ANMAL FEED PROCESSING INDUSTRY

PROJECT FEASIBILITY STUDY

Promotor: Green Plc

PEOJECT LOCATION: SOUTH ETHIOPIA REGION, GEDIO ZONE, Dilla Zuriya

Woreda
SPECIFIC LOCATION: Dilla Zuriya Woreda
PREPARED BY: YOYA DEVELOPMENT CONCELTANCY AND TRAINING (PLC)

Adders: Mobile Phone: 09-11-38-48-33

January/ 2024
Table of Cotents
Acronyms...........................................................................................................................................................4
List of Annex......................................................................................................................................................5
List of Figure......................................................................................................................................................5
List of Table.......................................................................................................................................................5
Executive Summary...........................................................................................................................................6
1 BACKGROUND INFORMATION................................................................................................................11
1.1 INTRODUCTION....................................................................................................................................11
1.2 Animal Feed Production System in Ethiopia........................................................................................11
1.3 SUPPORT for the Project......................................................................................................................12
1.4 The Applicant / The project Promoter.................................................................................................12
1.5 BRIEF HISTORY OF PROMOTERS..........................................................................................................13
1.6 PROJECT MISSION AND VISION...........................................................................................................13
1.8 Project Land Acquisition & Utilization.................................................................................................13
2. GENERAL DESCRIPTION 0F THE PROJECT AREA..........................................................................................14
2.1 Topography of the Area......................................................................................................................14
2.2 Climatically condition of the project area...........................................................................................14
2.3 The soil of the project area..................................................................................................................15
2.4 WATER Resources................................................................................................................................15
2.5 SOCIO-ECONOMIC IMPORTANCE OF THE PROJECT.............................................................................16

2.5.1 Economic Benefit for the Community 16

2.5.2 Economic Benefit for the Country 16
2.6 Socio-economic environment OF THE PROJECT...................................................................................17

2.6.1 Population profile 17

2.7 PROJECT DESCRIPTION........................................................................................................................17
2.8 PROJECT OBJECTIVES...........................................................................................................................18
3. PROJECT KEY SUCCESS.................................................................................................................................19
3.1 Key Success Factors (KSF)....................................................................................................................19

3.1.1 Marketing promotion 19

3.1.2 PRICING 19
3.1.3 AVAILABILITY 19
3.1.4 Delivery System 20
3.2 The physical works...............................................................................................................................20
3.3 Site management practices.................................................................................................................20
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 3.4 Project Phasing....................................................................................................................................21
4. MARKET STUDAY AND APPLICATION.........................................................................................................22
4.1 PAST SUPPLY AND PRESENT DEMAND................................................................................................22

4.1.1 General over-view 22

4.1.2 Past Supply and Present Demand 22
4.1.3 Projection Demand 23
4.2 Pricing and Distribution.......................................................................................................................24
5. TECHNICAL STUDY OF THE PROJECT............................................................................................................25
5.1 Descriptions of the Project area..........................................................................................................25
5.2 PROJECT DESCRIPTION........................................................................................................................25
5.3 PURPOSE OF THE PROJECT..................................................................................................................26
5.4. FEED Production & Process.................................................................................................................27

5.4.1 Animal Feed Processing Plant 27

5.4.2 Office furniture & Equipment 28
5.4.3 COMPANY VEHICLES28
5.5 PLANT CAPACITY & PRODUCTION PROGRAM.....................................................................................29

5.1.1 Feed production & processing Capacity 29

5.5.2 Feed Production & Process Programe 29
5.6 MATERIALS AND INPUTS.....................................................................................................................30

5.6.1 RAW MATERIALS 30

5.6.2 UTILITIES 30
5.7 Land USE and OPERATION...................................................................................................................31

5.7.1 LAND USE PLAN BUILDING AND CIVIL WORKS 31

5.8 PROJECT OPERATING ACTIVITIES.........................................................................................................32

5.8.1 Project Implement Time Line 32

5.8.2 Pre-production Expense 32
6. ORGANIZATION AND MANAGEMENT.........................................................................................................33
6.1 Form of The project..............................................................................................................................33
6.2 PROJECT MANAGERAL REQUIREMENTS..............................................................................................33
6.3 ORGANIZATIONAL STRUCTURE...........................................................................................................33
6.4 MAN POWER Experience and Qualifications.......................................................................................34
6.5 LABOUR REQUIREMENT OF THE PROJECT...........................................................................................35
7. FINANCIAL BUDGET OF THE INVESTEMENT................................................................................................36
7.1 Total Investment Cost..........................................................................................................................36
7.2 Operating cost.....................................................................................................................................36
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 7.3 Contingencies.......................................................................................................................................37
7.4 Project Status.......................................................................................................................................37
7.5 SOURCE of fund....................................................................................................................................37
7.6 Financial and Economic Analysis.........................................................................................................37

7.6.1 Price for input and out put 37

7.6.2 Tax and Subsidy Policy 37
7.6.3 Financial depreciation 38
7.6.4 Financial and Economic Analysis 39
7.6.5 The financial condition & assumptions 39
7.6.6 Cash flow statement and net income statement 40
7.6.6.1 Cash-generating Capacity...............................................................................40
7.6.6.2 Discount cash flow and discount rate.............................................................40
7.6.7 Cost Benefit Analysis 41
7.6.7.1 Net Present Value (NPV).................................................................................41
7.6.7.2 Benefit: Cost’ Ratio (BCR)................................................................................41
7.6.7.1 Internal Rate of Return (IRR)...........................................................................41
7.6.7.3 Non-discounted measure of project worth.....................................................41
7.6.8 Loan Repayment Schedule 42
7.6.9 Sensitivity analysis 42
7.6.9.1 Risk and Uncertainty:......................................................................................42
8. CONCLUSIONS AND RECOMMENDATIONS.................................................................................................43
9. Annexes.......................................................................................................................................................44

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 Acronyms
ADLI Agricultural Development-Led Industrialization
EARO Ethiopian Agricultural Research Organization
ECX Ethiopian Commodity Exchange
ETB Ethiopian Birr
FDRE Federal Democratic Republic of Ethiopia
GDP Gross Domestic Product
GTP Growth and Transformation Plan
ha Hectare
KA(s) Kebele Administration(s)
KM Kilo Meter
m.a.s.l. Meters above sea level
mm Millimeter
MoARD Ministry of Agriculture and Rural Development
MoFED Ministry of Finance and Economic Development,
oC Degree Cellicious
PIF Policy and Investment Framework (of Ethiopian Agricultural Sector)
SERs Southern Ethiopia Regional State
Qtl(s) Quintal(s)
USA United States of America
USD United States Dollars

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 List of Annex
Annex 1: Annual Statement of Costs and benefits (Birr).............................................................44
Annex 2: Projected Cash Flow....................................................................................................45
Annex 5: Projected Balance Sheet..............................................................................................45
Annex 4: NPV & IRR on Total Investment...................................................................................46

List of Figure
Figure 1: Monthly Rainfall Distribution of the project area (Gedeo Zone, Dilla Zuriya Woreda)..........................15
Figure 2: Project location of Dilla Zuriya Woreda Map....................................................................................25
Figure 3: Organization Structure......................................................................................................................... 34

List of Table
Table 1 : Average maximum and Minimum Monthly Temperatures (oC) of the project area.....................................14
Table 2: Marketing promotion strategy of the project......................................................................................19
Table 3: Domestic production of Animal feed (2001-2012 tones)...........................................................................23
Table 4 Projected Demand for Cattle (tons)................................................................................................... 24
Table 5: Animal Feed Processing Machinery & equipment............................................................................27
Table 6: The Estimated Cost of Office Furniture and Equipment.............................................................................28
Table 7: Company Vehicles cost.................................................................................................................... 29
Table 8: Anticipated processed feed Production Capacity......................................................................................29
Table 9: Anticipated production programe of the project................................................................................30
Table 10: Farm & Processing Plant Principal Raw Material Required and Cost.............................................30
Table 11: Land use and civil work cost........................................................................................................... 31
Table 12: Project Pre-Operating Activities...................................................................................................... 32
Table 13: Pre-Operating Expense.................................................................................................................. 32
Table 14: Man Power Requirement and Relate Cost.....................................................................................34
Table 15: Estimation of labor cost related to the cattle feeds production........................................................35
Table 16: Summary of Investment Costs for project (in Birr).........................................................................36
Table 17: Summary of Operating Costs for project (000 in Birr)....................................................................36
Table 18: Project Investment cost by Source of Fund (in Birr)..............................................................................37
Table 19: Depreciation Schedule (Birr).......................................................................................................... 38
Table 20: Determination of Revenue (Birr)................................................................................................ 40
Table 21 Loan Repayment Schedule.......................................................................................................... 42

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1 Executive Summary
The present feasibility study business plan is established in view of new Green Plc, Animal Feed Production
and Processing Industry Project which is anticipated by Mr. Demisse Worasa.
Its objective is twofold to be used as a basis for developing the envisaged project to seek bank loans to
financial investment planned with in the foreseeable future. This summary highlights the key points of
feasibility investment business plan. This envisaged project was submitted by the year of 2024 to the Gedeo
Zone Administration. The regional government also advised to include the agro-processing and value
addition technology rather than production of raw feed products. Though, the owner was planned to
request new investment land for the processing of animal feed, for this purpose the project request
investment land of 2,500m2 for Animal Feed Production and Processing establishment.

Green Plc Animal Feed Production and Processing Plant Project have put forward its proposal of intensive
agro-industry project whose outputs are for domestic market. The current legislative and policy
environment both at national and regional level for private investment program is benefiting the country to
reach for most of its endeavor to become a food, secure or food self-sufficient country in the near future.
As a result, in the last four to five years, Ethiopia’s expected income from foreign trade and import
substitution especially agriculture projects which adds value on agricultural products. To realize this
therefore, it is convincing to make all efforts geared towards enhancing and improving the agricultural
sector, which is actually the back bone of the economy.

This is one of the reasons besides the market prospect has taken in to considerations on devious make by
promoter to take part in the agriculture sector particularly in and intensive agro industry practice which
mainly increase the value of agriculture products of livestock farm better marketable product of high quality
animal forage production. The project will be implemented at Gedeo Zone Dilla Zuriya Woreda
Administrate, at 2,500m2 of land with a total investment cost of 22.268 million birr. The detailed
summarized of the farm and industry in focusing area of specific study activity as follow:
Project Estimated Investment Cost
At the first year of production of the project will have the following estimated costs?
Pre-
Operation
Sr.no Project type Operation Total
Phase
Phase
1 Cattle Feed Production & Processing
2 Fixed Investment Capital 0 20,503,335 20,503,335
3 Pre-Operation Expenditure 596,200 0 596,200
4 Working capital 0 1,168,703 1,168,703
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 Sub-total 596,200 21,672,038 22,268,237
Total

MEANS OF FINNANICE
The promoter has planned to finance the project through a long-term loan from the Development Bank of
Ethiopia; and, partially from its own contribution. The debt equity ratio is assumed to be 30:70. The
following table briefly summarizes the project financing by source of funds.
Source of Fund
Description
Equity Contribution Bank Lon Total
INVESTMENT COST 5,740,934 14,762,401 20,503,335
Pre-operating cost 596,200 - 596,200
WORKING COST 362,298 806,405 1,168,703
Total Cost 6,699,432 15,568,806 22,268,237
% Share 30% 70%

Project Operation Cost Requirement

The total operating cost of the project is estimated at Birr 27,863,060 for full production capacity of the project
at fourth year. Operating costs are recorded on a year basis. It is divided into overheads (fixed costs) and variable
costs. The fixed cost component is estimated at about Birr 2,864,845 and Birr 24,998,215 is variable cost.
Summary at the full production capacity year operating costs are presented on the below table

Sr.no Project type Fixed Cost variable Total

Cost
1 Cattle Feed Production & Processing 2,864,845 24,998,215 27,863,060
Total 2,864,845 24,998,215 27,863,060

Feed production & processing Capacity of the project

Feed crops (potentially: Legumes such as Green Beef, Alfalfa, Siratro, Pigeeon Pea and All Grasses such as
Oats, Elephant grass, Rhodes grass, White Clove, Vetch, cowpea, pigeon pea sweet potato, soya bean) are
the major animal feed resources. Developing a feed manufacturing process that is integrated local
agricultural residue and mixed concentrate is very important the quality of animal feed nutrients. Assuming
the envisaged project has 8 hours in one shift & 200 dys per year and the project production plan is given
below table.
Production Unit Y-1 Y-2 Y-3 Y-4-y10
Cattle Feed Processing and Production Assumption
Plant Processing Installed Capacity kg/hrs 20,000 20,000 20,000 20,000
Project Utilization Capacity % 75% 85% 90% 100%
Project Processing Capacity Plan kg/hrs 15,000 17,000 18,000 20,000
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 Processing per hour/day kg/day 120,000 136,000 144,000 160,000
Processing per year kg/year 24,000,000 27,200,000 28,800,000 32,000,000
Total Production Feed Tons/year 24,000 27,200 28,800 32,000

LAND ALLOCTION
The total area of farm and industry of the projects are required 2,500m2. From this improved forge
activated or crops cover and feed processing area is 2,500m2, while the total farm including staff and
recreation built-up area, processing facilities, finished products and raw materials stores, offices and social
facilities. The total cost of buildings and civil work is about birr 8,644,000 at a unit cost of Birr 2,513 per m2.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation No 721/2004) in
principle, rural land permit by lease is on auction or negotiation basis, however, the time and condition of
applying the proclamation shall be determined by the concerned Gedeo Zone government office which
depending on the level of lease development policy. . In Ethiopia the lease period ranges from 35-60 years
for various type of investment while for this envisaged project the lease payment period ranges from 35
years based on the type of investment. For this envisaged project considered 35 years lease period
agreement according to South Ethiopia Region rural land investment policy of agriculture investment and
its cost is estimated 7 birr per square meter of land

Land Utilization Plan unit Total

Cattle Feed Production & Processing M2 2,500
Total investment Land M2 2,500
Leased Cost per Ha 35
Leased Period 7
Total Leased Cost birr 612,500
From the total Land Lease 10% paid including investment Cost birr 61,250
Economic, Social PROJECT PRODUCTION COMPONENTS
Based on the market study the proposed farm and plant project is assumed to produce nutritional feeds
and processed.
Benefit and Justification
The envisaged project has a wide range of benefits where it promotes the socio-economical and objectives
stated in the strategic plan of the Southern Nation, National Regional State. It is boost sinter sectorial
linkage between the agricultural (livestock) and industrial sector. At the sometime, therefore, it helps
diversify the economic activity of the region. The other major benefits are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns an average profit of Birr 13.239 million from cattle
feed production and processing at begging year 60% production capacity year first. Such result induces the

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project promoters to reinvest the profit which, therefore, increases the investment magnitude in the
region. The summary of profit generation presented below tax and revenue section.

B. Tax and Revenue

Through the project life under consideration, these envisaged projects generate revenue after tax
government will collect an average tax 7.129 million from cattle feed production& processing industry. The
tax comes from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result
creates additional fund for the regional government that will be used in expanding social and other basic
services in the region. Summary at the full production capacity year operating costs are presented on the
following table.

Sr.no Project type Net Income Gov. Tax Average (10 years)
1 Cattle Feed Production & Processing 13,239,000 7,129.000
Total 13,239,000 7,129.000
C. Employment and Income Generation
Project type Productio Managerial Permanent Casual Total
n staff &Marketing staff Total
Cattle Feed Production & 24 10 34 55 79
processing
Total 24 10 34 55 79

The proposed project is expected to create employment opportunity to several citizens of the region. That
is, it will provide permanent employment for production staff 24 and for managerial & marketing 10 totally
34 professionals as well as support staff 55 casual labors. Consequently the project creates income
employees for farm more than Birr 954,000 for technical and administrative staff for all projects per year.

CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS
Based on the framework set out in this feasibility study the following conclusions were made regarding the
feasibility of proposed medium scale of Animal feed production Commercial Farm Project by Green Plc
Animal Feed Production and Processing Project
MARKET FEASIBILITY
A market opportunity was identified for domestic sales at the present. The demand and market trend
confirms the products are marketable.
TECHNICAL FEASIBILITY
The analysis of technical feasibility of the proposed farm and plant enterprise revealed that the initial stock,
machinery, equipment, production facilities and services and the human resource could be integrated for
efficient improved forage production and feed processing plant. The marketing margin and transportation
farcicalities will enables the project its products.

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FINANCIAL FEASIBILITY
The analysis on financial feasibility of the proposed company revealed that based on the assumptions made,
the company is profitable. The company is projected to have a healthy cash flow and is viable over long term.
The positive financial feasibility is however, dependent on stable inflation and macro-economic conditions. The
profitability of the farm and plant can be further increased by using alternative production forge crops and
processing technology type and costs.
OVERALL FEASIBILITY
Based on the framework set out in this feasibility study where feasibility is assessed, it can be concluded
that the proposed forge production is feasible. The results of the feasibility study, however, are heavily
dependent upon the assumptions made during the study and other operating environments (political,
environmental and economic conditions) remain relatively stable.

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1 BACKGROUND INFORMATION
1.1 INTRODUCTION
The investor is planning to invest the establishment of Animal Feed production and processing Industry.
These products are currently one of the most required nutritional value feed in Ethiopia and the project is
in line with government interest and policy which focuses on high nutritional value feed products. It is also
in line with agricultural marketing high value added technology using for cattle feed processing strategy of
the South Ethiopia Region government and contributes to the recent undertakings of the region on
agricultural development corridors plan.

This proposed project is planned sale high quality feed production to fill full the Ethiopia cattle feed supply
gape to the national market. In line with this production of high standard nutritional value of feed
production farm with the processing milling plant is establishment studied by the promoter total 2,500m2
of land. This envisage project established by importing advanced plant with manufacturing capacity of
24,000 tons per annum at full production capacity year fourth. The proposed investment site of the project
found at the central part of South Ethiopia Regional State, at Gedeo Zone Dilla Zuriya Woreda
Administration. In terms of geographic coordinates, Gedeo Zone is situated between latitude and longitude
of 6°26'31.7"N & 38°17'10.2"E and an elevation of 1900 to 3000 meter above sea level.

1.2 ANIMAL FEED PRODUCTION SYSTEM IN ETHIOPIA

The livestock feed production and feed miller and mixed feeds industry has changed markedly in recent
years in response to many economic and technical developments. It has largely decentralized into smaller
mills with increased bulk deliveries; it has offered greater variety of products and services. More feed is
now fed directly to cattle either owned or custom fed by feed companies, feedlot operations, and farmers.
This engaged project need established of local feed farm and area mills have been built to meet this varied
demand.

Feeders have insisted on improved quality mixed feeds made possible by research and advances in animal
nutrition. Nutritional research has shown that cattle and dairy production can be greatly increased per unit
of feed, particularly through the addition of ingredients such as vitamins, antibiotics, hormones, and drugs.

This project profile deals with the establishment of feed farm and miller and mixer feeds from feed
dedicated to urban cattle fatting and dairy producers. Within this activity, raw materials (animal feeds and
other ingredients) are complemented by value added product obtained from the processing. For the
producers, the interest lies both in preparation and storage easiness as well as quality standard.

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 Animal feed is a mixture of feedstuffs produced by feed processing plant. It contains protein, minerals, and
other nutrients which are useful for beef and milk production and survival of the animals. The mixture
would be produced from oil seed cake, molasses, meal, Sadium hydrooxide (NaOH), lye-tearement of straw
or stock. Such mix may be varied over a wide range of compositions, determined by nutritional values
required, within the following average minimum and maximum values:

 NaOH lye-treated straw or stocks 40 – 64%

 Oil seed Cake 26 – 60%

 Molasses 0 – 12 %

This plant will be sized according to the possibility of treating the maximum amount of each material as per
the required feed composition. With better service and lower priced feeds in great demand, the feed
industry has done several things to satisfy these demands. New technology and equipment, together with
more efficient plant designs and material flows, have made possible tremendous improvements in plant
operating efficiencies. With the relocation of feed manufacturing facilities to production areas, this feed
industry has realized potential cost reductions and savings by:

(1) Use of operationally highly efficient specialized feed varieties farm & mills, (2) direct distribution of
larger volumes of mixed feed to production units, and (3) lower transportation costs.

1.3 SUPPORT FOR THE PROJECT

There are some supportive roles expected from the Regional states, Zonal and Woreda administrative in
ensuring smooth and effective implementation as well as long-run sustainability of the anticipated project.
Particularly important roles for the administrative are supporting investment processes activity and
regulatory functions. This includes, among others, monitoring and regulating externalities and subsequent
implementation of the project, maintaining a supportive legal framework, providing relevant technical and
organizational supports towards facilitating effective and smooth implementation of the project. The latter
particularly involves access and use of data/information and technical advice from government research
institutions and line bureaus/agencies.

1.4 THE APPLICANT / THE PROJECT PROMOTER

Name: Green Plc Animal Feed Production and Processing Industry
Address: Company Office South Ethiopia Gedeo Zone Dilla Town -Mobile: 0916830604
Nationality: Ethiopia
Legal form of ownership of the Sole Proportion: new
business
The project
Name Green Plc Animal Feed Processing Industry

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Project Address Region: South Ethiopia , Gedeo Zone Administrative
Status of the Project New – to be established
Project Sector Category Agriculture Farm and Industry
Type of Project
Project Objective The primary objective of the project is to engage in the development of
modern Animal Feed Production and Processing Plant to produce high
quality Animal feeding products for local market.
To successfully develop a Feed processing plant technology and deliver
high quality products thus making a profitable business venture
Project’s land holding;- Total area 2,500m2
Right of Occupancy of the project Land The promoter has acquired the land by lease from Gedeo Zone, Dilla Zuriya
Woreda Administrative
Lease period 70 years
Lease amount or rent fee The land rent payment for the total is birr 3,500,000
Type of products Animal Feed
Project period 10 years (2024-2032)

1.5 BRIEF HISTORY OF PROMOTERS

The anticipated “Animal Feed Production and Processing Plant” is owned by Ato. Demisse Worasa. The
owners, was born in Ethiopian and currently have an Ethiopia citizenship and He lived in Ethiopia. In view of
their education and work experiences, he bring a wealth of experience to the investment. Mr. Demisse
Worasa is the general manager of the project. Mr. Demisse Worasa educational back ground is BA in
Sociology, from Addis Ababa University. He has had more than 10 years of work experience in the area of
different trade business investment, support-market business, and other retail sales and vastly involved in
money management and administrations. He have an extensive experience in agricultural commercial
business, this is feasible for the current Animal feeding production and processing and marketing.

1.6 PROJECT MISSION AND VISION

Our Vision: To be one of the pioneer companies in the field of Animal feed production and processing
products supply customer base services throughout the country.

Our Mission: Production, processing different type of animal feed production and processing products
supply to local markets as well as enhancing and developing our society.

1.8 PROJECT LAND ACQUISITION & UTILIZATION

The project acquired a total land size of 10 hectares from the Gedeo Zone, Dilla Zuriya Woreda
Administration based on lease agreement. Green Plc Animal Feed Production and Processing Plant will
secure the required land of by made lease agreement between the government and company and for 70

13
years period, from year 2016 E.C to 2086 E.C, (2024 to 2094 G.C). The company will pay 10% of the total
lease amount at the begging of the project. The reaming will pay 30 years period.

2. GENERAL DESCRIPTION 0F THE PROJECT AREA

2.1 TOPOGRAPHY OF THE AREA

Dilla Zuria Woreda is found in the Gedeo Zone of Southern Ethiopia. The woreda's topography is
characterized by a mix of highlands and lowlands, with the Gedeo Mountains running through the eastern
part. The woreda has an elevation that ranges from 1,500 to 2,800 meters above sea level.
The Gedeo Mountains are a chain of volcanic mountains that formed about 70 million years ago. The
mountains are home to a variety of plants and animals. The mountains also provide a source of water for
the surrounding area, with many rivers and streams flowing from them.
The lowlands of Dilla Zuria Woreda are mostly used for agriculture. The woreda is known for its production
of coffee, tea, and spices. The woreda is also home to a number of traditional villages, where people live a
subsistence lifestyle.
The topography of Dilla Zuria Woreda has a significant impact on the woreda's climate and economy. The
highlands are cooler and wetter than the lowlands, and they receive more rainfall. This makes the highlands
more suitable for growing crops such as coffee and tea. The lowlands are warmer and drier, and they are
more suitable for growing crops such as maize and sorghum.

2.2 CLIMATICALLY CONDITION OF THE PROJECT AREA

The climate of Gedeo Zone is a subtropical highland climate, with warm temperatures and moderate
rainfall. The average annual temperature is 20°C (68°F), and the average annual rainfall is 1,500 mm (59 in).
The rainy season is from March to May and October to November. The climate of Dilla Zuria Woreda is
similar to that of Gedeo Zone, with warm temperatures and moderate rainfall. The average annual
temperature is 20°C (68°F), and the average annual rainfall is 1,400 mm (55 in). The rainy season is from
March to May and October to November. The climate of Gedeo Zone is suitable for the cultivation of
coffee, which is the main cash crop in the area. Other crops that are grown in the zone include maize,
sorghum, and teff.

Table 1 : Average maximum and Minimum Monthly Temperatures (oC) of the project area
Description Jan Feb Mar Apr may Jun Jul Aug Sep Oct Nov Dec
Av. Max.
temperature (oC) 35.50 37.03 38.83 39.00 38.27 32.17 29.37 29.67 30.57 31.50 34.10 34.27
Av. Min.
temperature (oC) 19.30 23.03 23.47 25.20 23.83 20.93 19.73 19.57 19.40 19.27 18.53 19.40

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Source: Ethiopian Meteorology Agency,Hwassa Branch

 Rainfall Trends
The project area has average annual rainfall of 1254.55 mm; which is higher than the average precipitation
requirements of most field crops. The monthly rainfall distribution of the Wereda shows that the area has a
mono-modal rainfall pattern where the wet months are May – October, during which 95.77% of the annual
rainfall occurs. As described in Figure 2 below, the wettest months are June – September; accounting for
79.43% of the annual rainfall; where the highest rainfall amounts occur in August (291.79 mm). On the
other hand, the driest months are December and January.
Average Rainfall (mm)

300
250
200
150
100
50
0
Ja M Ma Jul Sep No
Months

Source: Ethiopian Meteorology Agency, Hawassa Branch

Figure 1: Monthly Rainfall Distribution of the project area (Gedeo Zone, Dilla Zuriya Woreda)

2.3 THE SOIL OF THE PROJECT AREA

Soil Conditions of the Project Area: Results of soil sample analysis of the regional soil laboratory from the
project area indicate Abolus soil, the district major soil textures are Nitosols soil, Vertisols have wide
distribution; are heavy, black clay soils and sandy with strong coarse structure. The PH of surface soil ranges
from 5.5-7.1, which implies moderately acidic and alkaline soils. These soils are chemically and physically
suitable for avocado fruit and Niger seed vegetables cultivation. In addition, the proposed investment area
refers to water logged; it needs water drained systems that occur on almost flat to gentle slope. The
proportion of the land is suitable to most of annual crops.

2.4 WATER RESOURCES

The project is situated distance from the river, more than 1km away. So water is not a big problem in this
area since many homes depend on water from ground water. The project is not expected to have any

15
adverse impact on ground water quality as the level of waste emanating from the project will be low and
directed to the properly installed waste hip tank.

2.5 SOCIO-ECONOMIC IMPORTANCE OF THE PROJECT

2.5.1 Economic Benefit for the Community
The creation of substantial direct and indirect employment opportunities with potential for out-growers
will have impact for increasing incomes and skill of the rural community. There will also be good
opportunities for out-growers linkages with the surrounding farmers and the use of the project’s facilities,
knowledge and experience, thereby increasing the economic activities of the inhabitants of the area.
Promotion and transfer of new agricultural technology that could be adaptable to the surrounding farming
community and improve their skills through training and sharing of the project experiences will also be
another benefit for the community.

2.5.2 Economic Benefit for the Country

This investment project will have significant socio-economic benefits, both to the national economy of the
country at large, and the region in particular in which the project is to be established. The specific direct
benefits will include;

 Development of uninhabited part of the country and exploitation of hitherto abandoned physical
resources of the particular area through the establishment of modern animal feed agriculture.
 Supply of agricultural commodities to the national and export markets, thereby enlarging the
domestic basket of food items and contributing to the foreign exchange balance of the country,
both through generation of foreign exchange and import substitution.
 Provision of physical and social infrastructure, thereby creating conducive and suitable
environment for regional development.
 Substantial increase in federal and regional government revenue, through direct & indirect
taxation.

Upon realization of its full production stage within first years, the project's economic contributions to the
country’s economy will primarily create 77 jobs; which provide direct employment opportunities.

In view of the envisaged project anticipated commitment to ascertain high standards and quality of its
productions; supplying for the beef processing industries and local butchers. This will apparently influence
production and quality standards other producers of relevance; which in turn improves the Country’s
production quality standards; and therefore, enhances its share of local market opportunities.

16
2.6 SOCIO-ECONOMIC ENVIRONMENT OF THE PROJECT

2.6.1 Population profile

Since there is no relevant demographic data, we are considering the previous Dilla Zuria woreda
demographic & Economical Characteristics data. According to a 2007 report, Dilla Zuria had 8
kilometers of asphalt road, 66 kilometers of all-weather roads and 16 kilometers of dry-weather
roads, for an average road density of 369 kilometers per 1000 square kilometers. Based on the
2007 Census conducted by the CSA, this woreda has a total population of 98,439, of whom 49,413
are men and 49,026 women; none of its population are urban dwellers. With Gedeo as the
predominate tribe (CSA, 2007).

Road: Generally, There is a 48-kilometer Asphalt road from Dilla Zuriya to Gedeb Woreda. The
woreda is also served by a 22-kilometer all-weather road from Dilla town.

Electric Power: The project site of Dilla town has an access to hydroelectric power.

Water Resources: Generally, rivers and shallow well are the main sources of water supply in the project
area. Currently, access to safe drinking water is not much a problem in the project area. However, the
Water Resource Bureau and other stakeholders in collaboration with the community has established
different safe water generating schemes such as hand dug well, hand pump, developing spring water, deep
well and shallow well to alleviate the problem.

Telecommunication: According to the data collected from the Bureau of Finance and Economy, of Gedeo
zone in the project area have access to different telephone services, such as, mobile telephone service, and
wireless.

Financial Institutions: There are government or private banks in the project area and surrounding. Hence,
the project can get bank services in the project town of which is found at a distance of 5 km.

Health Services: The project area can get hospital service from the closest Dilla town Hospital located 5 km
from project area. There were 3 health centers in Dilla Zuriya in 2007.

2.7 PROJECT DESCRIPTION

The envisaged project has operating one main enter related project, such as Animal feed production and
processing project which operation – at 2,500m2 of land. The produced different perennial, annual legume
and tree which are nutritional important for animal feed tom improve the dairy & cattle meat production of
the company and the rest will seals for the local market. The project plans not only the company
consumption but also produce animal certified seed to the country.

17
Project Investment Cost is about 22.268 million ET. Birr is estimated as Project Investment Cost of
covering the initial investment cost for the establishment of the project.

2.8 PROJECT OBJECTIVES

Business Objectives
o Profitably produce and collect substantial animal feed potential of the area and, process the animal
feed to add value in hygienic and standard methods and faunally market products at affordable price
to the targeted customers.
o As a business firm one of objective of the Company is to earn reasonable income from the demand
supply gap exists in the sector at large and specifically at Southern Ethiopia city towns and others due
to market outlet
Development Objectives
o By commercializing animal feed production to increasing incomes streams for rural households.
o Regulation marketing problems of rural and urban animal feed farmers by creation opportunity of
continuous marketing outlet.
o Increase animal feed production by giving provision of assured marketing outlets with sufficiently
remunerative to dairy producers.

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3. PROJECT KEY SUCCESS

3.1 KEY SUCCESS FACTORS (KSF)

3.1.1 Marketing promotion
a) Advertisement
The modern marketing tools include product advertisement, TV and print media advertising and brochures.
The project allocates 1% of the revenue for advertising and promotional purposes from the 2% of
marketing expense. Apart from this advertisement, marketing tools, this study suggests to focus more on
other marketing magnets that include interactive marketing, interactive marketing may include
participation on the general exhibition and bazaar programe by displaying the products.

Overall marketing strategy may change with the change of target market. A market research study is
recommended to design the different dynamics of marketing before launching the product for sell.

Marketing expense of the project has been included in the total project cost and it has been estimated
around 1% the sell. The company may decide to increase or decrease the amount of marketing expense
depending upon this choice of promotion activities and type of media used. Following table gives the
breakup of the marketing expense.

Table 2: Marketing promotion strategy of the project

From the allocated 1% of the Adverting expense
TV Advertisement 10%
SITE Advertisement 10%
Newspapers 5%
Point of Sales Marketing 8%
The project core value proposition is that we will add value to our product by providing commercial animal
feed, products in quality with standard mode at comparatively low prices.

3.1.2 PRICING
The pricing strategy should be in line with the going rate market prices of local. Since this industry limited
and more demanded there is no challenge competition from the market except the raw material supply
limitation, it is suggested that the price ceiling should not be crossed whatever price strategy be adopted.

3.1.3 AVAILABILITY
The company industry products are a country driven products market whereby profitability comes from
combinations of high-value market research, design, quality standards, sales, marketing and financial
services that allow the designers and marketers to act as strategic.

19
In the company product, availability will also play the key role in attracting the customers. It is suggested
that the entrepreneur decides the availability of the product at any time local market. Since, the perception
of the product is also directly related with is availability so it is suggested that the strategy for the
availability of the product be full fill according to Animal feed quality control sector.

3.1.4 Delivery System

For all individual, commercial, government, and retail customers, delivery will be by specially designed
delivery cars for Feed products. Initially, Green Plc commercial animal feed production and Processing
Company will acquire and operate car from company asset and or rent source. Over time, as the company’s
customer base and delivery requirements expand, additional car will be acquired.

3.2 THE PHYSICAL WORKS

These are realized by different site preparations and putting the required infrastructures. The necessary
physical activities with the integration of certain biological engagements, if the need arises, are:

 Deep tillage with a twice plugging and harrowing of many times side by side with uprooting and
land clearance where ever undesirable stumps or shrubs exist. The frequency of the tillage will be
decreased in due time.
 Planting site marking, digging for woody plants and agro-forestry trees.
 Nursery establishment for cattle feeds seedling management of the different crops that will be
cultivated by the project.
 Digging water supply wells that will be used for irrigation and consumption
 Construction of canals and water ways.
 Construction of the different infrastructures including inter and intra farm roads.

3.3 SITE MANAGEMENT PRACTICES

The must-be done field management quests, necessarily focus on soil and water ameliorations. These
actually will be done at both preparatory and project implementation phases. The main operations in this
case are:

 Minimum tillage with light implements project years.

 Compost making and application throughout project years.

 Making drainage ditches at the start and continue whenever needed.

 Periodical maintenance of infrastructural facilities.

20
  Soil improvement through the course of the project by the use of periodical tests from selected
spots to determine, the rate, type and time of fertilization.

 Farm shad Agro-forestry will be undertaken unconditionally and unreservedly throughout project
years.

3.4 PROJECT PHASING

Because of the number type of the schemes to be carried or to be diversified or expanded, financial and
other unforeseen circumstances, Animal Feed Production and Processing Industry Project execution and
phasing out schedule may not be decided at ease at this point in time. Being a function of many
preconditions, the life span of the project remains as the matter of joint communiqué between the
responsible bodies under the lease and legal definitions of “Animal Feed Production and Processing
Industry” investment. For technical matters and activities to be implemented annually as successions and
rotations of cattle feed crops, produces to be harvested and processed, the project is proposed to be of a
10 years.

21
4. MARKET STUDAY AND APPLICATION

4.1 PAST SUPPLY AND PRESENT DEMAND

4.1.1 General over-view

The demand for fodder appears to be increasing in Ethiopia because of the increase in market-oriented
animal feed production activity. In areas where feed is important, there seems to be a year round demand
for fodder. However, demand for fodder for cattle fattening is seasonal. In general, the demand for straw,
Stover and hay is higher than the available supply at given prices. The demand for hay in Ethiopia looks to
be higher than for other straw and Stover types. In some areas such as Bishoftu, the demand for straw has
shown significant increase due to the expansion of dairy farming. In Metema area, sales volume of sorghum
Stover has increased considerably due to the expansion of animal feed export. In Sululta area, hay export
to Djibouti and the Middle East as feed for the exported animals was reported to be an important reason
for the increase in price. Similarly, in Alaba, as reported by the farmers, the supply of hay to the open
market is declining from year to year due to expansion of crop land into grazing areas. In Gondar area,
demand for hay is increasing, perhaps because of the increasing live animal export trade to Sudan. In Debre
Tabor area, the demand for hay is very high due to the increase in market oriented dairy farms.

4.1.2 Past Supply and Present Demand

Agriculture is the dominant feature of the Ethiopian economy in which the livestock subsector is an integral
part. According to the agricultural sample survey (C.S.A) of 2020/2021 the national private holdings of the
cattle population is estimated to be 70 million. The need for animal feed is supplied from locally existing
private and public Animal Feed Production and Processing plants. According to a study conducted by CSA,
at present there are six Animal Feed Production and processing plants in the country table 3 presents the
volume of domestic production of animal feed for the period 2001-2012.

22
 Table 3: Domestic production of Animal feed (2001-2012 tones)
Year(Et.Cal) Domestic production Imported Total
2001 28,294 0.7 28,295
2002 30,138 8.7 30,147
2003 28,192 18.7 28,211
2004 20,897 1234 22,131
2005 11,186 1286 12,472
2006 7,120 1325 8,445
2007 6,019 1277 7,296
2008 10,549 1284 11,833
2009 11,544 1299 12,843
2010 11,678 1312 12,990
2011 15,479 13677 29,156
2012 15,928 13453 29,381
Source: CSA Statistical Abstract
As can be seen above in table 3, local production of animal feed ranges between low figures of 6,019 tons
in the year 2007 to a high figure of 30,138 tons in the year 2002. The annual average productions of these
factories for the time under reference were about 16,419 tons for 2023. Considering the size of the
livestock population in the country and the recommended per capita consumption per annum, it is clear
that the supply of animal feeds in the country false short of the anticipated demand due to several reasons.
To determine the current demand for animal feeds in country the following assumptions are used.
I. According to “Agricultural Sample Survey”, C.S.A in 2020/2021 the current national cattle population is
estimated to be 70 million. It’s assumed that the number of livestock population stated above will be
maintained.
II. Considering conditional limiting factors such as product adaptability accessibility of the product to
market places, etc only 2.5 per cent of the cattle, sheep and goat population are assumed to be fed with
animal feed.
III. According to planning and programming unit of dairy development enterprise, the average feed
consumption during the period 2001-2012 in state cattle and dairy farms was 2.9 kg/ head a day. This is
taken as the per capita consumption of the targeted livestock population. With regard to the above
mentioned assumptions, the present demand for animal feed is estimated at 32,999 tons per annum.

4.1.3 Projection Demand

Demand projection is made on the assumption that the demand for animal feed should grow with the
growth in size of livestock population, income of farmers and the attitude of farmers towards the product.
Hence, a modest growth rate of 3 per cent is used to project the demand for animal feed in the region as
depicted in table 4.

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 Table 4 Projected Demand for Cattle (tons)
Year Domestic production Imported Total
2023(initial) 18908 16064 34,972
2024 19457 16545 36,002
2025 20021 17042 37,063
2026 20601 17553 38,155
2027 21199 18080 39,279
2028 21814 18622 40,436
2029 22446 19181 41,627
2030 23097 19756 42,853
2031 23767 20349 44,116
2032 24456 20959 45,416
2033 25165 21588 46,754
The demand gap increases from 36,002 tons in year 2024 to reach 46,754 tons by the year 2033. Therefore
the company will supply 12 %( 5,565 tons) of the country demand.

4.2 PRICING AND DISTRIBUTION

The price of processed cattle feed depends upon the availability and value of raw materials. In this profile,
the ex-factory price of cattle feed to be produced by the project under consideration is estimated at the
beginning of the year is Birr 1,999 per ton and 2,314 birr per ton for forage production at full production
capacity year four. For the envisaged project, it is recommended either to distribute the product directly to
end-users wherever they are accessible or by establishing a small distributing store or using commissioned
agent at strategic locations.

24
5. TECHNICAL STUDY OF THE PROJECT

5.1 DESCRIPTIONS OF THE PROJECT AREA

Dilla Zuriya Woreda is located in the central highlands of Ethiopia, just north of the town of Dilla. The
woreda is bordered on the north by Sidama region, on the east by Dilla town, on the south and on the west
by oromiya region. The woreda is divided into 28 kebeles (villages). The site for the location of the
proposed project is located in the near distance of the asphalt Road, Adiss Ababa Nairobi high way. The
central position of the City has made it to be one of the most important economic hubs of Gedeo Zone as it
provides the market for the absorption of the agriculture produce from all provinces. Global Position
System Reference of the proposed site is Latitude 6°22'12.3"N & Longitude: 38°18'30.1" E with an elevation
range about 1500-2800 above sea level. See Arial Image in Figure 2. The site is defunct smallholder farm on
dried up semi-plain, now productive. Built up environment include both farmland houses and industrial
buildings in the vicinity.

Figure 2: Project location of Dilla Zuriya Woreda Map

5.2 PROJECT DESCRIPTION

Feed is at the very interface of the positive and negative effects of cattle feed production on food security,
income and livelihoods and the environment. Lack of affordable, adequate feed (quantity and quality)
represents a major constraint to company competitiveness and the overall profitability of animal feed
production systems, because of its direct impact on animal productivity. Feed marketing, however, also
provides great opportunities for increasing women’s income through employee to animal feed or from
growing and marketing feed/fodder seed for specialized forages. Some of the feed sources are legumes
which are important for food security and are often managed by the project.
Green Plc Animal Feed Production and Processing Plant were established at Gedeo Zone administration of
South Ethiopia Region. The project will service feed processing for the surrounding feed producers but the
25
primary line will be for company itself. The company has owned and operated by Mr. Demisse Worasa
managed as a general manager.
The company is currently conducting a feasibility study of starting to establishment of processing plant and
manufacturing unit to procure company machinery & auxiliary equipment and purchase animal feed for the
Animal Feed Production and Processing Industry. The proposed start-of-art eco-friendly processing plant
will have a production capacity of 24, 00 tons at the beginning of the project year with working hour is at
8hr per day and 200 days per year with 1 shift throughout the project year.

However, in Animal Feed Production and Processing operation there is a lot of constraint, which hinder the
full production and process capacity of the company, because of this reason the company decided the
project installing capacity will start at 75% at the beginning.

The farm production has two component, one is feed seed production as a seed source for local market,
which is 16,766.67 tons per year at first year and then after the raw material is 22,597.78 tons at full
production capacity at year fourth, for production of 32,000 tons of processed animal feed for domestic
market per annum at full production capacity fourth years.

The project is in line with government interest and policy which focuses on avocado oil processing plant
investment as private or proprietor occupation right.

Through, this intended investment in the Animal Feed Production and Processing plant services will be
realized with an initial investment of Birr 22.268 million for the realization of the intended project. The
project area has 2,500 M2 will be acquired on based on the district lease. The realization of the project will
open up about 34 permanent and 55 temporary employment opportunities during the project operation
and implementation phase, respectively.
The investor has already commenced the design and feasibility business study activities of the project and
expects to conclude sooner. Following the acquisition of land the project phase activities will be
commenced within 12months duration. The investor has intended to speed up the project phase activities
with partner collaboration of Gedeo Zone and Dilla Zuriya Woreda Administrate through made
negotiation and using professional in project management and qualified contractor for the civil works

5.3 PURPOSE OF THE PROJECT

The overall goal of the project is to contribute towards the economic development of Ethiopia through
using the existing investment opportunities in the country and taking advantage of the expressed policy
incentives that emphasize on greater commercialization of agriculture and enhancing private sector
development.

The project’s main objective is to implement an agricultural investment project using intensive mechanized
farming for the production focused on cattle feed; which primarily involves feeding production and the
reaming for commercial with high nutrition standards and quality of production; while ensuring optimal

26
economic returns as well as socially and environmentally acceptable production system that will attain 75%
capacity at the first years and full production level within fourth years starting from 2025 production
season.

5.4. FEED PRODUCTION & PROCESS

5.4.1 Animal Feed Processing Plant

For the purpose of this study we are assuming that animal feed processing machinery and equipment and
farm tools around birr 8,121,664.72 will be able to give the desired quality of output.
The cost implications would depend on the capacity of the machine. For this pre-feasibility study the feed
processing manufactured state-of-art, eco-friendly 32,000 tons per year, at full production capacity ate
year fourth.

Table 5: Animal Feed Processing Machinery & equipment

Animal Feed Processing Machinery & equipment
Description Qt Rate USD Total Cost
USD
Hammer mill and accessories (unit) 1 259232.2593 $259,232.26
Grinder with accessories 2
Pulverize with accessories. 1
Bucket elevator (20 ton/hr) 4
Redler conveyers 4
Row material silo 8
Pre cutter 2
Straw cutter 2
Horizontal mixer 2
Lye-mixing tank 1
Lye-mixture 2
Lye-(NaOH) holding tank (30 m3) 1
Molasses tank (30 m3) 2
Molasses mixer (7 t/hr) 1
Pellet processer (7 t/hr) 1
Sieve (30 t/hr) 1
Straw feeder (10 t/hr)
Compressor (7atm, 400 lts/min)
Steam production plant and other auxiliaries
(set)
Sub -Total-1 $ $259,232.26
259,232
AUXILIARY EQUIPMENTS 2017
Finished feed silo and bagging equipment
Belt weighed 1
Belt conveyer 1

27
 Animal Feed Processing Machinery & equipment
Description Qt Rate USD Total Cost
USD
10 HP motor with starter and other accessories 1
Weighing Balance(50 to 100 kg) 6
Water storage tank 1500 liter 2
Other Local accessories and machineries(100 to 500 gr) $2,017.00
Sub-total-2
TOTAL Foreign Currency Cost $261,249.26
Total FOB Price at port of Origin (USD) $261,249.26
Grand Total ( 1+2) in Birr 7,124,267.30
Estimated ocean fright (7%of FOB) 498,698.71
Estimated insurance (5% of FOB) 356,213.37
Estimated Inland Transport (2% of FOB) 142,485.35
Total Feed Processing Plant coat 8,121,664.72

5.4.2 Office furniture & Equipment

The company Office furniture and equipment such as computer, printer & Fax machines will be acquired for
the project. e. The cost of Office and equipment will be birr 119,000 is given below table 6.
Table 6: The Estimated Cost of Office Furniture and Equipment
Description of Work Unit Qty Cost ( Et. Birr)
Plant manager office
Executive Table Pcs 1 5000 5,000.00
Swivel Chair Pcs 2 1700 3,400.00
Chair normal Pcs 7 1200 8,400.00
Guest chair Pcs 7 700 4,900.00
Computer Table Pcs 1 1200 1,200.00
Filing Cabinet Pcs 1 5,000 5,000.00
Normal table Pcs 5 3000 15,000.00
Shelf with locker Pcs 2 3500 7,000.00
Shelf ( 2 x 2) Pcs 4 4000 16,000.00
Table with sink and Drawer Pcs 2 5000 10,000.00
Computer with printer Set 2 22000 44,000.00
Total Cost 119,900.00

5.4.3 COMPANY VEHICLES

A loading vehicle would be required for providing services for transportation of raw material(s), small
amount of inputs, facilitating farm programmed, transporting locale raw materials from far places other
than, conducting marketing activates, transporting product sales to various market, mobilizing casual
laborers and other works, feed transport Truck for product sales loading fork lift. For this purpose the
company vehicle has been proposed which will cost around ET.Birr 3,150,000 without tax purchase for
foreign market, the cost breaks down as show at Table 7 below.

28
 Table 7: Company Vehicles cost
MOTOR VEHICLES AND TRUCK REQUIREMENTS Total
Capacit
equipment Unit Qt. Rate Birr
y Cost Birr
Truck 30 Qt No 1 2,900,000 2900000
Fork lift 11Qt No 1 250,000 250000
3,150,00
Total cost
0

5.5 PLANT CAPACITY & PRODUCTION PROGRAM

5.1.1 Feed production & processing Capacity

Feed crops (potentially: Legumes such as Green Beef, Alfalfa, Siratro, Pigeeon Pea and All Grasses such as
Oats, Elephant grass, Rhodes grass, White Clove, Vetch, cowpea, pigeon pea sweet potato, soya bean) are
already major animal feed resources and show high potential for increases in the quality and quantity of
available biomass without compromising food (grain, tuber) yield or additional inputs of land and water,
which are also required to produce food for people. Developing a feed manufacturing process that is
integrated into an animal production unit is a key element to lowering feed cost and remaining
competitive. The working day of the project 8 hours one shift is 200dys per year and the project production
& processing utilization capacity is given below table 8.
Table 8: Anticipated processed feed Production Capacity
Production Unit Y-1 Y-2 Y-3 Y-4-y10
Cattle Feed Processing and Production Assumption
Plant Processing Installed Capacity kg/hrs 20,000 20,000 20,000 20,000
Project Utilization Capacity % 75% 85% 90% 100%
Project Processing Capacity Plan kg/hrs 15,000 17,000 18,000 20,000
Processing per hour/day kg/day 120,000 136,000 144,000 160,000
Processing per year kg/year 24,000,000 27,200,000 28,800,000 32,000,000
Processing per year tons 24,000 27,200 28,800 32,000

5.5.2 Feed Production & Process Programe

Production Process: Raw materials, Legumes such as Green Beef, Alfalfa, Siratro, Pigeeon Pea and All
Grasses such as Oats, Elephant grass, Rhodes grass, White Clove, Vetch, cowpea, pigeon root crops, soya
bean) and additional raw materials such as oil seed cake, molasses, straw or stock and NaOH are supplied
to the processing plant. The stock or straw is unpacked and break into pieces before NaOH lye treatment
took place. After the lye-treatment mixing, pelletizing and drying up of these component completed. Then,
integrated fodder is weighed and bagged in jute bags and distributed to the market

29
Plant Installed Processing plant capacity will have 32,000 tons per year at full capacity year four with 75%
utilization capacity of project feed processing per annum at first year production and will increased
thereafter at full capacity. The working day of the project is 8 hours & 200dys per year in one shift.
Table 9: Anticipated production programe of the project
Production Plan Unit Y1 Y2 Y3 Y4-y10
Integrated Feed For Market
All grass Family tone 14400 16320 17280 19200
Legumes Family tone 4800 5440 5760 6400
Root fodder Family tone 4800 5440 5760 6400
Total Feed Production tone 24,000 27,200 28,800 32,000

5.6 MATERIALS AND INPUTS

5.6.1 RAW MATERIALS

The principal raw material for Processing is produce within the project which is described in the feed
production farm section in the above. While the plant additive (mixed)raw material requirement for the
production of processed cattle feed, at full operation capacity and the corresponding costs are shown in
Table 10 below and the process raw material such as oil seed cake, molasses, straw or stock and NaOH are
supplied to the processing plant.

Table 10: Farm & Processing Plant Principal Raw Material Required and Cost
PLANT RAW MATERIALS COST REQUIREMEBT
Unit Y1 Y2 Y3 Y4-Y10
Raw Material For different agriculture Birr/year 615,000 820,000 1,025,000 1,025,000
crop residue
Mixtures Raw Material
Oil Seed cake (tons) birr/year 1,512,000 1,713,600 1,814,400 2,016,000
Molasses (tons) birr/year 891,000 1,009,800 1,069,200 1,188,000
Wheat Bran (qut.) birr/year 4,095,000 4,641,000 4,914,000 5,460,000
NaOH (50% solution)- to birr/year 432,000 408,000 432,000 480,000
Sub-Total-Birr 6,930,000 7,772,400 8,229,600 9,144,000
Total 7,545,000 8,592,400 9,254,600 10,169,000

5.6.2 UTILITIES
The major utility required by the plant is electricity. Annual electric consumption of the plant at 100 per
cent capacity utilization rate is estimated at 57,600 kW per year and the estimated cost at the rate of birr
0.46 per kWh will amount to birr 26,672. Potable water will be required for personal use and for other
facility. Annual water requirement is estimated to be 1,200 cubic meters and water consumption at the
rate of birr 4.63 per cubic meter amounts to birr 5,557.

30
5.7 LAND USE AND OPERATION

5.7.1 LAND USE PLAN BUILDING AND CIVIL WORKS

Total land requirement for the envisaged feed farm and plant is total 2,500M2 and of which 2,400 M2 is
earmarked for the farm and processing plant building facilities. The total expenditure for land at the lease
rate of Birr 7 per square meter and land holding is estimated at Birr 612,500 for per annum for 35 years. Of
which 10% of the total land cost birr 61,250cost includes in the initial investment cost and the reaming cost
will paid by 28 years based and birr19,687.5 equally will paid. Thus the total cost of building and civil
works, at the unit cost of Birr 2,513 per m2 is estimated at Birr 8,644,000.
Table 11: Land use and civil work cost
Cattle Feed Processing Hall and Other Building Facility Cost
Description of Work Unit Qty Cost (Et. Birr)
PRE-PROCESSING M2
Raw Materials Receiving Shade M2 200 2500 500000
Pre-cleaning and Grading Shade M2 200 2500 500000
Sub-Total 400 1000000
PROCESSING ROOMS
Forage Miller Room M2 300 2500 1250000
Mixer Room M2 300 2500 1250000
Bag Stitching Room M2 200 2500 1250000
Axillary Machine Room M2 200 2500 1250000
Sub-Total M2 1000 5000000
STORGE Room
Raw Materials Store M2 200 2500 500000
Packaging and Lab lining Room M2 200 2500 500000
Finished Product Store M2 200 2500 500000
Sub-Total M2 600 1500000
ADMINE Building
Laboratory and Quality Control room M2 110 2600 312000
Labor Facility Room and Toilet M2 110 2600 312000
office M2 180 2600 520000
Sub-Total M2 400 1144000
Total Cattle Feed Processing Area M2 2,44 8,644,000
0

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 5.8 PROJECT OPERATING ACTIVITIES

5.8.1 Project Implement Time Line

During the implementation period, the different activities likely to be undertaken have been classified as
follows on the basis of activities category and schedule in twelve months period as shown in the activity
chart shown at table below 12

Table 12: Project Pre-Operating Activities

YEAR AND MONTHS
ACTIVITIES 1 2 3 4 5 6 7 8 9 10 11 12
Preparing Design and BOQ
Building and Site Work Construction
Purchase Machineries and Equipments
Manpower recruitment (Mangemnt Staffs)
Machinery Installatiosn
Commission of machinery
Manpower recruitment ( Production Staffs)
Training to Technical Staff by Supplier
Purchasing and supplying all inputs
Plant machinery testing and trails

5.8.2 Pre-production Expense

It is estimated that an additional amount of 730,158 Birr will be required in cash for pre-production
investment expense before starting production and generate revenue. The table shoe below
describes the assumption and estimated pre-production operational cost estimate of the
envisaged plant
Table 13: Pre-Operating Expense
PRE – OPERATING EXPENSE
TYPE OF EXPENSES ASSUMPTIONS COST
Feasibility Studies and Engineering 10000
Installation Cost 3% Machinery and 243,65
Equipments 0
Premium Insurance cost 0.50% Fixed Asset 147,16
9
Training 10,000
Safety Wear & Uniforms One Performa 25,000
year
Legal documentation, security deposits, stamp duty 1% 294,33
and other legal expenses(1%0f bank loan) 9
Total in Birr 730,15

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8

33
6. ORGANIZATION AND MANAGEMENT

6.1 FORM OF THE PROJECT

For this envisaged project of the form organization was sole proprietorship and The project will 24 skilled
workers for technical and production staff and 10 workers for the marketing and administrative staff totally
34 employees in permanent employment bases and for more than 55 casual laborers in daily base for
more than eight months.
The investor controls and supervises the overall activity of the project at times while the operation and
management of the washing station will be entrusted to qualified and well experienced manager.

6.2 PROJECT MANAGERAL REQUIREMENTS

The project human resources requirement was planned in two categorized, i.e.., Technical & production
Staffed and managerial staff. The technical & production staffed fully responsible for the production
processing and operation, and on quality animal feeds output were as the managerial staff was responsible
the allover production transaction and financial magnate. All staff members of the project are accountable
to the manager who is assigned by the investor to manage the overall activities of the project.
A junior accountant will be responsible to keep all the financial transactions of the project, control cash and
stock movements of the farm and prepare up to-date financial reports. He also serves as a cosignatory with
the manager of the project. The secretary cashier will handle all the payments and minor purchases and
does the secretarial works including keeping various files of the project. The four field attendant will be
responsible for the routine operation and management of the farm under close supervision and control of
the animal feeds station manager. The storekeeper will be responsible to systematically record and keep
the input and outputs of the project. The project managerial man power requirements are given in the
finical assumptions sections below and the labor requirement is based on the 200 days of the year.

6.3 ORGANIZATIONAL STRUCTURE

The organization structure consists of three major divisions. Each division consists of a number of
departments. In such an organization, the three division managers and the Chief Executive Officer (CEO)
form the higher executive management of the project. This team should meet regularly to discuss and
decide on important project issues. The department managers (middle management) should also meet
regularly to discuss and decide about division matters. He or she plays an important role in the transfer of
information, opinions, suggestions and instructions between the two management levels. The
organizational structure is depicted in the organization chart of figure 3.

34
Figure 3: Organization Structure

6.4 MAN POWER EXPERIENCE AND QUALIFICATIONS

Cattle feeds production is considered to be a labor intensive industry where most of the functions
are preformed manually. For the proposed setup 34 persons with their working Experience and
Qualifications of the entrepreneur and for each title was mentioned in table 14 below. The project unit
will work on one shift basis. Animal feeds production staff is sufficient to look after all the
processing operations, while one trained staff will be required for operating machine. Such staff is
available in the local market. Total estimated manpower required for the project business
operations along with their respective salaries cost birr 954,000 in the beginning year was given in
the table below and 5% growth along the project year.
Table 14: Man Power Requirement and Relate Cost
No Title/Designation Educational level Req. Monthly Annual
. No. Salary Wages
A. Plant Processing and Production
1 Plant Manger BSC in Mechanical Engendering 1 4000 48000
Experience 8 years
2 Shift supervisors Secretarial science Experience 5 years 1 4000 48000
3 Secretary BSC in Accounting Experience 5 years 1 4000 48000
4 Milling Line BSC in Mechanics Experience 5 years 1 2000 24000

35
 operates
5 Straw operators BSC in Mechanicals Experience 5 years 1 2000 24000
6 line operators BSC in Mechanics 3years 1 3000 36000
7 Mechanic/ BSC in Electrical Engineringv3years 1 3000 36000
electrician
8 Fork lift porter’s 3rd license driver 3years 1 3000 36000
9 line operators BSC in Accounting Experience 4 years 1 2000 24000
10 Driver 3rd license driver Experience 3 years 1 3000 36000
Sub-total 10 360000
B. Administrative Salaries
1 Chief Executive BSC in Accounting Experience 3 years 1 4000 48000
2 Administrative BSC in Accounting Experience 3 years 1 4000 48000
3 Manager Finance Out mechanic 1 3500 42000
4 Account Officer Reading writing 1 2000 24000
5 Admini Officer BSC in Accounting Experience 3 years 1 2000 24000
6 Accountant BSC in Accounting Experience 3 years 1 2000 24000
7 Accounts Assistant BSC in Accounting Experience 3 years 1 2000 24000
8 Computer Operate. BSC in Accounting Experience 3 years 1 2000 24000
10 Store man marketing and supply 2 1500 36000
11 Office Boy grad 10thent 1 1500 18000
12 Gardener grad 10thent 1 1500 18000
13 Security Guards grad 10thent 2 1500 36000
14 Driver grad 10thent 2 1500 36000
15 Guard BSC in Accounting Experience 3 years 4 1500 72000
16 Sweeper grad 10thent 1 1500 18000
17 Sales Manager BSC in Accounting 1 3500 42000
18 Sales Officer BSC in Accounting 2 2500 60000
Sub-total 24 - 594000
Total Cost 34 - 954,000

6.5 LABOUR REQUIREMENT OF THE PROJECT

The labor costs basically include overhead staff and temporary labor costs to carry out the cattle feeds
production activities. The overhead costs are mainly the wage paid to the casual labor of the farm.
Temporary labor costs consist of costs of tillage, weed, harvest and drying, grading and sacking the cattle
feeds production.
The daily wage varies according to the types of operations which are in the range of 40-50 birr/day. For
more detailed information show below table 15.
Table 15: Estimation of labor cost related to the cattle feeds production
Production years Y-1 Y-2 Y3 Y-4y10
Labor Cost
Casual Labor for feed production MD/Day 55 56 57 57

Casual Labor price Birr/day/Lab 40 42 44 46

36
 Total Casual Labor cost Birr/Year 660,000 705,600 754,110 791,816

7. FINANCIAL BUDGET OF THE INVESTEMENT

7.1 TOTAL INVESTMENT COST

The total investment cost of the proposed feed production farm and processed plan is estimated at Birr
22,268,237. The fixed investment component is estimated at about Birr 20,503,335 the working capital
portion is Birr 1,168,703 and Birr 596,200 is a pre-production expenditure. The following table-16 briefly
summarizes the total investment cost of the project.

Table 16: Summary of Investment Costs for project (in Birr)

Description ET BIRR
Initial Capital Cost
Land Lease 350.00
Infrastructures and installations cost 338,600
Animal Feed Processing building civil work cost 8,644,000
Farm Tools and Equipments 128,820
Feed Processing Machinery& equipment cost 8,121,665
Motor vehicle and Turk requirement cost 3,150,000
Furniture & Fixture 119,900
Pre-operating cost 596,200
Total Capital Costs 21,099,535
Initial Working Capital
Raw materials inventory 69,277.41
Administrative and marketing expenses 299,925.39
Operating expenses 799,500.00
Total Working Capital 1,168,703
CAPITAL INVESTMENT + WC 22,268,237

7.2 OPERATING COST

The total operating cost is estimated at Birr 27,863,060 for ten years project life. Operating costs are
recorded on a year basis. It is divided into overheads (fixed costs) and variable costs. The fixed cost
component is estimated at about Birr 2,864,845 and Birr 24,998,215 is variable cost. Summary of the
begging year operating costs are presented on the following table 17.
Table 17: Summary of Operating Costs for project (000 in Birr)
Sr.no Project type Fixed Cost variable Cost Total
1 Feed Production & Processing 2,864,845 24,998,215 27,863,06
0

37
Total 2,864,845 24,998,215 27,863,06
0

7.3 CONTINGENCIES

Investments costs are estimated with a certain margin of errors. To allow physical and financial
contingencies, a percentage of the initial total cost estimate usually between 5 and 15% generally used the
contingencies indicated in the above table 17.

7.4 PROJECT STATUS

The promoter of the project is in the production and process of securing land by its own. The required
amount of loan is expected to be obtained shortly; the implementation of the project would not take more
than a year. The enterprise will start commercial productions of 2024.

7.5 SOURCE OF FUND

The promoter of the project has planned to finance the project through a long-term loan from the
Development Bank of Ethiopia; and, partially from own contribution. The debt equity ratio is assumed to be
70:30. The following table briefly summarizes the project financing by source of funds.
Table 18: Project Investment cost by Source of Fund (in Birr)
Description Source of Fund

Equity Contribution Bank Lon Total

INVESTMENT COST 5,740,934 14,762,401 20,503,335
Pre-operating cost 596,200 - 596,200
WORKING COST 362,298 806,405 1,168,703
Total Cost 6,699,432 15,568,806 22,268,237
% Share 30% 70%

7.6 FINANCIAL AND ECONOMIC ANALYSIS

7.6.1 Price for input and out put

The prices for input and output are used as of current prices obtained from local. Price of cattle feeds is
mainly influenced by the export domestic supply of the other animal feed producers. Current market
average price of in Addis Ababa is Birr 590/ kg in cooperative supply. Assuming farm-gate price of animal
feeds are Birr averagely 450/kg and 550 birr/ kg. The price of lint animal feeds is determined mainly by the
local market and the available supply in the domestic market.

7.6.2 Tax and Subsidy Policy

Cattle Feed Production Farm and Processing Industry are expecting the applicability of the following
government tax and subsidy policy.
38
Qualification for Incentives: - The proposed cattle feed farm qualifies for incentives in the major areas of
investment, fulfills as well, the qualifying conditions as stipulated in the investment proclamation. It is an
investment in the required areas of natural resources development, agriculture, and agro-processing. The
project does also meet most of the relevant conditions for obtaining incentives, including satisfying and
addressing the investment objectives, more than the minimum required capital, and preferred investment
area, as shown above.

Import Duty Exemptions - We appreciate the legislated exemptions, from custom duties and from all other
taxes, which do help to facilitate private investment. It is our understanding that the project will be granted
exemptions on all imported items that are clearly justified in view of the sector being addressed, the
integration of the project, its location, and the level of investment expenditure required. All imports
required for the scheme are expected to be exempted, including all machinery and equipment for site
development, building construction, vehicles and other facilities, as well as other requirements that will be
made apparent during the detailed pre-investment works.

Income Tax Holiday - Cattle Feed Production Farm is a long-term investment requiring substantial capital
outlays and long gestation/development period. Subsequently, scheduling of the project implementation is
mostly dictated by inflexible technical, agronomic husbandry, and marketing requirements, as well as by
implementation capabilities, which, to a certain level is amenable to improvement. May project would,
thus, respectfully points out this issue of the inherent nature and characteristics of its project's
development with a view to maximize and rationalize the income tax holiday provisions?

7.6.3 Financial depreciation

The depreciation schedule shows the annual amount of depreciation for all project assets, the total of
which is deducted from the net Profit. The straight line method is employed to calculate depreciations of
the different project assets. Depreciation schedule of the project is shown in the table below 19.

Table 19: Depreciation Schedule (Birr)

Items Rate 0 y1 y2 y3 y4-
(%) y10
1-2
Infrastructures and installations cost 5% 339 17 17 17 17
Animal Feed Processing building civil work 10% 8,64 864 864 864 864
cost 4
Feed Processing Machinery& equipment cost 15% 8,12 1,21 1,21 1,21 1,218
2 8 8 8
Motor vehicle requirement cost 15% 3,15 473 473 473 473
0
Furniture & Fixture 10% 120 12 12 12 12

39
Pre-production costs 10% 730 73 73 73 73
Total 2,64 2,64 2,64 2,640
0 0 0

7.6.4 Financial and Economic Analysis

Under this section the various Performa financial statements and performance indicators of the investment
project are measured to examine the profitability and soundness of the envisaged investment. The
outcome of the financial analysis includes the following pro forma financial schedules and business results:-

i) Cash flow statement

ii) Projected net income statement,
iii) Discounted cash flow, NPV & IRR
iv) Break even Analysis.
Data concerning all aspects of the project including fixed investment cost, Production, Sales revenue,
working capital requirement and financial conditions are provided in the appropriate sections. For the sake
of convenience, these data are organized and annexed as part of the financial analysis section.

7.6.5 The financial condition & assumptions

The financial condition for the project and assumptions used in the financial analysis is described as follows:

a) Debt/equity:
The proportions of debt and equity are forecasted to be 70:30 respectively for the initial investment cost.

b) Loan:
As indicated above the long-term loan requirement of the project is estimated at Birr 15,568,806. The
Development Bank will provide 70% of the initial investment at an annual interest rate of 11.5 % to be
repaid on a half yearly basis for a period of 10 years.

c) Opportunity cost of capital:

The cost of capital is assumed to be 87% for total investment and 1.28% for equity. The equity share has a
time horizon of 2 years for short NPV calculation.

i. Corporate Taxes:
Profits are taxed at a flat rate of 30% of net income.

ii. Planning Horizon:

The planning horizon comprises one year development and 10 years of operation (production stage). Actual
production is scheduled to begin in the year 2022.

iii. Products & Revenue:

40
The planned Production & Expected Revenue: Animal Feed Production Farm annually producing capacity
of described below the table for each year which expected to produce and the production expected to
increase. The revenue earned out of the sales of feed sales assumed below the table for each one, two and
three year and from 4 to 10 year cumulatively.

iv. Initial Working Capital:

The initial working capital, to be financed as part of the fixed capital structure of the project is estimated
based on the initial stock raw material and other inputs required starting operation of the farm.
Table 20: Determination of Revenue (Birr)
Y-1 Y-2 Y-3 Y-4
Revenue unit
Annual Products
Processed Feed ton 24,000 27,200 28,800 32,000
Price Assumption
Cattle Feed birr/ton 1,999 2,099 2,204 2,314

63,464,31 74,041,69
Revenue birr/year 47,970,000 57,084,300
0 5

Total Revenue(birr'000') Birr/year 47,970 57,084 63,464 74,042

7.6.6 Cash flow statement and net income statement

The net income statement of the project for the entire period of its operation is computed and annexed.
According to the projected net income statement, the farm and industry will generate a net profit of Birr
13.239 million during the first year and Birr 17.382 million from second year operation. The net profit of the
enterprise is forecasted to Birr 20.294 million for the third year and Birr 25.656 million during the final
projection fourth to ten year.

7.6.6.1 Cash-generating Capacity

The cash generating capacity of the project for each period is found to be significant, i.e. the amount of
cash generated by the project for each period is computed by adding the depreciation over the net profit of
the business.

7.6.6.2 Discount cash flow and discount rate

This involves the process of calculating the present value of a future amount, based on time value of money
i.e. preference for the present. Accordingly, discounted cost 10% and benefits are calculated using the
relevant opportunity cost of capital 11.5 %, loan interest rate).

41
 7.6.7 Cost Benefit Analysis

7.6.7.1 Net Present Value (NPV)

The NPV is calculated by subtracting the present value of all the costs incurred for the project from the
present value of the stream of benefits is birr 140,716 and birr 204,319 before tax and after tax
respectively. As shown below, the resulting NPV.

7.6.7.2 Benefit: Cost’ Ratio (BCR)

Detailed in the appended analysis sheet provided at the end; the BCR; which measures the ratio of the
present value of benefits to the present value of costs; has been calculated by dividing discounted benefits
(or revenue) by discounted costs of the project. Again, a discount rate of 11% has been used.
That is:
B/C ratio = PVB/PVC
= 12.59

Given the BCR > 1; therefore, the project is considered economically sound.

7.6.7.1 Internal Rate of Return (IRR)

The internal rate of return is calculated as the rate of discount which equates the present worth of the
costs and benefits streams. Project internal rate return is 65% and 73% before tax and after tax
respectively.

7.6.7.3 Non-discounted measure of project worth

a) Payback Period
The payback period is simply defined as the period (i.e. the number of years) required recovering the
original investment cost. The Business Result obtained reveals that the investment is financially viable and
has a healthy cash flow forecast. The outcome of the financial analysis reveals that:-

 The payback period for total investment = 3 years with 10 month

b) Break even Analysis:

The break-even point of the project is estimated by using income statement projection.
BE = Fixed Cost (2,864,845) = 12.47 %
Sales – Variable cost (47,970,000- 24,998,215)
The breakeven ratio, the ratio of break-even sales to planned production, for the entire period is between
0.10 and 0.1247. The breakeven ratio of the project is not only low but it also steadily declines throughout

42
the operation period. This low break even ratio means low risk to the investment; the business has great
level of security against unforeseen operational difficulties. For details see the annexed tables.

7.6.8 Loan Repayment Schedule

The loan repayment period is simply defined as the period (i.e. the number of years) required paying the
principal and interest of the original investment cost throughout the project life. The business result
obtained reveals that the investment is financially viable and has a healthy cash flow forecast. The outcome
of the financial analysis reveals that: based on the following repayment schedule table 21, were paid
annual based. For the detailed information shown below the table
Table 21 Loan Repayment Schedule
Year Amount of Principal Installment Interest Total
Outstanding due Payable at 11.5% Amount
1 22,005,553 2,200,555.31 2,530,638.61 4,731,193.92
2 19,804,998 2,200,555.31 2,277,574.75 4,478,130.06
3 17,604,442 2,200,555.31 2,024,510.89 4,225,066.20
4 15,403,887 2,200,555.31 1,771,447.02 3,972,002.33
5 13,203,332 2,200,555.31 1,518,383.16 3,718,938.47
6 11,002,777 2,200,555.31 1,265,319.30 3,465,874.61
7 8,802,221 2,200,555.31 1,012,255.44 3,212,810.75
8 6,601,666 2,200,555.31 759,191.58 2,959,746.89
9 4,401,111 2,200,555.31 506,127.72 2,706,683.03
10 2,200,555 2,200,555.31 253,063.86 2,453,619.17
Total 22,005,553.10 13,918,512.34 35,924,065.43

7.6.9 Sensitivity analysis

7.6.9.1 Risk and Uncertainty:

The following risks and uncertain incidents that might affect the project could occur during operating
period of the project.
If the global economic crisis and inflation is prolonged and intensified, it will affect the project cost benefits
analysis. Besides, it may also affect the production cost and both inland and offshore markets.
 Conflict may arise in the project area and unless the government fully ensures the security
situation, the project might be adversely affected.
 Unforeseen natural disease outbreak. Starting the project in a hostile environment will pose the
greatest risk, preliminary assessment before the land lease, should be carried out by project about
the conduciveness of the environment for investment of the particular agro ecology area.

8. CONCLUSIONS AND RECOMMENDATIONS

43
Results of the financial appraisal show that investing in cattle feeds production and marketing is profitable.
These findings are encouraging and can be used as guidelines for these investors planning to produce for
the high quality cattle feeds markets. The major task will be to get financial resources to set up the required
facilities to produce it. The task for these investors will be to find what mechanisms will link them to cattle
feeds growers so that they can deliver feeds to the local market. Another challenge will be to offer
attractive prices to the feed required that are competitive compared to prices offered by other private and
cattle feeds growers’ associations, leaving at the same time a reasonable profit level for their operation. It
is, however, questionable how a high quality feeds will be obtained when the investors cannot monitor the
production stage of the cattle feeds and where there are no quality standards of cattle feeds.

However, based on the framework set out in this feasibility study the following conclusions were made
regarding the feasibility of proposed cattle feeds production and processing Feed production farm

o A market opportunity was identified for the domestic sales market. The demand and local trend
confirms the products are marketable
o The analysis of technical feasibility of the proposed high quality cattle feeds production industry
revealed that the machinery, equipment’s, production facilities and services and the human resource
could be integrated for efficient cattle feeds production for feed production farm
o The analysis on financial feasibility of the proposed farm revealed that based on the assumptions
made, the owner is profitable. The farm is projected to have a healthy cash flow and is viable over
long term. The positive financial feasibility is, however, dependent on stable inflation and macro-
economic conditions. The profitability of the farm can be further by developing alternative feeds
production and marketing integration with cattle feeds farmers reduced row material supply and
increased costs.
Based on the framework set out in this feasibility study where feasibility is assessed in two core areas, it
can be concluded that the proposed cattle feeds production farm establishment and high quality feeds
production project is feasible. The results of the feasibility study, however, are heavily dependent upon the
assumptions made during the study and other operating environments (political, environmental and
economic conditions) remain relatively stable.

44
9. Annexes
Annex 1: Annual Statement of Costs and benefits (Birr)
INCOME STATEMENTS( Et birr '000)
Year 0 Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Gross revenue 47,970 57,084 63,464 74,042 77,744 81,631 85,713 89,998 94,498 99,223
Cattle Feed Processing Expense
Raw Materils 6,651 7,536 8,422 8,865 8,865 8,865 8,865 8,865 8,865 8,865
Auxilury materisl and chmecals 12,124 13,713 14,520 16,133 16,133 16,133 16,133 16,133 16,133 16,133
Casual Labor at preparation line 660 706 754 792 831 873 917 962 1,011 1,061
Production Staffs salary 954 1,002 1,052 1,104 1,160 1,218 1,278 1,342 1,409 1,480
Utilites 77 81 85 89 93 98 103 108 113 119
Trabsport Cost 880 880 880 880 880 880 880 880 880 880
Sub-total of processsing plant cost 21,345 23,917 25,712 27,863 27,962 28,067 28,176 28,291 28,412 28,538
Gross margin 26,625 33,167 37,752 46,179 49,781 53,564 57,537 61,707 66,087 70,685
General administration & selling expenses
Salary and wage fur manegeral 594 624 655 688 722 758 796 836 878 921
Training Requirement 200 210 221 232 243 255 268 281 295 310
Utilites 20 22 24 27 29 32 35 39 43 47
Repairs & renewals 221 232 244 256 269 282 297 311 327 343
Travel and perdime 59 65 72 79 87 96 105 116 127 140
Stationary and printing 20 21 22 23 24 26 27 28 30 31
Marketing Expensses 480 571 635 740 777 816 857 900 945 992
Insurance expense 105 111 116 122 128 135 141 148 156 164
Professional fees (legal, audit, etc.) 20 21 22 23 24 26 27 28 30 31
Depreciation expense 1,720 1,877 2,011 2,190 2,305 2,426 2,553 2,688 2,830 2,980
Amortization expense (pre production cost) 60 60 60 60 60 60 60 60 60 60
Miscellaneous expense 20 21 22 23 24 26 27 28 30 31
Total of Adm and Selling Exp 3,519 3,835 4,103 4,463 4,693 4,937 5,193 5,464 5,750 6,051
Earnings before interest and taxes 23,105 29,332 33,649 41,716 45,088 48,628 52,343 56,243 60,337 64,634
Less interest expense 1,871 1,764 1,645 1,511 1,361 1,193 1,006 795 559 296
Pre-tax income 21,235 27,568 32,005 40,205 43,727 47,434 51,338 55,448 59,777 64,338
Cumulative pre-tax income (NOL) 21,235 48,803 80,808 121,013 164,740 212,174 263,512 318,960 378,738 443,076
Taxes 7,432 9,649 11,202 14,072 15,304 16,602 17,968 19,407 20,922 22,518
Earnings before taxes 21,235 27,568 32,005 40,205 43,727 47,434 51,338 55,448 59,777 64,338
Less taxes 7,432 9,649 11,202 14,072 15,304 16,602 17,968 19,407 20,922 22,518
Net income 13,802 17,919 20,803 26,133 28,423 30,832 33,370 36,041 38,855 41,820
Groos Profit Margine 56% 58% 59% 62% 64% 66% 67% 69% 70% 71%
Net profit Margine 28.77% 31.39% 32.78% 35.30% 36.56% 37.77% 38.93% 40.05% 41.12% 42.15%
Operting Profit Margine 44% 48% 50% 54% 56% 58% 60% 62% 63% 65%

45
Annex 2: Projected Cash Flow
Year 0 Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Net income 13,802 17,919 20,803 26,133 28,423 30,832 33,370 36,041 38,855 41,820
Plus depreciation 2,627 2,627 2,627 2,627 2,627 2,627 2,627 2,627 2,627 2,627
Less increase in inventory - (1,708) (206) (144) (172) (8) (8) (9) (9) (10) (10)
Less increase in accounts receivable - (2,399) (456) (319) (529) (185) (194) (204) (214) (225) (236)
Plus increase in accounts payable - 640 77 54 65 3 3 3 3 4 4
Cash flow from operations - 12,963 19,962 23,021 28,124 30,859 33,260 35,787 38,448 41,251 44,204
Less investment (21,100) - - - - - - - - - -
Cash flow from operations and invests (21,100) 12,963 19,962 23,021 28,124 30,859 33,260 35,787 38,448 41,251 44,204
Plus net new equity capital raised 6,680 - - - - - - - - - -
Less dividends paid - - - - - - - - - - -
Plus net new long-term debt 15,588 (888) (995) (1,114) (1,248) (1,398) (1,565) (1,753) (1,964) (2,199) (2,463)
Plus net new bank borrowings - - - - - - - - - - -
Cash flow from ops, invests, and fin 1,169 12,075 18,967 21,907 26,876 29,462 31,694 34,034 36,484 39,052 41,741
Beginning cash balance - 1,169 13,244 32,211 54,118 80,994 110,455 142,149 176,183 212,667 251,719
Ending cash balance 1,169 13,244 32,211 54,118 80,994 110,455 142,149 176,183 212,667 251,719 293,460

Annex 3: Projected Balance Sheet

Production Year Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Assets
Cash 1,169 13,244 32,211 54,118 80,994 110,455 142,149 176,183 212,667 251,719 293,460
Inventory - 1,708 1,913 2,057 2,229 2,237 2,245 2,254 2,263 2,273 2,283
Accounts receivable - 2,399 2,854 3,173 3,702 3,887 4,082 4,286 4,500 4,725 4,961
Total current assets 1,169 17,350 36,979 59,348 86,925 116,579 148,476 182,723 219,430 258,717 300,704
Gross property, plant & equipment 21,100 21,100 21,100 21,100 21,100 21,100 21,100 21,100 21,100 21,100 21,100
Less: Accumulated depreciation expense - -2,627 -5,254 -7,880 -10,507 -13,134 -15,761 -18,387 -21,014 -23,641 -26,268
Net property/equipment 21,100 18,473 15,846 13,219 10,592 7,966 5,339 2,712 85 -2,541 -5,168
Total assets 22,268 35,823 52,825 72,567 97,517 124,545 153,815 185,435 219,516 256,176 295,536

Liabilities Initial balance Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Accounts payable - 640 718 771 836 839 842 845 849 852 856
Notes payable/short-term debt - 0 0 0 0 0 0 0 0 0 0
Total current liabilities - 640 718 771 836 839 842 845 849 852 856
Long-term debt from 15,588 14,700 13,705 12,590 11,343 9,945 8,379 6,626 4,662 2,463 0
Shareholders equity 6,680 20,483 38,402 59,205 85,339 113,761 144,594 177,963 214,005 252,860 294,680
Total long-term debt and shareholders equity 22,268 35,182 52,107 71,796 96,681 123,706 152,973 184,590 218,667 255,323 294,680
Total liabilities 22,268 35,823 52,825 72,567 97,517 124,545 153,815 185,435 219,516 256,176 295,536

46
Annex 4: NPV & IRR on Total Investment

PROJRCT WORTH MAESURE ( NPV, IRR, PB ) before tax . Birr '000

Year 0 Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Cash flow (21,100) 12,963 19,962 23,021 28,124 30,859 33,260 35,787 38,448 41,251 44,204
PV factor 100% 90.09% 82.64% 75.13% 68.30% 62.09% 56.45% 51.32% 46.65% 42.41% 38.55%
PV of cash flow (21,100) 11,679 16,497 17,296 19,209 19,161 18,775 18,366 17,936 17,495 17,041
NPV 152,352
IRR ( BeforTax ) 88%
Cash flow (21,100) 12,963 19,962 23,021 28,124 30,859 33,260 35,787 38,448 41,251 44,204
Cumultaive cash (21,100) (8,136) 11,826 34,847 62,971 93,830 127,089 162,876 201,324 242,575 286,779
Pay Back Period 3.00 Years 24 Months

PROJRCT WORTH MAESURE ( NPV, IRR, PB ) AFTER TAX . Birr '000

Year 0 1 2 3 4 5 6 7 8 9 10
Cash flow (21,100) 12,963 19,962 23,021 42,196 46,164 49,862 53,755 57,855 62,173 66,722
PV factor 100% 90.09% 82.64% 75.13% 68.30% 62.09% 56.45% 51.32% 46.65% 42.41% 38.55%
PV of cash flow (21,100) 11,679 16,497 17,296 28,820 28,663 28,147 27,587 26,989 26,368 25,721
NPV 216,666
IRR ( After Tax ) 96%
Cash flow (21,100) 12,963 19,962 23,021 42,196 46,164 49,862 53,755 57,855 62,173 66,722
Cumultaive cash (21,100) (8,136) 11,826 34,847 77,042 123,206 173,068 226,823 284,678 346,851 413,573
Pay Back Period 3.00 Years 20 Months

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