ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the Establishment

Of Oral Re-hydration Salt 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.............................................................................................3
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..........................................................................................10
9 Economic and Social Benefit and Justification..................................11
ANNEXES....................................................................................................13
 1. Executive Summary
This project profile deals with the establishment of Oral Re-hydration Salt (ORS)
producing plant in Amhara National Regional State. The following presents the main
findings of the study

Demand projection divulges that the domestic demand for ORS is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 6 million cases of
ORS annually. The total investment cost of the project including working capital is
estimated at Birr 16.29 million and creates 77 jobs Birr 1,690,481 annual household
income from employment.

The financial result indicates that the project will generate profit beginning from the first
year of operation. Moreover, the project breaks even at 24.52% of capacity utilization and
payback fully the initial investment less working capital in second year. The result further
show that the calculated IRR of the project is 29.3%

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
import substitution

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

Oral Re-hydration salt (ORS) is an orally taken medicine and it is made of glucose,
sodium, chloride, sodium bicarbonate and potassium chloride.

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ORS is used for the treatment of dehydration due to diarrhea of any etiology in all age
groups. ORS is widely used in Ethiopia because of the prevalence of diarrhea/episode;
especially during periods of wide spread food shortages.

With a population of about 75 million, Ethiopia produces only 3 million packets of ORS
annually, but it also imports a large quantity of the same products through UNICEF, the
Red Cross and some NGOs. For example import of ORS between 2001/01 and 2006/07
was 5,328,105 packets on yearly average basis. This indicates that, in the past, the
demand for the product was greater than the domestic production showing an opportunity
for investment to exploit the domestic supply deficit of ORS. As the population of the
country grows by about 2.9 percent year, the demand for ORS will, at the minimum,
grow by the same percentage. Since practically all the raw materials of ORS can be
obtained from domestic sources, there is no reason why the total demand of ORS can not
be produced at home provided that the demand gap justifies the establishment of a viable
ORS producing plant.

3. Market Study, Plant Capacity and Production

Program

3.1 Market Study

3.1.1 Present Demand and Supply

In the year 2005 the demand for ORS was 29 million packets. With 3 million packets of
existing capacity, demand gap for 2006/7 was estimated to be about 26 million packets.
The current year (2008) demand gap is estimated to be 30.71 million packets.

This demand gap can absorb the production of at least four ORS making plants.

3.1.2 Projected Demand

The projected demand for ORS in the coming ten years is depicted in Table 1 below.

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 Table 1: Projected Demand for ORS

Projected
Year Demand for ORS
(in packets)
2008/09 31,596,874
2009/10 32,513,184
2010/11 33,456,066
2011/12 34,426,292
2012/13 35,424,654
2013/14 36,451,969
2014/15 37,509,076
2015/16 38,596,840
2016/17 39,716,148
2017/18 40,867,916
2018/19 42,053,086

3.1.3 Pricing and Distribution

Market survey indicates that the average retail price for ORS in major public and private
pharmacy on average is Birr 5 per package. Deducting 20% margin for retailer and 10%
for wholesaler and by taking the capacity of the envisaged plant in to account, the selling
price of Birr 3.50 per case of ORS has been estimated for the projection of the revenue of
the plant. The available retail and wholesale network shall be used by the envisaged plant
to reach its customers.

3.2 Plant Capacity

Given the expected demand for ORS presented earlier, the market price and the planned
technology, the envisaged plant is set to produce 6 million packets of ORS annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work
275 days in a year 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 2 nd year. The capacity will grow to 100 percent starting from

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the 3rd 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 for ORS is glucose (anhydrous). Sodium chloride, sodium
bicarbonate and potassium chloride are also necessary raw materials. Currently most of
these raw materials are produced locally in good quality. Although the sodium chloride
(edible salt) being produced in Ethiopia does not meet the necessary quality to be used as
an input for ORS preparation, the plan to introduce high tech in salt manufacturer is
assumed to materialize soon. Hence, it is assumed that the raw materials will mainly be
procured from the local market.

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 hereunder.

Table 2: Material and Utility requirement of ORS

Total Cost
Quantity (in Birr)
Material and Input (gm/case) L.C. F.C.
Anhydrous Glucose 13.5 8434329.1
Sodium Chloride 2.6 1624388.338
Trisodium Chloride 2.9 1811819.242
Potassium Chloride 1.5 937146.822
Lemon Extract 0.2 124953.936
Total Material Cost 20.7 4498308.338 8434331.66
Utility
Electricity 60000KWh 33,000  
Water 1000m3 2,650  
Total Utility Cost 35,650  

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5 Location and Site

The appropriate locations for the envisaged project in view of the availability of input,
infrastructures as well as market for the output are Bahir Dar, Combolcha, or another
location preferred by the investor.

6 Technology and Engineering

6.1 Production Process

The production process starts with the formulation of the ingredients. Thus the first
operation is preparation of ingredients that is drying of glucose and sifting of the other
three inputs. The materials are then weighed and are mixed according to proportions. The
mixture is then transferred to the filling machine. Packets are also formed in the some
machine from foil coils or rolls. At this stage the machine forms packets, fills them with
the product and seals them. Finally, packets are packed in boxes (first) and in cartons
(later) and become ready for dispatch.

Alternative technology
ORS can be prepared at home as well. There are` many recipes. One is the following.
To making a 1 (one) litre solution using Salt, Sugar and Water
Ingredients:
 one level teaspoon of salt
 eight level teaspoons of sugar
 one litre of clean drinking or boiled water and then cooled cupfuls (each cup
about 200 ml.)

Preparation Method:
Stir the mixture till the salt and sugar dissolve.
However, this technology is not appropriate for large scale commercial production.

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 6.2 Machinery and Equipment

The main machinery needed to produce ORS include; tray dryer, sifter, weighing
balances, mixers, containers, packet forming, filling and sealing machine. The detail
machineries and equipment required for producing ORS is detailed in Table 3 below

Table 3: Machinery and Equipment

Machinery and Equipment Quantity

  Tray dryer  2
  Sifter, weighing
balances  1
  Mixers  2
  Containers  3
  Packet forming  2
  Filling and sealing
machine  3
Total   13

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 2.3 million.

Suppliers Addresses
Savino Barbera SNC
Via Torino 12
Brandizzo (TO), 10032
Italy
hone: 39 011 913.90.63
Fax: 39 011 913.73.13

Buss-SMS-Canzler GmbH
Kaiserstrasse 13-15
Butzbach, 35510
Germany
Phone: 49 6033-85(0)

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 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 1,000m 2 where 600m2 is
allocated to the building place. The costs are estimated at Birr 60,000 and Birr 1.2
million, respectively.

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required human resource for the foreseeable plant is stated in Table 4 below.

Table 4: Human resource Requirement

Total
Monthly Annual
Position Required Salary Salary
No. (Birr) (Birr)
1 General Manager 1 8,981 107,772
2 Marketing head 1 6,415 76,980
3 Administration 1 5,132 61,584
4 Accountant 2 3,079 73,901
5 Mechanical Engineer 1 6,415 76,980
6 Secretary 1 2,181 26,173
7 Sales Clerk 3 1,796 64,663
8 Casher 2 1,796 43,109
9 Store Keeper 4 1,796 86,218
10 Electrician 3 1,925 69,282
11 Supervisor 4 3,849 184,752
12 Operators 10 2,566 307,920
13 Daily Laborers 10 1,026 123,168
14 Cleaners 3 898 32,332
15 Messengers 2 642 15,396
16 Driver 1 1,796 21,554
17 Guards 3 1,026 36,950
 Total   1,408,734
Benefit (20%)   281,747
 Grand Total 77 1,690,481

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 7.2 Training Requirement

Training of key personnel shall be conducted during the first year of operation. This can
be arranged with the suppliers of the plant machineries. The training should primarily
focuses on the production technology and machinery maintenance and trouble shooting.
Birr 166,790 is allocated as training expense.

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of ORS Producing plant 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 30% equity and 70% 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
16.29 million as shown in Table 5 below. The Owner shall contribute 30% of the finance
in the form of equity while the remaining 70% is to be financed by bank loan.

Table 5: Total Initial Investment

Total Initial Investment

Item Cost
Land 60,000.00
Building and civil works 3,079,200.00
Office equipment 256,600.00
Vehicles 769,800.00
Plant machinery & equipment 5,901,800.00
Total Fixed Investment 10,067,400.00
Pre production capital expenditure 500,754.90
Total Initial Investment 10,568,154.90
Working capital at full capacity 5,728,107.77
Total 16,296,262.67
*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 17.33 million as
detailed in Table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1.      Raw materials 12,932,640.00
2.      Utilities 35,650.00
3.      Wages and Salaries 1,690,480.80
4.      Spares and Maintenance 487,318.81
Factory costs 15,146,089.61
5.      Depreciation 1,023,910.98
6.      Financial costs 1,169,565.17
  Total Production Cost 17,339,565.76

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part 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 8.6%,
26.21% and 21.39% 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 24.52% of capacity utilization.

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 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 second year.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 25%.

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 29.3% and the net present value at 18 % discount is Birr 5.79 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 30.92% with payback
period of third year.

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 13.52 million within the
project life. Such result induces the project promoters to reinvest the profit which,
therefore, increases the investment magnitude in the region.

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 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 3.67 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

Based on the projected figure we learn that in the project life an estimated amount of US
Dollar 8 million will be saved as a result of the proposed project. This will create room
for the saved hard currency to be allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of

the region. That is, it will provide permanent employment to 77 professionals as well as
support staffs. Consequently, the project creates household income of Birr 1,690,481 per
year. This would be one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

F. Diversification and InterSectoral Linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the ANRS as well as the country as a whole. It also has a potential to
strengthen the linkage between the manufacturing and the trade sub-sectors.

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ANNEXES

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 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 7278654.016 8249140.876 9704871.166 9704871.166

Raw Materials in Stock- Total 0 0 3128369.692 3545485.822 4171158.734 4171158.734

Raw Material-Local 0 0 368043.946 417116.13 490724.406 490724.406

Raw Material-Foreign 0 0 2760325.746 3128369.692 3680434.328 3680434.328

Factory Supplies in Stock 0 0 13122.524 14872.536 17497.554 17497.554

Spare Parts in Stock and Maintenance 0 0 24582.28 27859.062 32775.518 32775.518

Work in Progress 0 0 328070.798 371813.4 437426.02 437426.02

Finished Products 0 0 656139.03 743624.234 874852.04 874852.04

2. Accounts Receivable 0 0 1763542.518 1998680.494 2351390.024 2351390.024

3. Cash in Hand 0 0 145797.554 165235.004 194395.028 194395.028

CURRENT ASSETS 0 0 6059621.83 6867573.118 8079497.484 8079497.484

4. Current Liabilities 0 0 1763542.518 1998680.494 2351390.024 2351390.024

Accounts Payable 0 0 1763542.518 1998680.494 2351390.024 2351390.024

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 4296081.878 4868892.624 5728107.46 5728107.46

INCREASE IN NET WORKING CAPITAL 0 0 4296081.878 572810.746 859217.402 0

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 9704871.166 9704871.166 9704871.166 9704871.166 9704871.166 9704871.166

Raw Materials in Stock-Total 4171158.734 4171158.734 4171158.734 4171158.734 4171158.734 4171158.734

Raw Material-Local 490724.406 490724.406 490724.406 490724.406 490724.406 490724.406

Raw Material-Foreign 3680434.328 3680434.328 3680434.328 3680434.328 3680434.328 3680434.328

Factory Supplies in Stock 17497.554 17497.554 17497.554 17497.554 17497.554 17497.554

Spare Parts in Stock and Maintenance 32775.518 32775.518 32775.518 32775.518 32775.518 32775.518

Work in Progress 437426.02 437426.02 437426.02 437426.02 437426.02 437426.02

Finished Products 874852.04 874852.04 874852.04 874852.04 874852.04 874852.04

2. Accounts Receivable 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024

3. Cash in Hand 194395.028 194395.028 194395.028 194395.028 194395.028 194395.028

CURRENT ASSETS 8079497.484 8079497.484 8079497.484 8079497.484 8079497.484 8079497.484

4. Current Liabilities 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024

Accounts Payable 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024

TOTAL NET WORKING CAPITAL REQUIREMENTS 5728107.46 5728107.46 5728107.46 5728107.46 5728107.46 5728107.46

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

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 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 5257926.45 10986033.91 17929342.52 18556377.98 21907109.53 21554400
1. Inflow Funds 5257926.45 10986033.91 1763542.518 235137.976 352709.53 0
Total Equity 2103170.58 4394413.564 0 0 0 0
Total Long Term Loan 3154755.87 6591620.346 0 0 0 0
Total Short Term Finances 0 0 1763542.518 235137.976 352709.53 0
2. Inflow Operation 0 0 16165800 18321240 21554400 21554400
Sales Revenue 0 0 16165800 18321240 21554400 21554400
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 5257926.45 5257926.45 19811618.99 16349458.88 20162871.03 18814497.05
4. Increase In Fixed Assets 5257926.45 5257926.45 0 0 0 0
Fixed Investments 5007549 5007549 0 0 0 0
Pre-production Expenditures 250377.45 250377.45 0 0 0 0
5. Increase in Current Assets 0 0 6059621.83 807948.722 1211924.366 0
6. Operating Costs 0 0 11260049.35 12747546.72 14978796.63 14978796.63
7. Corporate Tax Paid 0 0 0 0 1373117.92 1431594.494
8. Interest Paid 0 0 2491947.806 1169564.838 974638.648 779709.892
9.Loan Repayments 0 0 0 1624396.036 1624396.036 1624396.036
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 5728107.46 -1882276.47 2206921.658 1744238.5 2739902.952
Cumulative Cash Balance 0 5728107.46 3845830.99 6052750.082 7796988.582 10536891.53

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 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000
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 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000
Sales Revenue 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 7,279,052 7,255,585 7,202,409 6,516,187 6,516,187 6,516,187
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 5,837,411 5,837,411 5,837,411 5,837,411 5,837,411 5,837,411
7. Corporate Tax Paid 580,699 633,197 655,987 678,777 678,777 678,777
8. Interest Paid 227,897 151,931 75,966 0 0 0
9. Loan Repayments 633,046 633,046 633,046 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 1,120,948 1,144,415 1,197,591 1,883,813 1,883,813 1,883,813
Cumulative Cash Balance 5,227,297 6,371,712 7,569,302 9,453,115 11,336,927 13,220,740

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

4
 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 16165800 18321240 21554400 21554400

1. Inflow Operation 0 0 16165800 18321240 21554400 21554400

Sales Revenue 0 0 16165800 18321240 21554400 21554400

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 5257926.45 5257926.45 15556128.66 13320357.47 17211129.38 16410391.12

3. Increase in Fixed Assets 5257926.45 5257926.45 0 0 0 0

Fixed Investments 5007549 5007549 0 0 0 0

Pre-production Expenditures 250377.45 250377.45 0 0 0 0

4. Increase in Net Working Capital 0 0 4296081.878 572810.746 859217.402 0

5. Operating Costs 0 0 11260049.35 12747546.72 14978796.63 14978796.63

6. Corporate Tax Paid 0 0 0 0 1373117.92 1431594.494

NET CASH FLOW -5257926.45 -5257926.45 609671.336 5000882.532 4343270.618 5144008.88

CUMULATIVE NET CASH FLOW -5257926.45 -10515852.9 -9906181.564 -4905301.598 -562028.414 4581980.466
-
Net Present Value (at 18%) -5257926.45 4455869.264 437854.542 3043691.692 2240210.376 2248493.424
-
Cumulative Net present Value -5257926.45 9713795.714 -9275941.172 -6232249.48 -3992039.1 -1743545.68

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 21554400 21554400 21554400 21554400 21554400 21554400

1. Inflow Operation 21554400 21554400 21554400 21554400 21554400 21554400

Sales Revenue 21554400 21554400 21554400 21554400 21554400 21554400

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 16468870.26 16603580.13 16662059.27 16720535.84 16720535.84 16720535.84

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 14978796.63 14978796.63 14978796.63 14978796.63 14978796.63 14978796.63

6. Corporate Tax Paid 1490073.634 1624783.502 1683262.642 1741741.782 1741741.782 1741741.782

NET CASH FLOW 5085529.74 4950819.872 4892340.732 4833864.158 4833864.158 4833864.158

CUMULATIVE NET CASH FLOW 9667510.206 14618330.08 19510670.81 24344534.97 29178396.56 34012260.72

Net Present Value (at 18%) 1883841.73 1554185.144 1301549.614 1089823.822 923580.38 782694.15

Cumulative Net present Value 140296.05 1694483.76 2996030.808 4085854.63 5009435.01 5792129.16

Net Present Value (at 18%) 5792129.571

Internal Rate of Return 29.3%

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

1. Total Income 16165800 18321240 21554400 21554400 21554400

Sales Revenue 16165800 18321240 21554400 21554400 21554400
Other Income 0 0 0 0 0
2. Less Variable Cost 10649097.58 12068975.72 14198796.78 14198796.78 14198796.78
VARIABLE MARGIN 5516702.418 6252264.28 7355603.224 7355603.224 7355603.224
(In % of Total Income) 87.57758 87.57758 87.57758 87.57758 87.57758
3. Less Fixed Costs 1634862.75 1702481.982 1803910.83 1803910.83 1803910.83
OPERATIONAL MARGIN 3881839.668 4549782.298 5551692.394 5551692.394 5551692.394
(In % of Total Income) 61.60966 63.71378 66.10016 66.10016 66.10016
4. Less Cost of Finance 2491947.678 1169565.172 974637.6473 779710.1229 584782.573
5. GROSS PROFIT 1389892.58 3380216.254 4577055.517 4771983.041 4966910.591
6. Income (Corporate) Tax 0 0 1373116.663 1431594.905 1490073.172
7. NET PROFIT 1389892.58 3380216.254 3203938.854 3340388.136 3476837.393
RATIOS (%)  
Gross Profit/Sales 8.60% 18.45% 21.23% 22.14% 23.04%
Net Profit After Tax/Sales 8.60% 18.45% 14.86% 15.50% 16.13%
Return on Investment 26.21% 29.57% 25.72% 25.36% 25.00%
Return on Equity 21.39% 52.02% 49.31% 51.41% 53.51%

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 21554400 21554400 21554400 21554400 21554400

Sales Revenue 21554400 21554400 21554400 21554400 21554400
Other Income 0 0 0 0 0
2. Less Variable Cost 14198796.78 14198796.78 14198796.78 14198796.78 14198796.78
VARIABLE MARGIN 7355603.224 7355603.224 7355603.224 7355603.224 7355603.224
(In % of Total Income) 87.57758 87.57758 87.57758 87.57758 87.57758
3. Less Fixed Costs 1549799.85 1549799.85 1549799.85 1549799.85 1549799.85
OPERATIONAL MARGIN 5805803.374 5805803.374 5805803.374 5805803.374 5805803.374
(In % of Total Income) 69.12804 69.12804 69.12804 69.12804 69.12804
4. Less Cost of Finance 389854.946 194928.756 0 0 0
5. GROSS PROFIT 5415948.428 5610877.184 5805803.374 5805803.374 5805803.374
6. Income (Corporate) Tax 1624783.502 1683262.642 1741741.782 1741741.782 1741741.782
7. NET PROFIT 3791164.926 3927614.542 4064064.158 4064064.158 4064064.158
RATIOS (%)  
Gross Profit/Sales 25.13% 26.03% 26.94% 26.94% 26.94%
Net Profit After Tax/Sales 17.59% 18.22% 18.85% 18.85% 18.85%
Return on Investment 25.74% 25.38% 25.02% 25.02% 25.02%
Return on Equity 58.35% 60.45% 62.55% 62.55% 62.55%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 5257926.45 16243960.36 19397394.74 21388354.14 23320606.03 25036598
1. Total Current Assets 0 5728107.46 9905452.82 12920323.2 15876486.07 18616389.02
Inventory on Materials and Supplies 0 0 3166074.496 3588217.42 4221434.372 4221434.372
Work in Progress 0 0 328070.798 371813.4 437426.02 437426.02
Finished Products in Stock 0 0 656139.03 743624.234 874852.04 874852.04
Accounts Receivable 0 0 1763542.518 1998680.494 2351390.024 2351390.024
Cash in Hand 0 0 145797.554 165235.004 194395.028 194395.028
Cash Surplus, Finance Available 0 5728107.46 3845830.99 6052750.082 7796988.582 10536891.53
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 5257926.45 10515852.9 9491941.92 8468030.94 7444119.96 6420208.98
Fixed Investment 0 5007549 10015098 10015098 10015098 10015098
Construction in Progress 5007549 5007549 0 0 0 0
Pre-Production Expenditure 250377.45 500754.9 500754.9 500754.9 500754.9 500754.9
Less Accumulated Depreciation 0 0 1023910.98 2047821.96 3071732.94 4095643.92
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 5257926.45 16243960.36 19397394.74 21388354.14 23320606.03 25036598
5. Total Current Liabilities 0 0 1763542.518 1998680.494 2351390.024 2351390.024
Accounts Payable 0 0 1763542.518 1998680.494 2351390.024 2351390.024
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 3154755.87 9746376.216 9746376.216 8121980.18 6497584.144 4873188.108
Loan A 3154755.87 9746376.216 9746376.216 8121980.18 6497584.144 4873188.108
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2103170.58 6497584.144 6497584.144 6497584.144 6497584.144 6497584.144
Ordinary Capital 2103170.58 6497584.144 6497584.144 6497584.144 6497584.144 6497584.144
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 1389891.862 4770109.322 7974047.714
9.Net Profit After Tax 0 0 1389891.862 3380217.46 3203938.392 3340388.008
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 1389891.862 3380217.46 3203938.392 3340388.008

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
26,889,039.5
TOTAL ASSETS 9 29055805.91 31359024.42 35423088.57 39487150.17 43551214.32
1. Total Current Assets 21492741.59 24429307.91 27502326.42 32336190.57 37170052.17 42003916.32
Inventory on Materials and Supplies 4221434.372 4221434.372 4221434.372 4221434.372 4221434.372 4221434.372
Work in Progress 437426.02 437426.02 437426.02 437426.02 437426.02 437426.02
Finished Products in Stock 874852.04 874852.04 874852.04 874852.04 874852.04 874852.04
Accounts Receivable 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024
Cash in Hand 194395.028 194395.028 194395.028 194395.028 194395.028 194395.028
Cash Surplus, Finance Available 13413244.1 16349812.99 19422828.93 24256693.09 29090554.68 33924418.84
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 5396298 4626498 3856698 3086898 2317098 1547298
Fixed Investment 10015098 10015098 10015098 10015098 10015098 10015098
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 500754.9 500754.9 500754.9 500754.9 500754.9 500754.9
Less Accumulated Depreciation 5119554.9 5889354.9 6659154.9 7428954.9 8198754.9 8968554.9
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 26889039.59 29055805.91 31359024.42 35423088.57 39487150.17 43551214.32
5. Total Current Liabilities 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024
Accounts Payable 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024 2351390.024
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 3248792.072 1624396.036 0 0 0 0
Loan A 3248792.072 1624396.036 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 6497584.144 6497584.144 6497584.144 6497584.144 6497584.144 6497584.144
Ordinary Capital 6497584.144 6497584.144 6497584.144 6497584.144 6497584.144 6497584.144
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 11314435.72 14791273.35 18582438.27 22510050.25 26574114.41 30638176
9. Net Profit After Tax 3476837.624 3791164.926 3927614.542 4064064.158 4064064.158 4064064.158
Dividends Payable 0 0 0 0 0 0
Retained Profits 3476837.624 3791164.926 3927614.542 4064064.158 4064064.158 4064064.158

10