Feasibility Study on Cement

Based Construction
Materials Business Plan

Ow
ner: - Lalise Habtamu Dabasa
Addis Ababa, Ethiopia 2021
Contents
1.2 Brief profile of the Project holder..........................................................................................4
1.3 Business Description..............................................................................................................5
1.4 Vision the project...................................................................................................................5
1.5 Significance of the project.....................................................................................................6
2 Production process........................................................................................................................8
2.1 Production Process.................................................................................................................8
2.2 Technical Analysis...............................................................................................................10
2,3 Business details....................................................................................................................11
3.4 Plain Cement Tiles...............................................................................................................14
2.5 Terrazzo Tiles (Chequered Tiles)........................................................................................14
2 The market..............................................................................................................................15
3.1 Target Market.......................................................................................................................15
3.2 Demand projection...............................................................................................................15
3.3 Competitors analysis............................................................................................................19
3.4 S.W.O.T. Analysis...............................................................................................................19
3.5 Advertising & sales..............................................................................................................20
4 Technical Analysis......................................................................................................................20
4.1 Main Resources....................................................................................................................20
5 RAW MATERIALS AND UTILITIES......................................................................................21
5.1 RAW MATERIALS............................................................................................................21
5.2 Supplies................................................................................................................................22
5.3 Utilities.................................................................................................................................22
5.4 Production Capacity.............................................................................................................22
5.5 Process of manufacture........................................................................................................23
5.6 Cement floor and roof tiles..................................................................................................25
5.7Plant Layout..........................................................................................................................26
6 Organization and Management..............................................................................................27
6.1 Organization chart................................................................................................................27
7 The Finance.................................................................................................................................28
7.1 Assumptions.........................................................................................................................28
7.2 Start-up costs........................................................................................................................29
7.3 Detail breakdown Fixed investment cost.............................................................................29
7.4 Profit and loss forecast.........................................................................................................32

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 7.5 Operating Revenue...............................................................................................................32
7.6 Production Cost....................................................................................................................32
7.7 Cost of raw materials...........................................................................................................33
7.8 Salary and Wages.................................................................................................................33
7.9 Utilities.................................................................................................................................34
8 Environmental and Social Impact...............................................................................................43
Project’s Contributions to the local Economy...........................................................................43
Recommendations..........................................................................................................................44
Action Plan.....................................................................................................................................44

2
1 Executive Summary

Lalise Habtamu Dabasa Manufactures of articles

Business Name of Concert Cement and Plaster Manufactures of
articles of Concert Cement and Plaster

Project owner Lalise Habtamu Dabasa

Type of Establishment Medium scale Manufacturing company

Nationality Ethiopian

Legal form Sole ownership

Project location Addis Ababa Kirkos Sub City Wereda: 01

Premises required 600M2

Product Type Manufacturing Bricks, Floor tiles and Terrazzo

tiles.

Target Market The company is intended to sell the products for

construction companies and individual
contractors in Addis Ababa Town.

Demand projection

Investment capital and 11.4 million Birr of total investment out of which
sources of Financial 30% from promoter’s equity and 70% from long
term bank loan.

Financial viability The project is highly attractive with NPV value of

38.2 million, IRR36.5% at both 15% discount rate
and a payback period of a years and three
months.

Lalise Habtamu Dabasa Manufactures of articles of Concert Cement and

Plaster Manufactures of articles of Concert Cement and Plaster
3
 established in Addis Ababa Kirkos Sub City Wereda: 01 to produce
different size cement Bricks at small scale having a legal entity from
concerned government office. To avoided financial constraints, loan will be
requested from Leander institution. Therefore, this proposal is prepared to
produce different size bricks for domestic’s market
The total investment cost of the project including working capital is
estimated at Birr 11.4 million Birr of total investment out of which 30%
from promoter’s equity and 70% from long term bank loan

The project is financially viable with an internal rate of return (IRR) which is
(36.5%>15%). Therefore, the project is acceptable hence the IRR is greater than the discount rate

The project can create employment for 35 persons. The project will create
backward linkage with raw materials suppliers and forward linkage with the
construction sub sectors and generate income for the Government in terms
of tax revenue and payroll tax.

1.2 Brief profile of the Project holder

Lalise Habtamu Dabasa Manufactures of articles of Concert Cement and
Plaster Manufactures of articles of Concert Cement and Plaster is
established having a business License issued under commercial proc.
Number980/2016
principal Registration no ORO/WWZ/GT/1/0000252/2008 and Business
licenses AA/KKW01/04/231/721651/2013 and issued. Tax payer
Identification Number 0015396570.
It is initiated by committed high profile multidisciplinary Ethiopian
business elites namely Lalise Habtamu Dabasa , who have extensive
knowledge on market network development for processed product.
Moreover, the project holders are private investors who have ample

4
 experiences and overall capacity to implement the project. She has up-to-
date national knowledge on socio-economic development agendas, policies
and strategies. Lalise Habtamu Dabasa is General Manager, who has
extensive knowledge of the Blocket processing. She also has good financial
skills, high-level experience to organize business organization stand to work
with relevant stakeholders in this investment. In short, the project holders
have enough overall capacity to realize this project

1.3 Business Description

Lalise Habtamu Dabasa Manufactures of articles of Concert Cement and
Plaster Manufactures of articles of Concert Cement and Plaster is a business
involved in the manufacturing of building Concrete, bricks and blocks for
masonry, builders association, housing consultant, development agencies,
construction workers etc.
We make block of uniform quality and sell them at a price high enough to cover
costs and make a reasonable profit. Cement Concrete blocks are modern
construction materials and as such are use in all the construction viz:
residential, commercial, and industrial building construction
1.4 Vision the project
To be among the top 3 BLOCK Making company in Addis Ababa by 2026
Objective
- Constant growth in sales in 12 months.

- To generate customer satisfaction so that at least 60% of our customer base

is repeat business.

- To provide quality product at reasonable prices with exemplary services.

Goal 0f the project

- To be a one stop-shop for building materials in Addis Ababa
- To run business as a profitably
Mission
5
To exceed the customers’ expectations in every sense by providing quality
produce in a sustainable way.

-Success Factor
We will achieve this through teamwork, collaborative effort, dedication,
motivation and a well-resourced research environment.

Land Most Block Industry owners do not own the land they work from.
Having sufficient land for production shade and raw material dumping
Machinery modern production machine producing much bricks per day.
Materials need wooden pallets. This is where blocks stay to dry out after
molding. Bought from local makers. Start with a few hundred pieces (200-
500 pieces). also 1 x Wheel Barrow 2 x Shovels 2 x Metal drums(To house
water for machines during molding.) 2 x Security chains to secure items
when you leave site

1.5 Significance of the project

Infrastructure is the building block of economic growth. It forms the

foundation of an economy, reinforces its structures and integrates it into
productive system. It is economy’s spinal cord that builds, shapes,
nourishes, energizes & synergizes its existence, growth and continued
incremental progress Housing is one of the necessities for all human races
next to food and clothes. However, Despite its importance as a prime
production sector with linkages to other productive sectors, housing and
related services continue to be accorded low priority in national
development.
The housing problems in Ethiopia is a very critical issue that not only its
poor condition and level of affordability but also its critical degradation of
the environments. Because in the pastoral areas villages as well as most of
the towns are using wood for the construction of the houses, which lead to
6
 the environmental degradation and for high contribution of global warming.
Ethiopia is like in many other developing countries; especially African
countries have critical shortage and poor condition of housing which have
significant effect on the environment. These problems can be solved through
the application of engineering knowledge that the country need to stands for
the whole development.

The environmental issue such as global warming which leads to the

degradation of ozone layer and melting of ice that affect the human life as
whole is simply the contributions of many technological finding (to overcome
for the life of human being). The contribution from the deforestation is in
the field of engineering which needs a fast solution from engineers.

Wood is used as a building material for house construction in most of

African countries. This is mainly due to the bias against non-traditional
building construction materials. Many African countries, despite the fact
that they are endowed with abundant natural resources that can meet their
need for building materials, depend largely on imported building materials
and technologies, including green and environmentally friendly
technologies.

The scarcity of houses, the very low standard of the existing houses, the
ever-increasing cost of construction and even the wooden material scarcities
for the construction, less quality houses in the pastoral area also demands
the need for producing low cost construction materials of acceptable quality.
This initiated professionals to seek low cost materials and low-cost methods
of construction to solve the problems.

2 Production process
2.1 Production Process
The Production Process of HCB is as follows

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1. Cement sand & pumice are mixed with water in ratios based on the
classes of HCB

2. The mix is molded by HCB molding machines in different sizes.

3. Drying the molded HCB’s using natural sun light.

4. The HCB’s are cured periodically until attaining the required strength.

5 .Then the HCB will be ready for sale

The process of manufacture of cement Concrete hollow blocks involves the

following 5 stages;

(1) Proportioning

(2) Mixing

(3) Compacting

(4) Curing

(5) Drying

(1) Proportioning:

The determination of suitable amounts of raw materials needed to produce

Concrete of desired quality under given conditions of mixing, placing and
curing is known as proportioning. As per Indian Standard specifications, the
combined aggregate content in the Concrete mix used for making hollow
blocks should not be more than 6 parts to 1 part by volume of Portland
cement. If this ratio is taken in terms of weight basis this may average
approximately at 1:7 (cement : aggregate). However, there have been
instances of employing a lean mix of as high as 1:9 by manufacturers where
hollow blocks are compacted by power operated vibrating machines. The

8
water cement ratio of 0.62 by weight basis can be used for Concrete hollow
blocks.

(2) Mixing

The objective of thorough mixing of aggregates, cement and water is to

ensure that the cement-water paste completely covers the surface of the
aggregates. All the raw materials including water are collected in a Concrete
mixer, which is rotated for about 1 ½ minutes. The prepared mix is
discharged from the mixer and consumed within 30 minutes.

(3) Compacting

The purpose of compacting is to fill all air pockets with Concrete as a whole
without movement of free water through the Concrete. Excessive
compaction would result in formation of water pockets or layers with higher
water content and poor quality of the product.

Semi-automatic vibrating table type machines are widely used for making
cement Concrete hollow blocks. The machine consists of an automatic
vibrating unit, a lever operated up and down metallic mould box and a
stripper head contained in a frame work. 5

Wooden pallet is kept on the vibrating platform of the machine. The mould
box is lowered on to the pallet. Concrete mix is poured into the mould and
evenly levelled. The motorised vibrating causes the Concrete to settle down
the mould by approximately 1 ½ to 1 ¾ inches. More of Concrete is then
raked across the mould level. The stripper head is placed over the mould to
bear on the levelled material. Vibration causes the Concrete come down to
its limit position. Then the mould box is lifted by the lever. The moulded
hollow blocks resting on the pallet is removed and a new pallet is placed and
the process repeated. The machine can accommodate interchangeable
mould for producing blocks of different sizes of hollow or solid blocks.

9
(4) Curing

Hollow blocks removed from the mould are protected until they are
sufficiently hardened to permit handling without damage. This may take
about 24 hours in a shelter away from sun and winds. The hollow blocks
thus hardened are cured in a curing yard to permit complete moisturisation
for atleast 21 days. When the hollow blocks are cured by immersing them in
a water tank, water should be changed atleast every four days.

The greatest strength benefits occur during the first three days and valuable
effects are secured up to 10 or 14 days. The longer the curing time
permitted the better the product.

(5) Drying

Concrete shrinks slightly with loss of moisture. It is therefore essential that

after curing is over, the blocks should be allowed to dry out gradually in
shade so that the initial drying shrinkage of the blocks is completed before
they are used in the construction work. Hollow blocks are stacked with their
cavities horizontal to facilitate thorough passage of air.

Generally a period of 7 to 15 days of drying will bring the blocks to the

desired degree of dryness to complete their initial shrinkage. After this the
blocks are ready for use in construction work

2.2 Technical Analysis

a. Main Resources

The main resources for the production of cement-based products include

the following:

• Land and building

10
The location of our plant will be in Addis Ababa Kirkos Sub City Wereda: 01
and it is found in the first grade of urban areas.

2,3 Business details

a. Location
Location of the proposed unit should preferably near the major sites of
construction as well as sources of raw materials. The plant will be
located Addis Ababa Kirkos Sub City Wereda: 01 where it constitutes
the major sites of construction. Besides, there are many Real estate
and construction sites around Addis Ababa so this location will be the
ideal place.

b. Products/services
The company will produce the following range of products
i. Cement blocks and hollow blocks
The hollow (open & closed cavity) blocks are made with normal weight
aggregate and are known as normal weight units. The hollow load
bearing blocks are made of standard sizes, standard dimensions, length,
breadth and thickness and the weight per unit for solid cement blocks
and hollow cement blocks are as given below:

Solid Block Specifications: Hollow Block Specifications:

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Length 290 mm Length 400 mm
Width 200 mm Width 200 mm
Height 140 mm Height 200 mm
Weight: 16 kg Weight: 16 kg
ii. Paver Blocks
The paving blocks of different sizes and shape find application in
pavements, footpaths, gardens, passengers waiting halls, bus stops,
industry and other public places. The Paver blocks are made both in
natural cement colour and different bright colours. As per the
application they are made both in plain geometrical designs &
interlocking.

12
13
 iii. Cement tiles and Mosaic flooring tiles

Cement tiles proposed to be manufactured can broadly be classified in the

following categories:

3.4 Plain Cement Tiles

In the manufacture of plan cement tiles no pigment or stone chips, marble

chips & others are used.

Plain Color Tiles: The tiles have a plain color wearing surface.

2.5 Terrazzo Tiles (Chequered Tiles)

Are also known as Mosaic Flooring Tiles. The wearing surface is
composed of stone chips in a matrix of ordinary or colored Portland cement

14
mixed with or without pigments and the surface is mechanically ground to
achieve the smoothness.

The tiles are made in various sizes depending upon their use and usage
conditions. The details of the recommended sizes are as under:

Cement Flooring Cement Terrazzo

Tiles Tiles
200 x 200 x 20 200 x 200 x 22
(mm) (mm)
250 x 250 x 22 250 x 250 x 22
(mm) (mm)
300 x 300 x 25 300 x 300 x 25
(mm) (mm)
At the beginning of the project the company plans to produce only cement
tiles. After five years of operation the company plans to produce Cement
Terrazzo Tiles and Paver tiles. The three products the company plans to
produce at the beginning are Hallow Blocks, Cement floor and Roof tiles.

2 The market
3.1 Target Market
The target market for our business are all construction projects like building
construction in both in public and private sector, road construction,
bridges. The unit will do to replacement of red bricks by cement bricks both
on cost considerations as well as on advantages associated with the use of
cement bricks i.e. less consumption of cement in the construction for wall
construction and plastering.

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 3.2 Demand projection
The demand for Concrete blocks and pipes is derived from building
construction. The demand the country's requirement for Concrete
blocks is met through domestic production. The quantity of production of
the products during the period 1998 - 2005 is shown in the following
Table. During the period under reference, the supply of Concrete blocks
which constitutes only domestic production, exhibited considerable
fluctuations and averaged at

10.48 million. With an average increment rate of 8.1%/year

Supply of Concrete Blocks and Pipes ('000 Pcs)

Domestic Production
Concrete & Hallow
Year
Blocks
1998 9,044
1999 9,568
2000 9,763
2001 10,039
2002 9,639
2003 9,810
2004 10,400
2005 15,639
Average 10,488
Source: CSA, Statistical Abstract, various years

Since the consumption of the products is associated with the construction

sector, a rate of growth of 10%, which corresponds to the estimated growth
rate of the sector.

Based on this fact the projected demand for the product is presented in the
following table.

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 Table Projected Demand for Concrete Blocks ('000 PCS)

Year Projected Demand Concrete

Blocks
2016 29,922.8
2017 32,915.1
2018 36,206.6
2019 39,827.2
2020 43,809.9
Mosaic tiles
The country’s requirement of mosaic tiles is supplied through import. The
quantity of the product imported annually during the period 2002 - 2011 is
presented in the following Table

Table IMPORT OF MOSAIC TILES (TONS)

Year Import
2002 2
2003 26
2004 95
2005 239
2006 62
2007 372
2008 131
2009 427
2010 771
2011 509
Source: Ethiopian Revenue and Customs Authority.

As can be seen from the above Table import of mosaic tiles fluctuates
from year to year. However, a general growth trend can be observed.
The yearly average quantity imported during the period 2003-2005
17
 was around 120 tons. But during the period 2006 - 2008 and 2009 -
2011 the average amount annually supplied to the market has
increased to about 188 tonnes and 569 tons, respectively. So the
increment trend is very high.

In estimating the present demand for the product it is assumed that the
recent three years average (2008 – 2011) is a reasonable approximate of
current level of demand.

Accordingly, current (2015) demand for mosaic tiles is estimated at about 757
tons.

Accordingly, based on the above discussion and in order to be

conservative a growth rate of 10% which is slightly lower than the
expected growth rate of the country’s GDP during the GTP period
(2011 – 2015) is used. Based on the above assumption and using the
estimated present demand as a base the projected demand for
mosaic tiles is shown in the following Table.

Table FORECASTED DEMAND (TONS)

Year Projected
Demand

2015 757
2016 833
2017 916
2018 1,008
2019 1,109
2020 1,220
2021 1,342
2022 1,476
2023 1,623
2024 1,786
18
 2025 1,964

3.3 Competitors analysis

The cement products proposed to be manufacture by the unit
constituent the basic building blocks for any construction activity. The
main competition will be from the red clay bricks or the cement products
produced at different of locations. And there are also a lot of small scale
hollow block manufacturers. The main competitors’ strength and
weakness is stated below.

It is envisaged that the proposed project shall be able to supply the hollow
blocks and tiles for the construction activities related to different
government construction project and other construction projects at
economical prices due to lower cost of transport of finished goods from the
manufacturing unit to the construction sites.

3.4 S.W.O.T. Analysis

The following table stipulates the SWOT analysis, i.e. strength, weakness,
Opportunity and Threats in the context of Lalise Habtamu Dabasa .

Strengths Weaknesses

• Competent management • Shortage of capital

• Clear Business Strategy • New experience

• Strategic Marketing and

Sells plan

• Strong Financial systems

Opportunities Threats

• Conducive government  Unorganized youth labourer

policy

• Country development
19
 • Availability bank loan

3.5 Advertising & sales

The main marketing strategy begins as a provide quality, unique and full
package services; deliver to the needs of potential customers, that will fill
the needs of them. We are planning our marketing strategy so that we
ensure excellence product with affordable price.

Our promotion channels include print ads in the form of business card,
brochures, fliers and banners that keep the Lalise Habtamu Dabasa
name, phone and address of the company in front of the customer.
We will give advertising in different newspaper and magazine in our country.
In addition, we intend to participate in business workshop and related
exhibition.

On the other hand, Word of Mouth - By giving first-time customers great

service and a fair price, the word is sure to spread.

All marketing decisions with regard to specific media choices, frequency,

size, and expenditures will be conducted on an on-going basis with
careful considerations of returns generated.

4 Technical Analysis
4.1 Main Resources
The main resources for the production of cement-based products include
the following:
• Land and building
The location of our plant will be in Addis Ababa Kirkos Sub City Wereda: 01
and it is found in the first grade of urban areas. For manufacturing
company the land lease price is presented in the following table.

Area of Grade of Plot Price

activity Town grade (Birr/m2/year)
1St 2 6.50
Manufacturin 3 6.53

20
 g 2nd 2 6.53
3 4.70
3rd 2 4.70
3 4.00
So, the lease prices four this project will be 6.53
birr/m2/year. A). Plot
and built up area
Total land requirement 10,000m2
Constructed area for Shade 1500 m2
External shade for work in process inventory 3500 m2
Parking, green area, recreational place, waste 5000m2
disposal, road

Land Lease Cost: Land on lease @ Birr. 6.53 /m2 per annum

• Plant and machinery o Hydraulically operated

stationary block making machine with o Moulds

o Hydraulic press (Cap. 150 kg/ sq. cm) with pressure gauge
o Hydraulic double piston pump with 5 HP motor combined with
safety valve, capable of feeding 4 to 5 presses, ram vibrator 1.5
HP, mould vibrator 2 HP

o Levelling (grinding) machine complete with all attachments

grinding
capacity 4 tiles at a time (5 HP)
o Semi polishing machine with 2 HP motor for sample polishing
for testing o Mould with 1 set of extra mould o Pallets o
Tipping borrows

5 RAW MATERIALS AND UTILITIES

5.1 RAW MATERIALS
The raw material used to produce aggregate is basalt rock which is locally
available. The annual raw material requirement at full operation capacity of
the plant

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 • Raw materials like o Portland cement o Stone aggregates o Natural
sand o Stone crush

o Synthetic and natural pigments

5.2 Supplies
It is estimated that 300,000 KWH power connections will be required for
the production unit including the power requirement for production
machines and general purpose lighting. The cost of the power has been
calculated on the basis of birr 0.65/kwh.

5.3 Utilities

S.n Description Consumption/year Measuremen Cost(Birr) Total Cost

t
1 Electricity 300,000 kWh 0.65 195,000
(kWh)
2 Water (M3) 130,000 m³ 11 1,430,000
3 Fuel Oil (litters) 56,250 Litter 20 1,125,000
4 Lubricating oil As reqd. As reqd. - 200,000
(kg)
Total Annual Cost 2,950,000
• Skilled and unskilled manpower
5.4 Production Capacity
For the purpose of financial analysis product mix has been taken into
consideration on the basis of single shift working for 300 days in a year. 300
days of production has been taken for the manufacture of each item
mentioned below. 90% of installed machine capacity has been taken as the
production capacity or feasible normal capacity of the plant. The capacity of
the machine is producing 10,000 units/ day i.e. 3,000,000 unites/year. So
90% will be the normal capacity of the company i.e. 9,000 unites/day and
27000, 000 unites/ year for the three products. Depends on the market
demand of the three products the percentage usage of this capacity will be
60, 25 and 15 percent for Blocks, Floor tiles and cement tiles respectively.

22
The product mix along with quantity of each item of production per annum
is given below.

Sno Product Deamination Number of unites per

annum
1 Hollow 390 x 190 x 0.7*3,000,000=1,890,000
blocks 140
2 Floor tiles 390 x 190x 0.2*3,000,000=540,000
190
3 Terrazzo 300 x 300 x .15*3,000,000=270,000
Tiles 22

5.5 Process of manufacture

i. Cement blocks
The manufacturing process of cement blocks mainly involves mixing and
casting of blocks. The mix in respect of cement aggregate and sand
should be suitably proportioned to gain required strength of block
conforming to the standards. The coarse, fine & medium grade materials
should preferably be mixed in the ratio of 40:20:40 for obtaining better
interlocking of grains. Vibration & pressing action together helps in better
dispersion of mixture and compaction. The amount of water required for
the mixture varies depending upon the grading of aggregated & capacity
of press machine.

PAN MIXER SKIP LOADER

23
 VIBRO-HYDRAULIC PRESS

Batching equipment is used for proportioning the ingredient accurately.

Mixer is used for homogenous mixing and blocks are shaped in a vibrio
compactor. Material handling is carried out with the help of shovel
loader, screw & belt conveyer and forklift etc. The blocks after formation
are stacked on pallets and carefully shifted to shed in a humid
atmosphere to develop initial strength in 24-36 hours. The blocks are
stacked & sprayed with the water. The spraying of water must be
continued intermittently for a period of three weeks for complete curing.
The blocks are then allowed to dry for four week before dispatch.

As stated above, keeping in view the size of the demand for these products
in the market, a semi-automatic process has been recommended in the
project.
24
 ii. Paver Blocks
The process flowchart for the manufacture of cement blocks and paver
blocks is as given below:

PROCESS FLOW CHART

SAND AGGREGATE PORTLAND CEMENT

PROPORTIONING AN D BATCHING

WATER MIXER

MIXER FOR
VIBRO -PRESSING
COLOUR

STACKING OF GREEN MATERIAL

CURING

DRYING FINISHED PRODUCT

5.6 Cement floor and roof tiles

The process flowchart for the manufacturing of plain and colored mosaic
tiles is given below:

25
 SAND AGGREGATE CEMENT MARBLE CHIPS,
POWDER

PROPORTIONING AND BATCHING

WHITE
WATER MIXER COLOURS
CEMENT

MIXER FOR
V IBRO -PRESSING TOP LAYER MIX
TOP LAYER

SETTING

CURING

TOP -LAYER GRINDING

POLISHING
FILLING & REPAIR

FINISHED PRODUCT

5.7Plant Layout
The following diagram shows the layout arrangement of the factory.

26
6 Organization and Management
6.1 Organization chart
The Organization structure below shows the working relationship Lalise
Habtamu Dabasa the CEO of the factory and owner. The General
Manager will be accounted to the owner. Under each division heads there
are employees who will undertake day to day activities.

General
Manager

Admin & Production Marketing &

Finance head head sales head

27
7 The Finance
7.1 Assumptions
The following assumptions are taken in to consideration throughout the
financial analysis. All finance are expressed in terms of Birr, and fractions
are rounded to the next digit.

Particulars Measure
Rate of Interest (Bank) 8.5%
80% Loan
Source of finance
20% Equity
Discount rate 15%

Accounts receivable 30 days

Account payable 30 days

Raw material local 30 days

Raw material abroad 90 days

Work in process inventory 35 days

Cash on hand 5 days

Depreciation (Building) SLM* 20 years

Depreciation (Machinery) SLM 10 years

Depreciation(furniture & fixtures) SLM 20 years

Tax 30%

Tax holidays 3 years

Repayment period of Debt 8 years

Construction period 1 year.

Capacity Utilization 90%

Working Capital Cycle 1 month

5% of plant &
Spare Parts and Maintenance machinery

28
 7.2 Start-up costs

Sno Description Amount

1 Machinery 3,455,335
2 Land & Construction Cost 5,720,000.00
3 Miscellaneous Fixed Assets 250,000.00
4 Pre-operating Expenses 205,000
5 Training Expense 34553
6 Working Capital 1,721,676.78
Total 11,386,565

7.3 Detail breakdown Fixed investment cost

A. Cost of land and construction

sn Cost/m2 Area Total Cons

o Descriptions (Birr) /m2 cost
1 Land 18 10,000 720,000
2 Shade 1,500 2,500 3,750,000
4 Site Preparation for FG 500 2,500 1,250,000
inventory
5,720,000

Cost of machinery and Equipment for Cement Concrete

Sno Descriptions Measurement Amount Unit
Price
Hydraulically operated
stationary block making 340,000 340,000
1 machine (M1) No 1
200 x 200 x 400 (mm) cavity 9,600
2 block ram & mould (M2) No 1
3 150 x 200 x 400 (mm) cavity Dozen Dozen 9,600
block ram & mould (M3)

29
 100 x 200 x 400 (mm) cavity 9,000
4 block ram & mould (M4) Dozen Dozen
5 200 x 200 x 400 (mm) solid Dozen Dozen 8,700
block ram & mould (M5)
6 150 x 200 x 400 (mm) solid Dozen Dozen 8,700
block ram & mould (M6)
7 100 x 200 x 400 (mm) solid Dozen Dozen 8,700
block ram & mould (M7)
8 Paver block mould (M8) Dozen Dozen 100,000
9 Pallet stacker (M9) No 1 220,000
Pan mixer of 500 kg. capacity
No 1 140,000
10 with 15 HP motor (M10)
11 Mix conveyor with 2 HP motor No 1 674,078
(M11)
Platform electronic weighing
No 1 24,000
12 scale 500kg capacity (M12)
13 Water dosing pump with 2 HP No 1 17,000
motor (M13)
14 Wheel barrows with No 4 600 2,400
pneumatic wheels (M14)
15 Pallet truck 1500 kg. capacity No 2 8,000 16,000
(M15)
Pallet truck capacity 500 kg.
No 2 16,000 32,000
16 with pneumatic wheels (M16)
17 Pallets size 900 x 650 x 250 No 500 500 250,000
(mm) (M17)
18 Skip loader (M18) No 1 13,000 13,000
19 Color mixer 100 kg. capacity No 1 24,000 24,000
7 HP (M19)
Sub Total B 1,906,778

30
S
n Measure Amou Unit
o Description ment nt Price Total price
1 Registration and formation of LS 15,000
the company
2 Consultant fees while project LS 85,000
preparation
3 Salary, travel expense, legal LS 105,000
expense etc
Subtotal E 205,000

31
 Total Fixed Cost A+B+C+D+E 8,792,678.00

7.4 Profit and loss forecast

The income prepared based on the company’s revenue and cost. The detail
for each part and the summary of income statement is stated below

Operating Revenue
The company plans to produce and sell three types of products. The
demands for these services are forecasted based on detail analysis of the
construction sector and the future of the country. The price and the number
of units produced and considered to be constant in the normal operation of
the company. The detail of this part is presented in the following table.

7.5 Operating Revenue

Measurem Unit
Sn Type of e Production/ selling Total
o Product Specification nt ye ar Price sales/year
Solid 390 x 190 x
1,890,000 17,955,000
1 blocks 140 No 9.5
390 x 190x
Floor tiles 540,000 20,250,000
2 190 No 37.50
Terrazzo 225 x 112 x
270,000 10,125,000
3 Tiles 80 No 37.50
Total Operating Revenue 2,700,000 48,330,000
Les Wastage 2% Operating Revenue 966,600
Total Annual Revenue 47,363,40
0

7.6 Production Cost

The operation requires different inputs, like raw material, manpower,
utilities e.t.c. and the cost of materials are assumed to be the same
throughout the project life. The main reason is that we neglect the impact of

32
 inflation during operation, by assuming that, if the price of the inputs
increase the company will increase the output price and this two will offset
one another. The current costs are set by collecting data from different
market sources and by taking the current market price of inputs.

7.7 Cost of raw materials

Raw material requirement for All

products
S.no Descriptio Measurement Amount Unit Price Total price
n

1 Cement Quintal 54,000 289.00 15,606,000.00

2 Komche Tones 36,000 175.00 6,300,000.00
Stone
Tones 5,424 1,330.00 7,213,920.00
3 aggregate
Marble
Tones 252 1,870.00 471,240.00
4 chips
Mineral
18
5 colors Lump-Sum 2,100.00 37,800.00
6 Sub Total 29,628,960.00
7 Handling 1,481,448.00
loss@5%
Total Material Cost 31,110,408.00

7.8 Salary and Wages

Salary
Monthly per
Sno Position Number of W Salary annum
1 Manager 1 6,750 81,000
2 Plant Supervisor 1 4,560 54,720

33
 Marketing Executive &
3 Accountant 1 2,200 26,400
4 Office's Manager 1 1,500 18,000
5 Machine Operators 1 3,580 42,960
6 Laboratory Technician 1 3,100 37,200
9 Unskilled Labor 15 1,200 216,000
Total salary 21 476,280

7.9 Utilities
Consumption/ Total
S.n Description Measurement Cost(Birr)
year Cost
Electricity 195,00
1 300,000 kWh 0.65
(kWh) 0
935,00
2 Water (M3) 85,000 m³ 11
0
3 Other Lump sum 90,000
1 ,220
Total Annual Cost
, 0 00

Interest cost

Year Outstanding Interest Repayment Balance

loan
1 7970595 677501 996324.4143 6974271
2 6974271 592813 996324.4143 5977946
3 5977946 508125 996324.4143 4981622
4 4981622 423438 996324.4143 3985298
5 3985298 338750 996324.4143 2988973
6 2988973 254063 996324.4143 1992649
7 1992649 169375 996324.4143 996324
8 996324 84688 996324.4143 0

34
Depreciation cost
The calculation of depreciation is based on the straight line method. In order
to calculate the residual value of the project at the end of the period we
calculate the remaining life of the plant building and machineries. The
calculation shown below,

Depreciation=

yea Plant& Office Buildin Total

r Machinery@10 Equipmen g Depreciatio
% t @5% n
@20%
1 345533 5000 187500 538033
2 345533 5000 187500 538033
3 345533 5000 187500 538033
4 345533 5000 187500 538033
5 345533 5000 187500 538033
6 345533 5000 187500 538033
7 345533 5000 187500 538033
8 345533 5000 187500 538033
9 345533 5000 187500 538033
10 345533 5000 187500 538033

35
36
Income Statement

Income Statement
Operating
years 1 2 3 4 5 6 7 8 9 10
Installed 3,000, 3,000 3,000, 3,000, 3,000 3,000 3,000 ,000 3,000,00 3,000, 3,000,000
000 ,000 000 000 ,000 ,000 0 000
Capacity
Capacity 90% 90% 90% 90% 90% 90% 90% 90% 90% 90%
Utilization
PRODUCTI 2,700, 2700 27000 27000 2700 2700 2700 000 2700000 27000 2700 000
000 000 00 00 000 000 00
ON
Sales 47,363 47,36 47,363 47,363 47,36 47,36 47,36 3,400 47,36 47,363 47 ,
Revenue(S ,400 3,400 ,400 ,400 3,400 3,400 3,400 ,400 363,400
R)
31,110 31,11 31,110 31,110 31,11 31,11 31,11 0,408 31,11 31,110 31 , 11
,408 0,408 ,408 ,408 0,408 0,408 0,408 ,408 0,408
Utilities
1,220, 1220 12200 12200 1220 1220 1220 000 1220000 12200 1220 000
000 000 00 00 000 000 00
Sub Total
Wages & 32,330 32,33 32,330 32,330 32,33 32,33 32,33 0,408 32,33 32,330 32 , 33
,408 0,408 ,408 ,408 0,408 0,408 0,408 ,408 0,408
Salaries
Factory 55724 5572 55724 55724 5572 5572 5572 47.6 55724 55724 5572 47.6
7.6 47.6 7.6 7.6 47.6 47.6 7.6 7.6
Overheads
General 205,00 2050 20500 20500 2050 2050 2050 00 20500 0 20500 2050 00
0 00 0 0 00 00 0
Overheads
 250,00 2500 25000 25000 25000 250000 250000 250000 250000 2500 00
0.00 00 0 0 0
Land Lease
Estimated 720,00 2350 23508 23508 23508 235080 2350 80 23508 0 23508 2350 80
Cost of 0 80 0 0 0 0
Production
34,062 33,57 33,577 33577 3357 33577735. 33577735.6 33577 33577 3357
,656 7,736 ,736 735.6 7735. 6 735.6 735.6 7735. 6
Selling
6
Expenses
Cost of 250,00 250,0 250,00 250,00 250,0 250,0 250,000 250,0 00 250,00 250,0 00
0 00 0 0 00 00 0
Sales
34,312 33,82 33,827 33,827 33,82 33,82 33,827,736 33,82 33,827 33 , 82
,656 7,736 ,736 ,736 7,736 7,736 7,736 ,736 7,736
EBITDA
13,050 13,53 13,535 13,535 13,53 13,53 13,53 5,664 13,53 13,535 13 , 53
,744 5,664 ,664 ,664 5,664 5,664 5,664 ,664 5,664
Interest
Depreciatio 677,50 592,8 508,12 423,43 338,7 254,0 169,375 84,688 0 0
n 1 13 5 8 50 63
53803 5380 53803 53803 5380 5380 538033.496 53803 53803 5380
3.496 33.49 3.496 3.496 33.49 33.49 3.496 3.496 33.49 6
Profit
Before Tax 6 6 6

Taxation 11,835 12,40 12,489 12,574 12,65 12,74 12,82 8,256 12,91 12,997 12 , 99
,210 4,818 ,505 ,193 8,881 3,568 2,943 631 7,631
@30%
35505 3721 37468 37722 3797 3823 3848 38738 38992 3,899
445. 664.1 070.4 476.7 82.99 289.2
Net Profit 3
63.091 63 51.636 57.908 81 54 26 9 89.271 71

38
Expected cash flow

Discounted Cash flow statement (Total Investment)

Construction Operat
Period i on
Period
Years t=0 t=1 1 2 3 4 5 6 7 8 9 10
Cash Inflows
Net Cash 8,2 8,6 8,7 8,8 8,9 8,9 9,0 9,0 9,0
Accruals After 84, 83, 42, 01, 8,861, 20, 79, 39, 98,342 98 ,34
Interest &tax 647 373 654 935 216 498 779 060 2
Less: Change in
Working
Capital 0 0 0 0 0 0 0 0 0 0
Add back 677 592 508 423 254 169
financial ,50 ,81 ,12 ,43 338,75 ,06 ,37 84 ,
Expenses 1 3 5 8 0 3 5 688 0 0
Terminal Cash
in flow 0 0 0 0 0 0 0 0 0
8,9 9,2 9,2 9,2 9,1 9,1 9,1 9,0 9 , 0
62, 76, 50, 25, 9,199, 74, 49, 23, 98,342 98 ,
Total inflow 148 186 779 373 967 560 154 748 342
Cash Outflows
Investment 11,386 ,565
Total outflow 9,664,8 1,7
87.96 21 ,

39
 677
1,7
-
21, 8,9 9,2 9,2 9,2 9,1 9,1 9,1 9 , 0
9,664,8 62, 76, 50, 25, 9,199, 74, 49, 23, 9,0 98 ,34
677
Net Cash flow 88 148 186 779 373 967 560 154 748 98,342 2
IRR on
Investment 0.8 0.7 0.6 0.6 0.4 0.4 0.3 0.3 3 0.2 95
(26.1%) 85 83 93 13 0.54 8 25 76
7,9 7,2 6,4 5,6 4,4 3,8 3,4 3,0 02, 2 , 6
NPV (15% 38,251, 31, 63, 10, 55, 4,967, 03, 88, 30, 453 84 ,01
Discount Rate) 287 501 253 790 154 982 789 391 529 1
1 years 3
Pay Back
months
Period

40
D. Break-even analysis
1. Net present value criteria(NPV)
Is the sum of the present value of all the cash flows (positive or negative)
expected to occur over the life of the project. Value obtained by discounting (at
a constant interest rate and separately for each year) the differences of all
annual cash outflows and inflows accruing throughout the life of a project.

NPV = PV of Cash Inflows - Initial Investment Cost

The projects NPV =Birr 38,251,287

2. Benefit-Cost Ratio (BCR)

It is a measure relates the present value of benefits to the initial investment:

Hence the BCR>1 the project is acceptable

3. Internal Rate of Return (IRR)

It is the discount rate at which the present value of cash inflows is equal to the
present value of cash outflows. Or Discount rate that makes project’s NPV zero.

Where: NPV & NPV are the net present values obtained at the estimated
discount
rates & respectively

Or

The project is acceptable hence the IRR is greater than the discount rate (which is
36.5%>15%)
 4. PAYBACK PERIOD (PBP)
The payback period is the length of time required to recover the initial cash
outlay on a project.
When the annual cash inflow is a constant sum, the payback period is
simply the initial outlay divided by the annual cash inflow.

But in our project case the cash inflow is not the same;
When the project’s cash flows are not uniform, the payback period is
computed as follows:

The payback period is 8 year

8 Environmental and Social Impact

Production process of crushing and sizing. These unit operations can be performed in
a controlled manner. Hence, it is environmentally friendly.

Project’s Contributions to the local Economy

The project will employ 35 employees, excluding members of the
entrepreneur.
It aims to raise the quality standard of the HCB .It will also result in
healthy Competition by forcing existing HCB producers in the Area to
improve their product quality.

Recommendations
Given, the imbalance relationship of bricks market demand and supply create scarcity at the
market level. So the business is viable especially at area where proposed to produce. The

42
 demand is more than the production. Therefore, the proposal shows that the project is
feasible and sustainable; therefore, the concerned parties should provide all necessary support
that would help the project come to exist.

Action Plan
S.N Description Year
2014 201 2016 2017 2018-2022
5
Land development
Purchasing of machinery
tool, office equipment and
Machineries
Start production

43