Investment Office ANRS

Project Profile on the Establishment

Of Aluminium Household Utensil Making
Plant

Development Studies Associates

(DSA)

July 2016
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...........................................................................................2
3.2 Plant Capacity..................................................................................................................4
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....................................................................................................8
7 Human Resource and Training Requirement................................................8
7.1 Human Resource..............................................................................................................8
7.2 Training Requirement......................................................................................................9
8 Financial Analysis...........................................................................................10
8.1 Underlying Assumption.................................................................................................10
8.2 Investment......................................................................................................................11
8.3 Production Costs............................................................................................................12
8.4 Financial Evaluation......................................................................................................12
9 Economic and Social Benefit and Justification.............................................13
ANNEXES..............................................................................................................15

2
 1. Executive Summary

This project profile deals with the establishment of Aluminium Household Utensil Making Plant
in Amhara National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for aluminium household utensils is
substantial and is increasing with time. Accordingly, the planned plant is set to produce 700,000
various types of utensils annually. The total investment cost of the project including working
capital is estimated at Birr 68.81 million and creates79 new jobs.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 26.41% of capacity utilization and it will
payback fully the initial investment less working capital in third year of operation. The result
further show that the calculated IRR of the project is 20.9% and NPV discounted at 18% per
annum is Birr 61.38 million.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and diversification.

Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Aluminium utensils are popular because they are light; they don’t rust and are relatively less
expensive than utensils made from steel and sliver.

3
The proposed plant produces kitchen vessels such as pans and kettles for boiling, and bowls and
tubs using aluminium. The plant, however, will be able to produce almost any other sort of
household vessels. Market Study, Plant Capacity and Production Program

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

If we assume that there one aluminium utensil per household, the current demand in ANRS is
approximately 2,956,632. The proposed plan produces only 700,000 units (a small fraction of the
demand) when it operates at full capacity. If we add the demand from the neighbouring regions,
the total demand will be much more than the plants capacity.

3.1.2 Projected Demand

The future demand is projected taking a conservative assumption that demand will increase by
2% annum. Table 1 depicts the outcome.

Table 1: Projected Demand

Demand
Year (pcs)
2,016 3,533,449
2,017 3,604,118
2,018 3,676,200
2,019 3,749,724
2,020 3,824,718
2,021 3,901,212
2,022 3,979,236
2,023 4,058,820
2,024 4,139,996
2,025 4,222,796

4
 3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the average selling
price of aluminium utensils has been estimated at Birr 103.

3.2 Plant Capacity

Thus, given the expected demand for aluminium utensils presented earlier, and the planned
technology, the envisaged plant is set to produce 700,000 annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 75 percent capacity and then it grows to 85
percent in the 2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This
consideration is developed based on the assumption that market and logistics barriers would take
place for the first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The major raw material aluminium rod should be imported preferably from Asia. It can also be
obtained from Europe but it will be a bit more expensive.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in Table 2 here under.

5
 Table 2: Required Raw Material at Full Capacity
Qty Price
No. Material (Kg) Unit Local Foreign Total
Aluminum rod (99% 35000 52
aluminum) 0 9,340,240 37,360,960 46,701,200
Total 35000
0 9,340,240 37,360,960 46,701,200

5 Location and Site

The location of the plant should be in big towns where real estates, hotels, commercial buildings,
residential houses, government buildings etc are to be built. In this regard, Bahir Dar could be
the most preferred location. Bahir Dar is also an ideal location to collect the plant's raw materials
from Addis and distribute its out put to the rest of zonal towns of the region.

6 Technology and Engineering

6.1 Production Process
The plant has three lines:
 the pan body, bowl, and tub line;
 the kettle line; and
 the lid (cover) line.

The process up to forming is general; the process thereafter (polishing and surface finishing),
however, will differ depending on the demand. That is, only buff polishing is required in certain
situations and further chemical brightening to increase the gloss is required in other situations.

After polishing, too, only degreasing and washing are necessary in certain situation, and
electrolytic anodizing treatment might be required in other situations. The latter treatment will
improve the anticorrosion property and the hardening of the surface. The cost, of course, will be
higher than simply degreasing, but the merit is certain. Electrolytic anodizing treatment is done
in an acid bath such as sulfuric acid or oxalic acid, so the building in which electrolytic
anodizing treatment is done should be built separately. An apparatus to keep the products
flowing, however, such as a conveyor, is actually being used.

6
In the finishing and packing process the body and lid will be fastened in one piece during the
assembly process for products which require a lid, so two lines, on the whole, would be
sufficient. During the manufacturing process a side line would be desirable for surface treatment.
That is, external damage, slight corrosion, or other defects will generally occur during
manufacturing., Some of these defective products can be reprocessed. In order to reprocess the
defective products, however, the surface layer of the vessel must be removed in most cases.
Caustic soda is used to do the work. This line is called the alkaline treatment line. This line is
generally attached to the vessels manufacturing plant. The explanation made so far is the so
called direct manufacturing line.

Alternative technology
There are three stages in the production process of aluminum utensils. These are pressing,
beading and coating. Aluminum scrap or ingot first melted in iron crucible and molten metal
cast into the slab type open mould by mechanical process into rectangular billets. The billets,
after annealing and cleaning are pressed through re-rolling machine three to five times to make
the sheet of reaustic thickness. The stamped circle is now ready for deep drawing to get the
shape of the desired utensils. Shaping refers to pressing with dies on press, beading on the lathe
and surface treatment. Main plant and machinery include coal fired furnace, reversible moulds
could rolling mill, pre-heating, circle cutting and stamping machine, de-drawing double action
power press, spinning lather and pre- heating furnace, counter spinner and hand press and
cleaning tanks.

6.2 Machinery and Equipment

The machineries and equipment required are shown in tables 3 and 4.

7
 Table 3: Manufacturing Facilities for
No.
of
Item set Capacity
1) Two-high roller for oil coating 1 5,000/8hrs.
2) 80-ton drawing pres(with auto-leader or by natural) 1 3,500/8hrs.
Spining machine for surface smoothing
3) (with auto-loader or by manual) 1 2,000-2,400/8hrs.
Trimming machine(including curling if necessary)
4) (with auto or manual loading) 1 2000-2,500/8hrs.
Outside polishing machine
5) (full automatic machine is recommendable) 1 2,000-3,000/8hrs.
6) Perforating machine (auto or manual) 1 3,000-5,000/8hrs.
Anodizing line (including sealing)
7) automatic line except lading and unloading) 1 2,000-4,000/8hrs.
Degreasing line (by chemical agent)
8) (auto or manual) 1 2,000-4,000/8hrs.
9) Finish polisher (manual or auto 1 2,000-3,000/8hrs.
10) Riveting machine (manual or auto) 4 500-1,000/set/8hrs.
Assembling & Packaging conveyer line
11) (usually by manual with tools) 1
12) Trimming & Curling machine (for bowl & tub) 1 2,000/8hrs.
13) Inside Polishing machine(auto or manual) 1 2,000/8hrs.

Table 4: Auxiliary Facilities

1
) Belt Conveyor lines and /or hanger conveyor lines
2 Alkaline treatment line 10% NaOH solution
) (70oC) Rinse10% HNO3 solution -Rinse- Drying)
3
) Fork-lifters
4
) 10-30ton press
5
) Lathes
6
) Milling machine
7
) Boters
8
) Grinders
9
) Shear

The total cost of machineries equipment excluding the auxiliary facilities is estimate at Birr
32,998,760.
Suppliers Addresses:
Pingguo Asia Aluminum Co., Ltd.

8
Sales Company
Tel: 86-757-8522 3888 　 　 Fax: 86-757-8522 8658
Add: Lixi Industrial Zone, Dali Town, Nanhai, Foshan, GuangDong, China.
P.C.: 528231

Manufactory Company
Tel: 86-776-5608888 　 　 Fax: 86-776-5608666
Add: Pingguo Industrial Zone, Baise, Guangxi, China.
PC.: 531400
Email: sales@goldapple.com.cn

The technology of Machinery and Equipment of the plant could also be selected from companies
of Italy and Germany.

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 4,000 m2 where 2000m2 is allocated
to the production place and the remaining space is left for stores, office buildings and facilities.
The land lease is estimated at Birr 240,000 while the buildings cost Birr10.2 million.

The annual power requirement of the plant is estimated at 380,000 kwh. Water consumption will
be about 68750 m3 per day. Thus, the annual cost for utilities will amount to Birr 209,000 for
power and Birr 182,188 for water summing up to Birr 391,188.

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is stated in table 6 below

9
 Salary/Wage (Birr)

Job Title No. Monthly Annual

1 General Manager 1 11547 138564
2 Production Head 1 8981 107772
3 Technicians 6 5132 369504
4 Ass. Machinists 12 2566 369504
5 Labourers 40 1283 615840
6 Personnel Head 1 5132 61584
7 Secretary 1 2181 26173.2
8 Accountant 1 5132 61584
9 Marketing Officer 1 5132 61584
10 Casher 1 2181 26173.2
11 Security 5 898.1 53886
12 Clerks 4 2053 98534.4
13 Genitor 5 898.1 53886
Total 79 2,044,589
Employment Benefits 20% of Annual
Salary 408,918
2,453,507

The envisaged plant therefore, creates 79 job opportunity. The professionals and support staffs
for the envisaged plant shall be recruited from Amhara region

7.2 Training Requirement

Training of key personnel shall be conducted. The training should primarily focuses on the
production technology and machinery maintenance and trouble shooting. Birr 230,940 is
included in working capital for this purpose.

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8 Financial Analysis
8.1 Underlying Assumption

The financial analysis is based on the data provided in the preceding chapters and the following
assumptions.

A. Construction and Finance

Construction period 2 year

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

B. Depreciation

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

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 C. Working Capital (Minimum Days of Coverage)

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

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 68.81
million as shown in table 5 below.

Table 5: Total Initial Investment and Working Capital

Total Initial Investment

Item Cost
Land 30,792
Building and civil works 10,264,000
Office equipment 192,450
Vehicles 641500
Plant machinery & equipment 32,998,760
Total Fixed Investment 44,127,502
Pre production capital expenditure 2,206,375.1
Total Initial Investment 46,333,877
Working capital at full capacity 22,476,786
Total 68,810,663
*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.

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 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 60.22 as detailed in table
6 below.
Table 6: Total Production Cost at Full Capacity

Total Production Cost at Full Capacity

Items Cost
1.      Raw materials
46,701,200
2.      Utilities 391,187.50
3.      Wages and Salaries
2,453,506.56
4.      Spares and Maintenance
1,323,825.06
Factory costs
50,869,719.12
5.      Depreciation
4,401,896.02
6.      Financial costs
4,954,367.73
  Total Production Cost 60,225,982.86

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex 3) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 0.71%, 17.39%, and
1.40% in the first year and are gradually rising. Furthermore, 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 break even at 26.41% of capacity utilization.

13
 III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in third year of
operation.
IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 17.6%.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
20.9% and the net present value at 18 % discount is Birr 6.13 million.

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This result is accompanied by IRR value of 22.18%% with payback period of four
years.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it promotes 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 Birr 57.17 million within the project life.
Such result induces the project promoters to reinvest the profit which, therefore, increases the
investment magnitude in the region.

14
 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 24.2 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
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

This plan has string import substitution effect and saves hard currency

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to 79l citizens of the region.
This would be one of the commendable accomplishments of the project.

E. Diversification
The project contributes a lot in diversification of the regions as well as the country’s economy.

15
ANEXES

16
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 75% 85% 100% 100%

1. Total Inventory 0 0 29566145 33508298 39421525 39421525

Raw Materials in Stock- Total 0 0 12991424 14723616 17321898 17321898
Raw Material-Local 0 0 764201 866094.3 1018936 1018936
Raw Material-Foreign 0 0 12227224 13857519 16302966 16302966
Factory Supplies in Stock 0 0 45723.55 51820.37 60965.59 60965.59
Spare Parts in Stock and Maintenance 0 0 108313.4 122754.9 144417 144417
Work in Progress 0 0 1143086 1295499 1524114 1524114
Finished Products 0 0 2286173 2590995 3048231 3048231
2. Accounts Receivable 0 0 5878472 6662270 7837962 7837962
3. Cash in Hand 0 0 282870.7 320585.8 377158.4 377158.4
CURRENT ASSETS 0 0 22736061 25767536 30314750 30314750
4. Current Liabilities 0 0 5878472 6662270 7837962 7837962
Accounts Payable 0 0 5878472 6662270 7837962 7837962
TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 16857588 19105268 22476785 22476785
INCREASE IN NET WORKING CAPITAL 0 0 16857588 2247677 3371519 0

17
 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 39421525 39421525 39421525 39421525 39421525 39421525

Raw Materials in Stock-Total 17321898 17321898 17321898 17321898 17321898 17321898
Raw Material-Local 1018936 1018936 1018936 1018936 1018936 1018936
Raw Material-Foreign 16302966 16302966 16302966 16302966 16302966 16302966
Factory Supplies in Stock 60965.59 60965.59 60965.59 60965.59 60965.59 60965.59
Spare Parts in Stock and Maintenance 144417 144417 144417 144417 144417 144417
Work in Progress 1524114 1524114 1524114 1524114 1524114 1524114
Finished Products 3048231 3048231 3048231 3048231 3048231 3048231
2. Accounts Receivable 7837962 7837962 7837962 7837962 7837962 7837962
3. Cash in Hand 377158.4 377158.4 377158.4 377158.4 377158.4 377158.4
CURRENT ASSETS 30314750 30314750 30314750 30314750 30314750 30314750
4. Current Liabilities 7837962 7837962 7837962 7837962 7837962 7837962
Accounts Payable 7837962 7837962 7837962 7837962 7837962 7837962
TOTAL NET WORKING CAPITAL REQUIREMENTS 22476785 22476785 22476785 22476785 22476785 22476785
INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

18
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 23166939 45643723 59764472 61854598 73023695 71848000
1. Inflow Funds 23166939 45643723 5878472.5 783797.5 1175695 0
Total Equity 9266775 18257490 0 0 0 0
Total Long Term Loan 13900163 27386235 0 0 0 0
Total Short Term Finances 0 0 5878472.5 783797.5 1175695 0
2. Inflow Operation 0 0 53886000 61070800 71848000 71848000
Sales Revenue 0 0 53886000 61070800 71848000 71848000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 23166939 23166939 71835891 58432547 70373422 65248202
4. Increase In Fixed Assets 23166939 23166939 0 0 0 0
Fixed Investments 22063751 22063751 0 0 0 0
Pre-production Expenditures 1103188 1103188 0 0 0 0
5. Increase in Current Assets 0 0 22736061 3031475 4547211 0
6. Operating Costs 0 0 38493903 43565638 51173238 51173238
7. Corporate Tax Paid 0 0 0 0 3643268 3890987
8. Interest Paid 0 0 10605925 4954369 4128640 3302912
9.Loan Repayments 0 0 0 6881065 6881065 6881065
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 22476785 -12071419 3422051 2650270 6599798
Cumulative Cash Balance 0 22476785 10405369 13827420 16477690 23077488

19
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 71848000 71848000 71848000 71848000 71848000 71848000
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 71848000 71848000 71848000 71848000 71848000 71848000
Sales Revenue 71848000 71848000 71848000 71848000 71848000 71848000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 64670192 64263055 63685046 56225969 56225969 56225969
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 51173238 51173238 51173238 51173238 51173238 51173238
7. Corporate Tax Paid 4138704 4557296 4805014.6 5052734 5052734 5052734
8. Interest Paid 2477183 1651457 825728.54 0 0 0
9. Loan Repayments 6881065 6881065 6881065.1 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 7177808 7584945 8162954.1 15622031 15622031 15622031
Cumulative Cash Balance 30255295 37840240 46003194 61625225 77247257 92869285

20
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 71848000 71848000 71848000 71848000 71848000 71848000
1. Inflow Operation 71848000 71848000 71848000 71848000 71848000 71848000
Sales Revenue 71848000 71848000 71848000 71848000 71848000 71848000
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 55311942 55730533 55978252 56225969 56225969 56225969
3. Increase in Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
4. Increase in Net Working Capital 0 0 0 0 0 0
5. Operating Costs 51173238 51173238 51173238 51173238 51173238 51173238
6. Corporate Tax Paid 4138704 4557296 4805014.6 5052734 5052734 5052734
NET CASH FLOW 16536058 16117467 15869748 15622031 15622031 15622031
CUMULATIVE NET CASH FLOW 18081196 34198663 50068410 65690442 81312470 96934502
Net Present Value (at 18%) 6125478.2 5059677 4221957.8 3522081 2984815 2529504
Cumulative Net present Value -12179614 -7119937 -2897976 624105.1 3608920 6138424
Net Present Value (at 18%) 6,138,424

Internal Rate of Return 20.9%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION

21
 1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 53886000 61070800 71848000 71848000 71848000

Sales Revenue 53886000 61070800 71848000 71848000 71848000
Other Income 0 0 0 0 0
2. Less Variable Cost 37301950 42275543 49735934 49735934 49735934
VARIABLE MARGIN 16584050 18795257 22112066 22112066 22112066
(In % of Total Income) 30.78 30.78 30.78 30.78 30.78
3. Less Fixed Costs 5593849.2 5691988.4 5839200 5839199.9 5839200
OPERATIONAL MARGIN 10990201 13103266 16272866 16272866 16272866
(In % of Total Income) 20.4 21.46 22.65 22.65 22.65
4. Less Cost of Finance 10605925 4954368.7 4128640 3302911.6 2477183
5. GROSS PROFIT 384276.46 8148900.1 12144226 12969955 13795683
6. Income (Corporate) Tax 0 0 3643268 3890987.5 4138704
7. NET PROFIT 384276.46 8148900.1 8500958 9078967.3 9656979
RATIOS (%)
Gross Profit/Sales 0.71% 13.34% 16.90% 18.05% 19.20%
Net Profit After Tax/Sales 0.71% 13.34% 11.83% 12.64% 13.44%
Return on Investment 17.39% 20.02% 18.35% 17.99% 17.63%
Return on Equity 1.40% 29.61% 30.89% 32.99% 35.09%
Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
6 7 8 9 10

22
 Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 71848000 71848000 71848000 71848000 71848000

Sales Revenue 71848000 71848000 71848000 71848000 71848000
Other Income 0 0 0 0 0
2. Less Variable Cost 49735934 49735934 49735934 49735934 49735934
VARIABLE MARGIN 22112066 22112066 22112066 22112066 22112066
(In % of Total Income) 30.78 30.78 30.78 30.78 30.78
3. Less Fixed Costs 5269625 5269625 5269625 5269625 5269625
OPERATIONAL MARGIN 16842441 16842441 16842441 16842441 16842441
(In % of Total Income) 23.44 23.44 23.44 23.44 23.44
4. Less Cost of Finance 825728.5 0 0 0 825728.5
5. GROSS PROFIT 16016713 16842441 16842441 16842441 16016713
6. Income (Corporate) Tax 4805015 5052734 5052734 5052734 4805015
7. NET PROFIT 11211701 11789710 11789710 11789710 11211701
RATIOS (%)
Gross Profit/Sales 21.14% 22.29% 23.44% 23.44% 23.44%
Net Profit After Tax/Sales 14.80% 15.60% 16.41% 16.41% 16.41%
Return on Investment 17.85% 17.49% 17.13% 17.13% 17.13%
Return on Equity 38.63% 40.73% 42.83% 42.83% 42.83%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 23166938.6 68810661.7 75073411 77125041 79920628 82118530
1. Total Current Assets 0 22476784.6 33141430 39594956 46792439 53392237

23
 Inventory on Materials and Supplies 0 0 13145461 14898188 17527281 17527281
Work in Progress 0 0 1143086 1295499 1524114 1524114
Finished Products in Stock 0 0 2286173 2590995 3048231 3048231
Accounts Receivable 0 0 5878472 6662270 7837962 7837962
Cash in Hand 0 0 282870.7 320585.8 377158.4 377158.4
Cash Surplus, Finance Available 0 22476784.6 10405369 13827420 16477690 23077488
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 23166938.6 46333877.1 41931981 37530085 33128189 28726293
Fixed Investment 0 22063751 44127502 44127502 44127502 44127502
Construction in Progress 22063751 22063751 0 0 0 0
Pre-Production Expenditure 1103187.55 2206375.1 2206375 2206375 2206375 2206375
Less Accumulated Depreciation 0 0 4401896 8803792 13205688 17607584
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 23166938.6 68810661.7 75073411 77125041 79920628 82118530
5. Total Current Liabilities 0 0 5878472 6662270 7837962 7837962
Accounts Payable 0 0 5878472 6662270 7837962 7837962
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 13900163.1 41286398.6 41286399 34405331 27524266 20643198
Loan A 13900163.1 41286398.6 41286399 34405331 27524266 20643198
Loan B 0 0 0 0 0 0
7. Total Equity Capital 9266775.42 27524265.7 27524266 27524266 27524266 27524266
Ordinary Capital 9266775.42 27524265.7 27524266 27524266 27524266 27524266
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 384276.5 8533174 17034134
9.Net Profit After Tax 0 0 384276.5 8148900 8500958 9078967
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 384276.5 8148900 8500958 9078967

Annex 5: Projected Balance Sheet (in Birr): Continued

PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 84894442 88647066 92977699 104767409 116557119 128346826.9
1. Total Current Assets 60570045 68154990 76317944 91939975.02 107562006 123184034.9
Inventory on Materials and Supplies 17527281 17527281 17527281 17527281.11 17527281 17527281.11

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 Work in Progress 1524114.2 1524114 1524114.2 1524114.19 1524114.2 1524114.19
Finished Products in Stock 3048230.9 3048231 3048230.9 3048230.946 3048230.9 3048230.946
Accounts Receivable 7837962.5 7837962 7837962.5 7837962.47 7837962.5 7837962.47
Cash in Hand 377158.38 377158.4 377158.38 377158.378 377158.38 377158.378
Cash Surplus, Finance Available 30255295 37840240 46003194 61625225.36 77247257 92869285.27
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 24324397 20492076 16659755 12827434 8995113 5162792
Fixed Investment 44127502 44127502 44127502 44127502 44127502 44127502
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 2206375.1 2206375 2206375.1 2206375.1 2206375.1 2206375.1
Less Accumulated Depreciation 22009480 25841801 29674122 33506443.1 37338764 41171085.1
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 84894442 88647066 92977699 104767409 116557119 128346826.9
5. Total Current Liabilities 7837962.5 7837962 7837962.5 7837962.47 7837962.5 7837962.47
Accounts Payable 7837962.5 7837962 7837962.5 7837962.47 7837962.5 7837962.47
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 13762133 6881065 0 0 0 0
Loan A 13762133 6881065 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 27524266 27524266 27524266 27524265.72 27524266 27524265.72
Ordinary Capital 27524266 27524266 27524266 27524265.72 27524266 27524265.72
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 26113102 35770081 46403770 57615470.59 69405181 81194888.51
9. Net Profit After Tax 9656979.3 10633691 11211701 11789710.24 11789710 11789710.24
Dividends Payable 0 0 0 0 0 0
Retained Profits 9656979.3 10633691 11211701 11789710.24 11789710 11789710.24

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