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Soap Noodles
Soap Noodles
January, 2024
A Feasibility study to Establish Soap Noodles Manufacturing Factory
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
Table of Contents
Project Profile .................................................................................................................................. i
1. Introduction ............................................................................................................................. 1
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
4.4.2. Annual Raw Material Requirements for Soap Noodle Production ................................ 31
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6.1. Conclusion:..................................................................................................................... 39
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
Project Profile
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
1. Introduction
In the heart of Ethiopia, Mojo Town stands as a inspiration of industrial potential, poised for
transformative economic growth. This feasibility study explores the viability of establishing a
state-of-the-art soap noodle manufacturing factory in Mojo Town, contributing to Ethiopia's rich
history of soap production and reinforcing its commitment to self-sufficiency. With a planned
production capacity of 3000kg/hr, this venture aims to not only meet local demand but also position
Ethiopia as a key player in the regional soap industry.
1.1. Background
Ethiopia's historical commitment to soap production sets the stage for Worknesh's expansion plans.
The nation's deep-rooted dedication to harnessing natural resources for economic prosperity aligns
seamlessly with the impending establishment of soap and soap noodle manufacturing factories, as
championed by the Chemical and Construction Inputs Industry Development Institute (CCIIDI).
Worknesh Aligaz's journey began in 2013 when she identified a gap in the paint manufacturing
industry. The importation of Calcium Carbonate by big paint factories presented logistical
challenges, from cross-border price negotiations to currency exchanges. Leveraging her
experience in the granite/calcium carbonate space from Midroc Ethiopia PLC, Worknesh founded
her company to address these issues. Initially focused on providing Calcium Carbonate fillers to
Ethiopia's main paint factories, the company's innovative machine design earned her a local patent,
marking a historic milestone as the first in Ethiopia to achieve such recognition.
The evolution from a paint-centric enterprise to a diversified company, now including concrete
block production, showcases Worknesh's resilience and adaptability. However, her current focus
centers on the establishment of a soap noodle factory with a production capacity of 3000kg/hr.
This ambitious endeavor requires a special emphasis on Worknesh's leadership as a strong woman
in a traditionally male-dominated industry.
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
Her success has not gone unnoticed, as Worknesh Aligaz has earned several awards for her
outstanding contributions. These accolades not only highlight her business prowess but also
recognize her role as a trailblazing woman in the Ethiopian business landscape. Her achievements
serve as an inspiration to aspiring entrepreneurs, particularly women, encouraging them to pursue
their visions with determination.
A pivotal aspect of Worknesh's plan involves reducing reliance on physical labor through
technological advancements, such as the introduction of a mill grinding machine for separating
and packaging products. Acknowledging the need for continuous improvement, she aims to refine
assembly and loading processes, ensuring seamless operations.
As Worknesh Aligaz steers her company towards a future marked by innovation, diversification,
and social responsibility, her journey serves as a testament to the transformative power of strong
women in business. Through her soap noodle factory initiative and ongoing commitment to
excellence, Worknesh continues to shape the narrative of Ethiopian entrepreneurship, leaving an
indelible mark on the industry and inspiring a new generation of visionary leaders.
I. To determine the viability of the project or the project or the attractiveness of the project.
II. To serve as a plan document indicating the series of choices or strategies for realizing the
objectives of the project.
III. It serves as a guide during the implementation of the project.
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IV. It demonstrates to investors the existence of market for the product/service, the liquidity of
the project and potential revenue source for the project.
V. The report serves as a control guide to the investor with regards to product specifications
and performance.
• Ethiopia has historically depended on importing soap noodles and related products
to meet domestic demand. By creating a local manufacturing facility with a
substantial production capacity of 3000kg/hr, the project aims to significantly
reduce reliance on imports, contributing to the country's economic self-sufficiency.
• The soap noodle manufacturing factory is poised to become a catalyst for economic
growth in Mojo Town and the surrounding regions. It will create job opportunities,
stimulate economic activities, and attract further investments, fostering a positive
cycle of development and prosperity.
• Mojo Town's strategic location provides logistical advantages for the transportation
and distribution of soap noodles across Ethiopia. The town's accessibility and
connectivity make it an ideal hub for the soap manufacturing industry, ensuring
efficient supply chain operations and reducing transportation costs.
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
• The soap noodle manufacturing factory addresses the growing demand for soap and
related products in Ethiopia. With an enhanced production capacity, it is well-
positioned to meet the needs of the local market while potentially catering to the
demands of neighboring countries, thereby boosting Ethiopia's soap export
capabilities.
The establishment of a soap noodle production line, with a robust production capacity of 3000kg/hr
carries immense significance across various dimensions, impacting the local community, the
national economy, and the broader industrial landscape. The following points elucidate the
significance of this transformative project:
• The soap noodle manufacturing factory will play a pivotal role in addressing
unemployment challenges in Mojo Town and its vicinity. The project's workforce
requirements, ranging from skilled technicians to administrative staff, will
contribute to job creation and provide valuable employment opportunities for the
local population.
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• By reducing the need for importing soap noodles, the project aims to save foreign
exchange for Ethiopia. This shift towards local production aligns with economic
sustainability goals, strengthening the nation's economic resilience and reducing
dependence on external markets.
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• The project brings about positive social change by improving hygiene standards
through increased availability of locally produced soap products. The accessibility
of affordable soap noodles contributes to public health awareness, emphasizing the
role of the project in enhancing overall well-being.
The establishment of a soap noodle production line in Mojo Town is driven by overarching
objectives aimed at contributing to the economic, social, and industrial development of Ethiopia.
The general objectives of this transformative initiative include:
The objective of establishing a soap noodle manufacturing factory in Mojo Town, Ethiopia, with
a production capacity of 3000kg/hr, is to contribute significantly to the nation's economic self-
sufficiency and industrial diversification. This transformative initiative aims to reduce dependency
on imported soap noodles, generating sustainable local employment, fostering technological
advancements, and creating a hub for soap production in Mojo Town. By leveraging advanced
manufacturing processes and sustainable sourcing of raw materials, the project seeks to enhance
Ethiopia's competitiveness in the soap industry, promote regional development, and positively
impact public health. Additionally, the factory aims to play a pivotal role in reducing foreign
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The project scope for establishing a soap noodles manufacturing factory in Mojo Town, Ethiopia,
with a production capacity of 3000kg/hr encompasses key production requirements, materials, and
the entire manufacturing process. This includes the installation of a steam boiler with a capacity
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of 2 MT/hr at 1.25 Mpa, a workshop larger than 350 m² (L: 35m, W: 10m, H: 8m), a power supply
exceeding 280 kW/hr at 380 V, 50 HZ, and provision of circulating water for a 15 m³ vacuum
drying system. The project also entails employing a workforce of 10 individuals. Raw materials
for soap production involve tallow, caustic soda (NaOH 97%-99%), clean water, and sodium-
chloride (NaCl), with optional materials such as perfume, pigment, titanium dioxide, talcum
powder, etc. The production process includes melting and mixing, saponifying and caustic soda,
vacuum drying, extruding soap noodles, and a finishing line involving soap noodle grinding,
vacuum extruding, cutting into finished soaps, and packaging. This comprehensive scope ensures
a systematic and well-equipped establishment capable of achieving the targeted production
capacity.
The soap noodles manufacturing factory with a production capacity of 3000kg/hr is strategically
located and established in Mojo Town, Ethiopia. Mojo Town, situated in the Oromia State, offers
a central and accessible location that is conducive to industrial activities. This specific location has
been chosen for its logistical advantages, including proximity to transportation networks, potential
for regional economic growth, and alignment with the broader industrial development goals of
Ethiopia. The factory's presence in Mojo Town aims to contribute to the local economy, generate
employment opportunities, and position the town as a hub for soap manufacturing within the
region. The strategic choice of Mojo Town reflects a commitment to leveraging the town's
infrastructure and resources to facilitate the success and sustainability of the soap noodles
manufacturing project.
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2. Technical Aspect
The project aims at establishing a soap noodles factory in Modjo town. The factory will be mainly
The factory area is assumed to cover 700 m², and its construction is estimated to be within a budget
of 21,000,000.
The projected equipment and initial investment requirements are detailed in the following table.
The total investment encompasses not only the cost of equipment but also includes expenses for a
transport vehicle and working capital requirements.
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The production requirements for the soap noodles manufacturing factory in Mojo Town, Ethiopia,
encompass essential elements to ensure efficient and effective operations.
A. The steam boiler is specified with a capacity of 2 MT/hr and a pressure of 1.25 Mpa,
providing the necessary energy for the manufacturing process.
B. The workshop is mandated to be larger than 350 m², with dimensions of L: 35m, W: 10m,
and H: 8m, creating a spacious and conducive environment for production activities.
C. The power supply is stipulated to be greater than 280 kW/hr, operating at 380 V and 50
HZ, ensuring the necessary electricity for the machinery.
D. The water requirements include circulating water for the vacuum drying system, totaling
15 m³, and production water.
E. The workforce is planned to consist of 10 workers, contributing to the various aspects of
the soap noodles manufacturing process. These production prerequisites collectively form
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The material and consumables essential for soap production in the proposed factory in Mojo Town,
encompass a diversified range of elements.
A. Animal fatty acid, forms a fundamental component, contributing to the soap's formulation.
B. Caustic soda, with a concentration of NaOH ranging from 97% to 99%, is a critical
ingredient in the saponification process, facilitating soap production.
C. Clean water is imperative for various stages of the soap manufacturing process.
D. Sodium-chloride (NaCl) adds to the production process, enhancing the soap's
characteristics.
E. Optional materials, such as perfume, pigment, titanium dioxide, talcum powder, and
others, provide opportunities for customization and product differentiation. This
comprehensive array of materials ensures a versatile and high-quality soap production
process, catering to a variety of formulations and meeting diverse consumer preferences.
The soap noodles manufacturing process for the proposed factory in Mojo Town, involves a
systematic series of steps to ensure the production of high-quality soap products.
Step 1: - initiates the process by melting and mixing various oils, including tallow, providing the
foundational components for soap formulation.
Step 2: - the mixture undergoes saponification, facilitated by the interaction of tallow with caustic
soda (NaOH 97%-99%), a critical chemical reaction in soap production.
Step 3: - focuses on vacuum drying and extruding the soap noodles, ensuring controlled and
efficient drying conditions for the soap's formation.
Step 4: - encompasses the finishing line, involving soap noodle grinding, vacuum extruding,
cutting the noodles into finished soaps, and packaging the end products. This methodical
production process underscores the factory's commitment to delivering soap noodles of
superior quality, catering to both local and potential international markets
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The production of soap noodles requires several key raw materials, including tallow, caustic soda,
salt, water, calcium carbonate, and others. In the established soap and soap noodle production line,
there is an existing grinding machine for producing calcium carbonate. However, the current
grinding machine has limitations, with lower capacity and aging components that hinder its ability
to meet the growing demand for calcium carbonate, both for the soap noodle production line and
the local market. To overcome these challenges, it is imperative to integrate a new and advanced
grinding machine into the production process.
The proposed solution involves replacing the existing grinding machine with the MTW138
Trapezium Mill Plant, designed to address the specific requirements of soap noodle production.
This milling machine has a capacity of 10 tons per hour, ensuring a more efficient and reliable
supply of finely ground calcium carbonate. The machine's project background outlines its
suitability for processing raw materials such as marble, limestone, and dolomite, with an input size
of less than 350mm and low input moisture (<6%). The output size of 180-45 microns aligns with
the specifications needed for soap and soap noodle production.
The MTW Trapezium Grinding Mill is a cutting-edge solution developed by the company's experts
with over 20 years of research and development on grinding machines. It boasts several
advantages, including a bevel gear transmission system without an independent reducer, an
internal thin oil lubrication system, and a curved air duct that reduces resistance and enhances
airflow. The machine is versatile, catering to the processing and grinding needs of various raw
materials such as limestone, calcite, bentonite, dolomite, and more. Its performance has earned a
high reputation among overseas customers.
The advantages of the MTW138 Trapezium Mill Plant include its unique features like the shovel
with a replaceable blade, isolated cyclone collector, no-resistance inlet volute, exquisite
appearance, heavy mill base for stability, and an overall bevel gear drive system. The total cost of
the MTW138 Trapezium Mill Plant, including transportation and installation, is estimated at
$441,500. This investment reflects not only the machine's capabilities but also the long-term
benefits it brings to the soap and soap noodle production process, ensuring efficiency, reliability,
and meeting the demands of the local mark.
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The soap and soap noodles market in Ethiopia is undergoing a transformative phase, driven by the
nation's expanding population, increasing urbanization, and a growing awareness of hygiene
practices. The market size is on a steady climb, reflecting a compound annual growth rate (CAGR)
indicative of the rising demand for soap and detergent products. Ethiopian consumers exhibit a
preference for high-quality personal care items, creating a significant opportunity for soap noodles
manufacturers to meet this demand. With a focus on natural ingredients and sustainable sourcing
gaining traction, manufacturers have the potential to align with these preferences to capture a
growing market segment. The competitive landscape is dynamic, marked by both local and
international players, contributing to the diversity and innovation within the soap noodles industry.
Regulatory compliance, particularly in quality standards for soap and detergent products, is a
critical consideration for market acceptance and establishing consumer trust.
Looking ahead, the soap noodles market is poised for further growth in Ethiopia. The trends of
increased demand for natural ingredients, product diversification, and adoption of advanced
manufacturing technologies are likely to shape the market's trajectory. Challenges such as raw
material sourcing dependence on palm oil and ensuring consumer affordability need strategic
solutions for sustainable growth. New entrants can leverage effective distribution strategies,
collaborate with local distributors, and incorporate digital marketing to successfully navigate this
burgeoning market. Overall, the soap noodles market in Ethiopia presents a promising landscape
for manufacturers who embrace innovation, align with consumer preferences, and navigate the
unique dynamics of this emerging market.
The analysis of Ethiopia's soap market reveals a significant disparity between exports and imports,
forming the basis for a compelling Demand-Supply Gap assessment. Despite being the 130th
largest global exporter of Soap in 2021, Ethiopia's soap exports amounted to only $93.9k, ranking
Soap as the 303rd most exported product domestically. Key export destinations include Somalia,
India, the United States, Belgium, and Sweden. Notably, the fastest-growing export markets during
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2020-2021 were India, Belgium, and Cote d'Ivoire, indicating potential areas for market expansion.
On the flip side, Ethiopia's soap imports surged to $27.2M in 2021, making it the 75th largest
global importer. Indonesia emerged as the primary supplier, accounting for a significant portion
of imports, followed by Egypt, Malaysia, the United Arab Emirates, and India. The stark contrast
between export and import figures underscores a considerable demand-supply gap within
Ethiopia's soap market, signaling a strategic opportunity for the establishment of a soap noodles
manufacturing factory in Mojo Town, capable of producing 3000kg/hr to address the domestic
shortfall and potentially tap into growing export markets.
Closing this demand-supply gap holds strategic significance for the Mojo Town soap noodles
factory, offering the prospect of reducing the nation's dependence on soap imports and enhancing
self-sufficiency. The identified fastest-growing export destinations provide a strategic roadmap for
market expansion, suggesting that the factory could target high-potential regions such as India,
Belgium, and Cote d'Ivoire. To maximize impact, the factory should focus on quality production,
cost-effective manufacturing processes, and potentially collaborate with local and international
partners. Bridging the demand-supply gap not only contributes to local economic development but
also positions the Mojo Town factory as a potential key player in both the domestic and global
soap markets.
The market demand for soap noodles in Ethiopia presents a promising landscape, as evidenced by
data from Volza's Ethiopia Soap Noodle Buyers & Importers directory. The directory reveals the
active presence of 209 soap noodle importers in Ethiopia, engaged with 8 suppliers. Notably,
UNILEVER MANUFACTURING PLC emerges as a dominant player, holding the maximum
import market share with 137 shipments. Following closely is MULTI COMMODITY
INTERNATIONAL LTD with 103 shipments, and ABEM INDUSTRY PLC secures the 3rd spot
with 74 shipments. These insights, updated until May 30, 2023, underscore the substantial demand
for soap noodles in Ethiopia and provide valuable information for potential market entrants.
Establishing a soap noodles factory in Modjo with a production capacity of 3000kg/hr aligns
strategically with this demand, offering the opportunity to cater to existing importers and
contribute significantly to the local soap manufacturing landscape.
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Moreover, the data derived from Volza's directory, which includes information on buyers,
suppliers, and top decision-makers, serves as a valuable resource for market intelligence.
Understanding the preferences and requirements of key importers can inform the soap noodles
factory's production strategies, ensuring alignment with market needs. The directory's
comprehensive export-import shipment data from 70 countries enhances the feasibility study,
providing a robust foundation for the soap noodles factory's market entry and growth in the
Ethiopian soap industry.
This table provides a concise overview of the market insights derived from Volza's Ethiopia Soap
Noodle Buyers & Importers Directory, highlighting the number of active importers, leading
importers, their market share, and additional details. Establishing a soap noodles factory in Modjo
with a 3000kg/hr capacity is strategically aligned with the substantial demand reflected in this
market data.
In the emerging landscape of soap manufacturing in Mojo Town, two notable competitors set to
impact the market dynamics are Repi Wilmar and the Allied Chemical factory. Repi Wilmar,
positioned in Sebeta, is slated to be a significant player with a formidable estimated cost of Two
Billion Birr. Leveraging byproducts from vegetable oil refinery, Repi Wilmar aims to produce
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soap and soap noodles, aligning with global sustainability trends and introducing an innovative
approach to raw material processing. The joint venture with Wilmar International adds an
international dimension, propelling Repi Wilmar to not only address Ethiopia's historical reliance
on soap noodle imports but also to elevate the nation's soap production capacity from 20,000 tons
to an impressive 120,000 tons annually. This strategic move positions Repi Wilmar as a key
contributor to Ethiopia's self-sufficiency in soap production and opens doors for regional exports,
fostering economic collaboration with neighboring countries.
On the other front, the Allied Chemical factory, set to be established in Adama, holds a crucial
role in the soap ingredient landscape. With a targeted investment of 36 million Birr, this factory
strategically located in Mojo Town aims to significantly reduce soap ingredient imports by
substituting up to 90 percent of Ethiopia's current imports. The strategic positioning of the Allied
Chemical factory enhances logistical efficiency, positioning it as a formidable competitor in the
region. As both Repi Wilmar and Allied Chemical forge ahead with their plans, their impact on
the local soap industry in Mojo Town is poised to be transformative, intensifying competition and
fostering advancements in soap and soap noodle manufacturing practices.
The target market for the proposed soap noodles manufacturing factory in Mojo Town is multi-
faceted, encompassing both local and regional segments. Locally, the factory aims to cater to the
domestic demand for soap and soap noodles in Ethiopia, contributing to the nation's self-
sufficiency in the production of essential personal care products. The factory's output is intended
to reach consumers across urban and rural areas, aligning with Ethiopia's commitment to enhance
hygiene practices and improve overall public health.
Regionally, the soap noodles produced in Mojo Town are positioned to tap into neighboring
markets such as Kenya, Somalia, Djibouti, Sudan, and others. By strategically leveraging Mojo
Town's logistical advantages, the factory seeks to become a regional hub for soap manufacturing,
offering high-quality soap noodles to neighboring countries. This regional expansion aligns with
Ethiopia's broader economic goals of fostering collaboration and trade partnerships within the East
African region.
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The target market also includes businesses and industries that use soap noodles as a crucial
ingredient in their own production processes. Establishing partnerships with local and regional
soap manufacturers, cosmetic companies, and other relevant industries is part of the strategy to
diversify the market reach and create collaborative opportunities. By targeting a broad spectrum
of consumers and businesses, the soap noodles factory in Mojo Town aims to play a pivotal role
in transforming the local soap industry while contributing to Ethiopia's economic development and
regional trade.
• Local Consumers:
• Regional Consumers:
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• Economic Goals:
The establishment of the soap noodles factory in Ethiopia marks a significant milestone in the
country's industrial landscape, particularly in the soap manufacturing sector. Historically, most
soap factories in Ethiopia have heavily relied on the importation of raw materials, including
essential components like soap noodles and filler materials such as calcium carbonate, procured
from foreign suppliers like Worknesh Quartz, Vim, Powder, and Block Company. This
dependence on imports often strained the country's foreign currency reserves, leading to economic
challenges.
The laundry soap noodles production line introduced by this factory is a game-changer, as it
prioritizes utilizing locally sourced raw materials. This strategic decision not only ensures a stable
and sustainable supply chain but also plays a pivotal role in mitigating the strain on foreign
currency reserves. By substituting imported raw materials with those available in the local market,
the soap noodles factory contributes significantly to Ethiopia's economic self-sufficiency and
reduces its reliance on external sources. This approach aligns with the government's vision of
promoting domestic industries and fostering economic resilience.
The key raw materials utilized in the production of soap noodles sourced from the local market
include a variety of components crucial for soap manufacturing. These locally procured materials
not only meet the quality standards required for soap production but also stimulate the growth of
domestic suppliers. The soap noodles factory's commitment to sourcing locally not only enhances
the overall economic development of the region but also creates a positive ripple effect by
supporting local businesses and contributing to job creation. In essence, this initiative not only
transforms the soap manufacturing sector in Ethiopia but also serves as a model for other industries
to explore self-sufficiency and reduce dependence on foreign currencies.
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• Market Analysis:
• Conduct a comprehensive market analysis to understand consumer preferences,
demand trends, and competitive landscape in both local and regional markets.
• Identify key competitors, their strengths, weaknesses, opportunities, and threats.
• Explore the regulatory environment and industry standards governing soap
manufacturing.
• Target Audience:
• Develop detailed buyer personas for local consumers, regional markets, and
businesses/industries.
• Tailor marketing strategies to address the unique needs and preferences of each
target segment.
• Product Positioning:
• Clearly define the unique selling propositions (USPs) of the soap noodles produced,
emphasizing quality, sustainability, and adherence to international standards.
• Highlight the factory's commitment to contributing to Ethiopia's self-sufficiency in
soap production and regional economic collaboration.
• Branding:
• Create a strong and memorable brand identity for the soap noodles factory,
reflecting the company's values and commitment to excellence.
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• Develop a compelling brand story that resonates with both local and regional
audiences.
• Distribution Channels:
• Establish efficient distribution channels to ensure the widespread availability of
soap noodles in Mojo Town and neighboring countries.
• Forge partnerships with distributors, retailers, and online platforms to maximize
reach.
• Promotional Strategies:
• Implement targeted advertising campaigns on various media platforms, considering
the preferences of the local and regional audience.
• Utilize social media channels to create engagement, share product information, and
gather customer feedback.
• Offer promotions and discounts to incentivize initial product adoption.
• Collaborations and Partnerships:
• Actively seek collaborations with local soap manufacturers, cosmetic companies,
and industries that utilize soap noodles.
• Participate in industry events, trade shows, and business forums to establish
connections and partnerships.
• Sustainability Initiatives:
• Emphasize the factory's commitment to sustainability and environmental
responsibility in marketing materials.
• Highlight eco-friendly production processes and packaging.
• Customer Education:
• Develop informative content to educate consumers and businesses about the
benefits and uses of soap noodles.
• Conduct workshops and webinars to showcase the factory's production processes
and quality standards.
• Monitoring and Evaluation:
• Implement key performance indicators (KPIs) to measure the success of marketing
initiatives.
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4. Financial Analysis
When an organization receives a project, it’s necessary to find out how worth it will be for the
organization in terms of finance if the project is officially accepted. In order to analyze this, the
portfolio/project/program has to go through a Project Financial Analysis process to calculate how
much of a cash flow the organization receives throughout the project. Therefore, financial analysis
is analytical work required to identify the critical variables which are useful for likely to determine
the success or failure of an investment. Its concern is to determine, analyze and interpret all the
financial consequences of an investment that might be relevant to and significant for the
investment and financing decisions. Accordingly, the computation of total construction cost,
revenue, cash flow analysis, income statement, Net Present Value (NPV), and the payback period
is presented as follows;
The Facilities, Plant, and Beginning Inventories costs for establishing the soap noodle production
line amount to $1,282,835, equivalent to 71,979,871.85 Ethiopian Birr at the exchange rate of
56.11. This comprehensive investment covers critical components such as a Laundry Soap noodles
Production Line with a 3000kg/hr capacity, a steam boiler, machinery for oil decoloring, and
essential items like cables, heating insulating material, packing machines, and consumable
materials for installation. The cost also includes the setup of the factory, comprising a generator
with 280KV, a van, and office equipment, including computers and furniture.
Importantly, the detailed breakdown reflects considerations for logistical aspects, such as freight,
loading, unloading, and local transport costs, demonstrating a thorough approach to ensure a well-
equipped and operational facility. This investment lays the foundation for a modern and efficient
soap noodle production plant in Mojo Town, incorporating the necessary machinery and
infrastructure to meet the planned production capacity and deliver high-quality products.
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The projected equipment and initial investment requirements are detailed in the following table.
The total investment encompasses not only the cost of equipment but also includes expenses for a
transport vehicle and working capital requirements.
The working capital is calculated as 1% of the Facilities, Plant, and Beginning Inventories costs,
amounting to 91,054,537.89 ETB. Therefore, the working capital is determined as 0.01 multiplied
by 91,054,537.89, resulting in 910,545.38 ETB. This approach ensures a proportionate allocation
for working capital needs based on the overall investment in facilities, plant, and initial inventories.
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The pre-operating costs for the soap noodle production line amount to ETB 6,425,000 and
encompass establishment costs, lease fees, and other miscellaneous expenses. These expenses
cover crucial aspects such as design review, consultancy services, and construction supervision,
laying the foundation for a successful and well-planned project launch.
The total investment cost for the soap noodle production line includes an initial investment of
91,054,537.89 ETB, pre-operating costs amounting to 6,425,000 ETB, and working capital of
910,545.38 ETB. Combining these components, the overall total investment cost for the project is
calculated as 98,390,083.27 ETB. This comprehensive estimate covers the necessary expenditures
for establishing the facility, pre-operational activities, and working capital to support the project's
initial phases.
The financing strategy for this project involves a combination of owner's equity in kind and
external financing through a loan. The owner is committed to contributing equity in kind, utilizing
existing assets at the project location. Notably, the owner has already invested in constructing an
office with a built-up area of 120 sqm, incurring a cost of 5,400,000 ETB. Additionally, there are
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existing stores, one measuring 14m x35m x7m with a cost of 19,600,000 ETB, another measuring
20m x35m x10m with a cost of 19,200,000 ETB, and a new store which going to be constructed,
has size of 20m x35m x10m with an estimated cost of 21,000,000 ETB. The expenses for land
development and a transformer collectively amount to 10,000,000 ETB. Therefore, the owner's
equity contribution in kind is valued at 75,200,000 ETB.
To cover the remaining initial investment of 98,390,083.27 ETB, external financing in the form of
a loan will be sought. This dual approach ensures a substantial commitment from the owner,
demonstrated through the contribution of tangible assets, while also securing the necessary funds
to initiate and sustain the soap production plant through external financial sources. The
comprehensive financing structure aligns with the project's requirements, leveraging existing
assets and optimizing external resources to facilitate a successful and sustainable venture.
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4.3.1. Assumptions
In arriving at the financial projections, the following assumptions were made based on the
information available to us at the time of this study. For example, national economy is expected to
grow at a projected rate of 4.5% per annum through 2024, and the rate of inflation is estimated as
published by the National bank of Ethiopia and reported at 4% per annum. Based on these
assumptions, it is strongly believed that the projections would hold true with little or no variation
on the operations of the project, while it is assumed that the cost of the various factors of production
would hold from within the foreseeable future. Basis: 3 tones /hr. of laundry soap noodle
production.
MAJOR ASSUMPTIONS
1 Work hour per day 24
2 Number of work days per month 26
3 Capacity Utilization 80.0 % (or19.2hrs)
4 Inventory of Finished goods Negligible
5 Maintenance & Repairs (Land/Buildings) 2.5% pa on cost (straight line)
6 Maintenance Repairs (Plant & Machinery) 2.50% pa on cost (straight line)
7 Maintenance Repairs (Motor Vehicle) 2.50% pa on cost (straight line)
8 Maintenance Repairs (Office Equipment) 2.50% pa on cost (straight line
9 Depreciation (Plants & Machinery) 10.00% pa on cost (straight line)
10 Depreciation (Land & Buildings) 5.00% pa on cost (straight line)
11 Depreciation (Office Equipment) 20.00% pa on cost (straight line)
12 Depreciation (Motor Vehicles) 20.00% pa on cost (straight line)
13 Business Promoters 1.00% pa on Revenue
14 Pay roll Services 1.00% Pa on payroll
15 Company Income Tax 30.00% Pa
16 National Economic Growth Rate 4.5.00% Pa
17 Inflation 4.00% pa
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
The soap noodle production facility boasts an impressive capacity, operating at 3000 kilograms
per hour. With continuous operation 24 hours a day, for 26 days each month, the plant aims to
maximize productivity. Considering the expected capacity utilization rate of 80%, the facility is
strategically designed to meet the demands of the market efficiently. By calculating the annual
production capacity, accounting for the hours of operation, days per month, and targeted utilization
rate, the soap noodle production line is projected to yield a substantial output of 17,971.2 tons per
year.
This significant annual production capacity underscores the facility's capability to meet market
demands effectively, providing a consistent and substantial supply of soap noodles. The intricate
planning and operational considerations, including hours of operation, workdays, and capacity
utilization, are geared towards ensuring optimal production efficiency and positioning the soap
noodle production facility as a reliable contributor to the soap manufacturing industry.
The production of soap noodles requires several essential raw materials to ensure the quality and
effectiveness of the final product. Tallow, derived from animal fat, serves as a primary ingredient,
contributing to the soap's texture and cleansing properties. Caustic soda, with a purity range of
97%-99%, plays a crucial role in the saponification process, enabling the conversion of fats into
soap. Clean water is essential for dilution and consistency, ensuring a uniform and desirable soap
noodle texture. Sodium-chloride (NaCl), commonly known as table salt, may be used to enhance
the soap's hardness and stability. Additionally, glycerin, a valuable byproduct of the soap-making
process, adds moisturizing properties to the soap noodles, providing a more skin-friendly end
product.
The careful selection and combination of these raw materials are pivotal in achieving the desired
soap noodle characteristics, such as texture, cleansing ability, and moisturizing properties. The
synergy between tallow, caustic soda, water, salt, and glycerin contributes to the overall
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effectiveness and quality of the soap noodles, meeting consumer expectations and industry
standards.
To calculate the share of each raw material used to produce 1 ton of laundry soap noodles with a
TFM (Total Fatty Matter) of 60%. Here's the breakdown:
Tallow (Animal Fat):
➢ Assume 0.54 kg of caustic soda per kg of tallow.
➢ Tallow required = 1 ton / (1 + 0.64) ≈ 0.65 tons (650 kg).
➢ Percentage = (650 kg / 1000 kg) * 100% ≈ 65%.
Caustic Soda (NaOH 97%-99%):
➢ Assume 0.54 kg of caustic soda per kg of tallow.
➢ Caustic soda required = 1 ton / (1 + 0.54) ≈ 0.65 tons (650 kg).
➢ Percentage = (650 kg / 1000 kg) * 100% ≈ 65%.
Clean Water:
➢ Assume 40.5% of the tallow weight for water.
➢ Water required = 0.405* 650 kg ≈ 263.1 kg.
➢ Percentage = (263.1 kg / 1000 kg) * 100% ≈ 26.31%.
Sodium Chloride (NaCl):
➢ Assume 1.35% of the tallow weight for salt.
➢ Salt required = 0.0135 * 650 kg ≈ 8.77 kg.
➢ Percentage = (8.77 kg / 1000 kg) * 100% ≈ 0.877%.
Glycerin (Byproduct):
➢ Assume 8.2% of the tallow weight for Glycerin.
➢ Glycerin = 0.082 * 650 kg ≈ 53.2 kg.
➢ Percentage = (53.2 kg / 1000 kg) * 100% ≈ 5.32%.
Table8: Beginning Inventory Item
S/No Beginning Inventory Item Unit Quantity Unit Price per Kg Amount (ETB)
1 Tallow (Animal Fat) kg 650 35 22,750
2 Caustic soda: NaOH 97%-99%. kg 650 35.67 23,185.5
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The above table shows the beginning inventory needed to start the business.
The annual raw material requirement for producing 17,971.2 tons of soap noodles has been
meticulously calculated to ensure a smooth and uninterrupted production process. The primary
raw materials include Tallow (Animal Fat), Caustic soda (NaOH 97%-99%), Clean water, Sodium-
chloride (NaCl), Calcium carbonate and Glycerin (Byproduct). The quantities of each raw material
needed are derived from the soap noodle production specifications, taking into account the
expected production capacity. The total cost for these raw materials per year is estimated at
911,741,048.525 ETB, reflecting a comprehensive analysis of unit prices, quantities, and
associated costs. This detailed breakdown underscores the importance of strategic planning and
resource management to facilitate cost-effective and sustainable soap noodle production.
The calculated total cost for raw materials signifies a substantial investment in ensuring a
consistent and reliable supply chain for soap noodle production. It reflects a commitment to
quality, efficiency, and cost-effectiveness in the production process. This comprehensive approach
not only addresses the immediate raw material needs but also contributes to the overall financial
viability and success of the soap noodle manufacturing venture.
S/No Beginning Inventory Item Unit Quantity Unit Price per Kg Amount (ETB)
1 Tallow (Animal Fat) kg 11,681,280 35 408,844,800
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
The utilities cost for the soap noodle production facility encompasses various essential services,
including power, water, telecom, and fuel. A prudent approach has been taken to calculate the
utilities cost, which is set at 1% of the Total Investment Cost. With the Total Investment Cost
amounting to 98,390,083.27 ETB, the utilities cost is meticulously derived by multiplying this
percentage with the Total Investment Cost, resulting in a sum of 983,9008.327 ETB. This strategic
calculation ensures that a reasonable and proportionate allocation is made for utilities, supporting
the operational requirements of the soap noodle production facility. The inclusion of these costs in
the financial planning underscores the importance of a comprehensive approach to budgeting,
considering both direct production costs and the supporting services vital for smooth operations.
The breakdown of the manpower requirements for soap noodle production provides a
comprehensive overview of the essential roles and responsibilities within the manufacturing
process. The positions, spanning across Production, Quality Control, and Administration
departments, include crucial roles such as Production/Factory Manager, Quality Control Manager,
Soap Boilers, Shift Leaders, Factory Workers, Machine Operators, Quality Control Supervisor,
Technicians (Elect. & Mech.), Admin/General Manager, Account Officers, Security Officers, and
Drivers. This well-structured distribution of workforce ensures a systematic and organized
approach to managing the different aspects of soap noodle production.
The total of 39 skilled and specialized staff members with varying expertise and responsibilities
signifies a well-rounded team. Each staff member's basic unit salary and the corresponding total
salary highlight the financial commitment to securing a qualified and efficient workforce. This
strategic manpower allocation aims to not only meet the production needs but also emphasizes the
importance of quality control, administration, and overall management in achieving a seamless
soap noodle production process.
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
The annual production and sales forecast for the laundry soap & soap noodles manufacturing
venture are integral components of the business strategy. With a production capacity of 17,971.2
tons per year, the soap noodles production line is well-equipped to meet market demand. This
significant annual output positions the venture to capitalize on market opportunities and establish
itself as a reliable supplier in the soap manufacturing industry. Additionally, the strategic pricing
decision to sell the soap noodles at 185 Birr per kilogram reflects a careful consideration of
market dynamics, ensuring a competitive yet profitable positioning in the industry. The pricing
strategy aligns with the quality and value proposition of the soap noodles, creating a favorable
balance between market demand and sustainable revenue generation.
The soap noodles' annual production and sales plan embody a forward-looking approach that seeks
to achieve both scale and profitability. The sizable production volume, coupled with a strategic
pricing model, positions the venture for success in a competitive market. As the soap noodles find
their way into various soap manufacturing processes, the annual production and sales figures are
not only indicative of the venture's manufacturing capabilities but also serve as a key driver for
revenue generation and market penetration. The alignment of production capacity and pricing
underscores the commitment to meeting market needs while ensuring the financial sustainability
and growth of the soap noodles manufacturing business.
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Over the initial six years of the project, the operating costs for the soap production plant exhibit a consistent upward trend. Material
costs, comprising essential raw materials, are anticipated to rise from ETB 911,741,049 in Year 1 to $1,109,272,393 in Year 6. Utilities
costs, encompassing power and essential services, are projected to incrementally increase from ETB 9,839,008 in Year 1 to ETB
11,970,658 in Year 6. Labor costs, covering workforce wages, are expected to grow steadily from ETB 9,504,000 in Year 1 to ETB
11,563,069 in Year 6. Overhead costs, including miscellaneous expenses, display a continuous ascent from ETB 37,841,149 in Year 1
to ETB 46,039,544 in Year 6. The cumulative total production cost is estimated to climb from ETB 968,925,206 in Year 1 to ETB
1,178,845,664 in Year 6, reflecting the combined impact of material, utilities, labor, and overhead costs during this phase of the project.
Y1 Y2 Y3 Y4 Y5 Y6
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
Over the projected six-year period, the revenue forecast for soap noodles production demonstrates a
consistent upward trajectory. In Year 1, the revenue is anticipated to reach ETB 3,755,980,800, with
subsequent years showcasing growth to ETB 4,680,635,431 in Year 6. The individual revenue projections
for soap noodles production encompass the following annual figures: ETB 3,755,980,800 (Year 1), ETB
3,924,999,936 (Year 2), ETB 4,101,624,933 (Year 3), ETB 4,286,198,055 (Year 4), ETB 4,479,076,968
(Year 5), and ETB 4,680,635,431 (Year 6). The grand total revenue for the soap noodles production
segment over the six-year period sums up to ETB 25,228,516,122.95, showcasing a robust and sustained
revenue stream over the initial phase of the project.
1 2 3 4 5 6
Revenue 3,755,980,800 3,924,999,936 4,101,624,933 4,286,198,055 4,479,076,968 4,680,635,431
Less: Income Tax (30%) 833,164,976 872,243,614 913,138,927 955,934,989 1,000,719,754 1,047,585,228
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
The projected income statement for the soap noodle manufacturing project reflects a positive financial
outlook over the six-year period. The revenue forecasts indicate a steady increase, reaching
approximately 4.6 billion ETB in the sixth year. Despite the escalation in raw material costs and operating
expenses, the project demonstrates resilience, maintaining profitability throughout the projection period.
The net profit consistently grows, starting at 1.94 billion ETB in the first year and reaching 2.44 billion
ETB in the sixth year. This sustained profitability, coupled with prudent cost management, underscores
the project's potential for generating substantial returns on investment. Investors and stakeholders can
take confidence in the project's ability to generate consistent profits, positioning it as a promising venture
in the soap manufacturing industry.
The project's cash flow analysis underscores its financial viability and robustness over the six-year period.
The cumulative cash balance steadily grows from the initial investment, reaching 1.07billion ETB by the
sixth year. This positive trend indicates the project's ability to generate surplus funds, providing a strong
foundation for sustained operations and potential expansion. Despite the substantial cash outflows
associated with raw material costs, operating expenses, and income tax payments, the consistent positive
net cash flow showcases the project's resilience and financial health. Investors and stakeholders can find
confidence in the project's ability to not only cover its costs but also generate surplus cash, reinforcing
its potential as a lucrative venture in the soap manufacturing industry. However, careful consideration of
the cash flow dynamics, market conditions, and risk factors is essential for making informed decisions
about the project's future.
0 Y1 Y2 Y3 Y4 Y5 Y6
Cash inflows
Net profit/ Revenue 1,944,051,610 2,035,235,099 2,130,657,495 2,230,514,975 2,335,012,759 2,444,365,531
Total cash inflows 1,944,051,610 2,035,235,099 2,130,657,495 2,230,514,975 2,335,012,759 2,444,365,531
Investment cost on 98,390,083
fixed asset
Production cost 968,925,206 1,007,682,214 1,047,989,503 1,089,909,083 1,133,505,446 1,178,845,664
Income Tax 833,164,976 872,243,614 913,138,927 955,934,989 1,000,719,754 1,047,585,228
Total Cash out flow 98,390,083 1,802,090,182 1,879,925,828 1,961,128,429 2,045,844,072 2,134,225,200 2,226,430,892
Net Cash flow 141,961,428 155,309,271 169,529,066 184,670,903 200,787,559 217,934,639
Cum. Cash Balance 141,961,428 297,270,699 466,799,765 651,470,668 852,258,227 1,070,192,866
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The Net Present Value (NPV) is a financial metric used to assess the profitability of an investment
by calculating the present value of its expected future cash flows, discounted at a specific rate. In
this case, the NPV analysis was conducted for each year of the soap noodle manufacturing project.
The positive NPV values for each year indicate that the project is expected to generate positive
returns, with the total NPV over the 6-year period amounting to 1,984,268,887.89. A positive NPV
is generally considered favorable, suggesting that the project's expected cash inflows, when
discounted, exceed the initial investment and operating costs. This positive NPV reinforces the
financial feasibility of the soap noodle manufacturing project, indicating the potential for value
creation over the specified period.
5. Economic Impact
The establishment of a laundry soap and soap noodles production line, coupled with a milling
machine for processing materials like dolomite and marble with a production capacity of 10 tons
per hour, promises substantial economic benefits for the region. Firstly, the project is anticipated
to create numerous 250 job opportunities, spanning various skill sets and sectors. This includes
employment in soap manufacturing, machine operation, maintenance, logistics, and administrative
roles, thereby contributing to the reduction of unemployment and fostering economic growth in
the local community.
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The economic benefit extends beyond job creation to the overall improvement of public health and
hygiene standards. The production line's output of laundry soap and soap noodles will meet the
rising demand for affordable and quality hygiene products, positively impacting the well-being of
the local population. The economic analysis will consider the potential increase in consumer
spending on these essential products, thus contributing to the overall economic vibrancy of Modjo
Town.
Furthermore, by establishing a milling machine for dolomite, marble, and other materials, the
project aims to reduce dependency on imported raw materials. This not only ensures a stable and
cost-effective supply chain but also conserves foreign exchange, benefiting the national economy.
The economic analysis will delve into the comparative cost advantages of locally sourcing and
processing these materials, taking into account potential savings, reduced transportation costs, and
the overall impact on the cost structure of the soap production line.
The project's economic benefits are expected to extend to local suppliers and service providers.
The demand for ancillary services, such as transportation, equipment maintenance, and utilities, is
likely to increase, creating a ripple effect that stimulates economic activity in the surrounding area.
Additionally, as the project contributes to local economic development, it is expected to attract
further investment and foster a conducive business environment.
In summary, the establishment of a laundry soap and soap noodles production line, along with a
milling machine for processing raw materials locally, holds the promise of substantial economic
benefits. From job creation to improved public health, reduced reliance on imports, and the
stimulation of local businesses, this integrated project is poised to become a catalyst for economic
growth and development in the region.
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A Feasibility study to Establish Soap Noodles Manufacturing Factory
The comprehensive financial analysis of the soap noodle manufacturing project demonstrates its
promising economic viability. The positive Net Present Value (NPV) of 1,984,268,887.89 over
the 6-year period indicates that the project is expected to generate returns that exceed the initial
investment and operating costs, emphasizing its potential for profitability. The robust cash inflows,
coupled with careful consideration of factors such as raw material costs, operating expenses, and
income tax, contribute to a positive financial outlook for the soap noodle manufacturing venture.in
general,
➢ Soap is among Fast Moving Consumer Goods (FMCGs) and this would make the business
to experience a very high turnover in sales.
➢ It could be ascertained that from the net first year annual profit of 1,944,051,610 ETB
realized that the project is feasible, viable and profitable. Also, the project will be able to
pay off its cost of investment.
➢ Also, financial institutions would be interested in funding such an investment while money
invested would be recouped at the end of five financial years with all the loan terms and
interest paid up.
6.2. Recommendations:
Based on the financial analysis, it is recommended to proceed with the establishment of the soap
noodle manufacturing factory in Mojo Town, Ethiopia. The positive NPV suggests that the project
is financially sound and has the potential to provide substantial returns on investment. However,
it is crucial to monitor and adapt to market dynamics, raw material price fluctuations, and other
external factors that may impact the project's financial performance. Additionally, a thorough risk
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assessment and mitigation strategy should be in place to address potential challenges and
uncertainties.
Considering the positive financial indicators, there is an opportunity to focus on sustainability and
future growth. Implementing eco-friendly practices, ensuring ethical sourcing of raw materials,
and exploring avenues for product diversification could enhance the long-term success of the soap
noodle manufacturing venture. Collaborating with local and regional partners, staying abreast of
industry trends, and continuously optimizing operational efficiency will contribute to the project's
resilience and its positive impact on the local economy.
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