.87
2465953.87
2465953.87
2465953.87
2465953.87
2465953.87
960000.00
960000.00
960000.00
960000.00
960000.00
960000.00
Raw Material-Local
305454.55
305454.55
305454.55
305454.55
305454.55
305454.55
Raw Material-Foreign
654545.45
654545.45
654545.45
654545.45
654545.45
654545.45
Factory Supplies in Stock
6922.92
6922.92
6922.92
6922.92
6922.92
6922.92
Spare Parts in Stock and Maintenance
19811.78
19811.78
19811.78
19811.78
19811.78
19811.78
Work in Progress
173073.05
173073.05
173073.05
173073.05
173073.05
173073.05
Finished Products
346146.11
346146.11
346146.11
346146.11
346146.11
346146.11
2. Accounts Receivable
1090909.09
1090909.09
1090909.09
1090909.09
1090909.09
1090909.09
3. Cash in Hand
150538.91
150538.91
150538.91
150538.91
150538.91
150538.91
2747401.87
2747401.87
2747401.87
2747401.87
2747401.87
2747401.87
4. Current Liabilities
1090909.09
1090909.09
1090909.09
1090909.09
1090909.09
1090909.09
Accounts Payable
1090909.09
1090909.09
1090909.09
1090909.09
1090909.09
1090909.09
TOTAL NET WORKING CAPITAL REQUIREMENTS
1656492.78
1656492.78
1656492.78
1656492.78
1656492.78
1656492.78
0.00
0.00
0.00
0.00
0.00
0.00
Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock-Total
CURRENT ASSETS
INCREASE IN NET WORKING CAPITAL
Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
3178140.00
4834632.78
7763636.36
8109090.91
9109090.91
10109090.91
3178140.00
4834632.78
763636.36
109090.91
109090.91
109090.91
Total Equity
1271256.00
1933853.11
0.00
0.00
0.00
0.00
Total Long Term Loan
1906884.00
2900779.67
0.00
0.00
0.00
0.00
0.00
0.00
763636.36
109090.91
109090.91
109090.91
2. Inflow Operation
0.00
0.00
7000000.00
8000000.00
9000000.00
10000000.00
Sales Revenue
0.00
0.00
7000000.00
8000000.00
9000000.00
10000000.00
Interest on Securities
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL CASH OUTFLOW
3178140.00
3178140.00
7267619.23
6309903.20
7592807.40
8227538.11
4. Increase In Fixed Assets
3178140.00
3178140.00
0.00
0.00
0.00
0.00
Fixed Investments
3026800.00
3026800.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
151340.00
151340.00
0.00
0.00
0.00
0.00
5. Increase in Current Assets
0.00
0.00
1923181.31
274740.19
274740.19
274740.19
6. Operating Costs
0.00
0.00
4082626.08
4656966.10
5231306.11
5805646.12
7. Corporate Tax Paid
0.00
0.00
0.00
0.00
804717.46
961261.44
8. Interest Paid
0.00
0.00
1261811.84
576919.64
480766.37
384613.09
9.Loan Repayments
0.00
0.00
0.00
801277.28
801277.28
801277.28
10.Dividends Paid
0.00
0.00
0.00
0.00
0.00
0.00
Surplus(Deficit)
0.00
1656492.78
496017.13
1799187.71
1516283.51
1881552.80
Cumulative Cash Balance
0.00
1656492.78
2152509.91
3951697.62
5467981.13
7349533.93
TOTAL CASH INFLOW
1. Inflow Funds
Total Short Term Finances
3. Other Income
Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5
10000000.00
6
10000000.00
7
10000000.00
8
10000000.00
9
10000000.00
10
10000000.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Equity
0.00
0.00
0.00
0.00
0.00
0.00
Total Long Term Loan
0.00
0.00
0.00
0.00
0.00
0.00
Total Short Term Finances
0.00
0.00
0.00
0.00
0.00
0.00
2. Inflow Operation
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
Sales Revenue
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
7885490.64
7872344.14
7805036.85
6936452.28
6936452.28
6936452.28
4. Increase In Fixed Assets
0.00
0.00
0.00
0.00
0.00
0.00
Fixed Investments
Pre-production
Expenditures
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5. Increase in Current Assets
0.00
0.00
0.00
0.00
0.00
0.00
6. Operating Costs
5805646.12
5805646.12
5805646.12
5805646.12
5805646.12
5805646.12
7. Corporate Tax Paid
990107.42
1073114.20
1101960.18
1130806.16
1130806.16
1130806.16
8. Interest Paid
288459.82
192306.55
96153.27
0.00
0.00
0.00
9. Loan Repayments
801277.28
801277.28
801277.28
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Surplus(Deficit)
2114509.36
2127655.86
2194963.15
3063547.72
3063547.72
3063547.72
Cumulative Cash Balance
9464043.29
11591699.15
13786662.29
16850210.01
19913757.73
22977305.44
TOTAL CASH INFLOW
1. Inflow Funds
Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
10.Dividends Paid
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION
PRODUCTION
Year 1
Year 2
TOTAL CASH INFLOW
0.00
0.00
7000000.00
8000000.00
9000000.00
10000000.00
1. Inflow Operation
0.00
0.00
7000000.00
8000000.00
9000000.00
10000000.00
Sales Revenue
0.00
0.00
7000000.00
8000000.00
9000000.00
10000000.00
Interest on Securities
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL CASH OUTFLOW
3178140.00
3178140.00
5242171.03
4822615.37
6201672.84
6932556.83
3. Increase in Fixed Assets
3178140.00
3178140.00
0.00
0.00
0.00
0.00
Fixed Investments
3026800.00
3026800.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
151340.00
151340.00
0.00
0.00
0.00
0.00
4. Increase in Net Working Capital
0.00
0.00
1159544.94
165649.28
165649.28
165649.28
5. Operating Costs
0.00
0.00
4082626.08
4656966.10
5231306.11
5805646.12
6. Corporate Tax Paid
0.00
0.00
0.00
0.00
804717.46
961261.44
NET CASH FLOW
-3178140.00
-3178140.00
1757828.97
3177384.63
2798327.16
3067443.17
CUMMULATIVE NET CASH FLOW
-3178140.00
-6356280.00
-4598451.03
-1421066.40
1377260.76
4444703.92
Net Present Value (at 18%)
-3178140.00
-2693338.98
1262445.40
1933854.38
1443346.02
1340807.68
Cumulative Net present Value
-3178140.00
-5871478.98
-4609033.58
-2675179.21
-1231833.19
108974.49
2. Other Income
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5
10
TOTAL CASH INFLOW
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
1. Inflow Operation
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
Sales Revenue
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6795753.54
6878760.32
6907606.30
6936452.28
6936452.28
6936452.28
3. Increase in Fixed Assets
0.00
0.00
0.00
0.00
0.00
0.00
Fixed Investments
0.00
0.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5. Operating Costs
5805646.12
5805646.12
5805646.12
5805646.12
5805646.12
5805646.12
6. Corporate Tax Paid
990107.42
1073114.20
1101960.18
1130806.16
1130806.16
1130806.16
NET CASH FLOW
3204246.46
3121239.68
3092393.70
3063547.72
3063547.72
3063547.72
CUMMULATIVE NET CASH FLOW
7648950.38
10770190.06
13862583.76
16926131.48
19989679.19
23053226.91
Net Present Value (at 18%)
1186953.95
979835.27
822694.74
690695.43
585335.11
496046.70
Cumulative Net present Value
1295928.44
2275763.71
3098458.45
3789153.88
4374488.99
4870535.69
Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW
4. Increase in Net Working Capital
Net Present Value (at 18%)
Internal Rate of Return
4,870,535.69
34.5%
Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1
70%
80%
90%
100%
100%
7000000.00
8000000.00
9000000.00
10000000.00
10000000.00
7000000.00
8000000.00
9000000.00
10000000.00
10000000.00
Other Income
0.00
0.00
0.00
0.00
0.00
2. Less Variable Cost
3891960.88
4447955.30
5003949.71
5559944.12
5559944.12
3108039.12
3552044.70
3996050.29
4440055.88
4440055.88
44.40
44.40
44.40
44.40
44.40
796201.20
814546.80
832892.40
851238.00
851238.00
2311837.92
2737497.90
3163157.89
3588817.88
3588817.88
33.03
34.22
35.15
35.89
35.89
4. Less Cost of Finance
1261811.84
576919.64
480766.37
384613.09
288459.82
5. GROSS PROFIT
1050026.08
2160578.26
2682391.53
3204204.79
3300358.06
0.00
0.00
804717.46
961261.44
990107.42
1050026.08
2160578.26
1877674.07
2242943.35
2310250.64
Gross Profit/Sales
15%
27%
30%
32%
33%
Net Profit After Tax/Sales
15%
27%
21%
22%
23%
Return on Investment
31%
36%
30%
33%
32%
Return on Equity
33%
67%
59%
70%
72%
Capacity Utilization (%)
1. Total Income
Sales Revenue
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
6. Income (Corporate) Tax
7. NET PROFIT
RATIOS (%)
Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6
10
100%
100%
100%
100%
100%
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
10000000.00
Other Income
0.00
0.00
0.00
0.00
0.00
2. Less Variable Cost
5559944.12
5559944.12
5559944.12
5559944.12
5559944.12
4440055.88
4440055.88
4440055.88
4440055.88
4440055.88
44.40
44.40
44.40
44.40
44.40
670702.00
670702.00
670702.00
670702.00
670702.00
3769353.88
3769353.88
3769353.88
3769353.88
3769353.88
37.69
37.69
37.69
37.69
37.69
4. Less Cost of Finance
192306.55
96153.27
0.00
0.00
0.00
5. GROSS PROFIT
3577047.33
3673200.61
3769353.88
3769353.88
3769353.88
6. Income (Corporate) Tax
1073114.20
1101960.18
1130806.16
1130806.16
1130806.16
7. NET PROFIT
2503933.13
2571240.42
2638547.72
2638547.72
2638547.72
Gross Profit/Sales
36%
37%
38%
38%
38%
Net Profit After Tax/Sales
25%
26%
26%
26%
26%
Return on Investment
34%
33%
33%
33%
33%
Return on Equity
78%
80%
82%
82%
82%
Capacity Utilization (%)
1. Total Income
Sales Revenue
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
RATIOS (%)
Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits
Year 1
3178140.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3178140.00
0.00
3026800.00
151340.00
0.00
0.00
0.00
3178140.00
0.00
0.00
0.00
1906884.00
1906884.00
0.00
1271256.00
1271256.00
0.00
0.00
0.00
0.00
0.00
0.00
Year 2
8012772.78
1656492.78
0.00
0.00
0.00
0.00
0.00
1656492.78
0.00
6356280.00
3026800.00
3026800.00
302680.00
0.00
0.00
0.00
8012772.78
0.00
0.00
0.00
4807663.67
4807663.67
0.00
3205109.11
3205109.11
0.00
0.00
0.00
0.00
0.00
0.00
PRODUCTION
1
9826435.22
4075691.22
690714.29
121151.14
242302.28
763636.36
105377.24
2152509.91
0.00
5750744.00
6053600.00
0.00
302680.00
605536.00
0.00
0.00
9826435.22
763636.36
763636.36
0.00
4807663.67
4807663.67
0.00
3205109.11
3205109.11
0.00
0.00
0.00
1050026.08
0.00
1050026.08
2
11294827.11
6149619.11
789387.76
138458.44
276916.89
872727.27
120431.13
3951697.62
0.00
5145208.00
6053600.00
0.00
302680.00
1211072.00
0.00
0.00
11294827.11
872727.27
872727.27
0.00
4006386.39
4006386.39
0.00
3205109.11
3205109.11
0.00
0.00
1050026.08
2160578.26
0.00
2160578.26
3
12480314.81
7940642.81
888061.23
155765.75
311531.50
981818.18
135485.02
5467981.13
0.00
4539672.00
6053600.00
0.00
302680.00
1816608.00
0.00
0.00
12480314.81
981818.18
981818.18
0.00
3205109.11
3205109.11
0.00
3205109.11
3205109.11
0.00
0.00
3210604.34
1877674.07
0.00
1877674.07
4
14031071.79
10096935.79
986734.70
173073.05
346146.11
1090909.09
150538.91
7349533.93
0.00
3934136.00
6053600.00
0.00
302680.00
2422144.00
0.00
0.00
14031071.79
1090909.09
1090909.09
0.00
2403831.83
2403831.83
0.00
3205109.11
3205109.11
0.00
0.00
5088278.41
2242943.35
0.00
2242943.35
Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits
5
15540045.16
12211445.16
986734.70
173073.05
346146.11
1090909.09
150538.91
9464043.29
0.00
3328600.00
6053600.00
0.00
302680.00
3027680.00
0.00
0.00
15540045.16
1090909.09
1090909.09
0.00
1602554.56
1602554.56
0.00
3205109.11
3205109.11
0.00
0.00
7331221.76
2310250.64
0.00
2310250.64
6
17242701.01
14339101.01
986734.70
173073.05
346146.11
1090909.09
150538.91
11591699.15
0.00
2903600.00
6053600.00
0.00
302680.00
3452680.00
0.00
0.00
17242701.01
1090909.09
1090909.09
0.00
801277.28
801277.28
0.00
3205109.11
3205109.11
0.00
0.00
9641472.40
2503933.13
0.00
2503933.13
7
19012664.16
16534064.16
986734.70
173073.05
346146.11
1090909.09
150538.91
13786662.29
0.00
2478600.00
6053600.00
0.00
302680.00
3877680.00
0.00
0.00
19012664.16
1090909.09
1090909.09
0.00
0.00
0.00
0.00
3205109.11
3205109.11
0.00
0.00
12145405.53
2571240.42
0.00
2571240.42
8
21651211.88
19597611.88
986734.70
173073.05
346146.11
1090909.09
150538.91
16850210.01
0.00
2053600.00
6053600.00
0.00
302680.00
4302680.00
0.00
0.00
21651211.88
1090909.09
1090909.09
0.00
0.00
0.00
0.00
3205109.11
3205109.11
0.00
0.00
14716645.96
2638547.72
0.00
2638547.72
9
24289759.59
22661159.59
986734.70
173073.05
346146.11
1090909.09
150538.91
19913757.73
0.00
1628600.00
6053600.00
0.00
302680.00
4727680.00
0.00
0.00
24289759.59
1090909.09
1090909.09
0.00
0.00
0.00
0.00
3205109.11
3205109.11
0.00
0.00
17355193.68
2638547.72
0.00
2638547.72
10
26928307.31
25724707.31
986734.70
173073.05
346146.11
1090909.09
150538.91
22977305.44
0.00
1203600.00
6053600.00
0.00
302680.00
5152680.00
0.00
0.00
26928307.31
1090909.09
1090909.09
0.00
0.00
0.00
0.00
3205109.11
3205109.11
0.00
0.00
19993741.39
2638547.72
0.00
2638547.72
10
