ADDIS

PLASTE
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 Table of Contents
I. EXECUTIVE SUMMARY.......................................................................................................................................................3
II. DESCRIPTION AND APPLICATION..................................................................................................................................4
III. MARKET STUDY AND CAPACITY...................................................................................................................................4
A.MARKET STUDY...............................................................................................................................................................4
1. Past Supply and Present Demand.....................................................................................................................................4
2.Pricing and Distribution...................................................................................................................................................5
B. CAPACITY AND PERFORMANCE PROGRAMME.......................................................................................................5
1. Our company Capacity....................................................................................................................................................5
2. Performance program......................................................................................................................................................6
Production Program.......................................................................................................................................................................6
IV. MATERIAL INPUTS AND UTILITIES..............................................................................................................................6
A. RAW MATERIALS.............................................................................................................................................................6
B. UTILITIES...........................................................................................................................................................................7
V. TECHNOLOGY AND ENGINEERING................................................................................................................................7
A.TECHNOLOGY....................................................................................................................................................................8
1. Process Description...........................................................................................................................................................8
2. Source of Technology.......................................................................................................................................................8
B. ENGINEERING..................................................................................................................................................................8
1. Machinery and Equipment................................................................................................................................................8
Machinery and equipment requirement and cost......................................................................................................................9
2. Office...............................................................................................................................................................................9
VI.. MANPOWER AND TRAINING REQUIREMENT............................................................................................................9
A. MANPOWER REQUIREMENT.......................................................................................................................................9
C. TRAINING REQUIREMENT..........................................................................................................................................10
VII. FINANCIAL ANALYSIS...................................................................................................................................................10
A. TOTAL INITIAL INVESTMENT COST.........................................................................................................................11
B. PRODUCTION COST.......................................................................................................................................................12
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C. FINANCIAL EVALUATION............................................................................................................................................13
1.Profitability.......................................................................................................................................................................13
2. Ratios...............................................................................................................................................................................13
3.Break-even Analysis........................................................................................................................................................13

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 4.Payback Period.................................................................................................................................................................14
5.Internal Rate of Return.....................................................................................................................................................14
6. Net Present Value............................................................................................................................................................15
7 Economic Benefits..........................................................................................................................................................15

List of Tables
Table1 Production Program…………………………………………………………………………………………….7

Table 2.1 raw materials requirement and cost………………………………………………………………………..7

Table 2.2 Annual utility requirements and cost………………………………………………………………………8

Table 3 Machinery and equipment requirement and cost…………………………...…………………………......9

Table 4.1 Permanent manpower requirements & annual cost…………………………………………………...10

Table 4.2 Site worker requirement & annual cost…………………………………………………………………11

Table 5.1 Initial investment cost…………………………………………………………………………..………....12

Table 5.2 Annual production cost at full capacity…………………………………………………………………13

Table 5.3 Annual fixed cost……………………………………………………………………………………………13

Table 5.4 Annual variable cost………………………………………………………………………………………..13

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ADDIS PLASTER
I. EXECUTIVE SUMMARY

This profile envisages the establishment of a subsidiary company for building wall finishing covering
with a capacity of 118,800.00 m2 per annum.

The major raw material required is cement and sand. All materials are locally available while plastering
solution machinery must be imported.

The present demand for the wall plastering service is estimated at more than 15,000,784 m 2per annum.
The demand is expected to grow rapidly as the construction industry is booming.

The total investment requirement is estimated at Two Million Eight Hundred Eighty-Five Thousand
(2,885,000.00), out of which Birr two and half million is required for the purchase of machinery. The
Company will create employment opportunities for 5 permanent and 21 temporaries.

The project is financially viable with an internal rate of return (IRR) of 45% and a net present value
(NPV) of Birr 0.8 million, discounted at 15.5%.

The establishment of such a company will affect maximizing the finishing standard of the building and
its play a big role in waste minimization of mortar (cement, sand and add mixture), labor cost, and the
total project cost by minimizing project delivery time. It has also a forward linkage with creating and
advancement of jobs for youth.

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II. DESCRIPTION AND APPLICATION

Plastering is the process of covering rough walls and uneven surfaces in the construction of houses and
other structures with a plastic material, called plaster, which is a mixture of lime or cement concrete and
sand along with the required quantity of water. Rendering is similar to plaster but is applied to the
outside of buildings and waterproofing properties.

Addis Plaster (AP) is established to ease the difficulty of building plastering and rendering by
integrating different finishing tools and machinery with trained professionals with the right workflow to
save construction time and minimize wastage.

III. MARKET STUDY AND CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

Nowadays rendering is made manually, which is not satisfying the quantitative and qualitative demands
of the current construction industry. Besides the unsatisfying quantity and quality of work done by labor,
wastage of aggregate will reach 15%.

Plastering and Rendering walls vary depending on the project type, design, purpose, and special
requirements. Since rendering was made by hand the quality of work and the area that can be done per
day also vary according to the appointed worker.

A closer look at the data set further reveals that the total time of rendering and plastering took is very
high as compared to the remaining construction phase. Thus, considering data collected from ten

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contractors, the average daily coverage of plastering by a single plasterer team (4-5 people) is from 20-
25m2. But using plastering solution it is possible to plaster/render from 200m 2-400m2 per day. Further
analysis of manual vs plastering solution.

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 Manually per week Using plastering solution per week
25sq.m X 6days = 150m2 200sq.m X 6days = 1,200 m2

Based on this equation, a single plastering solution is equivalent to 8-10 professional plasterers provided
that quality is granted.

1. Pricing and Distribution

The plastering price for interior and exterior wall ranges between 25 and 45 Birr per square meter in
Addis Ababa. Our company price recommended for the service under study is Birr 36 per square meter.
Marketing of our service will be done through our own and external marketers.

B. CAPACITY AND PERFORMANCE PROGRAMME

1. Our company Capacity

Based on the market study of minimum economies of scale and average efficiency of the machine, the
construction capacity of our company is proposed to be 118,800.00m2 in the first year of operation.

2. Performance program

Using the demand projection as a guide for performance activity, the performance program is
118,800.00 m2. The company will perform 55% of its capacity during the first year, 75% in the second
year, and at full capacity in the third year and then after. The company will operate 240 days in a year
and one shift of 8 hours per day. AP also aims to expand its services and own 20 machines in 5 years.
The capacity utilization of the company at the startup period is due to marketing and other factors like

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skill and experience.

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 Production Program
Year 1 2 3
2
Annual production (m ) 118,800 162,000 216,000
Capacity utilization (%) 55 75 100
In terms of Birr 4,276,800 5,832,000 7,776,000

Table2 Production Program

IV. MATERIAL INPUTS AND UTILITIES

A. RAW MATERIALS

Wall and floor finishing consists of plastering, gypsum work, tiling, and paints. This proposal is mainly
focused on rendering & plastering. The main aggregates needed to conduct the plastering work are
cement, sand, gypsum, and water.

Each part requires different raw materials as listed in Table 2.1 . Among the raw materials, cement,
sand, and gypsum are locally available from producing factories operating in the country and are usually
supplied by the main contractor or owner of the project.

Raw materials requirement and cost

Sr. Raw Material Description Annual Input(KG) Total Cost
No. ( Birr )
1 Plastering & Gypsum work      

1.1 Cement 50Kg Bag By contractor/Owner 240 Birr

1.2 Sand M3 By contractor/Owner 980 Birr
1.3 Gypsum 25kg Bag By contractor/Owner 118 Birr
2 Tiling      
2.1 Mortar Pack By contractor/Owner  
2.2 Adhesive Cartoon By contractor/Owner  
3 Paint      
3.1 Decorative paint Gallon By contractor/Owner  
3.2 Quartz Gallon By contractor/Owner  
3.3 Granite Barrel By contractor/Owner  

7 Table 2.1 raw materials requirement and cost

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 B. UTILITIES

The major utility requirement of the project is water, telephone, and electricity. The required quantity
and cost of these items are indicated in Table 4.2. These costs are mostly covered by the contractor or
owner of the building as the machine uses the electricity and water at the site.

Annual utility requirements and cost

Sr. Utility Unit Qty Cost ( Birr )
No.
1 Electricity kWh - 7,000.00
2 Water m3 - 6,000.00
3 Telephone Minutes 99000 41,580.00
Total 54,580.00

Table 2.2 Annual utility requirements and cost

V. TECHNOLOGY AND ENGINEERING

A.TECHNOLOGY
1. Process Description
The machine integrates three main things for optimum output.
1. Automatic laser positioning system,
2. Vibrator to compact and fasten the mortar against the wall
3. Blade to smooth & polish the wall
4. The steeping motor, which moves the machine up and down
5. Compressor (3HP @ 4Bar)

This process is carried out by fastening the mortar against the wall while moving up and smoothing
using the blade while it moves down. This machine and the technology it uses can thus produce
hundreds of square meters of a wall a day. This plastering solution has the capacity of plaster 400-

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600sqm per day.

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2. Source of Technology

The technology for plastering walls can be sourced from Europe, China, etc. The local agent whose
address is given below can be contacted.
MileSight Engineering Plc,
Tel 00251-929003016,
E-mail sales@milesighteng.com

B. ENGINEERING

1. Machinery and Equipment

The building finishing can be done using several kinds of processing machinery depending on building
type, finishing material, and finishing requirement. There are factors like productivity, cost, working
environment, and safety. The choice of machinery for this project was done by taking into consideration
most of the above set of factors. The list of selected machinery for the envisaged project is presented in
Table 5.1.

Machinery and equipment requirement and cost

Sr.N0 Name of Machine Type Qty Total Cost

1 Ezrenda Full Automatic 3 2,100,000

automatic wall 220/380V
rendering machine.
4.5M height and
0.5M width.

2 Cement spray Semi-auto 3 290,000

plastering machine 220V
3 Sator   10 55,000
4 Rotor   10 60,000

9   Grand Total     2,505,000

Table 3 Machinery and equipment requirement and cost

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2. Office

The total area requirement of the company is 60m2. Out of the total area, 30m2 will be for workshop
facility, 10m2 for storage of spare parts and machinery while idle and the rest 20 for office. The total
cost of office rent will be 15,000 Birr per month.

Accordingly, the total lease cost for a period of the year will be 180,000 Birr.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The envisaged company requires 26 workers. Of these 5 are permanent office/administration workers
and the rest are machine operators and site workers. The total yearly salary and benefit amount to Birr
264,000 – 408,000.

The details are shown in Table 4.1.

Permanent manpower requirements & annual cost

Sr. Description Req. Monthly Salary Annual Salary

No. No. ( Birr ) ( Birr )
1 Manager/finance 1 9,000 108,000.00
2 Salesperson 2 3,000 36,000.00
3 Supervisor 1 4,000 48,000.00
4 Technician 1 6,000 72,000.00
  Grand-Total 5   264,000.00

Table 4.1 Permanent manpower requirements & annual cost

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 Site worker requirement & annual cost
Sr.N0 Description Qty Monthly Annual Salary
Salary (Birr)
1 Machine 3 5,200.00 187,200.00
operator
2 Pump operator 3 4,680.00 168,480.00
3 Plasterer 3 5,850.00 210,600.00
4 Laborers 9 2,600.00 280,800.00
5 Forman 3 3,250.00 117,000.00
Total site wedge per year 964,080.00

Table 4.2 Site worker requirement & annual cost

C. TRAINING REQUIREMENT

On the job demonstration of the operation of the machine would be enough for workers with background
knowledge on building finishing construction. Special training is given by Milesight Engineering plc is
required.

VII. FINANCIAL ANALYSIS

The financial analysis of the building finishing is based on the data presented in the previous chapters
and the following assumptions: -

Office setup period 1 month

Source of finance 20 % equity/Cash 80 % loan
Tax holidays 0 years
Bank interest 13.0%
Accounts receivable 30 days
Raw material local 15 days
Work in progress 1 days

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Cash in hand
Accounts payable
5 days
15 days
Repair and maintenance 10% of machinery cost

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 A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 1.3million. The
major breakdown of the total initial investment cost is shown in Table 5.

Initial investment cost

Sr. Cost Items Total
No.   Cost
1 Office rent 180,000
2 Machinery 2,505,000
3 Office Furniture and Equipment 45,000
4 Working Capital 150,000
5 Pre-performance expenditure 5,000
Total Investment Cost 2,885,000.00

Table 5.1 Initial investment cost

*N.B Pre-performance expenditure includes costs of registration, licensing, and formation of the
company including legal fees, commissioning expenses, etc.

B. PRODUCTION COST

The annual cost at full operation capacity is estimated at Birr (see Table 7.2).On assumption that the raw
material cost waived to or supplied by the owner of the project. The other major components of the
production cost are cost depreciation, financial cost, and direct labor, utility, maintenance, and other
administrative costs.

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 Annual production cost at full capacity

Items Cost %
Utilities 54,580.00 0.02
Maintenance and repair 200,000.00 0.09
Direct Labor cost 964,080.00 0.41
Rent 180,000.00 0.08
Administration Costs 264,000.00 0.11
Insurance 35,000.00 0.01
Total operation Costs 1,697,660.00
Depreciation 501,000.00 0.21
Sales Commission 144,000.00 0.06
Total Production Cost 2,342,660.00

Table 5.2 Annual production cost at full capacity

Annual fixed cost

Items Cost %
Administration Costs 264,000.00 0.26
Utilities 54,580.00 0.05
Rent 180,000.00 0.17
Insurance 35,000.00 0.03
Depreciation 501,000.00 0.48
Total Fixed Cost 1,034,580.00  

Table 5.3 Annual fixed cost

Annual variable cost

Items Cost %
Maintenance and repair 200,000.00 0.15
Direct Labor cost 964,080.00 0.74
Sales Commission 144,000.00 0.11
Total variable Cost 1,308,080.00  

13 Table 5.4 Annual variable cost

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C. FINANCIAL EVALUATION

1. Profitability

Based on the projected profit and loss statement, the project will generate a profit throughout its
operational life. Annual net profit before tax will grow from Birr 2.5 million Birr during the life of the
project.

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 of 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 fixed costs and revenues. It indicates the
level at which costs and revenue are in equilibrium. To this end, the break-even point of the project
including the cost of finance when it starts operation is estimated by using income statement projection.

NB: This break-even analysis considering the company's performance at 65% of its capacity and
variable and fixed costs at full capacity.

Fixed Cost = Admin cost + Utilities + Depreciation + Rent + Insurance = 1,034,580.00

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Fixed cost per sqm = 8.71 Birr
Sales = 4,158,000
Variable cost = Direct labor cost + Sales commission + Maintenance & repair = 1,290,800.00

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Variable cost per sqm = 10.86 Birr

3.1 Break-Even revenue = Fixed Cost = 1,481,498.64 Birr

1-(Variable Cost per unit/Selling price per unit)

3.2 Break-Even units = Fixed Cost = 41,152.74 Sqm

Unit Contribution Margin
NB: unit contribution margin = Selling price per unit – Variable cost per unit

4. Payback Period

The payback period, also called pay – off period is defined as the period required to recover 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 project’s initial investment will be fully recovered within
2 years.

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 35.37% indicating the viability of the project.

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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 during the life of a project into 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 11.5%.

7 Economic Benefits

The project can create employment for 5 permanent and 21 temporary people. In addition to the supply
of domestic needs, the project will generate Birr 4.01 million in terms of revenue. The establishment of
such a company will have a saving effect on aggregates and time which saves a considerable amount of
money to the contractor or owner.

It has also a backward linkage effect with youth job creation; saving forging currency, work
advancement, and knowledge transfer.

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