PROJECT PROPOSAL

ALMUNIUM PROFILE MANUFACTURING PLANT

PROJECT TO BE IMPLEMENTED IN GALAN TOWN,

OROMIA REGION STATE

PROMOTER: - ZEMEN KEBEDE

OCT, 2020

FINFINE, 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

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 4.3. Training Requirement.............................................................................................................23
5. FINANCIAL REQUIRMENT and ANALYSIS...............................................................................23
5.1. Total Initial Investment Cost..................................................................................................23
5.1.1. Fixed Investment.............................................................................................................24
5.2. Annual Production Cost at Full Capacity.............................................................................27
5.3. Financial Analysis and Statements.......................................................................................29
5.3.1. Underlying Assumption...................................................................................................29
5.3.2. Sources of Fund..............................................................................................................30
5.3.3. Loan repayment Schedule.............................................................................................31
5.3.4. Depreciation Schedule...................................................................................................31
5.3.5. Revenue Projection.........................................................................................................31
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 ALMUNIUM PROFILE AND FIBER GLASS

MANUFACTURING PLANT

2. Project Owners ZEMEN KEBEDE

3. Nationality Ethiopian

4. Project Location Galan District, Oromia Special Zone Surrounding

Finfine

5. Project WATER TANKER ,SHOWER TREE,DOOR AND

Composition WINDOW etc

6. Premises Required 10,000 M2

7. Total Initial Br 81,000,600 of which 30% equivalent to 24,300,180

Investment Capital
financed by the owners equity and the rest 70%
equivalent to 56,700,420 financed through bank loan

8. Employment 450 peoples

Opportunity
9. Benefits of the Produce and supply of quality fiber product, add value
factory For The
to the economy, Source of Revenue, Employment
Region/ Country
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.

Therefore, the lucrative market potential and those viable investment policies attracted
the owners of this project to engage in production of fiber glass plant in Galan district,
Special Zone in Oromia region.

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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 fiber glass 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 fiber glass 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 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.

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 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 300 persons.

E. Save the Country’s Foreign Exchange

By minimizing the market gab for fiber glass 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.

H. Technology Transfer

By producing fiber glass 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.

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 1.3. Location and Premises Required

i. Location

The envisioned project is planned to be located in Galan town (which is around 20Km
from the capital), Oromia special Zone Surrounding Finfine, Oromia Regional State. 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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1.4. Location Map of the Area

9
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 Fiber glass goods is increasing with the growth in investment
in different sectors. Consumer demand in the country is growing for fiber glass 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 Fiber glass manufacturing
industry.

At present most of the fiber glass 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 fiber glass 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 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:-

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 2.1.2. Market Prospects

From the above market demand and supply analysis for fiber and aluminum 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
The In local market, the requirement for fiber glass and aluminums products can be
categorized into four namely:
 Construction sector
 Newly built house
 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 fiber glass and other home products for their newly built

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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 290 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;

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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 fiber glass 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.

3.4. Production Description

In general aluminum 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.

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 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 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

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 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:

Aluminum Works

The Aluminum 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.

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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 Fiber glass 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.

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

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 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

 Shaping machine

 Welding stand

 Active reactive

 Generator

 Drum machine

 Hydraulic puncher

 Ban saw machine

 Puncher hand operated

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  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

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:

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  Water Supply,

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

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
300 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.

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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

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 aluminum 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 aluminum 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.
 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

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  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 aluminum 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.

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 81,006,000

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Table Total Initial Investment Capital

No Description Cost in birr in Br.

Land, Building & Construction

1 25,442,000.00
Machines & Equipments
2 30,052,150.00
3 Vehicles 4,800,000
4 Office Equipment 117,650
  Total Fixed Investment Cost 60,411,800
5 Pre service Expense 1,588,200
6 Initial Working capital 15,000,000
  Total 77,000,000
  Contingency(Lump sum) 4,006,000
  Total Initial Investment Capital 81,006,000

5.1.1.Fixed Investment
A. Building & Construction
No Description Land Total cost in
Requirement(M2) br.
1 Production Hall 5,200 12,810,000
2 Warehouse 4,800 10,846,000
3 Office Building, Shops & 5000
Showrooms 545000
4 Waste Accumulation area 2000 521000
5 Green area, buffer and 1,800
parking 180000
6 Fences   150000
7 Site Development   90000
8 Design and supervision   105000
9 Land lease initial   195,000
Total 25,442,00
  18,800 0.00

B. Machineries And Equipment’s

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 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 aluminum roller (Rolling machine) up to 1.5 mm thickness / hand operated / 1.5 - 2.2 m Unit 1
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 center Unit  3

2000mm
Universal milling machine Table size 1500X300mm, table swivel in both directions Unit 1
450 , distance from spindle to over arm 155mm

Air compressor 300 liter Unit 1

Hydraulic press Min. 5 tons Unit 1 
Oxy-Acetylene welding equipment   Unit 2
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

25
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

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

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

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

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 E. Initial Working Capital
The initial working capital is estimated to be birr. 15,000,000

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

5.2. Annual Production Cost at Full Capacity

i. Raw Materials and Inputs

Sr. Description UOM Qty Unit Total

No Cost in Cost 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 Tapestry dressing, matters, LS     185,000
10 Other Machine supplies LS Lump   25,000
sum
  Grand Total       2,656,800

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 ii. Salary Expense

No. Description No. Qualification Monthly Annual

Salary in br Salary in
br
1 General manager 1 BA in Business Management 2500 30000
2 Production Head 1 BSC in Industrial Engineering 2000 24000
3 Production supervisor Advanced Diploma in production
2 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 2 10+2 in salesmanship and 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
13 Metal Worker 8 10+2 in Metal work technology 1200 115200
14 Helper/laborer 12 10 completed 700  
15 Mechanic 2 10+2 in General mechanics 1000 24000
16 Admin and Finance
Head 1 BA in 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

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 iii. Other Operating Expenses

Sr. Description
No Annual Cost in br Assumption Used
1 Property Insurance 604,118 1% of fixed Investment 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
6 Repair and maintenance 1,208,236 2 % of the Fixed 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
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

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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%

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 24,300,180
2 Bank Loan 70 56,700,420
Total 100 81,000,600

5.3.3.Loan repayment Schedule

Year principal Payment Remaining Balance

30
 0 0 56,700,420
1 5,670,042 51,030378
2 5,670,042 45,360,336
3 5,670,042 39,690,294
4 5,670,042 34,020,252
5 5,670,042 28,350,210
6 5,670,042 22,680,168
7 5,670,042 17,010,126
8 5,670,042 11,340,084
9 5,670,042 5,670,042
10 5,670,042 0.00

5.3.4.Depreciation Schedule
Original Value Depreciation Per
SN Description In Birr Depreciation rate in % year
1 Construction and Civil Work 25,442,000.00 5 1,272,100.00
2 Machines & 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

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 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
25,442,000.00
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
56,700,420
Owners Equity  

Capital
24,300,180
Total Liability & Owners’ Equity
81,000,600

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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 Material & Inputs 12,258,280
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 Expenses 414,570
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 24,300,180      

Loan principal 56,700,420      
Net sale 0 13,874,500.00 14704750 15,535,000.00
Total cash in flow 81,000,600 23,874,500 24,704,750 25,535,000
Cash payment        
Purchase of raw materials 0 1,859,760 2,258,280 2,656,800
Salary expense 0 524370 636,735 749,100
Pre operating expense 0 0
61,500 0
Investment 0 0 0
3,881,800
Other Operating cost 0 341,410 414,570 487,729.00
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 / Deficit 379,555.76 661,980.97 944,407.18
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.

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

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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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