ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the Establishment of Steel

Profile PRODUCING PLANT

Development Studies Associates

(DSA)

July 2016 Revised

Bahir Dar
 Table of Contents

1. Executive Summary............................................................................................1
2. Product Description and Application..................................................................1
3. Market Study, Plant Capacity and Production Program.....................................2
3.1 Market Study...................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................2
3.1.2 Projected Demand....................................................................................................2
3.1.3 Pricing and Distribution...........................................................................................3
3.2 Plant Capacity..................................................................................................................3
3.3 Production Program.........................................................................................................4
4. Raw Materials and Utilities.................................................................................4
4.1 Availability and Source of Raw Materials.......................................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................4
5. Location and Site.................................................................................................5
6. Technology and Engineering...............................................................................5
6.1 Production Process...........................................................................................................5
6.2 Machinery and Equipment...............................................................................................6
6.3 Civil Engineering Cost....................................................................................................7
7. Human Resource and Training Requirement......................................................7
7.1 Human Resource..............................................................................................................7
7.2 Training Requirement......................................................................................................8
8. Financial Analysis...............................................................................................8
8.1 Underlying Assumption...................................................................................................8
8.2 Investment........................................................................................................................9
8.3 Production Costs............................................................................................................10
8.4 Financial Evaluation......................................................................................................11
9. Economic and Social Benefits and Justification...............................................12
ANNEXES...............................................................................................................13
 1. Executive Summary
This profile envisages the establishment of a plant for the production of 2400 tons of steel
profiles per year in Amhara Region.

The present domestic demand for steeled profiles is estimated at 19624 tons per annum. The
demand is expected to grow to 22,469 and 76,005 tons in the years 2001 and 2010, respectively.

The total investment requirement is estimated at Birr 27.05 million out of which Birr 11.0
million or about 41% is for machinery and equipment.

The plant will create employment opportunities for 35 persons.

The project is financially viable with an internal rate of return (IRR) of 25.8% and a net present
value (NPV) of Birr 6.0 million discounted at 18%.

2. Product Description and Application

The steel profiles are products rolled out of billets (pieces of semi-finished steel nearly square in
section made by rolling an ingot). Steel profiles generally are produced in the form of rods,
angles, channels, squares, hexagons etc. from steel billets by using rolling mills.

The main applications of these rolled products are for structural fabrication, house construction
projects, machinery construction in engineering industries etc. The steel profiles are required to
be of standard sizes and pertain to standards like BS/ASTM, DIN etc. the present scheme has
been drawn up on the basis of the general requirement.

1
 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

The end user of steel profiles (structures) is the building construction sector. Building
construction is rapidly growing in the country as well as in Amhara Region. People want to build
condominiums, high-rise buildings for apartment and commercial purpose. Private firms
construct offices, houses, stores and factory buildings all using steel profiles. Although various
types of profiles are manufactured locally (mainly in Addis Ababab, but no single plant in
Amhara Region) for which data couldn’t be produced, the main source of steel profiles is import.

Import of steel profiles is aggregated with steel pipes and steel tubes of cast iron, steel, alloy and
stainless steel. As per the Industrial Project Studies (IPS) estimation, the demand for steel

profiles for the year 1999 is assumed to be about 17,139 tons. Applying the annual growth rate
of the construction sector (14.5%) on this figure, the present (2000) effective demand for steel
profiles is estimated at 19, 624 tons.

3.1.2 Projected Demand

The demand for steel profiles is directly related to the building construction sector. The demand
for steel profile is expected to increase with the ever growing building construction through out
the country. The national plan has forecasted an annual growth rate of 14.5% for the construction
sector. The same growth of building sector and the demand for steel fabricator is assumed to
exist in Amhara Region.

To estimate the next ten years demand for steel profiles, a 14.5 % annual growth rate is adopted
(based on the estimated present demand,) as shown in table 1 below.


Years in this document are in Ethiopian calendar.

2
In this conservative projection, demand for steel profile is increased from 22,469 tons in 2001 to
76,005 tons in 2010. This indicates that it is high time to have a plant that produces steel
structure in Amhara Region.

Table 1
DEMAND PROJECTION FOR STEEL PROFILES

Year Quantity (Ton)

2001 22,469
2002
25,728
2003
25,728
2004
29,458
4005
33,729
4006
38,620
2007 50,632
2008
57974
2009 66,380
2010
76,005

3.1.3 Pricing and Distribution

Based on market survey the average price per ton of steel profiles is about Birr 16,000. Thus this
price is adopted to calculate the sales revenue of the project.

Due to the nature of the product the proposed distribution channel could be direct sale to the end
users through the project’s own channel and through wholesalers.

3.2 Plant Capacity

Considering the time needed for developing production and industrial skill, the plant capacity is
planned to be 2,400 tons of steel profiles per annum. The production capacity is based on a
single shift of 8 hours a day and 275 working days a year. Production can be doubled or tripled
after experience is gained and penetrate the market by introducing additional shifts.

3
 3.3 Production Program

The production program is scheduled in such a way that the plant will assume production at an
initial capacity of 75% of its annual rated output during the first year. During the second and
third years of production, the plant will produce 85%, and 100% of its rated output, respectively.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The principal raw materials and consumables required for the manufacture of steel profiles are
steel billets, rail & plate spares (billets), furnace oil, tools and spares. The raw materials are to be
imported.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material requirements and their corresponding costs for the production of 2,400
tons of steel profiles are estimated at Birr 27.6 million, of which is in local currency, as given in
Table 2.

Electricity, water and furnace oil are the major utilities required for the plant operation. Total
installed electric power is 400 kw. Annual consumption of electric power at 100% capacity
utilization of the plant is 880, 000 kwh. Annual water consumption is 1,000 cubic meters.
Requirement for furnace oil at full capacity operation of the plant for 275 days a year and a
single shift a day amounts to 2,200 liters per annum. Annual utilities requirements and the
corresponding estimated costs are about birr 498,000 as presented in Table

4
 Table 2
RAW MATERIAL REQUIREMENT

Qty Cost ‘000 Birr

No Raw Material Foreign Local Total
.
1 Steel Billets 600 5,155 1,804 6,959
2 Rail and Plate Spares (Billets) 2,100 13,896 4,864 18,760
3 Miscellaneous consumable including Ls 1,392 489 1,881
lubricating oil etc.
Sub total 20,443 7,157 27,600
Utility
Electricity ( Kwh) 880,000 484 484
Water ( M3) 1,000 3 3
Furnace Oil ( Liter) 2,200 11 11
Sub total 498 498
Total 20,443 7,655 28,098

5. Location and Site

The main plant that produces steel profiles has to be based in towns where various constructions
are taking place currently and in the future. In this regard Bahrdar, Gondar and Combolcha are
preferable towns for the establishment of steel profile plant.

6. Technology and Engineering

6.1 Production Process

The steel billets are heated in a furnace at around 1,200 0c. White hot billets are rolled to desired
dimension in rolling mills. After rolling, the materials are shifted in a stockyard for dispatch.

Physical and chemical tests are carried out on the rolled products in order to ascertain that they
are manufactured according to specifications.

The chemical tests are mainly carried out for confirmation of the composition and specification
of the rolled products. Shearing, drilling, grinding, boring, coil drawing and other related
operations are involved in the manufacturing process of steel profiles.

5
Alternatively, the production process or technology could be more labor intensive and be
developed in to multi purpose work shop.

The technical data and information are compiled from a document provided by the National
Research Development Corporation of India.

6.2 Machinery and Equipment

The list of plant machinery and equipment is given in Table 4. The total cost of machinery and
equipment is estimated to be about Birr 11.0 million of which Birr 8.25 million will be required
in foreign currency. The project will require about Birr 250,000 and Birr 20,000 to purchase a
pick-up vehicle and office furniture and equipment.
Table 4
MACHINERY AND EQUIPMENT REQUIREMENT

No. Machinery and Equipment Qty.

1. Rolling mill complete 10” diameter, fly wheel, 10 tons, No. of rolls 38, with all 1
accessories, stands, containing double side three rolls
2. Pre-heating oil fired furnace with oil burners chimney 14”x35”, hearth area 5m 1
x 2.5 m, capacity 20 tons per shift, complete with overhead oil tank, hand
pump, strainer and heating arrangement, blower and motor
3. 600 KVA transformer complete with two OCBS, (800 & 600 amp), PVC cable 1
for transformer (30, double pole with lighting arresters, operating rod, switch
board
4. 300 HP motor with OCB and starter cables V belts and pulleys 1
5. Heavy duty lathe, 1500 mm x 500 mm 1
6. Lathe, 2000 mm x 250 mm., Norton type gear box 1
7. Billet shearing machine with 20 HP motor 1
8. Shaper 24” 1
9. Pillar drilling machine, 25 mm 1
10. Double ended pedestal grinder, 2000 mm 1
11. Motors 5 HP & 10 HP 2
12. Pump set, motor water pipe fittings and over head tank for water 1
13. Coil winding machine for making coils of 6 mm. to 12 mm. rod, with motor 1
14. Various tools, safety appliances & accessories
15. Weighing scale, platform type 5 tons capacity

The promoter can contact a machinery supplier through the following address.
Company Name: Metalec AD Prilep
Contact Person: Mr. Jandre Zdraveski
Address: Aleksandar Makedonski 2/11

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City: Prilep
State/Province: Prilep
Zip/PC: 7500
Country: Macedonia
Tel: + 38948403700
Fax: + 38948403735
http://www.metalecprilep.com.mk

6.3 Civil Engineering Cost

Total land requirement of the plant is 5,000 sq. meters. The total built-up area required is 1,500
sq. meters. Total cost of building at the rate of Birr 1,800 per sq. meter is estimated to be Birr
2,700,000.

7. Human Resource and Training Requirement

7.1 Human Resource

The total direct and indirect human resource required for the plant on the basis of single shift
operation is 36 persons. Table 5 depicts full details of human resource requirement and total
labor cost including employees’ benefit, which is Birr 426,240.

Table 5

MANPOWER REQUIREMENT

Monthly Annual Salary

Description No. Salary /person
1 General Manager 1 3,500 42,000
2 Salesman 1 700 8,400
3 Store Keeper 1 800 9,600
4 Account ant 1 800 9,600
5 Secretary 1 750 9,000
7 Guards 3 400 14,400
8 Maintenance foreman 1 1200 14,400
9 Electrician 1 1000 12,000
10 Operators & Technician 10 1000 120,000
11 Assistant Operators 5 600 36,000
12 Production Workers 10 600 72,000
Sub Total 35 347,400
Employees’ Benefit (20% of basic salary) 69,480
Total 416,880

7
8
 7.2 Training Requirement

Ten production & maintenance personnel need a two week on-the-job training on how to use the
machines and on the manufacturing process by the machinery supplier. Total cost of training is
estimated at Birr 25,000.
Ten production & maintenance personnel need a two week on-the-job training on how to use the
machines and on the manufacturing process by the machinery supplier. Total cost of training is
estimated at Birr 25,000.
Ten production & maintenance personnel need a two week on-the-job training on how to use the
machines and on the manufacturing process by the machinery supplier. Total cost of training is
estimated at Birr 25,000.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of steel profile producing plant is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

Construction period 2 years

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

9
 B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 days

Raw Material-Foreign 120 days
Factory Supplies in Stock 30 days
Spare Parts in Stock and Maintenance 30 days
Work in Progress 10 days
Finished Products 15 days
Accounts Receivable 30 days
Cash in Hand 30 days
Accounts Payable 30 days

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 27.0
million as shown in table 6 below. The Owner shall contribute 40% of the finance in the form of
equity while the remaining 60% is to be financed by bank loan.
The foreign component of the project accounts for Birr 17.6 million or 63.5% of the total
investment cost.

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 Table 6: Total initial investment

  LC FC Total
Land
15,000   15,000
Building
2,700,000   2,700,000
Office equipment
20,000   20,000
Vehicles
250,000   250,000
machinery & equipment
2,750,000 8,250,000 11,000,000
Total Fixed Investment
5,735,000 8,250,000 13,985,000
Pre production
699,250   699,250
Total Initial Investment
6,434,250 8,250,000 14,684,250
Working capital
3,443,564 8,920,582 12,364,146
Total 9,877,814 17,170,582 27,048,396
*Pre-production capital expenditure includes - all expenses for pre-investment studies,
consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest expenses
during construction.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 32.0 million (See Table
7). Raw materials and utilities account for 86.3%.
Table 7

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 27,600,000
2.      Utilities 498,000
3.      Wages and Salaries 416,880
4.      Spares and Maintenance 419,550
Factory costs 28,934,430
5.      Depreciation 1,426,850
6.      Financial costs
1,622,904
  Total Production Cost 31,984,184

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 8.4 Financial Evaluation

I. Profitability
According to the projected income statement, the project will generate profit beginning from first
year of operation. Important ratios such as net profit to equity (Return on equity) and net profit
and interest on total investment (return on total investment) are 14% and 23% respectively in the
first year and are gradually rising. The income statement and other profitability indicators show
that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly the project will breakeven at 17.9% of capacity utilization.

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project wills payback fully the initial investment less working capital in two year's
time.

IV. Simple Rate of Return

It is a ratio of net profit and interest to the total capital invested for a single year at full capacity
operation. Thus the SRR of the project is calculated to be 21.8%.

V. Internal Rate of Return and Net Present Value

Based on the projected cash flow statement, the calculated IRR of the project is 25.8% and the
net present value (NPV) is Birr 6.0 million.

VI. Sensitivity Analysis

The financial viability of the steel profiles processing plant will not be affected if prices of raw
materials are increased by 10%.

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 9. Economic and Social Benefits and Justification
Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project promotes the construction sector, the socio-economic goals and
objectives stated in the strategic plan of the Amhara National Regional State. These benefits are
listed as follows

A. Profit Generation
The project is found to be financially viable and earns on average a profit of birr 4.8 million per
year and birr 48.3 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue
In the project life under consideration, the region will collect about birr 18 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
additional fund for the regional government that will be used in expanding social and other basic
services in the region.

C. Import Substitution and Foreign Exchange Saving

As there is no sufficient local production of steel profile in the country, the commencement of
this project relieves a portion of the import burden. That is, based on the projected figures we
learn that in the project life an estimated amount of US Dollar 41.0 million will be saved as a
result of the proposed project. This will create room for the saved hard currency to be allocated
to other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create employment opportunity for several citizens of the
country. That is, it will provide permanent employment to 35 professionals as well as support
staff. Consequently the project creates income of birr 417 thousands per year. This would be one
of the commendable accomplishments of the project.
E. Pro Environment Project

The proposed plant production process will not harm the environment.

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ANNEXES

14
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0.00 0.00 75% 85% 100% 100%

1. Total Inventory 0.00 0.00 16474264.59 18670833.21 21965686.12 21965686.12

Raw Materials in Stock- Total 0.00 0.00 7276009.09 8246143.64 9701345.45 9701345.45

Raw Material-Local 0.00 0.00 585572.73 663649.09 780763.64 780763.64

Raw Material-Foreign 0.00 0.00 6690436.36 7582494.55 8920581.82 8920581.82

Factory Supplies in Stock 0.00 0.00 24841.05 28153.19 33121.40 33121.40

Spare Parts in Stock and Maintenance 0.00 0.00 34326.82 38903.73 45769.09 45769.09

Work in Progress 0.00 0.00 621026.18 703829.67 828034.91 828034.91

Finished Products 0.00 0.00 1242052.36 1407659.35 1656069.82 1656069.82

2. Accounts Receivable 0.00 0.00 3141818.18 3560727.27 4189090.91 4189090.91

3. Cash in Hand 0.00 0.00 74853.82 84834.33 99805.09 99805.09

CURRENT ASSETS 0.00 0.00 12414927.50 14070251.17 16553236.67 16553236.67

4. Current Liabilities 0.00 0.00 3141818.18 3560727.27 4189090.91 4189090.91

Accounts Payable 0.00 0.00 3141818.18 3560727.27 4189090.91 4189090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 9273109.32 10509523.90 12364145.76 12364145.76

INCREASE IN NET WORKING CAPITAL 0.00 0.00 9273109.32 1236414.58 1854621.86 0.00

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
  5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 21965686.12 21965686.12 21965686.12 21965686.12 21965686.12 21965686.12

Raw Materials in Stock-Total 9701345.45 9701345.45 9701345.45 9701345.45 9701345.45 9701345.45

Raw Material-Local 780763.64 780763.64 780763.64 780763.64 780763.64 780763.64

Raw Material-Foreign 8920581.82 8920581.82 8920581.82 8920581.82 8920581.82 8920581.82

Factory Supplies in Stock 33121.40 33121.40 33121.40 33121.40 33121.40 33121.40

Spare Parts in Stock and Maintenance 45769.09 45769.09 45769.09 45769.09 45769.09 45769.09

Work in Progress 828034.91 828034.91 828034.91 828034.91 828034.91 828034.91

Finished Products 1656069.82 1656069.82 1656069.82 1656069.82 1656069.82 1656069.82

2. Accounts Receivable 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91

3. Cash in Hand 99805.09 99805.09 99805.09 99805.09 99805.09 99805.09

CURRENT ASSETS 16553236.67 16553236.67 16553236.67 16553236.67 16553236.67 16553236.67

4. Current Liabilities 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91

Accounts Payable 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS 12364145.76 12364145.76 12364145.76 12364145.76 12364145.76 12364145.76

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 7342125.00 19706270.76 31941818.18 33058909.09 39028363.64 38400000.00
1. Inflow Funds 7342125.00 19706270.76 3141818.18 418909.09 628363.64 0.00
Total Equity 2936850.00 7882508.30 0.00 0.00 0.00 0.00
Total Long Term Loan 4405275.00 11823762.46 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 3141818.18 418909.09 628363.64 0.00
2. Inflow Operation 0.00 0.00 28800000.00 32640000.00 38400000.00 38400000.00
Sales Revenue 0.00 0.00 28800000.00 32640000.00 38400000.00 38400000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 7342125.00 7342125.00 38246416.35 30950341.62 37691630.16 34981438.13
4. Increase In Fixed Assets 7342125.00 7342125.00 0.00 0.00 0.00 0.00
Fixed Investments 6992500.00 6992500.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 349625.00 349625.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 12414927.50 1655323.67 2482985.50 0.00
6. Operating Costs 0.00 0.00 21760844.60 24642693.88 28965467.80 28965467.80
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 1915433.54 2012807.76
8. Interest Paid 0.00 0.00 4070644.25 1947484.49 1622903.75 1298323.00
9. Loan Repayments 0.00 0.00 0.00 2704839.58 2704839.58 2704839.58
10. Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 12364145.76 -6304598.17 2108567.47 1336733.48 3418561.87
Cumulative Cash Balance 0.00 12364145.76 6059547.59 8168115.07 9504848.55 12923410.41

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00
1. Inflow Funds 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00
Sales Revenue 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 34754231.61 34583980.08 34356773.56 31424727.46 31424727.46 31424727.46
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 28965467.80 28965467.80 28965467.80 28965467.80 28965467.80 28965467.80
7. Corporate Tax Paid 2110181.99 2264511.21 2361885.44 2459259.66 2459259.66 2459259.66
8. Interest Paid 973742.25 649161.50 324580.75 0.00 0.00 0.00
9. Loan Repayments 2704839.58 2704839.58 2704839.58 0.00 0.00 0.00
10. Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 3645768.39 3816019.92 4043226.44 6975272.54 6975272.54 6975272.54
Cumulative Cash Balance 16569178.80 20385198.72 24428425.16 31403697.70 38378970.24 45354242.78

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 28800000.00 32640000.00 38400000.00 38400000.00

1. Inflow Operation 0.00 0.00 28800000.00 32640000.00 38400000.00 38400000.00

Sales Revenue 0.00 0.00 28800000.00 32640000.00 38400000.00 38400000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 7342125.00 7342125.00 31033953.92 25879108.46 32735523.20 30978275.56

3. Increase in Fixed Assets 7342125.00 7342125.00 0.00 0.00 0.00 0.00

Fixed Investments 6992500.00 6992500.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 349625.00 349625.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 9273109.32 1236414.58 1854621.86 0.00

5. Operating Costs 0.00 0.00 21760844.60 24642693.88 28965467.80 28965467.80

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 1915433.54 2012807.76

NET CASH FLOW -7342125.00 -7342125.00 -2233953.92 6760891.54 5664476.80 7421724.44

CUMMULATIVE NET CASH FLOW -7342125.00 -14684250.00 -16918203.92 -10157312.38 -4492835.58 2928888.86

Net Present Value (at 18%) -7342125.00 -6222139.83 -1604390.92 4114887.32 2921674.12 3244104.15

Cumulative Net present Value -7342125.00 -13564264.83 -15168655.75 -11053768.43 -8132094.32 -4887990.16

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00

1. Inflow Operation 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00

Sales Revenue 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 31075649.79 31229979.01 31327353.24 31424727.46 31424727.46 31424727.46

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 28965467.80 28965467.80 28965467.80 28965467.80 28965467.80 28965467.80

6. Corporate Tax Paid 2110181.99 2264511.21 2361885.44 2459259.66 2459259.66 2459259.66

NET CASH FLOW 7324350.21 7170020.99 7072646.76 6975272.54 6975272.54 6975272.54

CUMMULATIVE NET CASH FLOW 10253239.08 17423260.07 24495906.83 31471179.37 38446451.91 45421724.45

Net Present Value (at 18%) 2713170.32 2250849.08 1881593.96 1572617.54 1332726.73 1129429.43

Cumulative Net present Value -2174819.84 76029.24 1957623.20 3530240.74 4862967.47 5992396.90

Net Present Value (at 18%) 5,992,396.90

Internal Rate of Return 25.8%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 28800000.00 32640000.00 38400000.00 38400000.00 38400000.00

Sales Revenue 28800000.00 32640000.00 38400000.00 38400000.00 38400000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 21488805.60 24353979.68 28651740.80 28651740.80 28651740.80
VARIABLE MARGIN 7311194.40 8286020.32 9748259.20 9748259.20 9748259.20
(In % of Total Income) 25.39 25.39 25.39 25.39 25.39
3. Less Fixed Costs 1698889.00 1715564.20 1740577.00 1740577.00 1740577.00
OPERATIONAL MARGIN 5612305.40 6570456.12 8007682.20 8007682.20 8007682.20
(In % of Total Income) 19 20 21 21 21
4. Less Cost of Finance 4070644.25 1947484.49 1622903.75 1298323.00 973742.25
5. GROSS PROFIT 1541661.15 4622971.63 6384778.45 6709359.20 7033939.95
6. Income (Corporate) Tax 0.00 0.00 1915433.54 2012807.76 2110181.99
7. NET PROFIT 1541661.15 4622971.63 4469344.92 4696551.44 4923757.97
RATIOS (%)
Gross Profit/Sales 5% 14% 17% 17% 18%
Net Profit After Tax/Sales 5% 14% 12% 12% 13%
Return on Investment 23% 26% 23% 22% 22%
Return on Equity 14% 43% 41% 43% 46%

7
 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00

Sales Revenue 38400000.00 38400000.00 38400000.00 38400000.00 38400000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 28651740.80 28651740.80 28651740.80 28651740.80 28651740.80
VARIABLE MARGIN 9748259.20 9748259.20 9748259.20 9748259.20 9748259.20
(In % of Total Income) 25 25 25 25 25
3. Less Fixed Costs 1550727.00 1550727.00 1550727.00 1550727.00 1550727.00
OPERATIONAL MARGIN 8197532.20 8197532.20 8197532.20 8197532.20 8197532.20
(In % of Total Income) 21 21 21 21 21
4. Less Cost of Finance 649161.50 324580.75 0.00 0.00 0.00
5. GROSS PROFIT 7548370.70 7872951.45 8197532.20 8197532.20 8197532.20
6. Income (Corporate) Tax 2264511.21 2361885.44 2459259.66 2459259.66 2459259.66
7. NET PROFIT 5283859.49 5511066.02 5738272.54 5738272.54 5738272.54
RATIOS (%)
Gross Profit/Sales 20% 21% 21% 21% 21%
Net Profit After Tax/Sales 14% 14% 15% 15% 15%
Return on Investment 22% 22% 21% 21% 21%
Return on Equity 49% 51% 53% 53% 53%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 7342125.00 27048395.76 31731875.10 34068916.24 36461785.22 38453497.08
1. Total Current Assets 0.00 12364145.76 18474475.10 22238366.24 26058085.22 29476647.08
Inventory on Materials and Supplies 0.00 0.00 7335176.96 8313200.55 9780235.94 9780235.94
Work in Progress 0.00 0.00 621026.18 703829.67 828034.91 828034.91
Finished Products in Stock 0.00 0.00 1242052.36 1407659.35 1656069.82 1656069.82
Accounts Receivable 0.00 0.00 3141818.18 3560727.27 4189090.91 4189090.91
Cash in Hand 0.00 0.00 74853.82 84834.33 99805.09 99805.09
Cash Surplus, Finance Available 0.00 12364145.76 6059547.59 8168115.07 9504848.55 12923410.41
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 7342125.00 14684250.00 13257400.00 11830550.00 10403700.00 8976850.00
Fixed Investment 0.00 6992500.00 13985000.00 13985000.00 13985000.00 13985000.00
Construction in Progress 6992500.00 6992500.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 349625.00 699250.00 699250.00 699250.00 699250.00 699250.00
Less Accumulated Depreciation 0.00 0.00 1426850.00 2853700.00 4280550.00 5707400.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 7342125.00 27048395.76 31731875.10 34068916.24 36461785.22 38453497.08
5. Total Current Liabilities 0.00 0.00 3141818.18 3560727.27 4189090.91 4189090.91
Accounts Payable 0.00 0.00 3141818.18 3560727.27 4189090.91 4189090.91
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 4405275.00 16229037.46 16229037.46 13524197.88 10819358.30 8114518.73
Loan A 4405275.00 16229037.46 16229037.46 13524197.88 10819358.30 8114518.73
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 2936850.00 10819358.30 10819358.30 10819358.30 10819358.30 10819358.30
Ordinary Capital 2936850.00 10819358.30 10819358.30 10819358.30 10819358.30 10819358.30
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 1541661.15 6164632.78 10633977.70
9. Net Profit After Tax 0.00 0.00 1541661.15 4622971.63 4469344.92 4696551.44
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 1541661.15 4622971.63 4469344.92 4696551.44

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 40672415.47 43251435.39 46057661.83 51795934.37 57534206.91 63272479.45
1. Total Current Assets 33122415.47 36938435.39 40981661.83 47956934.37 54932206.91 61907479.45
Inventory on Materials and Supplies 9780235.94 9780235.94 9780235.94 9780235.94 9780235.94 9780235.94
Work in Progress 828034.91 828034.91 828034.91 828034.91 828034.91 828034.91
Finished Products in Stock 1656069.82 1656069.82 1656069.82 1656069.82 1656069.82 1656069.82
Accounts Receivable 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91
Cash in Hand 99805.09 99805.09 99805.09 99805.09 99805.09 99805.09
Cash Surplus, Finance Available 16569178.80 20385198.72 24428425.16 31403697.70 38378970.24 45354242.78
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 7550000.00 6313000.00 5076000.00 3839000.00 2602000.00 1365000.00
Fixed Investment 13985000.00 13985000.00 13985000.00 13985000.00 13985000.00 13985000.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 699250.00 699250.00 699250.00 699250.00 699250.00 699250.00
Less Accumulated Depreciation 7134250.00 8371250.00 9608250.00 10845250.00 12082250.00 13319250.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 40672415.47 43251435.39 46057661.83 51795934.37 57534206.91 63272479.45
5. Total Current Liabilities 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91
Accounts Payable 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91 4189090.91
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 5409679.15 2704839.58 0.00 0.00 0.00 0.00
Loan A 5409679.15 2704839.58 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 10819358.30 10819358.30 10819358.30 10819358.30 10819358.30 10819358.30
Ordinary Capital 10819358.30 10819358.30 10819358.30 10819358.30 10819358.30 10819358.30
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 15330529.14 20254287.11 25538146.60 31049212.61 36787485.15 42525757.69
9. Net Profit After Tax 4923757.97 5283859.49 5511066.02 5738272.54 5738272.54 5738272.54
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 4923757.97 5283859.49 5511066.02 5738272.54 5738272.54 5738272.54

10