ETHIOPIAN CIVIL SERVICE UNIVERSITY

COLLEGE OF FINANCE, MANAGEMENT

AND DEVELOPMENT

Department Of Accounting and Finance

(BA Program)

Strategic Management

Group Assignment

Submitted to: Adbaru Tesfaye (MA)

November, 2019

Addis Ababa

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 List of Group Members

S.N Name Id. No Remark

1 Litigeb Alamir ECSU1700826 

2 Melisew Fantahun ECSU1700830 

3 Wubalem Lemma ECSU1700875 

4 Tigist Muluneh ECSU1700843 

5 Endeshaw Gebremaryam ECSU1700803 

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STRATEGIC BUSINESS PLAN

FOR CEMENT FACTORY

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 Table of Contents

1. Introduction ...................................................................................................................................... 1
2. Background and Description of the Business .................................................................................. 1
3. Organization and Management ........................................................................................................ 2
4. Senior Management Profile.............................................................................................................. 3
5. Product Use and Application ........................................................................................................... 3
6. Major Customers and Suppliers ....................................................................................................... 4
7. Industry Overview............................................................................................................................ 4
8. Demand Supply Analysis for Cement .............................................................................................. 5
9. Company Prospective, SWOT Analysis .......................................................................................... 6
10. Technical Analysis ....................................................................................................................... 7
11. Working Capital Determination ................................................................................................. 13
12. Financial Analysis ...................................................................................................................... 13
13. Conclusion ................................................................................................................................. 14
14. References .................................................................................................................................. 14
15. Appendices ................................................................................................................................. 16

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1. Introduction

The Ethiopian economy has experienced strong and broad growth over the past decade.
Expansion of the services and agricultural sectors account for most of this growth, while
manufacturing sector performance was relatively modest. Private consumption and
public investment explain demand side growth with the latter assuming an increasingly
important role in recent years.
Following the rapid economic development of the country especially on the construction
sector, a number of domestic and foreign investors join the cement manufacturing
market.

The attention given by the government of Ethiopia to the industry, the development of
the train stations and partial completions of the hydroelectric power projects are the
driving factories towards the cement factory operation. The projected financial statement
and the study of the this business plan shows the growing demand towards cement
product

2. Background and Description of the Business

1. Business Profile

Name: DL Cement Factory PLC

Form of Business- Private Limited Company

General Manager: Mr. Nahom Abebe

Deputy Manager: Ms. Almaz Walelegn

Address: Dejen Town

I. Vision

Our vision is to be role model cement manufacturing company, benefiting all stake
holders and fulfilling corporate social responsibilities while enjoying public respect and
goodwill.

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 II. Mission

While maintaining its leading position in quality of cement maximizes profitability

III. Goals and Objectives

 maintaining high quality product,

 Relentless pursuit of customer satisfaction,

 empowering employees to lead cement industry and achieve manufacturing

 Producing superior returns to our shareholders.

IV. Values

 We are committed to being the industry leader in providing outstanding value to

 safe and stimulating work environment for employees, and

 Superior returns for shareholders.

3. Organization and Management

DL Cement Factory PLC will be established by the year 2020 by seven Ethiopian
individuals with authorized capital of birr 100 million. The company is established to
engage in cement production by issuing 100,000 shares of 1000 par that total to a value
of 100 million birr. Per the memorandum and article of the association of the company,
the name of shareholders with respective capital contribution is shown below.

Shareholder Name No. Of Shares Par Value Contribution %

Mr. Kebede Worku 8,600 1,000 8,600,000 8.6%

Mr. Nahom Abebe 21,200 1,000 21,200,000 21.2%

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Ms. Almaz Walelegn 28,000 1,000 28,000,000 28%

Ms. Hana Alemu 14,200 1,000 14,200,000 14.2%

Ms. Halima Amare 9,000 1,000 9,000,000 9%

Mr. MekibebYohans 6,900 1,000 6,900,000 6.9%

Mr. Getaneh Mamo 12,100 1,000 12,100,000

Total 100,000 1,000 100,000,000 100%

4. Senior Management Profile

The factory is organized in to four functional departments namely:

 Finance,

 Production,

 Marketing and

 Human resource departments

The departments are under the umbrella of the company’s deputy general manager. The
deputy general manager in return is accountable and report to the general manager.

5. Product Use and Application

Cement is a finely ground inorganic material which, when mixed with water,
forms a paste which sets and hardens by means of hydration reactions and
processes and which, after hardening, retains its strength and stability under water.
It is very useful in construction and engineering works of housing, buildings,
bridges and cement concrete roads. Other applications of cement are for mortar
and concrete making.

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 6. Major Customers and Suppliers

The organizational raw material will be got the natural sources from Dejen Town
administration by itself and to import other available material from outside of the
country. The organization distributes the product throughout Ethiopia.

7. Industry Overview

Cement is one of the backbones for the development of the country’s economy serving
as a basic raw material for the development of infrastructures, construction of small,
medium and large-scale industries, construction of residential and non-residential
buildings and others. In this regard the demand for cement in the country is very huge,
whereas the installed capacities of the existing factories are limited.

The recent facts indicate that there is a tremendous potential for the growth of cement
industry in Ethiopia. Besides, the country’s foremost priorities are being the growth of
infrastructure, the construction industry, rapid growth of housing construction, etc., and
cement being the basic construction material it plays a leading role in every
development activity of the above sectors due to its backward and forward linkage. On
the other hand the country is endowed with substantial deposit of resource of cement
raw material that is awaiting exploitation, specially the limestone which is abundant in
reserve. The above facts show that the cement industry has ample opportunity in the
foreseeable years to come.

The construction sector is one of the fastest growing activities in the Ethiopian economy
over the past successive years. The growth in this sector is above that recorded on the
country’ average GDP growth. Data from central statistical office shows that the
construction sector over the past five years on the average has grown by over 11.06%
exceeding the 10.86% GDP growth rate of the economy.

Despite the growth registered over the past years, this sector is still one of the lowest when
we view the country’s construction requirement.

On the other side, the role played by the private sector in boosting the country’s economy
was almost negligible. This is because the country’s economy policy was command
economy where the private sector is not allowed to participate in any investment activities.

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Because of all these factors the country’s economy was in general backward and the
construction sector one of the poorest. It is because of this ugly situation before that the
present fast growth in the construction sector couldn’t attain the country’s growth
requirement. Besides, the ever increasing population of the country, increase in per capita
income of citizens as well as the growth in public and private investment associated with
the country’s attractive investment environment and resource potential ever increases the
construction requirement of the country.

This country is at early stage of development where the growth trajectories are taking root
towards more advancement. This requires the realization of varies development projects
and betterment of citizens income. The forefront sector that needs to be promoted during
realization of development projects is the construction industry.

It requires the activation of this sector when one think of constructing roads, hydroelectric
dams, manufacturing industries, housing constructions, other building constructions, social
service institutions, etc. According to the Ethiopian Investment office, private investment
since the declaration of the free market policy has improved and this is bound to bring
about significant positive impact to the demand for building construction for office,
factories and other purposes which in turn will increase the demand for construction
material. All the description above indicates that the construction sector at present in
Ethiopia is growing at fastest rate but a lot remains to be done when viewed with the
country development requirement and the construction that needs to take place to achieve
this since the country started the reconstruction from the scratch.

8. Demand Supply Analysis for Cement

The demand for cement in the country has increased significantly it has increased from
5.6 million tons in 2018 to 9.6 million tons in 2018/19. This huge increase in demand for
cement is attributed to the following factories

A. Construction of Condominium and Low Cost Houses.

The government of Ethiopia has introduced a low housing and condominium housing
program in 2011. However, construction was delayed for different reasons the 2nd
transformational plan which covers from 2016-2020 the government has planned to
construct a total of 1,500,000 condominium houses. Of this 1,500,000 condominium

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 houses, 900,000 is planned to be built here in the capital city and the other 150,000 in
other major cities.

B. The Countries Mega Hydroelectric Power Construction

The country has undergoing major mega projects most of which are on hydroelectric
dam construction.

C. Private Construction of Real Stats and Business Buildings

Despite financial constraints following lack of bank loans for the private construction
sector for housing, a number of constructions are undergoing and has been increasing on
year to year bases. The construction of hotels, real estates, banks and multipurpose
complex buildings in Addis Ababa and major cities, call up the ever increasing demand
for cement.

D. Roads, Water Construction Projects

The Ethiopian Roads Authority awarded contracts for road construction projects.

9. Company Prospective, SWOT Analysis

Strength

1. Company managements have enough experience in the business

2. Factory use local produced raw materials

3. Factory sells most products at factory get and hence transportation expense is saved

4. Sister company provide raw material requirement of the company.

Weakness

Lack of own trucks to transport factory product to different regional cities and to export to
neighboring countries when local demand falls

Opportunities

 The Ethiopia cement market is projected to grow, driven by GDP growth which is

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 projected to grow to 9.12 in 2025. Growth of population is also likely to key into
cement demand in relation to rise in housing demands. (Already, the country has
initiated some mass housing projects in various places to quell housing demand).
The population is expected to grow to reach 114.17m in 2025.

 Launching of mega infrastructure projects is also likely to fuel demand of cement as

 Ethiopia cement market has strong potential cement demand drivers, access to
alternative energy sources that are diverse and sustainable, ability to overcome
logistical challenges due to the upcoming/planned railway network, as well as a high
potential to diversify use of cement (the country has already reported a number of
high number of construction projects).

Other opportunities include abundance of raw materials reserves, accessibility of carbon

Threats

Power supply condition remains the big treats for factories such as this cement factory

Foreign currency shortages are another issue which the factory may face. Because the
construction companies (end users of our product) demand are highly dependent on the
foreign currency availability for their imported construction materials such as iron bars
and others. These may cause the fall in demand for our cement product.

10. Technical Analysis

Cement is manufactured by crushing, milling and proportioning the following materials:

1. Lime or calcium oxide, CaO: from limestone, chalk, shells, shale or calcareous rock

2. Silica, SiO2: from sand, old bottles, clay or argillaceous rock

3. Alumina, Al2O3: from bauxite, recycled aluminum, clay

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4. Iron, Fe2O3: from clay, iron ore, scrap iron and fly ash

5. Gypsum, CaSO4.2H2O: found together with limestone

The materials, without the gypsum, are proportioned to produce a mixture with the desired
chemical composition and then ground and blended by one of two processes - dry process
or wet process. The materials are then fed through a kiln at 2,600º F to produce grayish-
black pellets known as clinker. The alumina and iron act as fluxing agents which lower the
melting point of silica from 3,000 to 2600º F. After this stage, the clinker is cooled,
pulverized and gypsum added to regulate setting time. It is then ground extremely fine to
produce cement.

Process of Manufacture

The cement manufacturing process in VSK cement plants is described below:

A. Limestone mining and Crushing

Mined limestone is reduced to < 25 mm in size in the crushing section.

B. Proportioning of raw materials and fuel

Crushed raw materials are then extracted along with fuel and fed to mill in the right
proportion.

C. Grinding and homogenizing of raw meal

In the Raw mill these materials are ground to powder and then blended in a pneumatic
blending system.

D. Nodulising

The raw meal powder is then nodulised by spraying water in a nodulising drum.

E. Burning the nodules in VSK

The nodules are then fed to the kiln and burned to clinker.

F. Clinker storage

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The clinker and Gypsum are stored in a storage yard. Clinker is allowed to naturally cool
for 15 days.

G. Cement grinding

Clinker along with a small per cent of Gypsum is ground in to cement in the Cement mill.

Cement storage, packing and dispatching

The cement is stored in a RCC Silo. As and when required this cement is extracted from
silo and packed in to 50 kgs bags and dispatched by truck or train to the customers.

The following table shows proportions and use of materials for a 1000 ton/day cement
factory

1000 tons/day Cement Plant

Clinker production 1000 tons/day

Number of vertical shaft kilns 2 pices

Capacity of one kiln 1000tones/day

LIMESTONE REQUIREMENT

Daily requirement 1350 tons/day

Monthly requirement 33,750 tones/month

CLAY REQUIREMENT

Daily requirement 175 tones/day

Monthly requirement 4375 tones/month

COKE BREEZE REQUIREMENT

Daily requirement 175 tones/day

Monthly requirement 4375 tones/month

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ADDITIVE REQUIREMENT

Daily requirement 25 tones/day

Monthly requirement 625 tones/month

GYPSUM REQUIREMENT

Daily requirement 50 tones/day

Monthly requirement 1250 tones/month

CRUSHING SECTION

Weekly Limestone requirements 945 tones/week

Working hours/week 31.5 hours

Crushing capacity 30 tones/h

PACKING PLANT

Weekly requirement 7350 tones/wee

Working hours 49 hours/week

Capacity of packer 150 tones/h

POWER

Units/tone of OPC (avg) 120 kwh/t

Units reqd/year 4,158,000 kwh

FUEL

Coke Breeze

Calorific value of coke 5000kcal/kg (avg)

Heat required 1050kcal/kg of clinker (max)

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1 ton of clinker requires 1,050,000 kcal

Coke required 210kg/tone of clinker

ALTERNATELY

Petroleum Coke

Calorific value of Petroleum Coke(pet coke) 8000kcal/kg (avg)

Heat required 1050kcal/kg of clinker (max)

1 ton of clinker requires 1,050,000kcal

Coke required 131.3

kg/tone of clinker

Estimation of Annual Raw material Requirement for the cement factory is shown below.

Sr. Description Daily Qty Unit Total

1 Limestone, (72-76)% 1350 405,000 50 20,250,000

2 Clay, (6-10)% 175 52,500 1 52,500

3 Sandstone, (8-12)% 32,500 65 2,112,500

4 Pumice, (2-4)% 16,050 64.2 1,030,410

5 Gypsum, (4-5)% 50 15,000 120 1,800,000

Total 25,245,410.00

VSKs of MCPs do require energy in the range of 1000- 1100 kcal of heat per kg of
clinker. Similarly, consumption of electrical power in MCPs is in the order of 120 units
per ton of cement as compared to large cement plants which lies in the range of 100-110

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units per ton. Consequently, electricity and fuel oil are highly required. Water is also
essential for human consumption and for production process. Annual requirement of
utilities..

Power

In a SCP, daily power requirements are relatively less compared to the large cement
plant. A one million tons/annum plant will consume about 3.3 million units of electricity
a day compared to that of 100,000 tones/annum SCP at 0.033 million units/day.

Water Supply

Water is required in a cement plant for human consumption, cleaning purposes, cooling
of equipment and for nodulising in VSK plants. Taking an average of 250 litres/tone of
cement produced, we need about 75,000 liters of water/day for a 100,000 tpa cement
unit. This is far less than the 350,000 liters needed for a one million tons/annum plan

Description Requirement Qty KWH Unit Cost Total cost

1 Electricity KWH 120KWH/t 36,000,000 0.693 24,948,000

2 Water m3 250,000 1.5 375,000.00

3 Pet coke tone 131.3kg/t 39,390 6250 246,187,500.00

Total Utility 271,510,500

Other Associated Costs

Description Quantity Unit price Total price

Packaging cost 300,000 40 12,000,000.00

Transport cost 300,000 400 120,000,000.00

Total 132,000,000.00

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11. Working Capital Determination

Description Annual requirement MDC W.C required

Raw material 18,934,057.50 90 days 4,733,514.38

Salary and wages 1,351,483.00 90 days 337,870.75

Utilities 203,632,875.00 180 days 101,816,437.50

Packing and transportation 99,000,000.00 90 days 24,750,000.00

Total W.C 322,918,415.50 131,637,822.63

Packaging and Transportation

Cement, building adhesives, fine ground minerals and powdery chemicals can be bagged
into 5kg, 10kg, 25kg bags on the same machine at rates of 6-15 bags/minute.

Bags are made from a roll of flat film which is continuously formed into a tube before
being filled with cement - overlapping the back seal and making a 'one way' valve
allows air to escape but prevents ingress of water or moisture

12. Financial Analysis

1. Basis and Assumptions of the Plan

- The attention given by the government of Ethiopia for manufacturing sector and
the opportunities of the sectors.

- DL cement factory will increase its annual production from 55% to 75% in 2021
and to 80% in 2022

- This working capital loan of birr 63 million will solve companies foreign currency
demand to import coal from abroad which also has negative impact on the
production

- factory gate price is assumed to be constant at Birr 180/quintal

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 - Interest is also assumed to be constant at 9.5%. Outstanding balances of the three
loans are considered for the financial statements

- Administration expenses are more controllable by management and hence only 5%

Assuming there will not be a change in cost structure, the previous relationship is
assumed to continue. The financial statements (Income statement and cash flows) are
prepared based on the above assumptions and facts. The income statement below shows
the company’s performance in terms of profitability for the planning one year. The net
profit for the year is estimated to be birr 9.6 million. The Company’s liquidity position
can be seen from the following cash flow projection.

13. Conclusion

DL cement factory will be among the 11 cement factories which have annual production
capacity of below 700,000 tones. The economic development of the country, the ever
increasing number of population in urban areas and the need to change high cost asphalt
roads with concrete will raise the demand for Cement.

The country, being the third largest producer of cement in sub-Saharan Africa has also a
potential export market to the neighboring country.The export of cement have been
considered as uneconomical for the high cost of road transportation though a significant
foreign currency was gained in 2018 9.5 million USD and in 2019 about 15million
USD.

The business plan study and the financial results drown from the study reveal that the
business will be a high paid profitable business having a direct impact on the
development of the nation. It has also a great importance in reducing the high
unemployment labor force by creating new job opportunities.

14. References

 Thomas, J., Jennings, H., N.D. The Science Of Concrete

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 Zhang, J., Liu, G., Chen, B., Song, D., Qi, J., Liu, X., 2014. Analysis of CO2
emission for the cement manufacturing with alternative raw materials: a LCA-
based framework.
 CSI, 2014. Guidelines for Co-processing Fuels and Raw Materials in Cement
Manufacturing (Accessed 05.25.16)

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15. Appendices

DL Cement Factory PLC

Two Years Projected profit and Loss Statement

Account 2020 2021

Sales 382,500,000 408,000,000.00

Cost of sales 321,566,932 343,004,482.00

deprecation 11,876,807 11,876,807.00

Gross profit 49,056,261.00 53,118,711.00

Admin expense

Salary and benefits 1,351,483 1,351,483

Printing and stationery 201,609 201,609

Communication 145,908 145,908

Compensation 136,385 136,385

Vehicle rent 8,348 8,348

House rent 945,000 945,000

Food, per diem and accommodation 111,858 111,858

Advertisement 71,640 71,640

License and registration 123,452 123,452

Air fare and transportation 493,015 493,015

Airfare for production staff 777,574 777,574

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Medical 16,269 16,269

Uniform 121,447 121,447

Pension 400,996 400,996

Insurance 146,510 146,510

Utilities 25,969 25,969

Interest expense 2,893,972 1,346,047

Bank service charges 828,834 828,834

Legal and professional fee 390,913 390,913

Other expense 25,060 25,060

Clearing charges 100,106 100,106

Cleaning and sanitation 7,300 7,300

Loading and unloading 767 767

Fuel and Lubricant 373,662 373,662

Security service 551,250 551,250

Vehicle repair and maintenance 6,943 6,943

Miscellaneous 29,145 29,145

Total expense 10,285,415 8,737,490

Profit before tax 38,770,846.00 44,381,221.00

Profit tax 11,631,253.80 13,314,366.30

Net profit after tax 27,139,592.20 31,066,854.70

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 DL Cement Factory PLC

Projected Cash Flow

For Two Years

Cash Inflows 2020 2021

Net Income For The Year 27,139,592 31,066,854.70

Plus: Depreciation & Amortization 11,876,807 11,876,807.00

Incremental Working Capital 63,000,000

Total Inflows 102,016,399 42,943,662

Cash Outflows

Principal Loan Repayments Old Loans 38,688,000 25,746,721.30

Principal Loan Repayments New Loans 15,601,900 22,387,321.00

Total Outflows 54,289,900 48,134,042.30

Net Inflows 47,726,499 -5,190,381

Add: Existing Net Working Capital* 36,612,000.00

Current Assets 211,695,918

Current Liability 274,010,918

Net W/C Deficit To Be Financed -62,315,000 22,023,499

Closing Balance At The End Of The Year 22,023,499 16,833,119

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