60 40 Corn Flake Axum

PROJECT PROPOSAL ON THE
ESTABLISHMENT
of
Corn flakes factory
At
Tigray regional state, Axum town
PROMOTER: - Ethio-life agro-processing plc
Tel. 0914301612
DATE: -April, 2020
1
Project proposal for the establishment of corn flakes factory @ Axum town
Table of content
1. EXECUTIVE SUMMARY........................................................................................................... 4
1.1. DESCRIPTION OF BUSINESS OR PROJECT.................................................................................................4

1.2. AMOUNT OF FINANCING REQUIRED......................................................................................................4
1.3. MARKET PROSPECT...........................................................................................................................4
1.4. TECHNICAL FEASIBILITY.......................................................................................................................4
1.5. ORGANIZATION AND MANAGEMENT.....................................................................................................5
1.6. FINANCIAL VIABILITY..........................................................................................................................5
1.7. SOCIO ECONOMIC JUSTIFICATION.........................................................................................................5
2. INTRODUCTION........................................................................................................................ 6
2.1. PROFILE OF THE PROMOTER................................................................................................................6

2.2. BACK GROUND OF THE PROJECT.........................................................................................................6
2.3. PROJECT LOCATION...........................................................................................................................7
2.4. GENERAL OBJECTIVE OF THE PROJECT....................................................................................................7
2.5. POLICY FRAMEWORK FOR PRIVATE SECTOR DEVELOPMENT........................................................................8
3. MARKET STUDY....................................................................................................................... 9
3.1. PAST SUPPLY AND PRESENT DEMAND....................................................................................................9

3.2. PROJECTED DEMAND.......................................................................................................................10
4. TECHNICAL STUDY................................................................................................................ 12
4.1. PLANT CAPACITY AND PRODUCTION PROGRAMME.................................................................................12

4.2. PRODUCTION SCHEDULE...................................................................................................................12
4.3. RAW MATERIALS AND UTILITY...........................................................................................................13
4.4. AVAILABILITY AND SOURCE OF RAW MATERIALS...................................................................................13
4.5. ANNUAL REQUIREMENT AND COST OF RAW MATERIALS AND UTILITIES....................................................13
4.6. TECHNOLOGY AND ENGINEERING.......................................................................................................15
4.7. BUILDING AND CIVIL WORKS............................................................................................................19
5. ORGANIZATION AND MANPOWER.....................................................................................21
6. ENVIRONMENTAL IMPACT.................................................................................................. 24
7. FINANCIAL ANALYSIS & KEYASSUMPTIONS...................................................................25
8. CONCLUSION & RECOMMENDATION................................................................................30
2
Tables
TABLE 1: SUMMARY OF INITIAL INVESTMENT COST..........................................................5
TABLE 2: SUMMARY OF FINANCIAL VIABILITY..................................................................6
TABLE 3: DOMESTIC PRODUCTION AND IMPORT OF CORNFLAKES (IN TONS)...............10

TABLE 4: PROJECTED DEMAND FOR CORN FLAKES (IN TON).........................................11
TABLE 5: RETAIL PRICE OF IMPORTED CORN FLAKES....................................................12
TABLE 6: ANNUAL RAW MATERIALS AND INPUTS REQUIREMENT..................................15
TABLE 7: ANNUAL AUXILIARY MATERIALS REQUIREMENT AT FULL CAPACITY AND
COST...................................................................................................................................15
TABLE 8: ESTIMATED ANNUAL UTILITY COST.................................................................16

TABLE 9 Automatic corn flakes machine......................................................................18
TABLE 10: LIST OF EQUIPMENT........................................................................................19
TABLE 11: OFFICE FURNITURE..........................................................................................20
TABLE 12: CONSTRUCTION................................................................................................21
TABLE 13: MANPOWER AND COST....................................................................................23
TABLE 14: PRE-PRODUCTION CAPITAL EXPENDITURE.....................................................24
TABLE 15: WORKING CAPITAL REQUIREMENT.................................................................26

TABLE 16: INITIAL INVESTMENT COST.............................................................................27
TABLE 17: ANNUAL PRODUCTION COST AT FULL CAPACITY..........................................28
TABLE 18: PAYBACK PERIOD............................................................................................29

TABLE 19: INTERNAL RATE OF RETURN...........................................................................29
3
1. EXECUTIVE SUMMARY
1.1. Description of business or project

This project, named Ethio-life agro processing plc corn flakes factory envisages
production of different types of corn flakes having a capacity of 1106 ton per annum.
The corn flakes factory produces export substitute product that will save $356,879
foreign currency per year. The main raw materials used for the production of corn
flakes are corn/maize and sugar which is available in the country. 75 full time staff and
23 labors would be employed for the duration of the project at full production. The
proposed site for the establishment of the project will be Axum town and the land
required for the project is 6,000m2
1.2. Amount of financing required
The initial investment cost of the project is estimated birr 27.09 million. From this birr
24.26 million is for fixed cost and birr 2.84 million for working capital. The major
breakdown of the total initial investment cost is shown in the following Table.
TABLE 1: SUMMARY OF INITIAL INVESTMENT COST
s/No Description Total

1 Building, 13,502,500
2 Machinery 8,800,000
3 Equipment 362,700
4 Office furniture 91,160
5 Pre-production capital expenditure 250,000
6 Vehicles 1,250,000
7 Working capital 2,836,665
Total initial investment 27093025
Source of finance-60 % equity-40 % loan
1.3. Market prospect

As indicated in section 3 in this feasibility study, table-5, the present demand for the proposed
corn flakes is estimated at 3,375 tons per annum. The demand is expected to reach at 4,995 tons
by the year 2020.
1.4. Technical feasibility

The necessary machinery’s and equipment’s – for corn flakes production, listed on table-9
&10, will be purchased by the project. The estimated cost of machine is birr 8,800,000, of
which Birr 7,026,936 is in foreign currency.
4
The necessary constructions such as machinery house, office, store, toilet & shower, land
preparation and other necessary structures will be constructed. (See table -8).
1.5. Organization and management

The company will employ 75 permanent and 23 temporary at various levels of project
activities. The labour force is available in the local market. The women will benefit
from the project. The overall supervision of the company will be undertaken by skilled
man power. The company shall put in place a proper organizational set up.
1.6. Financial viability

The financial viability of a project has been tested by applying all the relevant
measures and was found to be very satisfactory and viable. The following results
have been found in the projections made.
TABLE 2: SUMMARY OF FINANCIAL VIABILITY
S/N Description Before tax After tax

1 Project IRR 25.31% 20.38%
2 Sensitivity test
a When benefit decrease by 5% 18.98% 13.05%
b When operating, costs increase by 5% 20.80% 15.19%
Description Year one Year ten
3 Net profit 4,237,358 5,278,989
4 Net cash inflow 5,253,432 16,049,832
5 NPV at 12% discounting factor 9.80 million
1.7. Socio economic justification

The project is socially desirable, economically very useful and environmentally
viable. This can be justified from various angles. To state some of the benefits of
the project;
 Employment opportunity for 75 permanent and 23 temporary during the operation

and construction phases. The project also creates a job opportunity during
construction phase.
 save foreign currency to the country
 Tax income for the government.
5
2. INTRODUCTION
2.1. Profile of the promoter

The promoters of corn flakes Manufacturing factory are two entrepreneurs who are
curious to share their idea, knowledge and capital towards a meaningful investment that
contributes to the growth of the country in particular.
They have involved in many businesses and got more than 22 years of experience in
various business activities including construction sectors. Their close experience on
different business coupled with the motivation of the government to investment has
kindled the idea of establishing corn flakes manufacturing plant at Axum town where
there is no such an establishment.
Project Name Ethio-life agro-processing plc

Project Location Axum town, Tigray Regional
state. Ethiopia
Requested Land 6,000 m2
Project owner Ethio-life agro-processing plc
Address Mekelle, Ethiopia
Tel. 0914301612
Type of Business Agro processing
Project status New
Purpose conflux processing
Legal Form of Organization Privet
Construction Program New
3 month building permit phase
9-month construction period
4 month finishing works & test
operation
Total Estimated Capital Birr 27.09 Million
2.2. Back Ground of The Project

Corn flakes being one of most nutritious foods and is consumed as breakfast food not
only in India but-elsewhere in the world. Basically, it is prepared from maize, this is
6
the main raw material. Flavours, like sugar or salt, are also added. Maize, the main raw
material, is itself a corn grain.
Ethiopia is predominantly an agricultural country. Due to the progressive increase in

farm produce a need has been felt to develop more agro-based food processing
industries to make gainful utilization of the raw material resources and to provide
remunerative prices to the growers. Maize is one of the important commercial food-
grains grown abundantly in our country. The maize is processed for the manufacture of
oil, flour, starch, liquid glucose, dextrose etc. Besides pop-corn, another snack foods
made from maize, maize is also used for the manufacture of corn flakes.
Corn Flakes are used mainly as break-fast food along with milk. They are also used for
making any delicious food by cooking. It is also being given to patients, since it
contains carbohydrates, protein and starch. This food acts as a stimulant for patients.
Corn flakes are mainly consumed by upper strata of society, in hotels, hospitals,
nursing homes etc. It is economical, convenient, nutritious and flavorful food suitable
for daily consumption. People getting modernized they need some sophistication in
their food also the need of which fulfilled by corn flakes. The per capita consumption
of corn flakes has increased many times as compared to last decade.
2.3. Project Location

The proposed project, con flakes, will be established in Axum town, of Tigray
Regional State. The site is selected for its proximity to market, electricity and
other infrastructure, Skilled man power etc.
2.4. General objective of the project

The main objective of the project is supplying corn flakes for local market
according to its type. This will be achieved by establishing competitive private
company that generates employment and income for owners and provides
affordable, different types of corn flakes for consumers in the region.
The specific objectives are

 To supply many types of corn flakes for local market.
 To generate job opportunity
 To save foreign currency
7
2.5. Policy framework for private sector development

Ethiopia’s development goals are laid down in the Plan for Accelerated and
Sustained Development to End Poverty (PASDEP) and its industrialization goals
are set out in the Industrial Development Strategy. The Industrial Development Plan
mentions a few general principles – e.g. to recognize the role of the private sector as
an engine of growth; the importance of state leadership to challenge and support
developmental firms; and the need to build on both foreign and domestic investors.
Additionally, it specifies priority areas for selective interventions that favour certain
sectors over others.
Accordingly, the Regional government of Tigray has named agro-processing factory

as one of its priority sector. According to Tigray investment and export
commission, and Axum town administration are committed to attracting potential
investors to the sector and provide all needed support.
8
3. MARKET STUDY
3.1. Past supply and present demand

Currently, there is only one recently established private company in the country
engaged in the manufacture of corn flakes. The planned annual production capacity
of this new company is 288 tons. The ingredients of the product of this company are
corn flour, chocolate powder and chocolate color. Data on actual production of this
plant could not be obtained. Moreover, corn flakes are also imported from abroad.
Assuming that the domestic plant produces at its full capacity, the total effective
demand of corn flakes in the country is presented in table 1 below
TABLE 3: DOMESTIC PRODUCTION AND IMPORT OF CORNFLAKES (IN TONS)
Domestic Impor Effective

Year Production t Demand
1997/98 0 29 29
1998/99 0 31 31
1999/00 0 24 24
2000/01 0 69 69
2001/02 0 71 71
2002/03 0 75 75
2003/04 0 72 72
2004/05 0 78 78
2005/06 288 84 372
2006/07 288 112 400
Source: - Customs Authority (various years)
The above table reveals that in 2006/07 alone a little less than half of the total
demand is met through import. A report by UNIDO in 2003 pointed out that there is
a worthwhile demand of corn flakes in the capital city, Addis Ababa alone mainly
by the international community, but also to a great extent by the affluent population
due to its ease and fast preparation. However, the fact that the price of imported
corn flakes is relatively high, being 50 times, the price of maize utilized to produce
it, the demand for the product is likely to increase substantially if production takes
place locally at a reasonable price.
9
3.2. Projected Demand

Currently corn flakes is consumed by the international community, and a portion of
middle and upper income groups of the urban population. The effective demand
could increase to a greater extent if the price of the product is reduced together with
proper promotional activities.
The 2006 statistical abstract confirm that there are 12.2 million people living in the
urban places of Ethiopia. With average family size of 5, this represents roughly 2.5
million families. If we conservatively assume that only 2.5 percent of these families
are able to demand the product, the number of families with potential demand will
be 62,500 families. With further conservative assumption of 1 kilogram of
cornflakes consumed per a family per week with the reduced price, the annual
demand would be 3000 tons of corn flakes. This demand analysis increases when
the international community and demand of hotels, restaurants and cafes is added in
the computation. Moreover, the advancement of modernization in the urban places
is likely to boost the demand for the product under study. Thus, taking a
conservative consideration of 4 percent growth of urbanization per annum, the
future demand of corn flakes 2007/8, 2008/9 and 2009/10 estimated at 3120, 3245
and 3375 respectively. The projected demand is indicated in the following table.
TABLE 4: PROJECTED DEMAND FOR CORN FLAKES (IN TON)
Year Projected Demand

2009/10 3,375
2010/11 3,510
2011/12 3,650
2012/13 3,796
2013/14 3,948
2014/15 4,106
2015/16 4,270
2016/17 4,441
2017/18 4,618
2018/19 4,803
2019/20 4,995
According to table 4, forecasted demand reaches 3,375 tons by 2009/10 and increases by
48% within 10 years (2019/20)
10
3.2.1. Pricing and Distribution

Market research conducted in various super markets in Addis Ababa revealed the
following average retail price of imported cornflakes.
TABLE 5: RETAIL PRICE OF IMPORTED CORN FLAKES
Weight (in gram) Price (in Birr)

300 36
350 40
500 55
700 67
In other words, the retail price of corn flakes on average is about Birr 100 per kilogram.
This is very expensive judged by any standard. The product is sold through wholesalers and
retailers. Based on the market research result and the capacity of the envisaged plant, the
selling price of corn flakes has been estimated at 10,000 Birr/ton (i.e. Birr 10 per kg). In
relation to the import price, the price set for the envisaged plant is substantially lower
mainly due to the availability of maize and sugar locally at reasonable price. The product
has got ample shelf life and thus, the existing retail and wholesale network shall be used by
the envisaged plant.
11
4. TECHNICAL STUDY
4.1. Plant capacity and production programme

4.1.1. Plant Capacity
Based on the outcome of market study and considering the minimum economic scale
of production, the envisaged plant will have production capacity of 1106 tons of corn
flakes per annum at full production capacity. This capacity is proposed on the basis
of a single shift of 8 hours per day and 300 working days per annum,
4.1.2. Production Programme
The project is assumed to start operation at 75% of its rated capacity, which reaches
85% of the rated capacity in the second year. Full capacity production will be
attained in the third year and thereafter.
Project year Attainable capacity (%)

1st 75%
2nd 85%
3rd and above 100%
4.2. Production schedule
The project implementation will take around sixteen months. The planned project
implementation activities are shown in Table-bellow.
year 1 year 2
Activity 3rd
1st 2nd 3rd 4th 1st 2nd 4th
quarte
quarter quarter quarter quarter quarter quarter quarter
r
Construction and site work
remain activities
Procurement of machinery &
equipment with transport
Electro-mechanical installation
Commissioning
Start-up
12
4.3. Raw Materials and utility
4.4. Availability and Source of Raw Materials

The major raw material used for the manufacture of corn flakes is maize (hybrid
yellow and white corns). In Ethiopia, maize is widely produced in all parts of the
country where in 2005/06, alone 33.4 million quintals were produced throughout the
country. In the same year Amhara region produced 35% of the total cereal
production in the country which roughly implies that 11.7 million quintals of maize
is the share of the region. The varieties grown are mixtures of white, yellow and
purple seeds where it is largely produced by the private farms. The fact that corn
does not constitute one of the staple foods in the Amhara Region points the presence
of ample maize (corn) for the envisaged plant.
Sugar is another raw material used for the manufacture of corn flakes. There are
three large-scale sugar establishments in the country. These establishments have
production capacity 280,000 tons of sugar annually. White sugar, which is used in
the manufacture of corn flakes, is mainly exported to the neighboring countries such
as Djibouti, Kenya and Yemen in quantities ranging between 30,000 to 50,000 tons
per annum.
In addition to the existing cane sugar establishments, new sugar projects are
currently under construction. After the completion of these new sugar projects, the
annual production of cane sugar in the country may reach about 1.4 million tons.
This exhibits the presence of ample raw material. Other ingredients including cocoa
powder and flavors are imported from abroad.
4.5. Annual Requirement and Cost of Raw Materials and Utilities

The annual requirement for raw materials at full capacity operation of the plant and
the estimated costs are given in Table 6.
13
TABLE 6: ANNUAL RAW MATERIALS AND INPUTS REQUIREMENT
Unit of Unit Cost, ('000 Birr)

Sr. Descriptio Require
Measur Price,
No. n d Qty. F.C. L.C. Total
e Birr/Unit
1 corn ton 1200 10,000 12,000,000 12,000,000
2 sugar m 3
165 20,000 3,300,000 3,300,000
Cocoa 1,350,000 1,350,000
3 45 30,000
Powder
4 Flavors ton 7.5 130,000 975,000 975,000
2,325,00 15,300,0 17,625,0
Sub Total 0 00 00
The major auxiliary materials required for the envisaged plant are packing materials
which comprise carton box, printed polypropylene film, scotch tape, polypropylene bag,
and sewing thread for bags. The annual requirement for the auxiliary materials at full
capacity production of both long cut and short cut pasta are given in Table 7.
TABLE 7: ANNUAL AUXILIARY MATERIALS REQUIREMENT AT FULL CAPACITY AND COST
Sr. Unit of Require Unit Price, Cost, ('000 Birr)

Description
No. Measure d Qty. Birr/Unit F.C. L.C. Total
1 Carton box pc 244,800 8.50 0 2,080,800 2,080,800
Printed polypropylene 20,074 87.50 512,300 1,244,140 1,756,440
2 ft2
film
3 Scotch tape roll 8,078 22.84 0 184,511 184,511
4 Polypropylene bag pc 97,920 5.00 0 489,600 489,600
5 Thread for bag sewing roll 384 38.00 0 14,592 14,592
Sub Total 0 0 371256
4.5.1. Utilities
Electric power and water are the power and utilities required for the envisaged
plant. Annual requirement for power and utilities at full capacity production along
with the estimated costs is shown in Table below
14
TABLE 8: ESTIMATED ANNUAL UTILITY COST

Unit of Required monthly Total Annual
S/N Description meas. Qty/year cost (Birr) Cost(Birr)
1 Electricity, kWh 365,000 17642 211700
2 Furnace Oil lit 50,000 29167 350000
3 Water, m3 10,000 8333 100,000
fuel, (40liter per
4 day+birr21/liter) lt 14,400 25200 302,400
lubricants (5% of
5 fuel) 1260 15,120
6 Stationary tel. 1000 12,000
Total 82602 991,220
4.6. Technology and engineering

4.6.1. Technology
4.6.1.1. production Process
Basically, corn flakes are prepared from maize. The process has been classified into 3 parts.
1. Grain cleaning Section.

2. Corn Grit Section.
3. Corn flake Section.
1) GRAIN CLEANING SECTION:
Yellow and white corn (Hybrid) may be used for the manufacture of corn flakes.
Initially corn grains are cleaned and polished to remove dirt, dust etc. Silos are used for
storing corn grains. Removal of dust, dirt and gern are carried by air classifiers, and
also polishing is done. Separator is used to separate large grains from small grains.
Usually No. 6 mesh screen is used which provides larger grains.
2) CORN GRIT SECTION

After polishing grains, they are milled to remove germ and bran. The broken pieces
are cooked in rotary steam cooker under pressure, generally handles 500 600 kgs. at
that time. It is subjected to steam and for 2 hours. Flavour syrup of sugar, malt, salt
and water are added during the process. The grits. the cooked material possess moisture
which raises to about 36 - 37%. The grits are again washed and cleaned by air
classifiers. The large and small grits are separated by separator. These are stored in
bins. The grits carried to an agitator or lump breaker and then is discharged into a pan
woler or may be sent to steamer where pre-heated air is blown to reduce the moisture
15
content to the desired degree about 20%. The dried material is kept in demoisturing
tank for few hours in order to provide the residual moisture to become equally
distributed. This is a very important process for uniform pressing in the flakes. The
flakes may be thin or thick, depending on the moisture i.e. more the moisture, more the
thinner and less the moisture, more the thicker. These grits are again gorn washed in a
gorn separator and are stored in storage tanks for further processing.
3) CORN FLAKE SECTION.

Finally comes the corn flake process.
The grits or cooked material are passed to heavy flaking machine, where the grits are
converted into flakes by pressing the grits. It is cooked by water roller. The flakes are
immediately transferred to the rotary of any other oven for roasting. These ovens are
usually gas fired and of slightly conical, rotating cylinder when the proper roasting is
over, it is continuously carried to the conveyor. The roasted flakes are inspected,
screened or graded to remove substandard flakes. these are immediately transferred to
packing machine. The packing material must be water resistances, generally polythene
containers of waxed paper.
Peeling and
Cleaning
Corn Degerming Classifying
coo
g
kin
Draying
Packing Cooling
Rolling and
toasting
16
Figure -1 Corn flakes manufacturing process
4.6.2. Engineering
4.6.2.1. Machinery
The machineries required for producing corn flakes are Automatic corn flakes machine
(Mixer, Extruder Cooker, Coating Machine, Packaging Machine etc.)
TABLE 9 Automatic corn flakes machine
Machine Description
The production line adopts the technology of two kinds of different texture and taste of the
product in the double screw extrusion co extruding advanced at the same time, the production
market popular sandwich rice crisp, Gamigo puffing food variety of sandwich; also, can
transform the mold and auxiliary equipment, puffed food production and nutrition powder,
cereals porridge and various shapes. The automatic production line to "features for a wide
range of raw materials, easy operation and repair, low energy consumption, high output" in the
domestic leading level.
17
The total cost of machinery is estimated to be Birr 8,800,000. of which Birr 7,026,936
is in foreign currency.
4.6.2.1. Equipment
The equipment required by the plant are listed down in Table 10.
TABLE 10: LIST OF EQUIPMENT
Machinery and Equipment Quantity Total cost birr

Equipment
Fuel Storage tank 1 150,000
Laboratory Equipment 1 set 150,000
Others set 62,700
Total equipment cost /birr 362,700
18
4.6.2.2. Office furniture

A lump sum provision of birr 91,160 for procurement of office/factory furniture is
assumed. This would include table, desk, chairs, and etc. The breakup of Factory Office
Furniture & Fixtures is as follows:
TABLE 11: OFFICE FURNITURE
unit total
S/N Description unit quantity price price
1 Managerial chair, high back pcs 5 1400 7,000
2 Open book shelf pcs 1 1800 1,800
3 Wooden filling cabinet, four pcs 1 1600
drawers 1,600
4 Coat hunger pcs 20 500 10,000
5 Executive sec. Desk and chair set 1 3300 3,300
6 Office desk pcs 5 1950 9,750
7 Arc joint table pcs 1 380 380
8 Computer table pcs 1 1960 1,960
9 Brand desktop computer with set 3 14060
42,180
network access
1 Mobile drawer pcs 1 1090
1,090
0
1 Swivel chair pcs 3 1200
3,600
1
1 Curtains & Interior Decoration
2 for office
1 Guest chair with arm seat pcs 10 850
8,500
3
Sub Total 91,160
4.7. Building and Civil Works

The project will employ a modern factory design that would allow easy logistical
handling of raw materials and promote a better working environment of the plant overall
operation. Buildings for different purposes like storehouse, production, and offices
ablution facilities, staff accommodation will be erected. Accordingly, the land required
for this project is 6,000m2 with 3600m2 buildup area. The total cost of construction is
estimated to be Birr 13,502,500.
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TABLE 12: CONSTRUCTION
Description Quantity Total cost

Total Area (m2)
1Building
1.1Production house - 1200 2,400,000
1.2 Raw material store 800 1,600,000
1.3Temporary storage 300 600,000
1.4 Manufactured material store 800 1,600,000
1.5Office 600 1,200,000
1.6Changing room 600 1,200,000
1.7Quality control 300 600,000
1.8Product display room 250 500,000
1.9Cafeteria 600 1,200,000
1.10Laundry 250 500,000
1.11Showers and toilets 200 400,000
1.12Guard house 100 200,000
Total built-up area 6000
Loading and unloading area, parking
2
and walk ways et
2500 125,000
3 Green area 1000 100,000
4 Waste treatment area 500 50000
Total 12,275,000
Contingency 1,227,500
Grand Total 10,000 13,502,500
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5. ORGANIZATION AND MANPOWER
5.1. Organization and Management
The plant will require a total of 75 permanent workers of whom 62 are production
workers while the remaining balance, i.e, 13 are administrative workers. Annual cost of
labor is Birr 2,328,000. The human resource required by type of job and the monthly
and annual salary is indicated on Table 13. The project also employs greater than 23
workers during construction phase.
The proposed organizational structure is shown here below.
PROPOSED ORGANIZATIONAL STRUCTURED
General
Manager
Secretary
Prod. & Finance &

Technical
Manager
Admi. Manager
Accountants
Operators, Purchaser
Quality Control , Sales Person
clerk
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TABLE 13: MANPOWER AND COST
Monthly
Item Required Work Total monthly
Position Education Level Salary
No. Number Experience
[Birr]
Salary [Birr]
A Administrative and technical
1 General Manager 1 BA. Management 5 6,000 6,000
2 Secretary 1 Diploma in Sec science 4 2,800 2,800
3 Production & Technical Manager 1 Bsc. Food Eng. 4 5,000 5,000
4 Accountants 1 Diploma in Finance 4 2,400 2,400
5 Purchaser 1 Diploma in Finance 4 3,500 3,500
6 Sales Person 2 Diploma in Marketing 4 3,700 7,400
7 Mechanics 1 Diploma in electric 4 1,400 1,400
8 Electricians 1 Diploma in electric 4 1,400 1,400
9 Guards 4 4th Grade 0 1,000 4,000
B Production 0
1 Operators 24 TVET Graduates 4 2,500 60,000
2 Quality Control 1 Diploma. Food Eng. 4 3,600 3,600
3 Clerks 2 TVET Graduates 4 2,600 5,200
4 Unskilled Labour 35 8th Grade 0 1,500 52,500
Total 62 121300
Employee Benefit: 25% of Basic 38,800
salary
Grand Total 194,000
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5.2. Training requirement
operators and leader/head should be given two weeks training on production technology,
machine operation and maintenance. On-the-job training on the operation of machines is
required by an expert from the supplier of the machinery equipment during the erection
and trial-run, production period. The total cost of training is estimated at about Birr
50,000. See table-14
TABLE 14: PRE-PRODUCTION CAPITAL EXPENDITURE
N TOTAL
O DESCRIPTION PRICE BIRR
Registration, licensing and formation of the
company including legal fees, commissioning
1 expenses, etc. 100,000
2 Land tax for the 1st year 10% of total 100,000
3 Training 50,000
Total 250,000
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6. Environmental impact
The implementation of corn flakes manufacturing project will have a pack of social and
economic benefits. It plays a role on the country’s economic development activity; as the
project create a considerable employment opportunity for the citizens, generates income for
local community. Operation of the project also creates a sustainable market opportunity for the
users of in the region and also in the country and it also saves foreign currency, stabilizes the
availability and price of respective products.
The main adverse environmental impacts potentially arise from issues associated with the
operation of the firm and theses impacts are minimal. Impacts are related to the solid and liquid
wastes, air pollution created during the operation of the firm and occupational health and safety
for workers employed with the company. Mitigation measures are available for all of the
anticipated environmental impacts and have been included in the project design.
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7. FINANCIAL ANALYSIS & KEYASSUMPTIONS
7.1. Key assumptions
The project cost estimates for the proposed “corn flakes manufacturing Business” have
been formulated on the basis of discussions with industry stakeholders and experts.
The projections cover the cost of land, machinery and equipment including office
equipment, fixtures etc. Some specific assumptions relating to individual cost
components are given as under.
 over all factory & office renovation
To renovate the factory / office premises in every year, a cost would be incurred for
which an amount equivalent to 1.5% of the total factory/office construction cost is
estimated.
 depreciation treatment
The treatment of depreciation would be on a diminishing balance method at the rate of

10% per annum on the following except the building which is 5%. The method is also
expected to provide accurate tax treatment.
1. Machinery
2. Land & Building Construction
3. Vehicles
4. Furniture and Fixtures etc.
 working capital requirements
It is estimated that an additional amount of birr 2,836,665 (approximately) will be

required as cash in hand to meet the working capital requirements. These provisions
have been estimated based on the following assumptions for the proposed business.
TABLE 15: WORKING CAPITAL REQUIREMENT
Description Amount in birr

Two Months Utilities Charges 495,610
Two Months Salaries 388,000
Raw Material for one Month 1,845,912
Miscellaneous expense 107,143
Total 107143
25
 selling & distribution expenses
For the purpose of this pre-feasibility, it has been assumed that the corn flakes
manufacturing unit is engaged in local sales. For the purpose of increasing awareness
about its product, the entity will be required to place some advertisements in local
publications. These arrangements would result in additional cost to the business for
which an amount equivalent to 1% of the annual sales has been assumed.
 miscellaneous expenses
Miscellaneous expenses of running the business are assumed to be birr 107,143 per
year. These expenses include various items like daily consumables, traveling
allowances etc.
 other assumptions are assumptions: -
Construction period-1 year

Source of finance-50 % equity-50 % loan
Tax holidays- 3year
Bank interest - 12%
Discount cash flow-12%
7.2. Total initial investment cost
The total investment cost of the project including working capital is estimated at Birr
27.09 million, of which birr 24.26 million will be for fixed cost. The major
breakdown of the total initial investment cost is shown in Table 16
TABLE 16: INITIAL INVESTMENT COST
/No Description Total Bank Equity

1 Building, 13,502,500 6,751,250 6,751,250
2 Machinery 8,800,000 4,400,000 4,400,000
3 Equipment 362,700 181,350 181,350
4 Office equipment 91,160 45,580 45,580
5 Pre-production 250,000 125,000 125,000
6 Vehicles 1,250,000 625,000 625,000
Working capital 2,836,665 1,418,332 1,418,332
7 requirement
Total initial investment 27093025 13546512 13546512
26
7.3. Production cost
The annual production cost at full operation capacity is estimated at Birr 29.29 million
(see Table 17). The material and utility cost accounts for 79 per cent, salary accounts
7.95 while other costs take 13.05 per cent of the production cost.
TABLE 17: ANNUAL PRODUCTION COST AT FULL CAPACITY
S/N Item year 3 %

1 Operating cost
1.1 Utilities/ 991,220 3.38%
1.2 Repairs & Maintenance’s 363,845 1.24%
1.3 Salary and Wage 2,328,000 7.95%
1.4 Raw material 22,150,943 75.61%
1.5 Land cost 32,143 0.11%
1.6 Other expenses 150,000 0.51%
1.7 Advertising & distribution expenses 64,483 0.22%
Total operating cost 26,080,634 89.02%
2 Depreciation 1,788,011 6.10%
3 Bank interest /financial cost 1,429,201 4.88%
Total cost of production 29,297,846 100.00%
7.4. Financial evaluation
i) Profitability
According to the projected income statement, the project will start generating profit in
the first 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 life-time of the project. The income
statement and the other indicators of profitability show that the project is viable.
ii) Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at
full capacity (year 3) is estimated by using income statement projection.
BE = Fixed Cost = 39.14 %

Sales – Variable Cost
27
iii) 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 within 4 years & 3 months.
TABLE 18: PAYBACK PERIOD
Investment Cumulative cash

Net cash inflows
Year out lays inflows
0 27,093,025
1 5,253,432 5,253,432
2 6,418,990 11,672,422
3 8,132,126 19,804,548
4 5,717,037 25,521,584
5 5,779,754 31,301,338
6 5,874,497 37,175,835
7 5,980,609 43,156,445
8 6,099,455 49,255,900
9 6,232,563 55,488,463
10 16,049,832 71,538,295
Total 71,538,295
PBP (payback period) Year 4.2719
iv) Internal Rate of Return

Based on the cash flow statement, the calculated IRR of the project is 20.38%
TABLE 19: INTERNAL RATE OF RETURN

Data Description
-27093025 Initial cost of a business
5253432 Net cash inflow for the first year
6418990 Net cash inflow for the second year
8132126 Net cash inflow for the third year
5717037 Net cash inflow for the fourth year
5779754 Net cash inflow for the fifth year
5874497 Net cash inflow for the sixth year
5980609 Net cash inflow for the seventh year
28
6099455 Net cash inflow for the eighth year

6232563 Net cash inflow for the ninth year
16049832 Net cash inflow for the tenth year
Formula Description (Result)
=IRR Investment's internal rate of return after
(A1:A11) ten years is 20.38%
v) Net Present Value

Net present value (NPV) is defined as the total present (discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value. It is a
standard method for using the time value of money to appraise long-term projects. NPV
is an indicator of how much value an investment or project adds to the capital invested.
In principal, a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 12% discount rate is found to be
Birr 9.8 million which is acceptable.
vi) Sensitivity Analysis

An increase in costs of operation or decreasing benefit by 5% will affect the
profitability of the plant.
When benefit decrease by 5%=IRR-13.05%
When operating, costs increase by 10% =IRR-15.19%
7.5. Economic benefits
The project can create employment for 75 permanent and 23 temporary persons. In
addition to supply of the domestic needs, the project will generate Birr 18.94 million in
terms of tax revenue during project life.
29
8. CONCLUSION & RECOMMENDATION
1. Conclusion
The project has clear social and economic benefits and will contribute to the reduction
of poverty. The project will create considerable employment opportunities for the local
community. During the construction and operation phase, the project will create direct
job opportunity 75 permanent workers mainly from the local community. The project
also creates job opportunities for greater the 23 workers during construction. operation
of the project also creates a sustainable market opportunity for corn flakes consumers
and distributers.
In addition to this the project is expected to support the knowledge and skill transfer
effort made by the regional government to the local community and generate income to
the government in different forms of taxes from its operation and sales activities.
2. Recommendations
The company should assist the local community by offering employment opportunities,
The company should give emphasis to support small enterprises through creating
supply chain of raw materials and product distribution schemes to and from the
company.
The proponent should create tight contact with the regional and federal governmental
sectors and institutions in order to easily access the market, develop new products
required.
30
Annex 1: Annual revenue
Type of
S/N products year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
Corn flakes 18,254,36 20,688,278 24,339,15 24,339,15 24,339,15 24,339,150 24,339,150 24,339,150 24,339,15 24,339,150
1 300gm 3 0 0 0 0
Corn flakes 6,163,811 6,985,652 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414
2 350gm
Corn flakes 2,821,129 3,197,279 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505
3 500gm
Corn flakes 2,489,231 2,821,129 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975
4 700gm
l TOTAL 29,728,533 33,692,338 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044
31
Annex 2: Annual production cost

S/N Item year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
1 Operating cost
1.1 Utilities/ 743415 842537 991,220 991220 991220 991220 991220 991220 991220 991220
Repairs & 363845 363845 363,845 363845 363845 363845 363845 363845 363845 363845
1.2 Maintenance’s
1.3 Salary and Wage 1746000 1978800 2,328,000 2328000 2328000 2328000 2328000 2328000 2328000 2328000
16613207 18828301 22,150,94 22150943 22150943 22150943 22150943 22150943 22150943 22150943
1.4 Raw material 3
1.5 Land cost 32143 32143 32,143 32143 32143 32143 32143 32143 32143 32143
1.6 Other expenses 112500 127500 150,000 150000 150000 150000 150000 150000 150000 150000
Advertising & 48362 54811 64,483 64483 64483 64483 64483 64483 64483 64483
distribution
1.7 expenses
Total operating 19659472 22227937 26,080,63 26080634 26080634 26080634 26080634 26080634 26080634 26080634
cost 4
2 Depreciation 1788011 1788011 1,788,011 1788011 1725511 1725511 1725511 1725511 1725511 1725511
Bank interest 1625581 1532949 1,429,201 1313003 1182861 1037102 873852 691012 486231 256877
3 /financial cost
Total cost of 23073065 25548897 29,297,84 29181648 28989006 28843247 28679997 28497157 28292376 28063022
production 6
32
Annex 3: Project income statement

Start-up Full Capacity
Description 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year
Sales Revenue 27310423 30951813 36413897 36413897 36413897 36413897 36413897 36413897 36413897 36413897
Cost of 23073065 25548897 29297846 29181648 28989006 28843247 28679997 28497157 28292376 28292376
production
Taxable profit 4237358 5402915 7116051 7232250 7424891 7570650 7733900 7916740 8121521 8121521
tax 0 0 0 2531287 2598712 2649728 2706865 2770859 2842532 2842532
Net profit 4237358 5402915 7116051 4700962 4826179 4920923 5027035 5145881 5278989 5278989
in % of sales 16% 17% 20% 13% 13% 14% 14% 14% 14% 14%
revenue
33
Annex 4: Depreciation and Amortization

Depreciation Original value Depreciation
s/No Description unit year-1 year-2 year-3 year-4 year-5 & above
1 Building birr 13,502,500
Depreciation 5% birr 675,125 675,125 675,125 675,125 675,125
2 machinery/packing and processing birr 8,800,000
3 Equipment birr 362,700
4 vehicle birr 1,250,000
5 Office furniture birr 91,160
Pre-production capital expenditure 250,000
Depreciation 25% 62,500 62,500 62,500 62,500 -
Total 24,256,360 1,788,011 1,788,011 1,788,011 1,788,011 1,725,511
34
Annex 5: Bank repayment Schedule
Principal loan 13,546,512

Interest loan 12%
Payment period 10
Annual
instalment 2,397,518 per year
Year Beginning balance Repayment Ending balance
Principal Interest
1 13,546,512.37 771,936.68 1,625,581.48 12,774,575.69
2 12,774,575.69 864,569.09 1,532,949.08 11,910,006.60
3 11,910,006.60 968,317.38 1,429,200.79 10,941,689.22
4 10,941,689.22 1,084,515.46 1,313,002.71 9,857,173.76
5 9,857,173.76 1,214,657.32 1,182,860.85 8,642,516.44
6 8,642,516.44 1,360,416.20 1,037,101.97 7,282,100.25
7 7,282,100.25 1,523,666.14 873,852.03 5,758,434.11
8 5,758,434.11 1,706,506.08 691,012.09 4,051,928.03
9 4,051,928.03 1,911,286.81 486,231.36 2,140,641.22
10 2,140,641.22 2,140,641.22 256,876.95 0.00
13,546,512.37 10,428,669.32
35
Annex 6: CASH FLOW STATEMENT
year 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
A. CASH IN FLOW
Equity Contribution 12128180
Bank Loan 13546512
27310423 3095181 3641389 3641389 3641389 3641389 3641389 3641389 3641389 36413897
Net Sales 3 7 7 7 7 7 7 7
Net Working Capital 2836665
Salvage Value 6751250
25674692 27310423 3095181 3641389 3641389 3641389 3641389 3641389 3641389 3641389 46001812
Total Cash Inflow 3 7 7 7 7 7 7 7
B. CASH out FLOW

Fixed Capital 24256360
Working Capital 1418332
19659472 2222793 2608063 2608063 2608063 2608063 2608063 2608063 2608063 26080634
Operating Cost 7 4 4 4 4 4 4 4
Repayment 771937 771937 771937 771937 771937 771937 771937 771937 771937 771937
Interest 1625581 1532949 1429201 1313003 1182861 1037102 873852 691012 486231 256877
Profit Tax 0 0 0 2531287 2598712 2649728 2706865 2770859 2842532 2842532
25674692 22056991 2453282 2828177 3069686 3063414 3053940 3043328 3031444 3018133 29951980
Total Cash Out Flow 3 1 1 3 0 8 2 4
Net Cash Inflow 0 5253432 6418990 8132126 5717037 5779754 5874497 5980609 6099455 6232563 16049832
Cumulative Cash 5253432 1167242 1980454 2552158 3130133 3717583 4315644 4925590 5548846 71,538,295
Flow 2 8 4 8 5 5 0 3
36
Annex 7: project area layout
Total area=10,000m2
Buildup area=6000m2
37

60 40 Corn Flake Axum

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60 40 Corn Flake Axum

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PROJECT PROPOSAL ON THE

Corn flakes factory

Tigray regional state, Axum town

PROMOTER: - Ethio-life agro-processing plc

DATE: -April, 2020

1.1. DESCRIPTION OF BUSINESS OR PROJECT.................................................................................................4

2.1. PROFILE OF THE PROMOTER................................................................................................................6

3.1. PAST SUPPLY AND PRESENT DEMAND....................................................................................................9

4.1. PLANT CAPACITY AND PRODUCTION PROGRAMME.................................................................................12

5. ORGANIZATION AND MANPOWER.....................................................................................21

7. FINANCIAL ANALYSIS & KEYASSUMPTIONS...................................................................25

8. CONCLUSION & RECOMMENDATION................................................................................30

TABLE 2: SUMMARY OF FINANCIAL VIABILITY..................................................................6

TABLE 3: DOMESTIC PRODUCTION AND IMPORT OF CORNFLAKES (IN TONS)...............10

TABLE 8: ESTIMATED ANNUAL UTILITY COST.................................................................16

TABLE 15: WORKING CAPITAL REQUIREMENT.................................................................26

TABLE 17: ANNUAL PRODUCTION COST AT FULL CAPACITY..........................................28

TABLE 18: PAYBACK PERIOD............................................................................................29

1.1. Description of business or project

1.2. Amount of financing required

s/No Description Total

1.3. Market prospect

1.4. Technical feasibility

1.5. Organization and management

1.6. Financial viability

TABLE 2: SUMMARY OF FINANCIAL VIABILITY

S/N Description Before tax After tax

1.7. Socio economic justification

 Employment opportunity for 75 permanent and 23 temporary during the operation

2.1. Profile of the promoter

Project Name Ethio-life agro-processing plc

2.2. Back Ground of The Project

Ethiopia is predominantly an agricultural country. Due to the progressive increase in

2.3. Project Location

2.4. General objective of the project

The specific objectives are

2.5. Policy framework for private sector development

Accordingly, the Regional government of Tigray has named agro-processing factory

3.1. Past supply and present demand

TABLE 3: DOMESTIC PRODUCTION AND IMPORT OF CORNFLAKES (IN TONS)

Domestic Impor Effective

Source: - Customs Authority (various years)

3.2. Projected Demand

TABLE 4: PROJECTED DEMAND FOR CORN FLAKES (IN TON)

Year Projected Demand

3.2.1. Pricing and Distribution

TABLE 5: RETAIL PRICE OF IMPORTED CORN FLAKES

Weight (in gram) Price (in Birr)

4.1. Plant capacity and production programme

4.1.2. Production Programme

Project year Attainable capacity (%)

4.2. Production schedule

4.3. Raw Materials and utility

4.4. Availability and Source of Raw Materials

4.5. Annual Requirement and Cost of Raw Materials and Utilities

TABLE 6: ANNUAL RAW MATERIALS AND INPUTS REQUIREMENT

Unit of Unit Cost, ('000 Birr)

TABLE 7: ANNUAL AUXILIARY MATERIALS REQUIREMENT AT FULL CAPACITY AND COST

Sr. Unit of Require Unit Price, Cost, ('000 Birr)

TABLE 8: ESTIMATED ANNUAL UTILITY COST

4.6. Technology and engineering

1. Grain cleaning Section.