PROJECT PROPOSAL ON

GREEN COFFEE PROCESSING, ROASTING,

GRINDING, PACKING AND EXPORT
FACTORY

Project Location: Oromia Regional State,

Surrounding Finfine Legedadi Legetafo city

Administration

PROMOTED BY: ELSAABET QAJEELAA EBBAA

MAY 2022
Table of Contents
1. EXECUTIVE SUMMARY .....................................................................................................4
2. BACKGROUND INFORMATION .......................................................................................7
2.1. Introduction ..............................................................................................................................7
2.2. Promoter background ...............................................................................................................8
2.3. Product description and application .........................................................................................8
2.4. Project Objective and benefit ...................................................................................................9
2.5 Mission and goal.......................................................................................................................9
2.5. Ethiopia Coffee background ..................................................................................................10
3. PROJECT LOCATION AND SOCIO ECONOMIC STATUS..................................................13
3.1. Project Location.....................................................................................................................13
3.2. Location .................................................................................................................................13
3.3. Altitude ..................................................................................................................................14
3.4. Demographics ........................................................................................................................14
3.5. Relief Work ...........................................................................................................................14
3.6. Infrastructure .........................................................................................................................14
4. MARKET STUDY ....................................................................................................................15
4.1 Demand and Supply Situation in Ethiopia .............................................................................15
4.2. Projected Demand in Ethiopia ...............................................................................................17
4.3. World market demand ...........................................................................................................18
4.4. Plant Capacity and Production Programme...........................................................................22
4.4.1. Plant Capacity..............................................................................................................22
4.5. Pricing and Distribution.........................................................................................................22
4.6 Competitors Overview............................................................................................................23
5. TECHNICAL ANALYSIS ........................................................................................................23
5.1. Production Process ................................................................................................................23
5.2. Raw Materials, Cost and Utilities..........................................................................................26
5.2.1 Raw and auxiliary materials ............................................................................................26
5.3.2. Utilities ...........................................................................................................................27
5.3. Machinery and Equipment.....................................................................................................27
5.4. Land, Building and Civil Works............................................................................................28
5.5. Environmental Impact Assessment .......................................................................................29
5.6. Implementation Schedule ......................................................................................................29

1
6. ORGANIZATIONS AND MANAGEMENT .........................................................................31
6.1 Organizational Structure.........................................................................................................31
6.2 Management ...........................................................................................................................31
6.3 Manpower Requirement.........................................................................................................32
7. FINANCIAL STUDY ................................................................................................................34
7.1 Fixed costs ..............................................................................................................................34
7.2 Production costs......................................................................................................................36
7.2.1 Direct production costs .................................................................................................36
7.2.2. Overhead cost .................................................................................................................37
7.3 Project Capital and financing .................................................................................................39
7.3.1 Project Capital .................................................................................................................39
7.3.2 Financing working capital ...............................................................................................39
7.4 Revenue projection .................................................................................................................42
7.5 Financial statements ...............................................................................................................43
7.5.1. Projected Profit/loss statement .......................................................................................43
7.5.2. Projected cash flow statement ........................................................................................44
7.5.3. Balance sheet.................................................................................................................45
7.2.3. Viability and other measurement....................................................................................46
8. SENSITIVITY ANALYSIS .......................................................................................................48
9. RISK ANALYSIS .......................................................................................................................48
10. MONITORING AND EVALUATION...................................................................................49
11. CONCLUSION AND RECOMMENDATION .........................................................................49

2
 Basic Information

Name of the Promoter: ELSAABET QAJEELAA EBBAA

 Contact Address: 0916420024
Project Location: Oromia regional state surrounding finfine Legetafo/Legedadi

City Administration

Project Capital: The total investment capital of the project is estimated is

110,247,250 birr of which

 Birr 57,530,000(52%) is allocate for fixed investment cost

 Birr 52,717,250 (47%) is allocate to production cost admin cost

Source of finance: The total investment capital of the project is to be financed by

the promoter’s equity and bank loan.
 Birr 33,074,17530%) is contributed by the promoter
 Birr 77,173,075 (70%) is to be financed by local banks.

Man power requirement: the project will be provide 303 employees job
opportunity, of which, 153 are permanent (33 skilled & 120 unskilled) and 150
casual (50 skilled and 100 unskilled) workers

Land requirement: The total area of land require for the coffee processing

project is 10,000 m2 of land

3
 1. EXECUTIVE SUMMARY

The project proposal study proposed on green coffee processing, Roasting

packaging and exporting factory has been promoted by ELSAABET
QAJEELAA EBBAA in Legetafo is found Oromya regional state surrounding
fininfine. It is a special zone of Oromia region at a Distance of 25 km
distance from north to the capital Addis Ababa.. There are lots and different
type of factories and industrial zone area. This is therefore ELSAABET
QAJEELAA EBBAA wants to establish green coffee processing, roasting and
exporting project founded base on it.

Coffee is a common name for any of a genus of trees of the madder family,
and also for their seeds (beans) and for the beverage brewed from them.
The Arabicas and Rubastas are the two major types of commercial coffee.
In order to meet wide consumer appeal, coffee liquor is extracted from
properly ground coffee beans that are expertly roasted from properly
sorted green coffee.

Ethiopia is one of top Five coffee export countries in the world According to
ICO (International Coffee organization ) report Brazil, Vietnam, Colombia,
Indonesian and Ethiopia are 5 ranked export countries respectively, next to
Ethiopia India, Hondurass and Uganda are follows and compotator exporter
countries. According to ICO the demand of the year 2020/2021 it needs
189,465 tone of 60 kg bags coffee export on world market.

Production capacity : based the above ICO information the company

wants to full fill the demand gap and give quality services for abroad
customers therefore the company plan purchase on 360 tons of green
coffee per annum, out of the total washed and sundered purchase coffee 14
% are rejected coffee therefore 310 tone green coffee is accepted or export
standard coffee, of which selected green coffee the company plan is (85%)
of the production is direct export and 15% will be rousted and
packaging for local market. The raw washed and sundered coffee is
available from ECX market

4
Total investment capital: The total investment capital of the project
without including working capital is estimated at Birr 110.2 million birr out
of this Birr 57.3 million or 52% is fixed investment cost and 52.7 million or
48 % are allocate to working capital

Profitability: The financial analysis of the envisaged project was carried

out for the following ten years. Based on the 10 years financial projections
using the income statement and the following results are obtained.
Income statement: According to the projected income statement, the project
will generate profit beginning from the first year of operation. Based on the
10 years financial projections the project average annual net profit after
payment of bank interest, depreciation and tax amounts to birr 29.6
million
 Cash flow statement: The cash flow statement also shows a
substantial amount of cash surplus right from the first year of project
operation life. The cash balance grows from birr 29.6 million in the
first year to cumulative balance of birr 352.4 million during the 10th
year of operation indicating the capacity of the project to finance itself
and generate cash surplus for further investments.
 FIRR Computation: The computation of the project FIRR shows that
the project will profitably generate reasonable return on investment.
Before tax financial internal rate of return is calculated to be 34 %.
It is indicates that the project is financially viable with an internal rate
of return (IRR) of 34% and net present value (NPV) 222 million birr at
discount rate 35 %.
 Socio economic benefits: The socio economic benefit of the project is
also very high.
o It provide 153 permanent and 150 causal workers ,
o generate foreign currency by promoting exports,
o Generate revenue for the government in form of taxes, facilitate
the transfer for good investment and also contribute towards
promoting the linkage sectors of the economy.
o

5
Conclusion and recommendation:
 The Project is operationally profitable, viable & has significant socio-
economic benefits.
 We recommended that according to this attractive financial and
economic benefit of the project all concerned offices & financial
institutions should give their support to facilitate the implementation of
this plan.

6
 2. BACKGROUND INFORMATION

2.1. Introduction
Ethiopia is now becoming more and more investment friendly country. The
Government is creating favorable condition that would highly encourage
the private Sector to be engaged in almost all areas of the economy. The
country with population of come 110 million offers significant domestic
market for locally for Locally produced goods and service the country
is also a member of the common Market for eastern and southern Africa
Comesa offering huge benefit of Exporting commodities in preferential
tariff rates to a wider regional market.
Privet investment should be encouraged to increase form year to year
and Investment constraints have to be alleviated in order to pave
development ways so That investment sector happens to be determinant
about factor of economic development of the country like Ethiopia.
it is usually considered as the engine of the economy .both private and
government Bodies in many ways have commonly agreed this idea
.economic development in Any case needs both efforts of the privet as
well as the public sector. There are Investments that could not be
undertaken by privet sector due to its difficult nature I .e high initial
capital and long gestation period.
But now a day as Ethiopia follows free market economy ‘the roll of
private sector for the achievement of the economy policy. Accordingly, the
Ethiopia federal democratic government is encouraging investors to invest
their records to contribute to the development of the country in all sectors
by avoiding all barriers and facilitating all the mince for the investment.

Currently our government is playing a vital role; which is aimed at

promoting micro, small and large businesses by creating different job
opportunities, facilitating investment land, market linkages and business
development strategies and keeping sustainable political situations for
them. Due to the above favorable conditions, different private sectors are
showing progress in their activities with a significant market share.

7
As a matter of the above facts, the promoter planned to establish green
coffee processing and exporting, Coffee Roasting, Grinding and
packaging factory in Legetafo City Administration the benefit of the
promoter, the town community, as well as the country as a whole.

2.2. Promoter background

The promoter, ELSAABET QAJEELAA EBBAA is well experienced in

different business activities for the long period. He has got reliable
knowledge and skill on the factory business management. The promoter
wants to know how to manage and lead any organization to profit and they
also knows to how to handle different challenges in the working
environment. Moreover the promoters has a very good reputation with
banks and different financial organizations

2.3. Product description and application

Coffee is a common name for any of a genus of trees of the madder family,
and also for their seeds (beans) and for the beverage brewed from them.
The Arabicas and Rubastas are the two major types of commercial coffee.
In order to meet wide consumer appeal, coffee liquor is extracted from
properly ground coffee beans that are expertly roasted from properly
sorted green coffee.

The principal physiological effects of coffee are due to caffeine, an alkaloid

that acts as a mild stimulant. Depending upon the granular size and
heterogeneity of the particles size, there are two distinct categories of
ground coffee. The first category is made up of uniform particles of
average size from which small powdery particles have been separated.
The second category of brewed coffee consists of grounds made up of
particles of various sizes of, which up to 50 per cent are of very small size.

8
2.4. Project Objective and benefit

The main objective of the project is aimed at to maximize the return on

invested capital in the form of profit for the promoter. However, its
implementation will benefit the employee, the consumer society and the
government at different levels. In this respect the project is aimed to
promote the following objectives:-
 To maximize the return on invested capital through modern factory
services
 To raise the significance and importance of the sector and thereby
raising its contribution to the national economic development,
 To produce roasted and packed Coffee and supply the produce to
local market and export
 Effectively use local inputs and strengthening the linkage between
agriculture and other sectors of the economy
 To provide gainful employment to a large segment of the population
of the project area and augment earning capacity at the grassroots
level,
 Increase government revenue through the different forms of taxes,
which in turn used to facilitate social and economic development.

In general, the project is believed to have significant social and economic

benefits that accrue to the society, the region and the country beyond the
financial returns to its owner.

2.5 Mission and goal

Mission

 Mission of the particular project is to expand the coffee processing

system and to produce quality roasted coffee and export.
 To prove to other people that struggle for a better life and economic
independences can do business and bring change and can make a
difference if opportunities are given.
 To become financially liquid and guaranteed more than ever.

9
Goal
Objectives are the goals toward which activities of the business are
directed and one of the most important functions the business owner must
perform is setting objectives. This important aims of this sole
proprietorship business among others include the following highly
interrelated general goals with each other.

 To create employment opportunities for 44 permanent and 76 causal

 Become known as trustworthy quality Coffee Roasting Grinding and
packing factory supplier in Addis Ababa and Export

2.5. Ethiopia Coffee background

Ethiopian Coffee Arabica is a species of Coffee originally indigenous to

the mountains of the southwestern highlands of Ethiopia. It is also known
as the "coffee shrub of Arabia", "mountain coffee" or "Arabica coffee". Coffee
Arabica is believed to be the first species of coffee to be cultivated, being
grown in southwest Ethiopia for well over 1,000 years. Wild plants grow to
between 9 and 12 m (29 and 39 ft) tall, and have an open branching
system; the leaves are opposite, simple elliptic-ovate to oblong, 6–12 cm
(2.4–4.8 in) long and 4–8 cm (1.6–3.2 in) broad, glossy dark green.
The flowers are white, 10–15 mm in diameter and grow in axillary clusters.
The seeds are contained in a drupe (though commonly called a "cherry";
the plural form is simply "cherry"—used only when referring to the fruit of
C. Arabica—when referring to the actual cherry fruit, the appropriate
plural is "cherries") 10–15 mm in diameter, maturing bright red to purple
and typically contains two seeds (the coffee seeds).

History: The coffee plant, Coffee Arabica, originates in Ethiopia. According

to legend, the 9th-century goatherder Kaldi discovered the coffee plant
after noticing the energizing effect the plant had on his flock, but the story
did not appear in writing until 1671 and is probably apocryphal.

10
Production: Ethiopia is the world's seventh largest producer of coffee, and
Africa's top producer, with 260,000 metric tons in 2006. Half of the coffee
is consumed by Ethiopians, and the country leads the continent
in domestic consumption. The major markets for Ethiopian coffee are the
EU (about half of exports), East Asia (about a quarter) and North
America. The total area used for coffee cultivation is estimated to be about
4,000 km2 (1,500 sq mi), the size is unknown due to the fragmented
nature of the coffee farms. The way of production has not changed much
since the 10th century, with nearly all work, cultivating and drying, still
done by hand.
The revenues from coffee exports account for 10% of the annual
government revenue, because of the large share the industry is given very
high priority, but there are conscious efforts by the government to reduce
the coffee industry's share of the GDP by increasing the manufacturing
sector.
The Coffee and Tea Authority, part of the federal government, handles
anything related to coffee and tea, such as fixing the price at which the
washing stations buy coffee from the farmers. This is a legacy from a
nationalization scheme set in action by the previous regime that turned
over all the washing stations to farmers cooperatives. The domestic
market is heavily regulated through licenses, with the goal of avoiding
market concentration.

Regional varieties: Ethiopian coffee beans that are grown in either

The Harar, Sidamo, Yirgacheffe or Limu regions are kept apart and
marketed under their regional name these regional varieties are
trademarked names with the rights owned by Ethiopia.

Sidamo: "Ethiopia Sidamo" is a type of Arabica coffee of single

origin grown exclusively in the Sidamo Province of Ethiopia. Like most
African coffees, Ethiopia Sidamo features a small and greyish bean, yet is
valued for its deep, spice and wine or chocolate-like taste and floral aroma.
The most distinctive flavour notes found in all Sidamo coffees are lemon

11
and citrus with bright crisp acidity. Sidamo coffee includes Yirgachefe
Coffee and Guji Coffee. Both coffee types are very high quality.

Harar: Harar is in the Eastern highlands of Ethiopia. It is one of the oldest

coffee beans still produced and is known for its distinctive fruity, wine
flavour. The bean is medium in size with a greenish-yellowish colour. It
has medium acidity and full body and a distinctive mocha flavour. Harar is
a dry processed coffee bean with sorting and processing done almost
entirely by hand. Though processing is done by hand, the laborers are
extremely knowledgeable of how each bean is categorized.

Beans: Ethiopian coffee beans of the species Coffea arabica can be divided
into three categories: Longberry, Shortberry, and Mocha. Longberry
varieties consist of the largest beans and are often considered of the
highest quality in both value and flavour. In some cases this is true but
more often than not it is just a marketing pitch. Shortberry varieties are
smaller than the Longberry beans but, are considered a high grade bean in
Eastern Ethiopia where it originates.

12
3. PROJECT LOCATION AND SOCIO ECONOMIC STATUS
3.1. Project Location

The proposed Coffee processing, Roasting, grinding and packaging and

exporting project is planned to be located in Legetafo city Administration.
Legetafo is a special zone of Oromia surrounding finffine. Oromia Special
Zone Surrounding Finfinne at a Distance of 25 km South East from Addis
Ababa Legetafo is one of the reform towns in the region and has a city
administration, municipality and two kebelles. The total land size the
promoter requesting for the implementation of the project is estimated at
14,000 square meters, which will be obtained from the Oromiya
Investment Commission,

3.2. Location
Sendafa is aworeda and separate woreda in central Ethiopia. Its name is
taken from the Oromo name for a kind of thick, jointed grass or reed which
grows in swampy areas. Located in the Oromia Special Zone Surrounding
Finfinne of the Oromia Region,

Concerning weather, Sendafa has a moderate temperature; June, July and

August are principal rainy season. The town has one senior secondary
school, which started enrolling students in 1987.

Sendafa enjoys relatively moderate technological facilities compared to

other towns of the same size in its Zone. Major public institutions here
include the Ethiopian Police College and the Sendafa military camp. The
town is also the planned location for the new training centre of the
Ethiopian People's Revolutionary Democratic Front, budgeted to cost 80
million birr. This plan includes a seven-story headquarters building to be
built in Arat Kilo US Peace Corps Volunteers served in Sedafa between
1966 and 1970.

13
3.3. Altitude

Sendafa has latitude and longitude of 9°09′N 39°02′E Coordinates: 9°09′N

39°02′E with an elevation of 2514 meters above sea level. The town lies on
the paved Addis Ababa - Adigrat highway, some 38 kilometers north of the
capital.

3.4. Demographics

The 2007 national census reported a total population for Sendafa of

12,298, of whom 6,373 were men and 5,925 were women. The majority of
the inhabitants said they practised Ethiopian Orthodox Christianity, with
84.15% of the population reporting they practised that belief, 11.38% were
Muslim.[4]

Based on figures from the Central Statistical Agency in 2005, this town
has an estimated total population of 9,952 of whom 4,737 are men and
5,215 are women.[5] The 1994 national census reported this town had a
total population of 5,573 of whom 2,569 were men and 3,004 were women.

3.5. Relief Work

For the past several years, the non-denominational Living Word

Community Church in York, Pennsylvania, has partnered with the village
of Legetafo, sending teams of church members to provide medical and
educational supplies. In 2010, Living Word Community Church members
raised $10,000 to pay for a clean-water well to be drilled in Legetafo.

3.6. Infrastructure
As it is near capital city, the area has well developed infrastructural
facilities schwa as road, portable water hydroelectric power telephone and
other social. Facilities like education health etc. Which is better developed

Due to the above socio economic study, the promoter selects Legetafo
Town for proposed project by looking every aspects of business
integrity.

14
4. MARKET STUDY

4.1 Demand and Supply Situation in Ethiopia

Coffee is served at least once in most of Ethiopian households. The coffee

ceremony at home is more cultural than the mare need of drinking
coffee. Roasting coffee is a craft by itself taken seriously by every
household.

Accordingly in Ethiopia as coffee is usually made at home, the official

statistics on milled coffee does not represent the total supply of packed or
milled coffee. In the near future households may began to buy packed
(milled) coffee. However, the associated cultural impacts of the coffee
ceremony will remain in fact for a long time making households out of the
target market for packed coffee.

The supply of milled r o a s t e d coffee from local production and Importing

from foreign is presented in Table 4.1. As can be seen from Table 4.1.,
the supply of milled coffee during the period 2002-2015 was on average
3,929 tones or 99 % of from all production is local and the remaining 0.94
% or 40 tone is imported from foreign market with a given study we cannot
determine the annual growth rate because the market trained per year is
not static

Table 4.1 Milled / Roasted Coffee Productions (Tonnes)

Year Production/Ton Imported Total

2002 300 0.165 300.2
2003 115 0.145 115.1
2004 259 - 259.0
2005 563 1.382 564.4
2006 1637 198 1,835.0
2007 1544 46.294 1,590.3
2008 2767 0.087 2,767.1
2009 1984 1.289 1,985.3
2010 1708 53.04 1,761.0
2011 1407 50.541 1,457.5
2012 19059 11.47 19,070.5
15
 2013 17807 18.487 17,825.5
2014 591 131.91 722.9
2015 5278 8.416 5,286.4
Average 3,929.9 40.1 3,967.2
% 99.06 0.94 100.0

Source : - CSA data from 2002-2015

Table 4.2 Export and Impart green Clean coffee data from 2002 up to 2016

The below table 4.2 indicated that the quantity of import and export green
coffee per ton per year; according to the given figure 99.9% the total
production is export green coffee , Ethiopia import only 0.03% of green
coffee from abroad it means that Ethiopia is very great full green coffee
exporter country . on the other side the table figures shows that from the
year 2006-2009 it is not good trained and also it is small figure exported
according to the others year but start from 2010 years it very good and
excellent trained

Import / export green coffee Quantity in tone

Year Import Export
2002 1.65 1196555.27
2003 1.45 1355481.99
2004 0.00 1217997.37
2005 13.82 1496550.15
2006 1980.00 409218.43
2007 462.94 622006.20
2008 0.87 614922.59
2009 12.89 602302.20
2010 530.40 1141044.48
2011 505.41 1140102.99
2012 114.70 1366662.39
2013 184.87 1287078.61
2014 1319.10 1545567.87
2015 84.16 1628949.12
2016 74.20 1597064.77
Average 352.43 1.148.100.30
% 0.03% 99.97%

Source: - C S A collection data from 2002-2016

16
4.2. Projected Demand in Ethiopia

The demand for packed coffee (roasted ground and packed) is directly
related with number of coffee serving bars. Literally bar means "house of
coffee" or "buna bet" in Amharic indicating the formation of such a
business as directly dependent on milled coffee. Hotels, restaurants and
clubs also provide coffee to the public using packed coffee.
Urbanization is another factor for the growth in demand for packed coffee.
However, the most determining factor is growth in the service industry
particularly in bars, hotels and restaurants. The gross domestic production
of trade, hotels and restaurants industrial sector.

Based on the above supply production in table 4.1 and demand projection
of the project, the supply of packaging production on the year 2015 is 5,286
tones from domestic production and imported. And the demand production
on the coming year 2018 is 23,350 tones. Therefore it is needs additionally
7074 tons of packaging production for the coming fiscal year 2018. This
project profile implementation plan is start the packaging production is on
the 2018 fiscal year.

The demand for Export green coffee is directly related with number of
coffee exporter in Ethiopia based on the above table 4.2 total export
production from the year 2002-2016. According to this figure the demand
of export coffee in 2016 was 1.59 million tone green coffee. But the above
give year trained is not static from the year from 2006-2009 shows table
4.1) therefore we can determine projected demand based on the 2002-2016
except 2006-2009 year we got the following figures

17
 Projected
year Demand
2017 1596543.91
2018 1631869.39
2019 1667194.87
2020 1702520.34
2021 1737845.82
2022 1773171.3
2023 1808496.77
2024 1843822.25
2025 1879147.73
2026 1914473.2
2027 1949798.68

According to the above figures the demand production on the coming year
2018 is 1.63 million tones. Therefore it is needs additionally 35,325 tone
green coffee for the coming fiscal year 2018. This project profile
implementation plan is start the roasted coffee supply and expand the green
coffee exporting system is on the 2018 fiscal year.

4.3. World market demand

Ethiopia is one of top Five coffee export countries in the world According to
ICO (International Coffee organization ) report Brazil, Vietnam, Colombia,
Indonasia and Ethiopia are 5 ranked countries respectively , next to

18
 Ethiopia India, Hondurass and Uganda is next to Ethiopia exporter
countries the detail production by exporting countries for the recent 10
years data as given below
Total production by all exporting countries In thousand 60kg bags
Crop year+
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Brazil 42,987 38,987 50,490 43,977 53,428 50,592 55,420 54,698 52,299 50,388 55,000
Vietnam/ 19,340 16,405 18,438 17,825 20,000 26,500 23,402 27,610 26,500 28,737 25,500
Colombia 11,775 12,516 8,664 8,098 8,523 7,652 9,927 12,163 13,339 14,009 14,500
Indonesia 7,483 7,777 9,612 11,380 9,129 10,644 11,519 11,265 11,418 12,317 11,491
Ethiopia 5,551 5,967 4,949 6,931 7,500 6,798 6,233 6,527 6,625 6,714 6,600
India 4,800 4,367 4,372 4,827 5,033 5,233 5,303 5,075 5,450 5,800 5,333
Honduras 3,461 3,640 3,450 3,603 4,331 5,887 4,686 4,578 5,258 5,766 5,934
Uganda 2,894 3,490 3,335 2,894 3,267 3,115 3,914 3,633 3,744 3,650 3,800
Guatemala 3,950 4,100 3,785 3,835 3,950 3,850 3,763 3,189 3,310 3,420 3,500
Peru 4,319 3,063 3,872 3,286 4,069 5,373 4,453 4,338 2,883 3,304 4,222
Mexico 4,200 4,150 4,651 4,109 4,001 4,563 4,327 3,916 3,591 2,785 3,100
Nicaragua 1,428 1,906 1,445 1,871 1,638 2,193 1,873 2,060 1,898 2,112 2,100
Côte
d'Ivoire 2,177 2,317 2,397 1,795 982 1,966 2,072 2,107 1,750 1,893 2,000
Costa Rica 1,706 1,797 1,580 1,447 1,581 1,776 1,658 1,444 1,408 1,634 1,486
Tanzania 822 810 1,186 675 846 641 1,151 811 753 930 900
Kenya 826 652 541 630 641 757 875 838 765 789 783
Papua New
Guinea 807 968 1,028 1,038 867 1,414 716 835 798 712 1,171
Ecuador 1,035 950 771 813 854 825 828 666 644 644 645
El Salvador 1,234 1,505 1,450 1,075 1,873 1,164 1,240 506 669 552 623
Lao,
People's
Dem. Rep.
of 391 393 406 434 544 514 541 538 499 511 500
Venezuela 1,571 1,520 932 1,214 1,202 902 952 804 650 501 400
Thailand 822 650 675 795 828 831 608 638 497 485 435
Madagascar 587 614 728 457 530 585 500 584 501 425 415
Dominican
Republic 387 465 645 352 378 491 488 425 397 400 400
Cameroon 818 795 725 902 527 669 371 404 483 391 480
Congo,
Dem. Rep.
of 378 416 422 346 305 357 334 347 335 371 335
Haiti 362 359 359 351 350 349 350 345 343 341 345
Rwanda 351 224 369 259 323 251 259 258 238 278 251
Burundi 499 133 412 112 353 204 406 163 248 274 258
Guinea 473 323 505 499 386 386 234 101 165 246 200
Philippines 441 446 587 730 189 180 177 186 193 208 200
Yemen 207 198 220 135 161 185 188 185 150 138 125
Panama 173 176 149 138 114 106 116 113 106 108 115
Central
African
Republic 114 43 60 112 78 91 23 90 63 100 100
Cuba 105 110 133 92 108 100 88 107 101 100 100
Bolivia 164 133 135 142 130 143 115 128 106 89 81
Togo 134 125 138 202 160 160 84 172 143 81 119
Timor-Leste 46 36 48 47 60 47 61 80 117 66 37
Sierra
Leone 31 40 86 91 33 78 61 32 46 51 50
Nigeria 51 42 50 34 42 47 41 41 43 41 42
Angola 35 36 38 13 35 29 33 35 39 41 45
19
Sri Lanka 33 33 31 32 37 36 35 36 35 35 35
Malawi 17 19 21 17 17 26 23 28 25 21 18
Jamaica 40 20 32 25 21 24 24 20 21 20 20
Paraguay 26 39 20 20 20 20 20 20 20 20 20
Zimbabwe 45 31 24 21 10 9 7 9 14 14 10
Ghana 20 35 26 37 92 94 82 45 19 13 5
Trinidad &
12 12 11 11 10 11 12 12 13 13
Tobago 12
Liberia 7 7 12 13 10 10 10 6 7 11 8
Guyana 8 9 10 9 9 10 10 2 8 10 10
Congo,
Rep. of 3 3 3 3 3 3 3 3 3 3 3
Zambia 56 61 35 28 13 11 5 11 3 2 2
Nepal 2 1 1 1 3 2 1 1 2 2 2
Gabon 1 1 2 0 2 1 1 0 0 1 1
Total 129,203 122,913 134,064 127,783 139,600 147,904 149,623 152,228 148,738 151,565 153,869

According to the above detail export information, the demand of the next 5 years of world
coffee market is as follows
Total production by all exporting countries in thousand 60kg bags
Predicted Value
Year Amount Year Average Min Max
2006 129203 2006 124206 112215 136198
2007 122913 2007 127835 115843 139826
2008 134064 2008 130412 118420 142403
2009 127783 2009 133898 121906 145889
2010 139600 2010 136348 124356 148339
2011 147904 2011 139791 127800 151783
2012 149623 2012 143751 131759 155742
2013 152228 2013 147472 135481 159464
2014 148738 2014 151075 139084 163067
2015 151565 2015 153926 141935 165918
2016 153869 2016 156775 144783 168766
2017 159565 147574 171557
2018 162664 150605 174723
2019 165763 153637 177888
2020 168861 156669 181053

20
ICO composite and group indicator prices (annual and
monthly averages)In US cents/lb
ICO
Colombian Other Brazilian
year composite Robustas
Milds Milds Naturals
indicator

2005 89.36 115.73 114.86 102.29 50.55

2006 95.75 116.80 114.40 103.92 67.55
2007 107.68 125.57 123.55 111.79 86.60
2008 124.25 144.32 139.78 126.59 105.28
2009 115.67 177.43 143.84 115.33 74.58
2010 147.24 225.46 195.96 153.68 78.74
2011 210.39 283.84 271.07 247.62 109.21
2012 156.34 202.08 186.47 174.97 102.82
2013 119.51 147.87 139.53 122.23 94.16
2014 155.26 197.95 200.39 171.59 100.43
2015 124.67 151.80 159.94 132.45 88.05
2016 127.31 155.29 163.80 137.78 88.59
2017
January 139.07 164.96 168.61 145.70 108.32
February 137.68 163.67 166.35 145.50 106.49
March 134.07 158.40 160.15 139.67 106.73
April 130.39 154.97 155.40 136.09 103.58
May 125.40 151.41 150.00 131.21 98.36
June 122.39 146.12 143.22 123.71 101.95
July 127.26 152.51 149.66 129.19 104.94
2017 130.89 156.01 156.2 135.87 104.34

21
4.4. Plant Capacity and Production Programme
4.4.1. Plant Capacity
Based on the above demand and supply projection it needs 35,325 tone
green processed coffee on the coming year 2022. This is therefore
the plant capacity of this project is plan to produce 600 tons of Green
coffee and roasted coffee per annum having two parts 70% of the total tone
is export green coffee and the remaining 30 % will be supply roasted coffee
for local and foreign market. The plant will operate 360 days per year, and
8hrs single shift per day.

S/N Description unit Quantity

1 Clean processed we coffee Tone 300
2 Roasted ground and packed coffee tone 60
Total 360

4.4.2. Production Programme

The annual production programme is formulated on the basis of the market
forecast and selected plant capacity. It is assumed that the plant will
achieve 70% and 85% capacity utilization rate in the first and second year,
respectively. Full capacity will be reached in the third year and onwards.
The production programme for total roasted, ground and packed coffee is
shown in Table 4.4.

Table 4.4 annual production programme

Sr. Product Production Year
No. 1 2 3 -10
2 Capacity utilization rate (%) 70 85 100

4.5. Pricing and Distribution

The price of clean green processed coffee export price is 3.7 USD in kg or
140 birr per kg and the price of roasted packed coffee at Addis Ababa is
Birr 200-300per kg. The proposed average price for the project understudy
is Birr 250 per kg. Distribution of the product should be handled by door
to door van delivery to bars and restaurants in order to attract permanent
customers.
22
EXPORT PLAN
Unit Price/kg total price/year
S/N Description unit Qty unit price in USD In Birr
Export market Tone USD5.6/kg
1 300 1,680,000.00 84,000,000.00
2 Local sale Tone 60 250/kg 12,500,000.00
Total 360 96,500,000.00

4.6 Competitors Overview

There are many or few compotators companies in Ethiopia for give a services
of green coffee exporter and supply roasted coffee to local market. but steel
it is happen the supply system .our business work is customer oriented and,
we believe to offer the best services to my customers at reasonable price &
win the competition.
In conclusion, our service compared to the competitors looks like:
 We keep the promise we make
 Quality service is our motto
 Transparent price setting and fixed price will be bases to win the
competitors
5. TECHNICAL ANALYSIS

5.1. Production Process

Milling or De-husking: Milling the beans is the process of removing the

remaining layers of fruit from the coffee to reveal the bean. A machine gently
tumbles the coffee berries before being prepared to export generally

Polishing
This step is not entirely necessary. If there is any silver skin remains on the
beans after the hulling process, it is removed with a polishing machine.
Apart from the looks, there is no difference between polished and
unpolished beans.

23
Grading & Sorting

Before exportation to be tasted, beans must be checked for imperfections

and other flaws. Only the best beans are allowed to continue, much like the
‘sorting squirrels’ in the recent Willy Wonka film. During this process, they
will also be sorted depending upon size. Beans are organised on a scale of
10 to 20, where each number represents the diameter of the bean in factors
of 1/64 inch. E.g. A number 14 will be 14/64 inches in diameter. They are
sorted based on their size and also weight using an air jet. Finally,
inadequate beans are removed by use of machinery or by hand. They will be
removed if they are of unsatisfactory size, colour or any other means.

Exporting
After milling, beans can be referred to as ‘green coffee’ and are then loaded
onto ships to be transported to the importing country. They are packaged in
large sacks into containers on a barge with approximately of coffee being
exported every year.

Tasting

Throughout this complicated process, beans are continuously tested for

their taste and quality. This is called ‘cupping’ and is quite a simple process.
It is only done in rooms designated for such reason. The ‘copper’ visually
analyses the beans for quality, roasts them, grinds them up and mmediately
infuses them with boiling water. The cupper ‘noses’ ie. smells the coffee to
experience its smell and feel. Once settled, they break the crust on top of the
brew and smells once more. The coffee is then slurped, the idea being to
make as much noise as possible and allow the coffee to mix with air in your
mouth. Much like wine, the coffee is spread out amongst the mouth,
reaching the roof before it is spat out. Samples are taken from a variety of
loads to ensure consistency and beans are tested daily. As well as ensuring
quality, the coffee is tasted in this way as it can indicate what blends will

24
work well together. Experts can decipher very subtle differences between
hundreds of cups a day.
Roasting
At this stage, beans are still green and therefore need to be transformed into
the lovely brown beans we can buy at supermarkets today. They are
effectively put into a rotating oven which is kept at a temperature of almost
300 degrees C. They are kept moving continuously throughout the roasting
and start to turn brown once the reach a temperature of 200 degrees C. At
this point, the oil, caffeol, from inside the beans begins to emerge in a
process called pyrolysis. This is what creates the flavour and aroma of our
drinkable coffee. Once perfectly roaster, beans are removed and are cooler
either on racks by air or by water and are straight off the the consumer.
Grinding
Coffee is ground with the purpose of releasing all of the flavour into the cup
of coffee. The type of grinding, how finely it is ground, is entirely dependent
upon the brewing method that will be used. Finer ground coffee should be
used quicker than less ground coffee “coffee ground for use in an espresso
machine is much finer than coffee which will be brewed in a drip system.”

25
5.2. Raw Materials, Cost and Utilities
5.2.1 Raw and auxiliary materials
The principal raw material required by the plant is Green wet coffee and
major auxiliary materials in the production of roasted, ground and packed
coffee comprise packing materials of various type and quality. The packing
materials to be used by the plant ar e paper bag, corrugated paper box
with carton panel, and gumming paper.

The principal raw material required by the plant is clean green coffee.
During roasting process the green coffee beans loose weight due to
evaporation of water. The extreme limits of the weight loss termed as “a
loss in the fire” are between 14 and 23 per cent of the initial weight of
coffee beans. Elimination of the silver skin of coffee beans that amounts
from 0.2% to 0.4% and the release of certain volatile elements also
occurs during roasting.
The major auxiliary materials in the production of roasted, ground and
packed coffee comprise packing materials of various type and quality. The
packing materials to be used by the plant are paper bag, corrugated paper
box with carton panel, an d gumming paper.

The estimated annual requirement for printed paper bag at 100 per
cent capacity utilization rate and the corresponding cost estimates are
given in Table 5.1.

Paper bag of required size, quality and desired number of colours can
be available from local private or public paper factories on an order
basis.
Table 5.1. Project raw materials
Unit cost
S/N Description Unit Qty/tone Total cost
/kg
1 Average wet coffee Tone 360 125 45,000,000.00
2 Corrugated paper box and panel pcs -
500gm pcs 10,000 12 120,000.00
100gm pcs 20,000 12 240,000.00
1500gm pcs 5,000 17 85,000.00

26
 3 Gumming paper pcs -
500gm pcs 1,000 35 35,000.00
100gm pcs 1,200 35 42,000.00
1500gm pcs 300 35 10,500.00
Total 45,532,500.00

5.3.2. Utilities
The project utilizes water and electric power as the main utilities. The
annual demand and cost in unit and monetary terms are presented in the
below table.
5.2. Project utilities
Description Quantity Unit price in birr cost/year
Electricity 1740 kwh 1.38 2400
water 125m3 12 1500
fuel expense 10,000 litter 20 200,000
Other oils and lubricants Ls 100,000
Total 303,900.00

5.3. Machinery and Equipment

Table 5.3 project machine equipment
Unit cost in Total Cost
S/n Description Qty
birr in Birr
1 Green Coffee processing machine
CIMBARA pre- cleaner delta 142.1-lh 1,100,000.00
1 1,100,000.00
version
CIMBARA Elevator EC6 in galvanized steel 1 350,000.00 350,000.00
CIMBARA pipe magnet separator PM2 1 200,000.00 200,000.00
cross beater coffee huller SSM 500 2 800,000.00 1,600,000.00
CIMBARA grader delta 126 1 2,000,000.00 2,000,000.00
Screw Conveyor SU 150 1 400,000.00 400,000.00
Dust Collecting System 1 1,600,000.00 1,600,000.00
CIMBARA Belt Convertor GT 400 1 400,000.00 400,000.00
subtotal 7,650,000.00
Coffee roasting, grinder and packing
2
machine
Coffee Roaster 2 600,000 1,200,000.00
Coffee Mixer 2 200,000 400,000.00
Coffee Grinder 6 180,000 1,080,000.00

27
 Automatic Packing m/c 2 500,000 1,000,000.00
Subtotal 3,680,000.00
3 Generator 2 850,000 1,700,000.00
4 Fright and insurance expense 800,000.00
-
Total 13,830,000.00

The total Office furniture and vehicles at estimated cost of Birr 7.3million,
of which, two ISUZU FSR cost at birr 3 million and two Pick up Toyota at
cost of 2.4 million ETB The detail as followers :-

Table 5.4 Office furniture and vehicles

S/n Description Qty Unit cost Total Cost (Br.) Remark
1 ISIZU track 2 1,500,000.00 3,000,000 Duty free
2 Pickup 2 1,200,000.00 2,400,000 Duty free
3 Minibus (Van) 2 850,000.00 1,700,000 Duty free
Computers and
Ls - 100,000
4 accessories
5 Office furniture 100,000
Total 7,300,000

5.4. Land, Building and Civil Works

The overall land required is about 14,000 square meters. Land lease cost is
calculated at the current Oromia land lease cost price and the promoter pay
10% in advance for land holding and construction cost. government has
following significances the remaining amount paid within 40 years per year
Land use plan of the project
A properly designed building will be constructed which insures smooth
functioning of all operations. The building will have a well-ventilated
appropriate Coffee Roasting Grinding and packing factory area the structure
includes separate rooms and other different activates the detail as follows
Table 5.5. Description of Land use plan
S/n Description Area/m2
1 Factory building of Green coffee processing 4000
2 Factory building of roasted coffee 3500
3 Office building and cafeteria(G+1) 500
5 Store for raw material 1500
28
 6 packaging and store for output product 2000
7 sales shop 500
8 Waste treatment plant Area 500
9 Generator and pump house 100
10 Guard house 100
garden area 300
11 parking area 1000
Total 14,000.00

5.5. Environmental Impact Assessment

The project will seriously involve itself protecting conserving and developing
the natural and flora of the project area in line with the millennium
development goal. To this to will play a vital role in participating the varies
organization and the community around the project area to from an
environmental commute in charge of all environmental issues to be handled
in accordance to varies environmental and water policies of 97/99.
The owner of the project believes to undertake several environmental issues
for the conservation development and creation of sustainable environmental
around the project area.

5.6. Implementation Schedule

The actual implementation of the coffee processing and roasting industry is

plans to begin on the March 2022. The major activities investigate are land
acquisition and preparation, construction of the building, Delivery of Plant
machinery, installation, Man power requirement and starting the
production. Undertaking of civil design works and execution of construction
works which will be taking 6 months. The FOB delivery of plant machinery
and equipment will take 4 months allowing additional one month for sea
freight and clearing, the delivery of plant of project site and installation
machineries requires 4 month. Man power requirement and training will
take 4 months when it is completed the above works it will be start the
production.

29
 The provision of infrastructural facilities such as Electric Power and water
will be carried out in the course of construction project and implementation
schedule. Other activities such us system development, procurement of low
and other supplies will also be duty performed to ensure that everything is
in place by ready the time of plant operation . All the project plan is
expected to take 14 months for completion of parallel and series task, the
detail are given below

Table 5.6. Implementation schedule

(Months) in Gregorian Calendar 2017/18

Duration
Description 2 3 4 5 6 7 8 9 10 11 12 1
Acquisition of Investment Land 2 Month x x
(March 2022)
Bank Loan process 3 months x x x
Land Cleaning and preparation 3 month x x x
Building Construction 6 month x x x x x x
Delivery of Plant machinery 5 month x x x x x
Installation and preparation 4 month x x x x
Recruitment of man power 4 month x x x
Start production 1 month
Customers, timely availability all the week including week end days,
customer care, and quick response to the feedback from clients.

30
6. ORGANIZATIONS AND MANAGEMENT

6.1 Organizational Structure

The project will have three main units, namely, production & technical unit,
marketing unit and admin and finance units under the office of the project
manager.
The main responsibility of production and technical unit is for operational
and technical aspects of production and maintenance. The marketing unit is
responsible for procurement of inputs and sales activities. The admin and
finance unit is responsible for controlling and guiding personnel and for
controlling and maintaining all financial accounts.

The organization structure presented below is envisaged to have taken the

activities of proposed project, and the manpower requirement is determined
based on this structure.

Project Owner

Production Manager

Secretary

Factory& Marketing Admin &

technical Unit Unit finance Unit

6.2 Management
As to the management of the project is concerned the owner will be
responsible for the overall project planning, co-ordination and
implementation. After project implementation the promoter serves as a top
management body and frequently visits and supervises the plant.

31
The Coffee processing and Roasting factory promoter is a business man who
has a long year experience in managing business activities. Therefore, the
extensive experience he has enables him to organize and properly manage
the industry.

6.3 Manpower Requirement

For smooth and efficient operation of the farm it has been anticipated that
each units will have adequate number of qualified and experienced
manpower. The manpower component of the factory will include factory
Manager, unit managers, technical experts, machine operator and assistant,
mechanics, and other admin stuffs.

Manufacturing is manpower intensive and requires trained technical

manpower for an effective production and management. The main activities
of the industry are production, cutting, packaging and supply to the market.
The manpower ready and capable of such responsibility should be arranged
during the planning phase of the establishment of the Industry.

The owner will hire qualified and experienced business marketing whose
main responsibility is to coordinate the overall activity of the project. The
marketing manager is accountable for the owner. Likewise, each main unit
will have their own managers that are accountable for the farm manager.
For the day-to-day activities, the project will hire professional and
nonprofessional employees.

The distinct units have their own operational teams under them. To fill in all
these work units with the required manpower the project needs 153
permanent employees out of this (33 skilled and 120 unskilled) and 200
casual (50skilled and 150 unskilled) employees for smooth operation of the
project, employees will be given on job training, clear duties and
responsibilities under the direct supervision of their respective units.

32
Table 6.1: Manpower Requirement
Monthly Annual
S/n Description of Job Qualification No.
salary Salary(Br)
1 General Manager CEO 1 10,000.00 120,000.00
Secretary Ba in secretarial 1 7,000.00 84,000.00
Accountant diploma in accounting 1 8,000.00 96,000.00
Personnel and
BSc in Accounting 1 7,000.00 84,000.00
General Service
Commercial Head BSc in Accounting 1 7,000.00 84,000.00
Green coffee
1.1
processing project
Site Manager BSc in Management 1 7,000.00
Secretary Ba in secretarial 1 5,000.00 60,000.00
Quality Controller MA in chemistry 1 8,000.00 96,000.00
Finance and
Administrative BSc in Accounting 1 5,000.00 60,000.00
Head
Purchaser BSc in management 1 5,000.00 60,000.00
Sales man Ba in Marketing 1 5,000.00 60,000.00
cleaner 8th Grade 1 1,500.00 18,000.00
Daily labor No skill 60 600.00 432,000.00
Coffee rousting and
1.2
packaging factory
Site Manager diploma in accounting 1 7,000.00 84,000.00
Secretary diploma 1 5,000.00 60,000.00
Quality Controller diploma in marketing 1 8,000.00 96,000.00
Finance and
Administrative diploma in marketing 1 7,000.00 84,000.00
Head
Commercial Head BSc in Marketing 1 7,000.00 84,000.00
Purchaser Ba in Marketing 1 5,000.00 60,000.00
Sales man Ba/Diploma in marketing 1 5,000.00 60,000.00
Electrician Electrician 1 4,000.00 48,000.00
Mechanic TVET 1 4,000.00 48,000.00
cleaner 8th Grade 4 1,500.00 72,000.00
Guard 8 th Grade 4 1,500.00 72,000.00
Driver 8 Grade 4 3,000.00 144,000.00
Daily labor no skill 60 600 432,000.00
Total 153 2,598,000.00

33
7. FINANCIAL STUDY
General
Financial analysis of the proposed project of Coffee processing, Roasting and
export factory will be projected to test the financial visibility if the
investigated organization. Quantifying both project cost and benefits over
the assumed project life, which is ten years, made the project visible.
Besides it has been tried to make a realistic forecasting of costs and the
benefits based in current market price of all necessary materials. Once the
anticipated Coffee Roasting Grinding and packaging factory operation has
been attained both projects cost and revenue is estimated to be consumed to
be compensated by increasing in sales revenue

7.1 Fixed costs

Fixed cost that include Land development, Building and civil work,
machinery equipment and vehicles and office furniture estimated birr 46.7
million, which is 52 % of the total project.
Table 7.1 land development
S/n Description Qty
1 Land clearing and leveling 2,000,000.00
2 Land lease cost(10%) 4,000,000.00
3 Water well drilling 1,000,000.00
Total 7,000,000.00
Table 7.2 Building and civil works
S/n Description Area/m2 Unit Price (Br)
1 Factory building of Green coffee processing 2000 6,000,000.00
2 Factory building of roasted coffee 1500 6,000,000.00
3 Office building and cafeteria(G+1) 500 5,000,000.00
5 Store for raw material 1500 5,000,000.00
6 packaging and store for output product 2000 5,000,000.00
7 sales shop 500 500,000.00
8 Waste treatment plant Area 500 500,000.00
9 Generator and pump house 100 100,000.00
10 Guard house 100 200,000.00
garden area 300 100,000.00
11 parking area 1000 1,000,000.00
Total
10,000.00 29,400,000

34
Table 7.3 List of machinery and equipment’s and cost
S/n Description Quantity Unit cost Total Cost
Green Coffee processing
1
machine
Coimbra pre- cleaner delta 1,100,000.00
1
142.1-lh version 1,100,000.00
Cimbara Elevator EC6 in galvanized 350,000.00
1 350,000.00
steel
cimbara pipe magnet separator 200,000.00
1 200,000.00
pm2
cross beater coffee huller ssm 500 2 800,000.00 1,600,000.00
cimbria grader delta 126 1 2,000,000.00 2,000,000.00
Screw Coneyor su 150 1 400,000.00 400,000.00
Dust Collecting System 1 1,600,000.00 1,600,000.00
Cimrraja Belt Convertor GT 400 1 400,000.00 400,000.00
subtotal 7,650,000.00
Coffee roasting, grinder and
2
packing machine
Coffee Roaster 2 600,000 1,200,000.00
Coffee Mixer 2 200,000 400,000.00
Coffee Grinder 6 180,000 1,080,000.00
Automatic Packing m/c 2 500,000 1,000,000.00
Subtotal 3,680,000.00
3 Generator 2 850,000 1,700,000.00
4 Fright and insurance expense 800,000.00
-
Total 13,830,000.00

Table 7.4.Procurement of Vehicles and furniture’s

S/n Description Qty Unit cost Total Cost (Br.)
1 ISIZU track 2 1,500,000.00 3,000,000
2 Pickup 2 1,200,000.00 2,400,000
3 Minibus (Van) 2 850,000.00 1,700,000
4 Computers and accessories Ls - 100,000
5 Office furniture 100,000
Total 7,300,000

35
Table 7.5 Summary of Fixed asset
S/n Description Estimate Cost birr
1 land lease and development cost 7,000,000
2 Building & Constructions 29,400,000
3 Machinery and equipment 13,830,000
4 vehicles and office furniture 7,300,000
Total 57,530,000

7.2 Production costs

Production cost of the project includes direct production and overhead costs.
The major cost item under this category includes cost of material and labour
inputs, fuel and lubricants, repair and maintenance, employee salary and
benefits, insurance, office supplies and other miscellaneous expenses; the
total estimated production cost is 52.7million which 48 % of the total project
capital is.
The raw washed and sundered coffee is available from ECX market the
average purchase price of washed and sundered coffee are birr
1400/fersula(17kg) and 900birr/fersula (17kg) respectively. According to
this price analysis the total estimated working capital of purchasing
capacity is 45.5 million birr.

7.2.1 Direct production costs

Table 7.6.Raw materials
Unit
S/N Description Unit Qty/tone Total cost
cost/kg
1 Average wet coffee Tone 360 125 45,000,000.00
Corrugated paper box
2 pcs -
and panel
500gm pcs 10,000 12 120,000.00
100gm pcs 20,000 12 240,000.00
1500gm pcs 5,000 17 85,000.00
3 Gumming paper pcs -
500gm pcs 1,000 35 35,000.00
100gm pcs 1,200 35 42,000.00
1500gm pcs 300 35 10,500.00
Total 45,532,500.00

36
Table 7.7 Utilities

Description Quantity Unit price in birr cost/year

Electricity 1740 kwh 1.38 2,400.00
water 125m3 12 1,500.00
fuel expense 10,000 litter 20 200,000.00
Other oils and lubricants Ls 100,000
303,900.00

7.2.2. Overhead cost

 Employee benefits : It includes medical expense, uniform and other
incentive package and assumed to be 25% of annual salary expense =
birr 649,500
 Travel expense: It is assumed to be 10% of annual salary expense i.e.
birr 259,800
 Repair and maintenance

Description Percent Estimated birr

Land lease development cost 2 140,000.00
Building & Constructions 2 588,000.00
Machinery and equipment 3 414,900.00
Vehicles & furniture’s 5 365,000.00
Total - 1,507,900.00

 Insurance: It is assumed to be 1% of fixed investment cost = birr

575,300/year.

 Office supplies: Including stationery and sanitary supplies annual

cost of birr 100,000 considered.

 Miscellaneous expense: It includes cost of land rent, telephone and

postage, audit, legal and license fees and other miscellaneous

expenses. The total annual cost of these cost components is estimated

to be birr 122,000 /year.

37
Table 7.8Determination of Initial Working capital requirement

S/n Cost item Annual cost(Birr)

1 direct cost
1.1 Raw product purchasing cost 45,532,500
1.3 Utilities 1,215,600
Sub total 46,748,100
2 Administrative costs
2.1 Salary and wage 2,682,000
2.2 Employee benefits 670,500
2.3 Travel expense 268,200
2.4 Repair and maintenance 1,150,600
2.5 Insurance 575,300
2.6 Telephone and wifi expense 300,000
2.7 Advertising expense 100,000
2.8 Office supplies 100,000
2.9 Miscellaneous expense 122,550
Sub total 5,969,150
Initial W.C. requirement 52,717,250

38
7.3 Project Capital and financing
7.3.1 Project Capital
The total investment capital of the project is estimated at birr 110,247,250
which birr 57,530,000 (52 %) is for fixed investment items while the
remaining balance of birr 52,717,250 (48%) will be production cost capital.
The detail of investment capital of the project is given below:
Table 7.9Project capital

Investment capital
S/n Item
(Br.)
1 Fixed cost
1.1 Land lease & development cost 7,000,000
1.2 Building & Constructions 29,400,000
1.3 Machinery and equipment 13,830,000
1.4 vehicles and furniture 7,300,000
2 57,530,000
2 3 month working cost
2.1 direct cost 46,748,100
2.2 Admin cost 5,969,150
Sub total 52,717,250
Total 110,247,250

7.3.2 Financing working capital

The total investment capital of the project is 110,247,250 to be financed
from the promoter’s equity and bank loan. Out of the total capital
77,173,075 (70%) birr at margin is needed from local bank and the
remaining 30 % birr 33,074,175 contribute from owners’ equity
(ELSAABET QAJEELAA EBBAA). The bank loan will be repaid based on the
following terms and conditions:
 Loan amount = birr 77,173,075
 Installment period/ term =10 year
 Interest on loan (including service charge) = 14.5%

39
 Year
Principal Interest
Year ending
Repayment Payment Balance
0 - - 77,173,075
1 7,717,308 11,190,096 69,455,768
2 7,717,308 10,071,086 61,738,460
3 7,717,308 8,952,077 54,021,153
4 7,717,308 7,833,067 46,303,845
5 7,717,308 6,714,058 38,586,538
6 7,717,308 5,595,048 30,869,230
7 7,717,308 4,476,038 23,151,923
8 7,717,308 3,357,029 15,434,615
9 7,717,308 2,238,019 7,717,308
10 7,717,308 1,119,010 0
0

Depreciation of fixed investment items

The straight-line method has been used to depreciate/amortize all fixed
items of the project. The depreciation rate applied for all fixed assets is given
below:
Table 7.11 Depreciation Schedule
Annual Depreciation
S/n Item Original Value Amount
%
(Br.)
1 Land development 7,000,000 5 350,000
2 Building & Constructions 29,400,000 5 1,470,000
3 Machinery and equipment 13,830,000 10 1,383,000
4 vehicles and furniture 7,300,000 7 511,000
Total 57,530,000 - 3,714,000

40
Table 7.12Summary of project Annual production costs

S/n Cost item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1 Direct cost
Raw product purchasing
1.1 47,809,125 50,199,581 52,709,560 55,345,038 58,112,290 61,017,905 64,068,800 67,272,240 70,635,852
cost 45,532,500
1.3 Utilities 1,215,600 1,276,380 1,340,199 1,407,209 1,477,569 1,551,448 1,629,020 1,710,471 1,795,995 1,885,795
Sub total 46,748,100 49,085,505 51,539,780 54,116,769 56,822,608 59,663,738 62,646,925 65,779,271 69,068,235 72,521,647
2 Administrative costs - 0
2.1 Salary and wage 2,682,000 2,816,100 2,956,905 3,104,750 3,259,988 3,422,987 3,594,137 3,773,843 3,962,536 4,160,662
2.2 Employee benefits 670,500 704,025 739,226 776,188 814,997 855,747 898,534 943,461 990,634 1,040,166
2.3 Travel expense 268,200 281,610 295,691 310,475 325,999 342,299 359,414 377,384 396,254 416,066

Repair and maintenance 1,150,600 1,208,130 1,268,537 1,331,963 1,398,561 1,468,490 1,541,914 1,619,010 1,699,960 1,784,958

Telephone expense 575,300 604,065 634,268 665,982 699,281 734,245 770,957 809,505 849,980 892,479
2.4 Insurance 300,000 315,000 330,750 347,288 364,652 382,884 402,029 422,130 443,237 465,398
2.6 Advertising expense 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
2.7 Office supplies 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
2.9 Miscellaneous expense 122,550 128,678 135,111 141,867 148,960 156,408 164,229 172,440 181,062 190,115
Sub total 5,969,150 6,267,608 6,580,988 6,910,037 7,255,539 7,618,316 7,999,232 8,399,193 8,819,153 9,260,111

Total cost working capital 55,353,113 58,120,768 61,026,807 64,078,147 67,282,054 70,646,157 74,178,465 77,887,388 81,781,757
52,717,250

Note: Production costs are assumed to increase by 5% annually.

41
7.4 Revenue projection
The project will collect its revenue from the provision of the majority 70% of
the production services is export processed green coffee and 30 % of the
production services is supply Roasted coffee for local and export market. The
following are detail output for fully production capacity

Table 7.13 Description of revenue projection

total
Unit Price/kg price/year
S/N Description unit Qty unit price in USD In Birr
1 Export market Tone 300 USD5.6/kg 1,680,000.00 84,000,000.00
2 Local sale Tone 60 250/kg 12,500,000.00
Total 360 96,500,000.00

42
 7.5 Financial statements
7.5.1. Projected Profit/loss statement

ELSAABET QAJEELAA EBBAA

COFFEE PROCESSING, ROASTING AND EXPORT FACTORY
Projected profit/loss statement
Table 7.14 Project Profit/loss statement
In ‘birr

Project Year
Description 1 2 3 4 5 6 7 8 9 10
Revenue 111,800,000 117,390,000 123,259,500 129,422,475 135,893,599 142,688,279 149,822,693 157,313,827 165,179,519 173,438,495

Less: Production costs 62,564,400 65,692,620 68,977,251 72,426,114 76,047,419 79,849,790 83,842,280 88,034,394 92,436,113 97,057,919

Gross Income 49,235,600 51,697,380 54,282,249 56,996,361 59,846,180 62,838,488 65,980,413 69,279,434 72,743,405 76,380,576

Less: Interest on loan 12,189,582 10,970,623 9,751,665 8,532,707 7,313,749 6,094,791 4,875,833 3,656,874 2,437,916 1,218,958

Less: Depreciation 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000

Profit before tax 33,332,018 37,012,757 40,816,584 44,749,654 48,818,431 53,029,698 57,390,580 61,908,559 66,591,489 71,447,617

Less: Income tax (35%) 11666206.44 12954464.80 14285804.30 15662379.02 17086450.70 18560394.19 20086703.10 21667995.68 23307021.12 25006666.07

Net Profit 21,665,812 24,058,292 26,530,779 29,087,275 31,731,980 34,469,304 37,303,877 40,240,563 43,284,468 46,440,951

Note: Sales revenue is assumed to increase by 5% annually

43
 7.5.2. Projected cash flow statement
ELSAABET QAJEELAA EBBAA
COFFEE PROCESSING, ROASTING AND EXPORT FACTORY
Projected cash flow statement
Table 7.15 Project cash flow Statement

Project Year
Description
0 1 2 3 4 5 6 7 8 9 10
Cash Inflow
Equity 33,074,175 - - - - - - - - -
Bank loan 77,173,075
Revenu 96,500,000 101,325,000 106,391,250 111,710,813 117,296,353 123,161,171 129,319,229 135,785,191 142,574,450 149,703,173
Depreciation 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000 3,714,000
Total Inflow 110,247,250 100,214,000 105,039,000 110,105,250 115,424,813 121,010,353 126,875,171 133,033,229 139,499,191 146,288,450 153,417,173
Cash Out Flow
Fixed Cost 57,530,000 - - - - - - - - -
Initial W.C 0 52,717,250 55,353,113 58,120,768 61,026,807 64,078,147 67,282,054 70,646,157 74,178,465 77,887,388 81,781,757
Loan
7,717,308 7,717,308 7,717,308 7,717,308 7,717,308 7,717,308 7,717,308 7,717,308 7,717,308 7,717,308
Repayment
Tax 35% 10,107,529 11,265,380 12,461,542 13,697,929 14,976,552 16,299,524 17,669,062 19,087,494 20,557,265 22,080,942
Total Out flow 57,530,000 70,542,086 74,335,800 78,299,617 82,442,043 86,772,006 91,298,886 96,032,526 100,983,266 106,161,961 111,580,007
Net Inflow - 29,671,914 30,703,200 31,805,633 32,982,770 34,238,347 35,576,285 37,000,703 38,515,924 40,126,490 41,837,166
Cumulative
- 29,671,914 60,375,113 92,180,746 125,163,516 159,401,862 194,978,147 231,978,850 270,494,775 310,621,265 352,458,430
balance

44
 7.5.3.Balance sheet

ELSAABET QAJEELAA EBBAA

COFFEE PROCESSING, ROASTING AND EXPORT FACTORY
Balance sheet
Table 7.16 balance sheet
Liabilities and
Description Asset capital
Current Asset
Direct cost
Row material, chemicals and reagents 45,532,500
Utilities and lubricants 1,215,600
Total Direct cost 46,748,100
Variable /admin cost
Salary and wage 2,682,000
Employee benefits 670,500
Travel expense 268,200
Repair and maintenance 1,150,600
Insurance 575,300
allowance for drinking Milk 300,000
Advertising expense 100,000
Office supplies 100,000
Miscellaneous expense 122,550
Total Admin cost 5,969,150
Total Production cost 52,717,250
Fixed Asset
Land development 7,000,000
Building & Constructions 29,400,000
Machinery and equipment 13,830,000
office furniture and vehicles 7,300,000
Total Fixed cost 57,530,000
Total asset 110,247,250
Liability and capital
Liability (Loan payable) 77,173,075
Initial capital 33,074,175
Total Liability and capital 110,247,250

45
 7.2.3. Viability and other measurement

ELSAABET QAJEELAA EBBAA

COFFEE PROCESSING, ROASTING AND EXPORT FACTORY
Financial IRR computation
Table 7.16 Financial IRR computation
In ' birr

Year 0 1 2 3 4 5 6 7 8 9 10
Gross income 96,500,000 101,325,000 106,391,250 111,710,813 117,296,353 123,161,171 129,319,229 135,785,191 142,574,450 149,703,173
Total costs 110,247,250 52,717,250 55,353,113 58,120,768 61,026,807 64,078,147 67,282,054 70,646,157 74,178,465 77,887,388 81,781,757
Gross profit -110,247,250 43,782,750 45,971,888 48,270,482 50,684,006 53,218,206 55,879,117 58,673,072 61,606,726 64,687,062 67,921,415
Less: Profit tax 15,323,963 16,090,161 16,894,669 17,739,402 18,626,372 19,557,691 20,535,575 21,562,354 22,640,472 9049001.6
After tax net
-110,247,250 28,458,788 29,881,727 31,375,813 32,944,604 34,591,834 36,321,426 38,137,497 40,044,372 42,046,591 58,872,414
benefit
DF at 35% rate 1 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.05
Present Value -110,247,250 71,506,500 55,627,425 43,194,848 33,624,955 26,157,087 20,321,593 15,776,946 12,356,452 9,552,488 7,485,159
Net present
185,356,202 - - - - - - - - - -
Value
DF at 30% rate 1 0.769 0.592 0.455 0.35 0.269 0.207 0.159 0.123 0.094 0.073

Present Value -110,247,250

74,208,500 59,984,400 48,408,019 39,098,784 31,552,719 25,494,362 20,561,757 16,701,578 13,401,998 10,928,332
Net present
230,093,200 - - - - - - - - - -
Value

46
  NPV (Net Present Value)

It is a method of calculating the expected net gain or loss from project by

discounting rate of all expected future cash inflow and outflows to the
present point in time In the above table shoes that NPV at 30% and 35 %
discount rate is 230 million and 185 million respectively, this figure is
positive value or NPV>0 it is indicate that accepted the project until 30 %
and 35 % of discount rate
 Payback Period(PBP)

The payback period is the amount of time required for a firm to recover its
initial investment in a project, as calculate from cash inflow
Theinvestmentcostandincomestatementprojectionareusedtoprojectthepay-
back period

PBP = Initial investment Cost

Net Profit + Depreciation

= 110,247,250
43,782,750 3,714,000

=2.3=2Years
The payback period =3 is less than the maximum acceptable payback
period (10) therefore accept the project.

 IRR

The internal rate of the project is the rate of discount that radios the present
value of the investigated project to zero. In calculating the IRR, the discount
rate can be adjusted until the NPV becomes Zero or at least as to zero.
Hence, the IRR of this project is calculated as follows
After tax IRR = 30 + 5 (185.4/230 million)
=34.0%
IRR=34.0% of the project returns its initial investment cost within its life

47
 8. SENSITIVITY ANALYSIS

Sensitivity analysis is variant of scenario analysis in which each scenario

represents a change in only one variable, rather than a number of variables.
For the proposed project, the sensitivity of the project has been computed at
30% and 35% for sales reduction, operating cost increase and investment
cost increased accordingly, as described in table 7.16 the result shows that
IRR at 34% operating cost increase and 30 and 35% investment cost
increase and 30% service sales reduction. Predicting among these sales
reduction is more sensitive to the project and it should further expand after
the project proposed life time because in this case NPV equal zero at
IRR=34%
9. RISK ANALYSIS

The major risk of this project shall be high market price fluctuation and
turnover the skilled and trained man power. These risks can be mitigated.
The high staff turnover may be lessened by creating conductive working
atmosphere and providing some benefits. For this project, 25% benefit is
proposed for the permanent employees
Characteristic (Personal) Risk: This is the most important risk, which
should be seriously considered? As to this company, the promoter have
sufficient years of work experience in both government and private
organization (leading private business by engaging themselves), so personal
risk is minimum under this context
Business Risk: The fate of the business is generally found to be dependable.
The demand- supply analysis exhibits the need of the service of the business
organization. According to the overall demand the effect of competitors in
the sector would not be an immediate alarming threat at least for the
coming few years. In additional to this. Long year experience of the owner in
the field will help to react against any adverse situation in the business.
However, the reaction of competitors should be attended. In additional to an
advanced promotional work and sustainable goodwill development by
creating new and best quality products with good service deliveries

48
Collateral Risk: Since the owners of the project are engaged on different
related business, there is no any risk related to collateral. In this regard, the
proposed building and other proposed equipment and the business as a
whole are dependable securities. The experience and skill of the owner as
well as the manager and the other expertise add confidence to the lenders.
Therefore, there is no risk regarding collateral in general.

Construction Risk: Construction risk is one of the most important areas

of risk that need great consideration during project implementation. In the
case of green Coffee processing factory, the construction work of the
proposed building will be made by phase with self-response supervision.
Hence, there is no as such serious risk related to construction work.

All the identified risks, which are related to the universally accepted lending
policy, are to the acceptable level that keeps the lender’s interest in safe
position. Furthermore, the quality of the assets of the company is
dependable and the projected finical reports show that the company will
have a capacity to pay the principal and interest without any problem with
in short period of time.

10. MONITORING AND EVALUATION

Monitoring and Evaluation (M&E) has long been recognized as a vital

aspect of development projects generally and of industrial and services
projects in particular. The monitoring of project performance consists of
the tracking of human, physical and financial resources and the recording
of how they are converted into outputs (project goods and services), and in
turn, outcomes and impacts.

11. CONCLUSION AND RECOMMENDATION

Conclusion: The Project is found to be operationally profitable & has

significant socio-economic benefits. According to the projected income

49
statement, the envisaged project starts earning profit from the first year of
production. The income statement and other profitability indicators show that
the project is viable. The project is believed to have significant social and
economic benefits that accrue to the society beyond those financial returns
to its owner. The most remarkable social benefits can be expressed in terms
of job creation that leads to reduction in the level of unemployment.

Recommendation: The project directly employs 153 persons; therefore,

considering the attractive financial and economic benefits the project is to
produce, the promoter has made the necessary preparation hoping that all
the concerned offices & financial institutions should give their support to
facilitate the implementation of this plan.

50