38.

PROFILE ON THE PRODUCTION OF

DETERGENT POWDER

38-1

TABLE OF CONTENTS
PAGE

I.

SUMMARY

38-2

II.

PRODUCT DESCRIPTION & APPLICATION

38-3

III.

MARKET STUDY AND PLANT CAPACITY

38-3

A. MARKET STUDY

38-3

B. PLANT CAPACITY & PRODUCTION PROGRAM

38-6

MATERIALS AND INPUTS

38-7

A. RAW & AUXILIARY MATERIALS

38-7

B. UTILITIES

38-7

TECHNOLOGY & ENGINEERING

38-8

A. TECHNOLOGY

38-8

B. ENGINEERING

38-9

MANPOWER & TRAINING REQUIREMENT

38-13

A. MANPOWER REQUIREMENT

38-13

B. TRAINING REQUIREMENT

38-15

FINANCIAL ANLYSIS

38-15

A. TOTAL INITIAL INVESTMENT COST

38-15

B. PRODUCTION COST

38-16

C. FINANCIAL EVALUATION

38-17

D. ECONOMIC & SOCIAL BENEFITS

38-19

IV.

V.

VI.

VII.

38-2
I.

SUMMARY

This profile envisages the establishment of a plant for the production of detergent powder with a
capacity of 1,000 tons per annum. The major use of detergent powders is in households for
washing clothes and utensils. They are suitable for hand washing and also for machine washing
in laundries and dish washers.

The country`s requirement of detergent powder is largely met through import. The present
(2012) demand for detergent powder is estimated at 784 tons. The demand for the product is
projected to reach 1,112 tons and 1,488 tons by the year 2018 and 2023, respectively.

The principal raw materials required are alkyl benzene sulphonic acid, sodium tri polyphosphate,
sodium sulphate, sodium silicate, and caustic soda. Caustic soda and sodium silicate can be
obtained locally while the other raw materials have to be imported
The total investment cost of the project including working capital is estimated at Birr 45.32
million. From the total investment cost the highest share (Birr 34.52 million or 76.19%) is
accounted by fixed investment cost followed by initial working capital (6.20 million or 13.68%)
and pre operation cost (Birr 4.60 million or 10.13%). From the total investment cost Birr 19.87
million or 43.85% is required in foreign currency.
The project is financially viable with an internal rate of return (IRR) of 20.46% and a net present
value (NPV) of Birr 23.85 million, discounted at 10%.
The project can create employment for 50 persons. 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 with the chemical manufacturing sub sector and also generates
income for the Government in terms of tax revenue and payroll tax.

38-3
II.

PRODUCT DESCRIPTION AND APPLICATION

A detergent powder is a surfactant or a mixture of surfactants with "cleaning properties in dilute

solutions. These substances are usually alkyl benzenesulfonates, a family of compounds that are
similar to soap but are more soluble in hard water, because the polar sulfonate (of detergents) is
less likely than the polar carboxyl (of soap) to bind to calcium and other ions found in hard
water. Powder detergents work because they are amphiphilic - partly hydrophilic (polar) and
partly hydrophobic (non-polar). Their dual nature facilitates the mixture of hydrophobic
compounds (like oil and grease) with water.

Detergent powder falls into four major groups:

Heavy duty detergents (high and low foaming),

Light duty detergents,

Soap powders, and

Soda products.

The major use of detergent powders is in households for washing clothes and utensils. They are
suitable for hand washing and also for machine washing in laundries and dish washers.

III.

A.

MARKET STUDY AND PLANT CAPACITY

MARKET STUDY

1. Past Supply and Present Demand

The countrys requirement of detergents is largely met through import. Although some brands of
detergents in a limited quantity are locally manufactured, the data which is published by the
Central Statistical Agency on the survey of Medium and Large Scale and Electricity Industries
lumps together with soap. Hence, in order to analyse the unsatisfied demand for detergents the
data obtained from the Ethiopian Revenues and Customs Authority on the import of detergents
for the past nine years is presented for analysis (see Table 3.1).

38-4
Table 3.1
IMPORT OF DETERGENTS

Year

Volume

Value

(Tons)

( 000 Birr)

2003

483.4

3,401

2004

405.3

2,788

2005

232.6

1,618

2006

2,316.6

12,005

2007

165.7

1,364

2008

1,096.6

8,554

2009

1,270.7

14,953

2010

780.3

13,674

2011

541.3

15,253

Source: - Ethiopian Revenues and Customs Authority.

As could be seen from Table 3.1, the imported quantity during the past nine years was highly
erratic, which ranges from the lowest 165.7 tons (year 2007) to 2,313.6 tons (year 2006). In the
absence of a clear trend in the data set the recent four years average is believed to indicate the
present demand. Accordingly, present demand (year 2012) for detergents is estimated at 922
tons.
Since there is no disaggregated data on the amount of powdered and liquid detergents, the views
of knowledgeable people in the area have been collected. Accordingly, it was learnt that about
85% of the total volume of imported detergents constitute powdered and the remaining 15%
liquid. Taking this as a base the current demand for detergent powder is estimated at 784 tons.

2.

Demand Projection

The factors that influence the future demand for detergent powder are numerous. Among the
major ones population growth, income rise, urbanization and increase of awareness of the

38-5
population on sanitation can be cited. The population of the country in general is growing at a
rate of about 2.9 % per annum. The urban population, which is the major user of detergents, is
also growing above 3.5%. Gross domestic product (GDP), which is one of the measures of
income, has been growing by more than 11% in the past five consecutive years and is forecasted
to continue in the future. The sanitation awareness of the whole population is increasing due to
the efforts underway by the Ministry of Health and other stakeholders. Hence, as the result of the
above factors the demand for detergents in the urban as well as rural areas will increase
substantially. By considering the combined effects of the above factors mentioned the future
demand is forecasted to grow by 6% per annum. The demand projection made based on this
assumption is presented in Table 3.2.

Table 3.2
DEMAND FORECAST FOR DETERGENTS (TONS)

Year

Projected
Demand

2013

831

2014

881

2015

934

2016

990

2017

1,049

2018

1,112

2019

1,179

2020

1,250

2021

1,324

2022

1,404

2023

1,488

Demand for detergent powder will grow from 831 ton in the year 2013 to 1,112 tons and 1,488
tons by the year 2018 and 2023, respectively.

38-6
3.

Pricing and Distribution

By considering the average imported price of detergent and adding costs of duty and other
import related expenses, a factory gate price of Birr 43,814 per ton is recommended.
The product can be classified as a consumer item. The end users of the product are numerous and
widely distributed throughout the country. Hence, the factory has to appoint a number of
distributors in different locations of the country. The distributors will sell the products to the
retailers to reach the final consumers of the product.
B.

PLANT CAPACITY AND PRODUCTION PROGRAM

1.

Plant Capacity

A plant with annual capacity of 1,000 tons, of detergent powder per year is envisaged on the
basis of a production schedule of 300 days per annum and three shifts of eight hours a day. The
plant capacity is determined by considering the unsatisfied demand and economy of scale
limitations.
2.

Production Program

The schedule is worked out considering the time required for gradual build up in labor
productivity and fine tuning of machinery and market penetration period. Production will
commence at 70%, and then will grow to 85% and 100% in the second year, and the third year
and then after, respectively. Detail production program is shown in Table 3.3 below.
Table 3.3
PRODUCTION PROGRAM
Year

3-10

Capacity utilization (%)

70

85

100

Detergent

700

850

1,000

(tons)

Production

38-7
IV.

MATERIALS AND INPUTS

A.

RAW AND AUXILIARY MATERIALS

The major raw materials used to produce detergent powder are Alkyl benzene sulphonic acid,
sodium tri polyphosphate, sodium sulphate, sodium silicate, and caustic soda. Caustic soda can
be obtained locally while the other raw materials are supposed to be imported. However, there is
a possibility to manufacture sodium sulphate and sodium silicate locally as the starting materials
for these chemicals are locally available.
necessary as packing materials.

Auxiliary material i.e. printed polyethylene is

The total cost of raw material at full capacity operation is

estimated at Birr 25.471 million. Annual consumption of raw and auxiliary materials at full
production capacity and their corresponding cost is given in Table 4.1.
Table 4.1
RAW AND AUXILIARY MATERIALS REQUIREMENT AND COST

B.

Sr.
No.

Description

Qty.

Cost, [`000 Birr]

250

14,000

14,000

Linear
Alkyl
benzene
sulphonate
Sodium tri polyphosphate

310

7,409

7,409

Sodium sulphate

190

982

982

Sodium silicate

230

1,380

1,380

Caustic soda

70

700

700

Printed polyethylene bags,

6
4 X 10
(250g det. Powder)
Grand Total

1,000
1,700

23,771

1,000
25,471

LC

FC

TC

UTILITIES

Electricity, water and fuel oil are the utilities required by the envisaged plant The total cost of
utilities is estimated at Birr 3,174,000. . Detailed requirement and costs of utilities are shown in
Table 4.2.

38-8
Table 4.2
UTILITIES REQUIREMENT AND COST
Sr.

Description

Quantity

Unit Price

Total

(Birr)

Cost(Birr)

No.
1

Electricity (kWh)

300,000

0.58

174,000

Water (m3)

30,000

10.00

300,000

Furnace oil (lt.)

150,000

18.00

2,700,000

Grand Total

3,174,000

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

Standard detergent powder manufacturing plant consists of mixing, drying, after drying, packing
and antipollution units. These units are briefly described as follows:
Mixing unit: Linear alkyl benzene sulphonate paste is metered into a slurry preparation tank
together with metered sodium silicate solution, and solid phosphates, sulphates and additives.
The slurry preparation tank acts as a coarse mixer. Here lumps are broken down and air pockets
are

eliminated.

Materials

after

blending

are

conveyed

to

an

ageing

vessel.

Mixing is carefully controlled to prevent aeration of the slurry. Feed slurry passes through a
coarse filter, homogenizer and fine filter. Deaeration of product is carried out if necessary. The
slurry of constant solid content and viscosity is ready for spray drying. This detergent slurry is
heated and transferred to the top of the spray drying tower by high pressure pump.
Drying unit: - Free flowing, non dusty, non caking detergent products in bead form are
produced by Spray Drying mostly in counter current flow using pressure nozzle atomization. The
mixed slurry is sprayed through nozzles (under pressure) to create small droplets. Inlet
temperatures vary according to product and up to 400C inlet temperatures are used for some
detergents. Hot air from direct fired air heaters is used for Spray Drying. Exhaust high efficiency

38-9
cyclones / bag houses are used to control emissions and maximize product recovery are part of
the spray drying plant. The dried detergent powder is taken out at the bottom of the tower, and is
transferred to the sieve by belt conveyor and air lift equipment.
After drying unit: - The dried detergent powder collected from the bottom of the spray tower is
pneumatically conveyed to the product silos after sieving. Here filtered atmospheric air is used as
the cooling & conveying media. Dense phase conveying systems are normally preferred.

After the granules have been cooled, heat sensitive ingredients, which are not compatible with
the spray drying temperatures (like bleach, enzymes and fragrance), are added.
Packing unit: - The final product is packed here. Detergent powder is fed into the packing
machine from baggies.
2.

Environmental Impact Assessment

The technology selected is equipped with Anti-pollution unit. Dust contained in the exhaust air,
is washed and separated by the spraying system. This water, containing detergent dust is recycled
to the mixing unit again.

B.

ENGINEERING

1.

Machinery and Equipment

The total cost of machinery and equipment with the envisaged capacity is estimated at Birr 26.5
million, out of which birr 19.875 million is required in foreign currency. The list of machinery
and equipment required by the envisaged plant is given in Table 5.1.

38-10
Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT
Sr.

Description

No.

2.

Qty.
(No.)

Caustic soda solution tank

Alkyl benzene sulphonic acid tank

Neutralizer

Sodium silicate tank

Mixing vessel(crutcher)

High pressure tank

Pumps

Set

Furnace

Blowers

Set

10

Spray drying tower

11

Cyclone

Set

12

Conveyors

Set

13

Sieve

Set

14

Perfumer

15

Baggies

Set

16

Packing machine

17

Anti pollution unit

Land, Building and Civil Works

The total land requirement, including provision for open space is 3,000 m2, of which 1,500 m2
will be covered by building. Based on estimated unit building construction cost of Birr 4,000 per
m2, the total cost of building will be Birr 6 million.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation No
721/2004) in principle, urban land permit by lease is on auction or negotiation basis, however,

38-11
the time and condition of applying the proclamation shall be determined by the concerned
regional or city government depending on the level of development.
The legislation has also set the maximum on lease period and the payment of lease prices. The
lease period ranges from 99 years for education, cultural research health, sport, NGO , religious
and residential area to 80 years for industry and 70 years for trade while the lease payment
period ranges from 10 years to 60 years based on the towns grade and type of investment.

Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%.The lease price is payable after the grace period annually. For those that pay the entire
amount of the lease will receive 0.5% discount from the total lease value and those that pay in
installments will be charged interest based on the prevailing interest rate of banks. Moreover,
based on the type of investment, two to seven years grace period shall also be provided.
However, the Federal Legislation on the Lease Holding of Urban Land apart from setting the
maximum has conferred on regional and city governments the power to issue regulations on the
exact terms based on the development level of each region.
In Addis Ababa, the Citys Land Administration and Development Authority is directly
responsible in dealing with matters concerning land. However, regarding the manufacturing
sector, industrial zone preparation is one of the strategic intervention measures adopted by the
City Administration for the promotion of the sector and all manufacturing projects are assumed
to be located in the developed industrial zones.
Regarding land allocation of industrial zones if the land requirement of the project is below
5,000 m2, the land lease request is evaluated and decided upon by the Industrial Zone
Development and Coordination Committee of the Citys Investment Authority. However, if the
land request is above 5,000 m2 the request is evaluated by the Citys Investment Authority and
passed with recommendation to the Land Development and Administration Authority for
decision, while the lease price is the same for both cases.
Moreover, the Addis Ababa City Administration has recently adopted a new land lease floor
price for plots in the city. The new prices will be used as a benchmark for plots that are going to

38-12
be auctioned by the city government or transferred under the new Urban Lands Lease Holding
Proclamation.
The new regulation classified the city into three zones. The first Zone is Central Market District
Zone, which is classified in five levels and the floor land lease price ranges from Birr 1,686 to
Birr 894 per m2. The rate for Central Market District Zone will be applicable in most areas of the
city that are considered to be main business areas that entertain high level of business activities.
The second zone, Transitional Zone, will also have five levels and the floor land lease price
ranges from Birr 1,035 to Birr 555 per m2 .This zone includes places that are surrounding the city
and are occupied by mainly residential units and industries.
The last and the third zone, Expansion Zone, is classified into four levels and covers areas that
are considered to be in the outskirts of the city, where the city is expected to expand in the future.
The floor land lease price in the Expansion Zone ranges from Birr 355 to Birr 191 per m2 (see
Table 5.2).
Table 5.2
NEW LAND LEASE FLOOR PRICE FOR PLOTS IN ADDIS ABABA

Zone

Central Market
District

Transitional zone

Expansion zone

Level
1st
2nd
3rd
4th
5th
1st
2nd
3rd

Floor
Price/m2
1686
1535
1323
1085
894
1035
935
809

4th
5th
1st
2nd
3rd
4th

685
555
355
299
217
191

38-13
Accordingly, in order to estimate the land lease cost of the project profiles it is assumed that all
new manufacturing projects will be located in industrial zones located in expansion zones.
Therefore, for the profile a land lease rate of Birr 266 per m2 which is equivalent to the average
floor price of plots located in expansion zone is adopted.

On the other hand, some of the investment incentives arranged by the Addis Ababa City
Administration on lease payment for industrial projects are granting longer grace period and
extending the lease payment period. The criterions are creation of job opportunity, foreign
exchange saving, investment capital and land utilization tendency etc. Accordingly, Table 5.3
shows incentives for lease payment.
Table 5.3
INCENTIVES FOR LEASE PAYMENT OF INDUSTRIAL PROJECTS

Scored point
Above 75%
From 50 - 75%
From 25 - 49%

Grace
period
5 Years
5 Years
4 Years

Payment
Completion
Period
30 Years
28 Years
25 Years

Down
Payment
10%
10%
10%

For the purpose of this project profile, the average i.e. five years grace period, 28 years payment
completion period and 10% down payment is used. The land lease period for industry is 60
years.
Accordingly, the total land lease cost at a rate of Birr 266 per m2 is estimated at Birr 798,000 of
which 10% or Birr 79,800 will be paid in advance. The remaining Birr 718,200 will be paid in
equal installments with in 28 years i.e. Birr 25,650 annually.

VI.

HUMAN RESOURCE AND TRAINING REQUIREMENT

A.

HUMAN RESOURCE REQUIREMENT

The plant requires 50 workers, and their annual expenditure, including fringe benefits, is
estimated at Birr 1,327,500. For details see Table 6.1.

38-14
Table 6.1
HUMAN RESOURCE REQUIREMENT AND LABOR COST

Sr.

Description

No.

Req.

Salary, (Birr)

No.

Monthly

Annual

Plant manager

8,000

96,000

Secretary

4,000

48,000

Production and technical manager

6,000

72,000

Finance and administration manager

6,000

72,000

Commercial manager

6,000

72,000

Accountant

5,000

60,000

Sales person

2,500

30,000

Purchaser

2,500

30,000

Clerk

900

10,800

Quality control manager

4,500

54,000

10

Chemist

6,000

72,000

11

Production foreman

6,000

72,000

12

Operator

13,500

162,000

13

Mechanic

4,500

54,000

14

Electrician

4,500

54,000

15

Unskilled labor

5,400

64,800

16

Driver

1,200

14,400

17

Guard

1,200

14,400

18

Cleaner

800

9,600

Sub-total

50

88,500

1,062,000

Employee benefit (25% BS)

22,125

265,500

Total

110,625

1,327,500

38-15
B.

TRAINING REQUIREMENT

On-site training program is believed to be adequate for key production, maintenance and quality
control personnel by the experts of machinery and technology supplier during commissioning
and performance testing period. The total cost of training is estimated at Birr 75,000.
VII.

FINANCIAL ANALYSIS

The financial analysis of the detergent powder project is based on the data presented in the
previous chapters and the following assumptions:Construction period

1 year

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

A.

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 45.32
million (see Table 7.1). From the total investment cost the highest share (Birr 34.52 million or
76.19%) is accounted by fixed investment cost followed by initial working capital (6.20 million
or 13.68%) and pre operation cost (Birr 4.60 million or 10.13%). From the total investment cost
Birr 19.87 million or 43.85% is required in foreign currency.

38-16
Table 7.1
INITIAL INVESTMENT COST ( 000 Birr)
Sr.
No
1
1.1
1.2
1.3
1.4
1.5
2
2.1
2.2
3

Cost Items
Fixed investment
Land Lease
Building and civil work
Machinery and equipment
Vehicles
Office
furniture
and
equipment
Sub total
Pre operating cost *
Pre operating cost
Interest during construction
Sub total
Working capital **
Grand Total

Local
Cost

Foreign
Cost

Total
Cost

%
Share

79.80
6,000.00
6,625.00
1,500.00

79.80
6,000.00
19,875.00 26,500.00
1,500.00

0.18
13.24
58.47
3.31

450.00
14,654.80

450.00
19,875.00 34,529.80

0.99
76.19

1,625.00
2,964.81
4,589.81
6,199.68
25,444.29

1,625.00
2,964.81
4,589.81
6,199.68
19,875.00 45,319.29

3.59
6.54
10.13
13.68
100

* N.B Pre operating cost include project implementation cost such as installation, startup,
commissioning, project engineering, project management etc and capitalized interest during
construction.
** The total working capital required at full capacity operation is Birr 8.99 million. However,
only the initial working capital of Birr 6.19 million during the first year of production is
assumed to be funded through external sources. During the remaining years the working
capital requirement will be financed by funds to be generated internally (for detail working
capital requirement see Appendix 7.A.1).
B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 40.28 million (see Table
7.2).

The cost of raw material account for 63.23% of the production cost. The other major

components of the production cost are depreciation, utility and financial cost which account for
15.42%, 7.88% and 7.08%, respectively. The remaining 6.39% is the share of labor, repair and
maintenance, labor overhead and administration cost. For detail production cost see Appendix
7.A.2.

38-17
Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY (YEAR THREE)
Items

Cost
(in 000
Birr)

25,471.00

63.23

3,174.00

7.88

795.00

1.97

1,062.00

2.64

265.00

0.66

150.00

0.37
-

Raw Material and Inputs

Utilities
Maintenance and repair
Labour direct
Labour overheads
Administration Costs
Land lease cost
Cost of marketing and distribution

300.00

0.74

31,217.00

77.50

6,210.00

15.42

2,853.63

7.08

40,280.63

100

Total Operating Costs

Depreciation
Cost of Finance
Total Production Cost

C.

FINANCIAL EVALUATION

1.

Profitability

Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax ranges from Birr 2.76 million to Birr 8.60 million
during the life of the project. Moreover, at the end of the project life the accumulated net cash
flow amounts to Birr 65.85 million. For profit and loss statement and cash flow projection see
Appendix 7.A.3 and 7.A.4, respectively.

38-18

2.

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.

3.

Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point for capacity utilization and sales value estimated by using income statement projection are
computed as followed.

Break -Even Sales Value = Fixed Cost + Financial Cost

= Birr 18,400,200

Variable Margin ratio (%)

Break- Even Capacity utilization

= Break -even Sales Value X 100 = 50.49 %

Sales revenue

4.

Pay-back Period

The pay- back period, also called pay off period is defined as the period required for 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 projects initial investment
will be fully recovered within 5 years.

38-19
5.

Internal Rate of Return

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 20.46% indicating the viability of the
project.
6. Net Present Value
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 10% discount rate is found to
be Birr 23.85 million which is acceptable. For detail discounted cash flow see Appendix 7.A.5.

D.

ECONOMIC AND SOCIAL BENEFITS

The project can create employment for 50 persons. The project will generate Birr 19.70 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 with the chemical manufacturing sub sector and also generates income for the
Government in terms of payroll tax.

38-20

Appendix 7.A
FINANCIAL ANALYSES SUPPORTING TABLES

38-21
Appendix 7.A.1
NET WORKING CAPITAL ( in 000 Birr)

Items

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Total inventory

4,457.43

5,412.59

6,367.75

6,367.75

6,367.75

6,367.75

6,367.75

6,367.75

6,367.75

6,367.75

Accounts receivable

1,828.49

2,214.95

2,601.42

2,601.42

2,603.55

2,603.55

2,603.55

2,603.55

2,603.55

2,603.55

22.09

26.82

31.56

31.56

31.91

31.91

31.91

31.91

31.91

31.91

6,308.01

7,654.36

9,000.72

9,000.72

9,003.22

9,003.22

9,003.22

9,003.22

9,003.22

9,003.22

Accounts payable

108.33

131.54

154.75

154.75

154.75

154.75

154.75

154.75

154.75

154.75

CURRENT
LIABILITIES

108.33

131.54

154.75

154.75

154.75

154.75

154.75

154.75

154.75

154.75

6,199.68

7,522.83

8,845.97

8,845.97

8,848.47

8,848.47

8,848.47

8,848.47

8,848.47

8,848.47

Cash-in-hand
CURRENT ASSETS

TOTAL WORKING
CAPITAL

38-22

Appendix 7.A.2
PRODUCTION COST ( in 000 Birr)

Item

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Raw Material and Inputs

17,830

21,650

25,471

25,471

25,471

25,471

25,471

25,471

25,471

25,471

Utilities

2,222

2,698

3,174

3,174

3,174

3,174

3,174

3,174

3,174

3,174

Maintenance and repair

557

676

795

795

795

795

795

795

795

795

Labour direct

743

903

1,062

1,062

1,062

1,062

1,062

1,062

1,062

1,062

Labour overheads

186

225

265

265

265

265

265

265

265

265

Administration Costs

105

128

150

150

150

150

150

150

150

150

26

26

26

26

26

26

300

300

300

300

300

300

300

300

300

300

Total Operating Costs

21,942

26,579

31,217

31,217

31,243

31,243

31,243

31,243

31,243

31,243

Depreciation

6,210

6,210

6,210

6,210

6,210

285

285

285

285

285

3,261

2,854

2,446

2,038

1,631

1,223

815

408

28,152

36,051

40,281

39,873

39,491

33,158

32,751

32,343

31,935

31,528

Land lease cost

Cost of marketing
and distribution

Cost of Finance
Total Production Cost

38-23

Appendix 7.A.3
INCOME STATEMENT ( in 000 Birr)

Item

Year
2

Year
3

Year
4

Year
5

Year
6

Year
7

Year
8

Year
9

Year 10 Year 11

Sales revenue

30,667 37,239 43,810 43,810 43,810 43,810 43,810 43,810

43,810

43,810

Less variable costs

21,642 26,279 30,917 30,917 30,917 30,917 30,917 30,917

30,917

30,917

VARIABLE MARGIN

9,025

10,960 12,893 12,893 12,893 12,893 12,893 12,893

12,893

12,893

in % of sales revenue

29.43

29.43

29.43

29.43

29.43

29.43

29.43

29.43

29.43

29.43

Less fixed costs

6,510

6,510

6,510

6,510

6,536

611

611

611

611

611

OPERATIONAL MARGIN

2,515

4,450

6,383

6,383

6,357

12,282 12,282 12,282

12,282

12,282

in % of sales revenue

8.20

11.95

14.57

14.57

14.51

28.04

28.04

28.04

28.04

28.04

3,261

2,854

2,446

2,038

1,631

1,223

815

408

Financial costs
GROSS PROFIT

2,515

1,188

3,529

3,937

4,319

10,652 11,059 11,467

11,875

12,282

in % of sales revenue

8.20

3.19

8.06

8.99

9.86

24.31

25.24

26.17

27.10

28.04

1,181

1,296

3,196

3,318

3,440

3,562

3,685

NET PROFIT

2,515

1,188

3,529

2,756

3,023

7,456

7,742

8,027

8,312

8,598

in % of sales revenue

8.20

3.19

8.06

6.29

6.90

17.02

17.67

18.32

18.97

19.62

Income (corporate) tax

38-24

Appendix 7.A.4
CASH FLOW FOR FINANCIAL MANAGEMENT ( in 000 Birr)
Item

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Year 11

Scrap

TOTAL CASH INFLOW

36,155

39,940

37,262

43,833

43,810

43,810

43,810

43,810

43,810

43,810

43,810

15,493

Inflow funds

36,155

9,273

23

23

Inflow operation

30,667

37,239

43,810

43,810

43,810

43,810

43,810

43,810

43,810

43,810

Other income
TOTAL CASH
OUTFLOW

15,493

36,155

31,215

35,264

39,494

38,921

38,656

40,145

39,860

39,575

39,289

34,927

Increase in fixed assets

36,155

Increase in current assets

6,308

1,346

1,346

Operating costs

21,642

26,279

30,917

30,917

30,943

30,943

30,943

30,943

30,943

30,943

Marketing and
Distribution cost

300

300

300

300

300

300

300

300

300

300

Income tax
Financial costs
Loan repayment

0
0
0

0
2,965
0

0
3,261
4,077

0
2,854
4,077

1,181
2,446
4,077

1,296
2,038
4,077

3,196
1,631
4,077

3,318
1,223
4,077

3,440
815
4,077

3,562
408
4,077

3,685
0
0

0
0
0

SURPLUS (DEFICIT)

8,725

1,998

4,340

4,889

5,154

3,665

3,950

4,235

4,521

8,883

15,493

CUMULATIVE CASH
BALANCE

8,725

10,724

15,063

19,952

25,107

28,771

32,721

36,957

41,477

50,360

65,853

38-25

Appendix 7.A.5
DISCOUNTED CASH FLOW ( in 000 Birr)
Year 1

Year
2

Year 3

Year
4

Year 5

Year
6

Year 7

Year
8

Year 9

Year
10

Year 11

Scrap

TOTAL CASH INFLOW

30,667

37,239

43,810

43,810

43,810

43,810

43,810

43,810

43,810

43,810

15,493

Inflow operation

30,667

37,239

43,810

43,810

43,810

43,810

43,810

43,810

43,810

43,810

Other income

15,493

TOTAL CASH OUTFLOW

42,354

23,265

27,903

31,217

32,401

32,538

34,438

34,560

34,683

34,805

34,927

Increase in fixed assets

36,155

Increase in net working capital

6,200

1,323

1,323

Operating costs

21,642

26,279

30,917

30,917

30,943

30,943

30,943

30,943

30,943

30,943

Marketing and Distribution cost

300

300

300

300

300

300

300

300

300

300

1,181

1,296

3,196

3,318

3,440

3,562

3,685

7,402
34,953

9,336

12,593
13,023

11,409

11,272

9,372

9,250

9,127

9,005

8,883

15,493

-1,614

9,658

19,030

28,279

37,407

46,411

55,294

70,787

9,461
18,448

7,793

6,999

5,290

4,746

4,258

3,819

3,425

5,973

-10,655

-3,657

1,634

6,380

10,638

14,457

17,882

23,855

Item

Income (corporate) tax

NET CASH FLOW

-42,354

CUMULATIVE NET CASH FLOW

-42,354

Net present value

-42,354

Cumulative net present value

-42,354

NET PRESENT VALUE

INTERNAL RATE OF RETURN
NORMAL PAYBACK

23,855
20.46%
5 years

6,729
35,625

-25,616
7,716
-27,909