PROJECT PROPOSAL FOR STEEL AND

METAL PRODUCT MANUFACTURING PLANT

PROJECT TO BE IMPLEMENTED IN ADDIS ABABA CITY

PROMOTER: - ENGINEER ABDI DEREJE GEMECHU

June, 2021

ADDIS ABABA, ETHIOPI

TABLE OF CONTENT
TABLE OF CONTENT..................................................................................................1
EXECUTIVE SUMMARY..............................................................................................3
1. INTRODUCTION....................................................................................................4
1.1. Objective of the project...................................................................................5
1.2. The Economic Significance of the Project........................................................5
1.3. Location and Premises Required.....................................................................7
1.4. Location Map of the Area................................................................................9
2. MARKET STUDY AND PLANT CAPACITY.............................................................10
2.1. Market Study................................................................................................10
2.1.1. Demand and Supply Analysis.................................................................10
2.1.2. Market Prospects....................................................................................11
2.1.3. Marketing Strategy and Promotion.........................................................11
2.1.4. Target customers....................................................................................11
2.2. Plant Capacity and Production Program........................................................12
2.3. Pricing..........................................................................................................12
3. PRODUCTION AND TECHNOLOGY.....................................................................13
3.1. Product Nature and Description....................................................................13
3.2. Raw materials and Input..............................................................................13
3.3. Technology...................................................................................................13
3.4. Production Description.................................................................................13
3.4.1. Production Process.................................................................................13
3.5. Machinery and Equipments..........................................................................17
3.6. Project Design and Engineering....................................................................19
3.7. Building and Construction Works.................................................................19
3.8. Utilities.........................................................................................................19
4. MANPOWER AND ORANIZATIONAL MANAGEMENT............................................20
4.1. Manpower.....................................................................................................20
4.2. Organizational Structure and management...................................................20
4.3. Training Requirement...................................................................................23

1
5. FINANCIAL REQUIRMENT and ANALYSIS...........................................................23
5.1. Total Initial Investment Cost.........................................................................23
5.1.1. Fixed Investment....................................................................................25
5.2. Annual Production Cost at Full Capacity......................................................28
5.3. Financial Analysis and Statements...............................................................30
5.3.1. Underlying Assumption..........................................................................30
5.3.2. Sources of Fund.....................................................................................31
5.3.3. Loan repayment Schedule......................................................................31
5.3.4. Depreciation Schedule............................................................................32
5.3.5. Revenue Projection.................................................................................32
5.3.6. Balance Sheet........................................................................................32
5.3.7. Income Loss Statement...........................................................................33
5.3.8. Cash Flow Statement..............................................................................34
5.3.9. Profitability.............................................................................................34
5.3.10. Break-Even Analysis...........................................................................35
5.3.11. Pay-Back Period..................................................................................35
6. FUTURE DEVELOPMENT...................................................................................35
7. ENVIRONMENTAL IMPACT OF THE PROJECT....................................................36
7.1. Socio-Economic Environment.......................................................................36
7.2. Environmental Impact Assessment of the Project..........................................36

2
EXECUTIVE SUMMARY

1. Project name Steel and Metal product Manufacturing plant

2. Project Owners Engineer Abdi Dereje Gemechu

3. Nationality Ethiopian

4. Project Location Addis Ababa

5. Project Different Steel Productions

Composition
6. Premises 10,000 M2
Required
7. Total Initial Br 120,000,000 of which 30% equivalent to
Investment
36,000,000financed by the owners equity and
Capital
the rest 70% equivalent to 84,000,000financed
through bank loan

8. Employment 450 peoples

Opportunity
9. Benefits of the Produce and supply of quality fiber product, add
factory For The
value to the economy, Source of Revenue,
Region/ Country
Employment opportunity, Save Foreign currency,
Benefit for the Local Community, Stimulate the
Local Economy and technology transfer

3
1. INTRODUCTION

Manufacturing Small and Medium Enterprises (SMEs) make up the largest and
the most important segment of the industrial sector in Ethiopia. In 2000, for
example, SMEs contributed to 68 per cent of gross value of production and
over 80 per cent of employment in the manufacturing sector. As will be shown
below, SMEs, especially the latter, are among the most dynamic and innovative
enterprises in the country. In reviewing the investment and technology policies
of Ethiopia, therefore, it is pertinent that special attention is paid to the pattern
of development and the strengths and weaknesses of SMEs in Ethiopia.

Besides, development of small and medium industries accelerates the fast

economic growth of Ethiopia and will help the nation lay its economy
foundation on strong industrial base. However, there exist constraints on the
transition of these industries to the heavy one.

The government of Ethiopia has developed a conducive investment policy

packages and other sectoral reforms at federal and regional level to attract a
huge private investment including in MSEs for the wellbeing of the nation and
its citizens as a whole. Besides, it is also currently implementing the five years
growth and transformation plan gave a special focus for manufacturing, small,
medium and large industries.

In this regard, the Oromia regional state government has been exerting its
maximum effort to expand investment opportunities in the region, so as to
foster the economic development of the region and subduing the region’s big
enemy that is the trap of poverty. Therefore, the regional government has been
preparing a viable business environment to attract many domestic and foreign
investors so that the dream of making poverty history turns to be true.

4
Therefore, the lucrative market potential and those viable investment policies
attracted the owners of this project to engage in production of metal plant in
Addis Ababa city.

The owners of this envisaged plant have a good business experiences and need
to extend this assets to this plant. Therefore, the owner is very determined to
establish the plant and considers getting the required support from regional
government by considering the existing facts and the multi benefits of this
project.

1.1. Objective of the project

The main objective of the plant is to manufacture metal products and to sale
with reasonable price for domestic and international market (in the future).

1.2. The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the

nation in general and the region in specific with following ways:

A. Supply of Quality fiber related Products

The project under discussion will establish metal plant that will produce
quality and affordable fiber products for the country market. This will benefits
the users to get better product with better price and durability.

B. Value Add

The establishment of this factory will add a value to the manufacturing sector
in specific and in the economy in general.

C. Source of Revenue

As public policy of any nation, the government collects different forms of taxes
from different business organizations and individuals. Among the different

5
forms of taxes, business income taxes, VAT and payroll taxes are collected from
undertaking business activities. Therefore, the factory will serve as sources of
revenue for both the region and nation in general.

D. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the
current objective of the government is working on tackling the problem of
unemployment and fostering the development process either through creating
self employment or employment in other organization. Hence, this factory will
hire around 450 persons.

E. Save the Country’s Foreign Exchange

By minimizing the market gab for metal products demand and supply, the
factory will help to reduce the nation’s foreign exchange cost to import these
materials. This will save the foreign exchange resource of the nation.

F. Benefit for The Local Community

As a corporate responsibility the company will engage in different development

activities on the surrounding areas (Gala district). This will better worse the
community and contribute for the development of the region.

G. Stimulate the Local and National Economy

This factory has positive externality in the zone that will encourage the
economic movement of local economy. Hence, there will be economic
relationship and transactions among different actors.

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 H. Technology Transfer

By producing metal products, the project will train and develops the capacity of
the technical staffs. By doing this, the company will add value in technology
transfer for the nation.

1.3. Location and Premises Required

i. Location

The envisioned project is planned to be located in Addis Ababa city . The main
justifications behind the selection of this location are:

 Strategically located to the central and largest market of the nation

(Addis Ababa)

 Relatively advanced development in infrastructure (Power, Water,

Telephone internet, road etc.

 All road to the nearest market outlets

 Accessibility of skilled labor force

 Conducive investment policy and governance

 Environmentally fit to manufacturing industry.

ii. Premises Required

The total land holding of the project is 10,000 M 2, the premises required
planned as follows in table 1

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 Table 1. Premises Required and Land Use Plan

No Description Land Requirement

1 Production Hall 5,000M2

2 Warehouse

2.1 Raw Material & Input 1,000M2

2.2 Finished Products 1,000M2

  Total Warehouse 7,000M2

3 Office Building 1,000M2

4 Shop and Showroom 1,000M2

5 Waste Accumulation area 500M2

6 Green area, Buffer zone and 500 M2

Parking
  Total 10,000M2

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2. MARKET STUDY AND PLANT CAPACITY

2.1. Market Study

2.1.1. Demand and Supply Analysis

The market potential is great because the construction industry is among the
fastest growing sectors of our economy. There is a lot of demand for doors,
gates, windows and burglar proofing etc. This sector is still informal as there
are very many small scale firms spread in major towns and trading centres in
the country.

Besides, the demand for metal goods is increasing with the growth in
investment in different sectors. Consumer demand in the country is growing
for metal products. Increase in purchasing power and changes in designs tend
to increase the demand still further. In addition, demand for Ethiopian nails
products are exports market has gone up considerably in recent years. This
aspect is relevant for the metal manufacturing industry.

At present most of the metal and aluminum factories are involved in

manufacturing household equipments, office, construction materials,
modification of simple molds etc. The main target market of these workshops is
government and next the private individuals.

Manufacturing of modern metal is being introduced to substitute import

products. A few of the workshops are also involved in mold modification works
and use as import substitution. Even though under and over design of

9
modifying machines occur during their start time they have proved that
nothing is impossible if financial strength is kept. Most of the workshops are
also involved in producing construction materials. In this regard, the
establishments of this plant will be helpful in terms of increasing the countries
supply- demand gap by substituting exported items of the sector. The major
products which will be produced by the cluster are described in the table
below: -

2.1.2. Market Prospects

From the above market demand and supply analysis for metal products, there
exist huge market gab in Ethiopian market. Hence, the envisioned factory will
be successful by entering in to this market.

2.1.3. Marketing Strategy and Promotion

The company will follow the following promotional methods:

 Electronic Medias

 Advertising(Media, flayer and news paper)

 Public Relations

 Branding

The marketing strategy mainly focus on the satisfying the needs, orders and
the requirement of the customers.

2.1.4. Target customers

In the local market, the requirement for metal products can be categorized into
Six namely:
 Construction sector
 Newly built house

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  For dowry;
 For renovation;
 For Institutional buyer.
 For offices (public & private sector)

The majority of customers in the domestic market belong to first and second
category. These customers require metal and other home products for their
newly built houses and usually buy range of products like water tanker
shower tree , dining sets and with other materials (door and window) for their

entire house.

2.2. Plant Capacity and Production Program

Considering the gradual growth of demand and the time required to develop
the required skill the rate of capacity utilization during the first, second and
third year of production will be 70%, 85% and 100% respectively. Full capacity
utilization will be reached during the third year of operation. The plant will
operate 450 days per year.

2.3.  Pricing

It would be important to examine the possible level of price based on the

competitor’s action. In this connection, the existing average prices of similar
metal workshop in Addis Ababa were assessed for the benefit of comparison.
Based on the existing price in the market the firm stetted the price as follows;

11
3. PRODUCTION AND TECHNOLOGY

3.1. Product Nature and Description

The factory will produce different products based on the customer desire and
request. In general the following products are designed by the plant to be
produced

The envisioned plant will produce different metal work products based on the
customer desire and order. Besides, it will undertake different maintenance on
demand base.

3.2. Raw materials and Input

The major raw materials required for the production of the nails products
include iron, RHS, aluminum sheet, rectangular bar, round pip, flat bar,
( includes galvanized iron) etc. The required raw materials will be imported or
purchased in the local market.

Different inputs and supplies are necessary to finalize those products.

3.3. Technology
Technologies used in this engineering plant use sophisticated and latest
machineries for a quality and branded products which are export standard. In
different stage of manufacturing- extreme care is required to ensure smooth
polishing and proper platting.

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 3.4. Production Description

In general metal work will have four production parts after the product idea are
generated. i.e., Design, Prototype, Develop and production.

3.4.1. Production Process

Activities performed to change a raw material into output product are called
production process. Production process, which is practiced by most of the
workshops, is similar. In broad, production process comprises pre-production,
on-production and postproduction.

A. Pre- production
Preparation and arrangement of resources are under this stage. The question
what to do? Where to do it? When to do it? Who to do it? All are answered at
this phase of production process.

A well prepared and arranged resources results in production cost reduction

and meeting due time.

Some of the activities involved at this stage are:

 Making a design
 Material selection
 Purchasing of raw material
 Adopting flexibility of production places
 Hiring of skilled workers
 Inspection of raw-material

B. On-production
The already prepared and arranged materials, machineries and human
resources are organized to start the real production process. The strength of

13
this stage depends on the pre-production stage. It needs a managerial skill to
coordinate the resources to achieve desire product.

Some of the activities involved in this stage are:

 Cutting of raw materials according to the specified dimension with

tolerance
 Joining the raw materials according to the design
 Quality control of the welding joints
 Checking up functionality of product

C. Postproduction
Postproduction is the final stage where preparation of product for shipment
under taken. Now the product has got the required design but needs polishing
to give good appearance.

Some of the activities involved in this stage are:

 Grinding
 Sanding
 Painting
 Assembly etc.

Note: Quality inspection activity is practical in all stages to keep the quality of
the product and to decrease scraps and reworks.

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Fig 1 Production Process Flow Chart:

Metal Works

The metal work and fabrication industry is primarily concerned essentially

heating/welding and shearing/forming operations. In view of the high cost of
most new equipment and the relatively long lead-time necessary to bring new
equipment into operation, changes in production methods and products are
made only gradually; even new process technologies that fundamentally change
the industry are only adopted over long periods of time.

Shearing operations cut materials into a desired shape and size and include
punching, piercing, blanking, cutoff, parting, shearing, and trimming activities.
Basically, these produce holes or openings, or produce blanks or parts, the
most common hole-making operation being punching. Cutoff, parting, and
shearing are similar operations with different applications.

15
Forming operations bend or conform materials into specific shapes by turning,
twisting,, drawing, rolling, spinning, coining, and forging metal into a specific
configuration. Bending is the simplest forming operation; the part is simply
bent to a specific angle or shape. Other types of forming operations produce
both two and three dimensional shapes.

Machining refines the shape of a work piece when shearing and forming are
complete, by removing material from pieces of raw stock with machine tools.
The main processes involved are drilling, milling, and turning,
shaping/planning, broaching, sawing, and grinding.

Holding the different pieces together is achieved either by riveting, bolting or

more permanently by welding. Welding is the process primarily used to join
metals, most welds being achieved by fusion in which the materials being
joined are melted at, and around, the joint between them. Most of the welds are
done with a rod of filler material with the resultant weld being composed
primarily of the filler. Increasingly though autogenously welding is catching on,
in which no added material is used. There are also forms of pressure welding
rather than fusion and combinations of the two. Welding is an integral part of
fabricating metal parts so as to form spheroids, boxes and cylinders. The
essential feature of a fusion welding process is a heat source either in the form
of a flame from a gas torch (most often oxyacetylene or propane) or an electric
arc.

16
 3.5. Machinery and Equipments
The following are the list of necessary machineries and equipments for the
envisioned metal and iron workshop plant;

 Sheet aluminum shear

 (Rolling machine)

 Arc Welding machine

 MIG Welding machine

 Portable electric hand grinder

 Portable drill machine

 Circular cutting of machine

 Centre

 Universal milling machine

 Air compressor

 Hydraulic press

 molds

 Pipe bender

 Bedding borderer

 Work bench

17
 Shaping machine

 Welding stand

 Active reactive

 Generator

 Drum machine

 Hydraulic puncher

 Ban saw machine

 Puncher hand operated

 Founder fun

 power hack saw

 Bed starching machine

 Electrical saw

 Electrical hydraulic press

 Steel cutter( round)

 Electrical and manual press

 Portable rotary machine

 Worker Safety kit

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 3.6. Project Design and Engineering

The proposed project comprises stock of different components to be executed at

different phases of the project life. These activities include: Design and
Construction of various buildings (workshops), importing of machineries,
additive chemicals and other raw materials, import of product transporting
medium vehicle

3.7. Building and Construction Works

A very simple building may suffice for an initial startup, the main consideration
being the security of the equipment and secure connections to electrical
supply. The building will have to be designed along factory production lines
allowing for smooth transitioning of the raw materials into completed products
and optimized for maximum efficiencies.

3.8. Utilities

A number of utilities would be put in place in order to ensure smooth

functioning of the factory. These utilities include:

 Water Supply,

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

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4. MANPOWER AND ORANIZATIONAL MANAGEMENT

4.1. Manpower

At the top of the organizational structure, there will be a general manager with
the responsibility of supervising the overall activity of the factory. Depending
up on the nature of the center and the amount of work to be performs; there
will be auxiliary units under the general manager. Employees under each unit
will be supervised by the unit head that is accountable for the general
manager.

The company will use efficient trained staffs in the area of marketing to be
competitive in the market. The opportunities of being serviced by well skilled
professionals well enable the company to evaluate the internal weakness and
strength of the company as well as to assess the global opportunity and risks
in the world market so that the company can cope up with the dynamics of the
market situation. The company will hire 450 employees.

The detail human power requirement, monthly and yearly salary is indicated in
part 5 financial part.

4.2. Organizational Structure and management

The organizational structure of the project is designed by including all the

necessary personnel under the right division. At the top of the organizational
structure, there will be a general manager with the responsibility of supervising
the overall activity of the plant. Employees under each unit will be supervised
by the department head that is accountable for the general manager. General
Manager is accountable to the owner of the factory as indicated in figure 3

20
Fig. 3 Organizational Structure

Owner/s

General
Secretary
Manager

Production Admin. & Marketing &

Dept. Finance Dept. Sales Dept.

Hence the following section deals with the duties and responsibilities of some
departments.

1. Manager
Duties and responsibilities

 She/he will plan, organize, direct and control the overall activities of the
plant
 She/he will devise policies and strategies that will enable the plant to be
profitable.
 She/he will incorporate modern technological innovation that will
facilitate the service delivery of the project center and increase
customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human
resources of the factory so as to achieve the short and long run objectives
of the organization.

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2. The Production Department
Duties and responsibilities:-

It is the core department of the project center and it has the following
responsibilities.

 Design and prepared prototype metal based products based on the plant
standard and customer preferences
 Use modern manufacture, processing technologies that will enhance the
quality of those products.
 Produce quality steel products that will enable the factory competent
both in the domestic and international market.
 Control on the quality of raw materials, inputs, quality of the product
and also the overall production process.
 Produce products in least cost so that the profitability of the center is
guaranteed.
 Moreover control over the quality of the final metal and iron products

3. Administration and Finance Department

Duties and responsibilities:-

 Will plan, organize direct and control the financial transaction of the
factory by using the entire necessary document.
 Will develop sound financial control system by developing modern
financial control systems.
 Will prepare the annual financial statements and prepare condensed
reports for the general manager, owner and other concerned government
body.

22
  Will control the human and non human resources of the plant, which
include: effective handling of the different inventories of the machineries,
equipments, raw materials, finished products, and devise strategies of
controlling against fraud and damage.
 Manage and execute the company national and international
procurement procedure
 Administer and control the company logistic resource
 Provide and manage general supportive service to the factory.

4. Marketing and Sales Department

Duties and responsibilities:-

 Will handle the overall marketing activities of the organization which

include planning, organizing, directing, and controlling.
 Gather information on new products, designs, fashions, profiles etc
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will develop the marketing strategies for future project center’s
development.
 Conduct both foreign and domestic market research for expanding the
sales of the company

4.3. Training Requirement

The production employees of the plant expected to take basic steel work
production skill training for 7 days. In addition training could be given to the
mechanic and to the supervisor will also take skill training from one of TVET
Colleges or similar undertaking factories in Addis Ababa.

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5. FINANCIAL REQUIRMENT and ANALYSIS

5.1. Total Initial Investment Cost

The total amount of money that is required to establish the envisaged plant is
estimated to be birr 120,000,000

Table Total Initial Investment Capital

No Description Cost in birr in Br.

Land, Building & Construction

1 33,442,000
Machines & Equipments
2 30,052,150.00
Vehicles
3 4,800,000
Office Equipment
4 117,650

  Total Fixed Investment Cost 60,411,800

Pre service Expense
5 1,588,200

6 Initial Working capital 36,000,000

  Total 77,000,000
Contingency(Lump sum) 4,006,000
 

  Total Initial Investment Capital 120,000,000

24
 5.1.1. Fixed Investment
A. Building & Construction
No Description Land Total cost in
Requirement(M )
2
br.
1 Production Hall 6,200 18,810,000
2 Warehouse 2500 12,846,000
3 Office Building, Shops & 500
Showrooms 545000
4 Waste Accumulation area 500 521000
5 Green area, buffer and parking 300 180000
6 Fences   150000
7 Site Development   90000
8 Design and supervision   105000
9 Land lease initial   195,000
  Total 10,000 33,442,000

B. Machineries And Equipments

The list of required machinery and equipment is indicated in Table below. The

total cost of machinery and equipment is estimated at Birr 30,052,150.00

Qty.
Type of Machineries and
Equipments Specification UOM
Sheet aluminum shear Up to 3mm thickness/ hand operated Unit 2
Sheet metal roller (Rolling up to 1.5 mm thickness / hand operated / 1.5 Unit 1
machine) - 2.2 m shaft length
Arc Welding machine Min 45 A. max 250A Unit 2
MIG Welding machine Max. 240A Unit 2
Portable electric hand grinder 180mm disc size Unit 2
Portable drill machine Max 13mm chuck size Unit 2

Circular cutting of machine 450mm disc size Unit 2

Centre Three sided jaw , diameter 200mm , center to Unit  3

center 2000mm

25
Universal milling machine Table size 1500X300mm, table swivel in both Unit 1
directions 450 , distance from spindle to over
arm 155mm
Air compressor 300 liter Unit 1
Hydraulic press Min. 5 tons Unit 1 
Oxy-Acetylene welding   Unit 2
equipment
Pipe bender Max. 1 1/2 diameter Unit 2
Bedding borderer   Unit 2
Work bench 150cm length Unit 2
Shaping machine   Unit 1

Welding stand Pair Unit 3

Active reactive   Unit 1
Generator   Unit 1
  Unit 2
Drum machine
  Unit 2
Hydraulic puncher
  Unit 2
Ban saw machine
  Unit 2
Puncher hand operated
  Unit 3
Founder fun
  Unit 1
power hack saw
Bed starching machine   Unit 2

Electrical saw   Unit 2

Electrical hydraulic press   Unit 1

Steel cutter( round)   Unit 1

Bench type grinder   Unit 2

Electrical and manual press   Unit 2
  Unit 2
Band saw
  Unit 2
Portable rotary machine
  Set 1
Worker Safety kit

26
 C. Vehicles
No Description Qty Unit Price in Total Price in Remark
br. br.

1 Pick up, 6 4,800,000 4,800,000

Isuzu truck
and service Duty free
Total     4,800,000
 

D. Office Equipments
No Description Qty Unit cost in Total cost in
br. Br.
1 Managerial Tables 3 2300 6,900
2 Secretarial chairs with table 1 750 750
3 Managerial Chairs 4 1550 12,200
3 Computer and Printer 3 8500 45,500
4 Shelf 2 2500 10,000
5 Filing Cabinets 3 1100 3,300
6 Assembly chair and table(set)     40,000

Total     117,650

E. Initial Working Capital

The initial working capital is estimated to be birr. 36,000,000

F. Pre-Service Expense
No Description Cost in br.
1 Project proposal 10,000
2 Licensing fee and others 1,500
3 Staff Capacity Building 50,000
  Total 61,500

27
 5.2. Annual Production Cost at Full Capacity
i. Raw Materials and Inputs

Sr. No Description UOM Qty Unit Total

Cost Cost in
in Br Br.
1 Cubic 900 400 360,000
aluminum sheet ft
2 Mild aluminum plate Pcs 800 1100 880,000
3 Tube Pipe Pcs 900 20 18,000
4 Angles lines Pcs 400 450 180,000
5 Grilling Disc Pcs 1950 60 117,000
6 Filler paste Pkt 600 1000 600,000
7 Hinges pair 4640 20 92,800
8 U channel Pcs 140 850 119,000
9 Other Inputs(locks, glue, nails, screw LS     185,000
Tapestry dressing, matters,
10 Other Machine supplies LS Lump   25,000
sum
  Grand Total       2,656,800

ii. Salary Expense

No. Description No. Qualification Monthly Annual

Salary in Salary in
br br
1 General manager 1 BA in Business Management 2500 30000
2 Production Head 1 BSC in Industrial Engineering 2000 24000
3 Production Advanced Diploma in
supervisor 2 production technology 1300 31200
4 Draftsman /
Designer 2 Diploma in draft technology 1100 26400
5 Machine man 2 10+2 in general mechanics 900 21600
6 Carpenter 8 10+2 in wood work technology 1200 115200
7 Sales 10+2 in salesmanship and
2 marketing 900 21600
8 Personnel 3 Diploma in HRM 900 10800
9 Finance head 1 BA in Accounting 1300 15600
10 Polish man 3 10+1 in fiber technology 1000 36000
11 Carving 2 10+1 in wood work technology 1000 24000
12 Marketing Head 1 BA in marketing management 1300 15600

28
 13 Metal Worker 10+2 in Metal work
8 technology 1200 115200
14 Helper/laborer 12 10 completed 700  
15 Mechanic 2 10+2 in General mechanics 1000 24000
16 Admin and BA in
Finance Head 1 Management/Accounting 1300 15600
17 Accountant 3 Diploma in accounting 1050 12600
18 Electrician 1 10+2 in general electricity 900 10800
19 Secretary 2 Diploma in secretariat science 800 9600
20 Clerk 1 10 completed 700 8400
21 Store keeper 10+2 in store and logistics
2 management 800 9600
22 Driver 6 10 completed 800 9600
23 Cashier 1 10+2 in Bookkeeping 800 9600
24 Office boy/girl 1 10 completed 700 8400
25 General service 1 Diploma in management 900 10800
26 Security 3 Unskilled 600 21600
27 Gardener 3 Unskilled 600 21600
28 Cleaner 3 Unskilled 600 21600
 29 Others works 200     1681000
 30 temp  120     68100
  Grand Total  450     1,749,100

iii. Other Operating Expenses

Sr. Description Annual Cost in

No br Assumption Used
1% of fixed Investment
1 Property Insurance 604,118 Cost
2 Audit & Legal Fee 4200 350 per month
3 Uniforms 90,000 450*200br
4 Telephone, fax and postal 5,400 450 per month
5 Cleaning goods supplies 6,000 500 per month
2 % of the Fixed
6 Repair and maintenance 1,208,236 Investment Cost
7 Advertisement 155,000 % of sales
Stationery and other office
6 supplies 4,800 400 per month
8 Electricity 75,375 0.335*225,000KW per year
9 Water 4,500 1.5*3,000m3 per year
10 Fuel 60,000 3000 lit*20 per year
11 Oil and lubricant 6,000 10% of fuel cost

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 12 Miscellaneous Expense 36,000 3000 per month
  Total 2,259,629  

5.3. Financial Analysis and Statements

5.3.1. Underlying Assumption

The financial analysis of the envisioned factory is based on the data provided in
the preceding sections and the following assumptions.

A. Construction and Finance

Construction period 16 months

Source of finance 30% equity and 70% loan

Tax holidays 2 years

Bank interest rate 10 %

Operating Costs increase by 5% after year 3

Raw materials and wages increase by 5% after year 3

Salary and wages increase by 3 % after year 3

B. Depreciation

Building 5%

Machinery and equipment 10%

Office furniture 10%

Vehicles 20%

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 C. Working Capital

Accounts receivable 30 days

Raw material local 30days

Work in progress 5 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

5.3.2. Sources of Fund

No Description % share Amount(in birr)

1 Owners Share 30 36,000,000

2 Bank Loan 70 84,000,000

Total 100 120,000,000

5.3.3. Loan repayment Schedule

principal
Year Payment Remaining Balance
0 0 84,000,000
1 8,400,000 71,030378
2 8,400,000 59,360,336
3 8,400,000 49,690,294
4 8,400,000 40,020,252
5 8,400,000 32,350,210
6 8,400,000 24,680,168
7 8,400,000 17,010,126
8 8,400,000 11,340,084
9 8,400,000 8,400,000
10 8,400,000 0.00

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 5.3.4. Depreciation Schedule
Original Depreciation Depreciation
SN Description Value In Birr rate in % Per year
Construction and Civil
1 Work 33,442,000 5 1,272,100.00
Machines &
2 Equipments 30,052,150.00 10 3,005,215.00
3 Vehicles 4,800,000 20 960,000.00
4 Office Equipment 117,650 10 11,765.00
  Total 60,411,800   5,249,080

5.3.5. Revenue Projection

Based on the price and the capacity program of the factory indicated in
previous chapter (chapter 2), the revenue of the factory projected as indicated
in the table below;

5.3.6. Balance Sheet

Asset
Current Asset  

Cash 10,623,766
Inventory of raw materials and inputs
9,376,234
Total Current Asset 20,000,000
Fixed Asset  
Land, Building and Construction
33,442,000
Machineries and Equipments
30,052,150.00
Office Equipment 4,800,000
Vehicles 117,650
Total fixed Asset 60,411,800
Total Asset  
Liability  
Account payable
84,000,000
Owners Equity  

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 Capital
36,000,000
Total Liability & Owners’ Equity
120,000,000

5.3.7. Income Loss Statement

Revenue Year 1 Year 2 Year 3
Sales Revenue
13,874,500.00 14704750 15,535,000.00
Purchase of Raw 12,258,280
Material & Inputs 11,859,760 12,656,800
Gross profit 2,014,740 2,446,470 2,878,200
Expenses      
Salary Expense 636,735
524370 749,100
Other Operating 414,570
Expenses 341,410 487,729.00
Deprecation Building
1,272,100.00 1,272,100.00 1,272,100.00
Deprecation
Machineries 3,005,215.00 3,005,215.00 3,005,215.00
Deprecation Vehicles
960,000.00 960,000.00 960,000.00
Deprecation office
Equip 11,765.00 11,765.00 11,765.00
Interest Expense
362202.12 325981.908 289761.696
Lease payment
45,000 45,000 45,000
Total Expense 1,569,062.42 1,853,151.56 2,002,455.70
Profit Before Tax 445,677.58 593,318.44 875,744.30
Tax(30% ) 0 0 262,723.29
Net Profit 4,445,677.58 5,593,318.44 6,613,021.01

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5.3.8. Cash Flow Statement
 Year Year 0 Year 1 Year 2 Year 3

Equity Capital 36,000,000      

Loan principal 84,000,000      
Net sale 0 13,874,500.00 14704750 15,535,000.00
Total cash in 23,874,500 24,704,750 25,535,000
flow 120,000,000
Cash payment        
Purchase of raw 0 2,258,280
materials 1,859,760 2,656,800
Salary expense 0 524370 636,735 749,100
Pre operating 0 0
expense 61,500 0
Investment 0 0 0
3,881,800
Other Operating 414,570
cost 0 341,410 487,729.00
loan repayment 0
724404.24 688184.028 651963.816
Lease payment
195,000 45,000 45,000 45,000
Tax payment 0 0 0
262,723.29
Total payment
4,138,300 3,494,944 4,042,769 4,590,593
Cash surplus / 379,555.76 661,980.97 944,407.18
Deficit
1,036,016.00

5.3.9. Profitability
According to the projected income statement, the project will start generating
profit in the 1st year of operation. Important ratios such as profit to total sales,
net profit to equity (Return on equity) and net profit plus interest on total
investment (return on total investment) show an increasing trend during the
lifetime of the project.

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The income statement and the other indicators of profitability show that the
project is viable.

5.3.10. Break-Even Analysis

The break-even point of the project including cost of finance when it starts to
operates at full capacity (year 3) is estimated by using income statement
projection.

BE = Fixed Cost / Sales – Variable cost = 57%

5.3.11. Pay-Back Period

The investment cost and income statement projection are used to project the
pay-back period. The project's initial investment will be fully recovered with in
9 year of operation.

6. FUTURE DEVELOPMENT

Every business undertakings be it large or small should have future

development plan. It is a plain fact that business activities are undertook in a
dynamic business nature and different environment. Therefore, the factory will
have an expansion phase depending on the condition of the industry character
particularly in producing the Profile itself by installing the plant. In this regard,
the Factory will expand its capacity and production varieties.

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7. ENVIRONMENTAL IMPACT OF THE PROJECT

7.1. Socio-Economic Environment

The owner will provide the land on lease bases, and all required compensation
will be paid for the project. The Livelihood of the local peoples around the
project area is rural dwellers of various occupation and economic background.

7.2. Environmental Impact Assessment of the Project

Environmental aspects are fundamental for the sustainability assessment of

the current and novel designs of any new project. In this regard the plant will
undertake a separate and detail Environmental impact Assessment.

To assess the impacts and design mitigation measure if any adverse impacts
are there so as to make the project benefited more society and nation.

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