Final - Maya Farm Feasibility Study - Revised Final

Feasibility Study for Milk Processing (Pasteurization
& Packaging) Facility integrated with an Animal

Feed Processing Plant Project
By: Maya Dairy Farm

Owner: Fatuma Dawed Rashid
Submitted to: Development Bank of Ethiopia

Harar Branch
April 2024
Maya City, Aweday Sub-City
Feasibility Study for Milk Processing (Pasteurization & Packaging) Facility integrated Aweday,
with an Animal Feed Processing Plant Project 2024
Contents
Executive Summary............................................................................. 5
Market Prospect & Technical Feasibility................................................... 5
Technical consideration ........................................................................ 5
Financing ........................................................................................... 6
Socio-Economic Benefits ...................................................................... 6
Recommendation ................................................................................ 7
1. Background .................................................................................... 8
1.1. Facilities & Location ...................................................................... 8
1.2. Owner’s Profile ............................................................................. 9
1.3. Mission Statement ........................................................................ 9
2. Project Strategies ............................................................................ 9
3. Project Rationale ............................................................................. 9
4. Market Study ................................................................................ 10
4.1. Background ............................................................................... 10
4.2. Market Opportunity ..................................................................... 10
4.3. Competition ............................................................................... 10
4.4. Present supply and demand ......................................................... 11
4.5. Import ...................................................................................... 11
Table: Imports of Milk & Milk products in Ethiopia .................................. 11
4.6. Trends and growth potential ......................................................... 12
Owner: Fatuma Dawed Rashid 1|Page

4.7. Projected demand ....................................................................... 12
Table: Projected Demand Gap ............................................................. 13
4.8. Pricing ...................................................................................... 14
4.9. Marketing strategy ...................................................................... 14
5. SWOT Analysis .............................................................................. 15
Strength .......................................................................................... 15
Weakness ........................................................................................ 15
Opportunities ................................................................................... 15
Threat ............................................................................................. 16
6. Organization, Management and Manpower ........................................ 16
61. Organization ............................................................................... 16
Fig: Organizational set up of the project ............................................... 16
7. Technical study ............................................................................. 16
Table: Capacity_milk prcessing & packaging plant ................................. 17
Table: production by source of raw milk ............................................... 17
Table: Animal Feed production at full capacity ....................................... 17
Table: proportion of feed produce ........................................................ 17
8. Financial Considerations ................................................................. 18
Table: Table: Existing Asset Value ....................................................... 18
Table: Sales ..................................................................................... 18

Table: Milk Sales Forecast .................................................................. 18
Table: income from Feed sales ............................................................ 18
Table: Feed Sales forecast .................................................................. 19
Table: Total sales forecast .................................................................. 19
Table: Costs of sales ......................................................................... 19
Table: Costs of sales forecast.............................................................. 20
Table: List of Machinery and Equipment ............................................... 20
Table: Other fixed asset ..................................................................... 20
Table: Summary of Capital Expenditure................................................ 20
Table: Depreciation ........................................................................... 21
Table: Repair and maintenance costs ................................................... 21
Table: Utilities Expense ...................................................................... 21
Table: Personnel plan ........................................................................ 22
Table: Operating Expenses ................................................................. 22
Table: Working Capital Determination .................................................. 23
Table: Existing + Planned Investment for the whole project .................... 23
Table: Sources of Finance .................................................................. 23
Table: Loan Repayment Schedule ........................................................ 24
Table: Profit and Loss Statement ......................................................... 24
Table: Cash Flow Statement ............................................................... 25

Table: Balance Sheet Statement ......................................................... 26
9. Environmental Impact ................................................................... 27
9.1. Beneficial Impacts ...................................................................... 28
9.1.1. Economic Benefit ................................................................ 29
9.1.2. Employment ....................................................................... 30
9.1.3. Investment ........................................................................ 30
9.2. Social Benefits ...................................................................... 31
9.2.1. Local Livelihood Improvement .............................................. 31
9.2.2. Gender Equity and Employment Opportunities ........................ 31
9.3. Adverse Impacts ........................................................................ 31
9.4. Conclusion ................................................................................. 31

Executive Summary
This Feasibility Study is prepared with the objective of developing a milk

processing and packing facility, integrated with an animal feed processing
plant, for Maya Dairy Farm, an already existing and well performing
Enterprise, owned by Mrs. Fatuma Dawed Rashid, who is an exceptional
entrepreneur, with demonstrated entrepreneurial skills and long years of
experience in Dairy Farming practice.
The proposed project is planned to be implemented on a one hectare land,

already secured by the promoter for the existing Dairy Farm at Aweday Sub-
City of Maya City Administration, Oromia.
Market Prospect & Technical Feasibility
The project will establish itself in the market with a strategy of providing the
highest quality Pasteurized Packed Milk in Ethiopia.
Our market study suggests that the product is highly demanded not only in
the areas surrounding the project area, but also in most areas of the country
as a whole.
Technical consideration
Currently, operating with an 80 Cows Dairy Farm, the existing milk

production capacity of Maya Dairy Farm amounts to 240,000 liters per
annum.

However, by implementing this project, the Enterprise planes to collect more

milk from local suppliers and enhance capacity to the production of 960,000
liters of value added (pasteurized and packed) milk products per annum.
Therefore, as part of the Farm’s expansion plan, we are now planning to

build a Milk Processing (Pasteurization & Packaging) Facility, integrated with
an animal feed processing plant.
Operating one shift (8 hours) per day, the project’s milk processing facility
will have an annual production capacity of producing 960,000.00 liters of
packed and pasteurized milk while the feed processing plant will produce
600,000.00 kgs of high quality animal feed per annum.
Financing
Operating with 80 lactating cows, the existing asset value of Maya Dairy
Farm amounts to ETB: 15,500,000.00.
Accordingly, our financial analysis indicates that the Enterprise will require
an additional investment of Birr: 13,803,137 in order to finance the startup
requirements of the proposed PASTURIZED Milk and Animal Feed
Manufacturing Projects. Out of this amount ETB: 11,671,337.00 is allocated
for capital goods purchase and is expected to be financed by the lease
financing policy of the Development Bank of Ethiopia.
Socio-Economic Benefits
The project is socially desirable and economically very useful. This can be
justified from various angles. These include:

Import substitution: On average, Ethiopia is currently importing 15 million

dollar worth milk per year. By substituting externally produced similar
products, the project helps the country to put the (hard-earned) money to
work within the boundaries.
Employment: The Company will have a total of 25 employees at various
levels of the project’s activity. It is expected that more than 15 temporary
employment opportunities shall be created by the project during subsequent
phases.
Nutrition: Provision of balanced diet for the people through availing

nutritious milk product.
Internal revenue: Generating income for the Government in terms of tax

revenue and payroll tax and etc…
Recommendation
Considering the technical/financial viability of the project and its contribution

to the country’s and the regional development, the requested medium term
loan of ETB 11,671,337.00 is highly recommended.

1. Background
Milk is a traditional constituent of the Ethiopian diet, especially in lowland
areas where the livelihood is based on cattle production. Liquid milk handled
traditionally has a very limited shelf-life. In modern dairy production exotic
cross breeds or pure breed cattle are used and the milk is processed to have
longer shelf-life.
The purpose of this business plan is to explore the potential for Milk
Processing (Pasteurization & Packaging) Facility integrated with an Animal
Feed Processing Plant Project in Aweday Sub-City of Maya City
Administration, Oromia Region.
Operating only one shift per day, the capacity of our milk processing facility
shall be 480,000 liters per annum, which can be expanded in future.
Likewise, the animal feed processing plant shall have 600,000 kg/annum
capacity.
1.1. Facilities & Location
The Project is proposed to be established on a one hectare land located at

the existing Dairy Farm, at Aweday Sub-City of Maya City Administration,
Oromia Region.
The Company will have its own feed processing facility that supplies the
Farm.
We have a comparative advantage by operating in Maya City, as we can

have easy access to raw materials and inputs, to supply both the milk
processing and animal feed manufacturing facilities of the project.

1.2. Owner’s Profile

Fatuma Dawed Rashid is the owner of the envisaged project. She is an
experienced entrepreneur, who has got very good entrepreneurial skills and
long years of experience in Dairy Farming practices.
1.3. Mission Statement
The Dairy Farm’s mission is to become the recognized leader in its targeted
market for sales of processed milk and milk products.
2. Project Strategies
The Strategies that will be employed to meet the stated objectives will be
a) Employing local labor force intensively

b) Arrange for a hygienic milk and feed processing facilities before the
commencement of operation
c) Establish a well-organized management system.
3. Project Rationale
With the existence of a wide and reliable market, the project area is a
convenient place for the proposed milk and feed processing facilities.
The current encouraging policies coupled with current good governance at all
level in the Administration, realization of the unsatisfied demand, and the
job opportunities generated by constructing such project are some of the
main reasons for the initiation of the project.

4. Market Study
4.1. Background
Dairying is practiced almost all over Ethiopia involving a vast number of
small or medium or large-sized, subsistence or market-oriented farms. Of
the total milk produced in the country only 5% is marketed as processed
fluid milk due to the underdevelopment of the infrastructure in rural areas.
The volume and price of milk and other dairy product sales is increasing. For
instance, coupled with inflation, the price of raw milk per litre has increased
dramatically at producer level within the last two decades.
4.2. Market Opportunity

In other developing markets, PASTURIZED milk has taken off as a substitute
for milk.
In Ethiopia where cold-chain infrastructure is weak, PASTURIZED MILK

product has a significant advantage over fresh milk products due to the lack
of need for refrigeration, addressing the issue of spoilage.
Additionally, consumers are already importing expensive PASTURIZED MILK

and milk powdered products; domestic production could disrupt the current
market. These factors create a unique market opportunity for our
PASTURIZED MILK products.
4.3. Competition
Of the total milk produced in the country, only 5% is marketed as processed
fluid milk due to the underdevelopment of the industry.
Owner: Fatuma Dawed Rashid 10 | P a g e

There is currently only a few producers of PASTURIZED MILK in the Country.

Therefore no strong completion is foreseen by the project.
4.4. Present supply and demand

There is inadequate supply of milk and milk products to urban consumers.
The bulk of the increased demand for milk is in urban areas, particularly for
processed, i.e. pasteurized milk and milk-products.
There is also unstable supply of milk and milk products to urban consumers
due to inefficient delivery system and inadequate market outlet for milk and
milk products from rural areas. The contribution of imports of milk and milk-
products to total consumption of milk has been rising over the past several
years, due to lack of quality milk production.
4.5. Import
In general, an increased volume of imports can be observed. According to
FAOSTAT, the value of imports of milk and dairy products is considerable,
particularly for dry milk, cheese and curd and fresh milk.
Despite the increases in production, Ethiopia remains a net importer of dairy

products and its milk market is essentially domestic. As can be seen from
the table below, between 2016 and 2019 Ethiopia has spent nearly 500
million Birr year on average for imported dairy products.
Table: Imports of Milk & Milk products in Ethiopia
Year Value (Birr)

2013 105,398,975.49
2014 152,792,962.44

2015 256,037,980.39
2016 352,801,349.55
2017 480,000,000.00
2018 495,372,359.20
2019 591,826,291.25
Sources: FAOSTAT
4.6. Trends and growth potential
With continuous investments from the private sector and appropriate policy
interventions from the Government, the dairy sub-sector could be taking-off
in the coming years.
The demand for dairy products has increased in the last decades and it is
projected to increase significantly through 2020 and beyond because of
urbanization, population growth and increased incomes.
Enhancing private investment in processing of PASTURIZED MILK and

powdered milk, as well as feed production and market infrastructure
continue to be named as priorities in the government’s second growth and
Transformation Plan 2015-2020.
Therefore the establishment of this PASTURIZED Milk Manufacturing Project

in Maya City is the right business at the right time.
4.7. Projected demand
In Ethiopia, the dairy industry has been increasing output and value over the
last 15 years. During that period, the total volume of cow milk produced has
increased gradually, from less than 1 billion litres in 2005 to approximately 4

billion litres in the year 2019, showing an average growth rate of 4.1%, as
shown in the table below.
The average per capita milk consumption has now reached 37 litres per year
which is well below the World average of 105 litres per year, and the African
average of 60 litres per year
The demand for milk depends on many factors including consumer

preference, consumer’s income, population size, price of the product, price
of substitutes and other factors.
In general, increasing population growth (as in the following Table) and

rising real income are expected to expand the demand for milk and milk
products. Therefore, increase in population growth and consumer income in
the future is expected to further increase the consumption of milk products.
Table: Projected Demand Gap
Year 2024 2025

Population based on current growth rate (2.61%) 127,488,684.32 130,816,138.98
Milk prod., in million liters based on current growth 5,160.23 5,371.80
rate (4.1%)
Milk available for cons.(68% of produce( in million 3,508.96 3,652.82
liters
Demand for milk in million liters based on FAO 7,968.04 8,176.01
recommendation (62.5kg)
Gap b/n projected milk available for cons and 4,459.09 4,523.19
demand based on FAO's recc., in million liters

The annual demand in Ethiopia for dairy products is increasing. This is as a

result of the current high population and future growth trends, a growing
number of urban centers and urbanized lifestyles, and finally steadies
economic growth rates registered by the country and visible increased
income levels of the general population. In Ethiopia, the demand for milk
products is increasing while supply is lagging.
As a result, imports have surged in recent years, which consist primarily of

processed milk, including cheese and milk powder.
4.8. Pricing
The current market price of PASTURIZED milk in Addis Ababa and major
cities of the country is 50 Birr/piece for 500 ml package.
Thus, a factory gate price of 42 birr per pack for 500 ml milk products is
adopted for our project.
Distribution of the products could be undertaken through small retail outlets

as well as large wholesalers and catering establishments.
The product can be distributed by establishing own distributing stores in

towns or the products will be delivered directly to the customers to avoid
unnecessary price increment which will affect the purchasing power of
customers.
4.9. Marketing strategy

Our marketing strategy will include the use of targeted print media
advertising and direct selling to wholesalers.

We have positioned ourselves as a differentiated provider of the highest

quality scarce products. The primary goal of our marketing efforts will be to
communicate this to existing and potential customers.
5. SWOT Analysis
The SWOT analysis provides us with an opportunity to examine the internal
strengths and weaknesses that the project must address. It also allows us to
examine the opportunities presented to our company as well as potential
threats.
Strength
 Owner’s experience in successfully managing a similar Dairy Farm
 Knowledgeable and friendly management team
 State-of-the art Manufacturing Technology
 High quality raw materials
 Working on the right business idea at the right time
 Well researched business plan and marketing plan
Weakness
 Cost factor associated with sophistication of equipment to be installed
Opportunities
 Expanding market for milk products in all directions of the Country
 Scarcity of the product in the local market as well as in most cities of
the Country
 Very HUGE Government incentives for the sector
 Availability of adequate work force in the market to supply our project

 Plenty of room to expand & grow in reasonably short time
Threat
 Fluctuation in cost of raw materials
 Dependency on foreign industries to find machineries required
6. Organization, Management and Manpower

61. Organization
Having assisted by three division heads with her experience and educational
background, the general manager will lead the project smoothly. The
organizational set up of the project will be as follows:
Fig: Organizational set up of the project
General Manager
Adminstyartive
Production and Techinical Marketing and Sales
and Finance
Department Department
Department
Techinical Production Finance Market and

HRM section Sales section
section section section Research section
7. Technical study
The project has two main divisions: Milk processing Division and Animal
Feed Production Division.
Operating one shift (8 hours) per day, the project’s milk processing facility
will have an annual production capacity of producing 960,000.00 liters of

packed and pasteurized milk while the feed processing plant will produce
600,000.00 kgs of high quality animal feed per annum.
Table: Capacity_milk prcessing & packaging plant

Description prod/hour prod/day prod/year Packages per
(litres) (litres) (litres) year
Milk 200.00 1,600.00 480,000.00 960,000.00
own milk processed 100.00 800.00 240,000.00 480,000.00
suppliers' milk processed 50.00 800.00 240,000.00 480,000.00
Table: production by source of raw milk

per day per year
own milk 800.00 240,000.00 50.00%
from suppliers 800.00 240,000.00 50.00%
1,600.00 480,000.00 100.00%
Table: Animal Feed production at full capacity

kg/hour kg/day @ 8 kg/year
hours
Animal Feed 250.00 2,000.00 600,000.00
Table: proportion of feed produce

kg/day kg/year %
feed_own farm consumption 800.00 240,000.00 40.00%
@ 10kg/day/cow*80xcow
feed_for market 1,200.00 360,000.00 60.00%
Total 2,000.00 600,000.00

8. Financial Considerations
Table: Table: Existing Asset Value
Description Value, Birr
Farm Building 7,500,000.00
Lactating Cows 8,000,000.00
Cash & inventory 400,000.00
Total 15,500,000.00
Table: Sales
sales packed milk
Product Selling Price birr/package Packages per sales per year
year
own milk processed 42.00 480,000.00 20,160,000.00
suppliers' milk processed 42.00 480,000.00 20,160,000.00
total milk sold 960,000.00 40,320,000.00
Table: Milk Sales Forecast

Year 1 Year 2 Year 3
Capacity utilization rate (%) 50.00% 75.00% 100.00%
Sales 20,160,000.00 30,240,000.00 40,320,000.00
Table: income from Feed sales

feed for outside sales per 360,000.00
year in kg
average price of feed/kg 33.60
sales 12,096,000.00

Table: Feed Sales forecast

Sales 6,048,000.00 9,072,000.00 12,096,000.00
Table: Total sales forecast

sales milk 20,160,000.00 30,240,000.00 40,320,000.00
sales feed 6,048,000.00 9,072,000.00 12,096,000.00
total sales 26,208,000.00 39,312,000.00 52,416,000.00
Table: Costs of sales

Description cost/year
Feed for own consumption @ 40% of
milk income from own cows 8,064,000.00
Milk from outside suppliers @ 70

birr/liters 16,800,000.00
Medicine and other inputs @ 10% of milk

income 2,016,000.00
Raw materials for feed processing @50%

of income from feed sales 6,048,000.00
Packaging costs @ 5% of milk income

2,016,000
TOTAL Cost of sales 34,944,000.00

Table: Costs of sales forecast

17,472,000.00 26,208,000.00 34,944,000.00
Table: List of Machinery and Equipment

No. Items Total Value, Birr
200L Milk production Line (Pasteurizer and Packaging
1 Machine) 3,951,684.00
2 Milking Machines and Feed Chopper machines 862,923.00
3 Complete Cow feed production kit 250Kg/h 1,556,730

Total Machinery & Equipment 6,371,337.00
Table: Other fixed asset

Items Total Costs
Office Furniture, PCs and others 500,000
Generator 800,000
Tractor 4,000,000
Grand Total 5,300,000
Table: Summary of Capital Expenditure

Description Value (Birr)
Plant machineries 6,371,337.00
Animal heads 8,000,000.00
Farm Building 7,500,000.00

Other Capital Goods 5,300,000.00
Total Fixed Investment 27,171,337.00
Table: Depreciation
Original value
Description Service life Annual Dep. (Birr)
(Birr)
Plant machineries 10.00 6,371,337.00 637,133.70
Animal heads 5.00 8,000,000.00 1,600,000.00
Farm Building 10.00 7,500,000.00 750,000.00
Other Capital Goods 10.00 5,300,000.00 530,000.00
Total Fixed Investment 27,171,337.00 3,517,133.70
Table: Repair and maintenance costs

Description Percentage Total Repair & maintenance
investment costs
Machineries & equipment 3.00% 6,371,337.00 191,140.11
Animal heads 3.00% 8,000,000.00 240,000.00
Farm Building 3.00% 7,500,000.00 225,000.00
Other Capital Goods 3.00% 5,300,000.00 159,000.00
Total 27,171,337.00 815,140.11
Table: Utilities Expense

Description Annual Consumption Unit Cost
360,000
Electricity LS
240,000
Water LS
72,000
others
672,000
Total Annual Cost

Table: Personnel plan

Position Quantity Salary Total Salary
General Manager 1 20,000.00 240,000.00
Finance Manager 1 12,000.00 144,000.00
Marketing & sales manager 1 12,000.00 144,000.00
Human Resources Manager 1 20,000.00 240,000.00
Production team leader 1 12,000.00 144,000.00
Head, quality control 1 12,000.00 144,000.00
Machine Operators 2 7,000.00 168,000.00
Mechanic 1 6,000.00 72,000.00
Electrician 1 6,000.00 72,000.00
Sales Team 2 5,000.00 120,000.00
Securities 2 4,000.00 96,000.00
Environmental Specialist 1 12,000.00 144,000.00
Guarders 2 3,000.00 72,000.00
Laborers 8 3,000.00 288,000.00
Total 25 1,848,000.00
Table: Operating Expenses

Total cost/year(birr)
Description 1st year 2nd year 3rd year
Utilities 672,000.00 739,200.00 813,120.00
Maintenance and Repair 470,140.11 470,140.11 470,140.11
Uniforms & other supplies 120,000.00 132,000.00 145,200.00
Manpower Expenditures( 1,848,000.00 2,032,800.00 2,236,080.00
Direct labor)
Administration Costs* 240,000.00 264,000.00 290,400.00
Total Operating Costs 3,350,140.11 3,638,140.11 3,954,940.11
Note: Operating expenses increase by 5% every year. Administrative cost includes social costs and
materials and services used by administrative staff etc.

Table: Working Capital Determination

Direct costs Days of coverage Required
working capital
Costs of sales 30 1,456,000.00
Sub total 1,456,000.00
Overhead working capital
costs
Wage and Salaries 60 308,000.00
Utilities 60 112,000.00
Administration Costs* 60 40,000.00
Miscellaneous (5% 95,800.00
Sub total 555,800.00
Total required working 2,011,800.00
capital
Table: Existing + Planned Investment for the

whole project
Description total existing planned
Machineries & equipment 6,371,337 0.00 6,371,337
Animal heads 8,000,000 8,000,000.00 0
Farm Building 7,500,000 7,500,000.00 0
Other Capital Goods 5,300,000 0.00 5,300,000
Total 27,171,337 15,500,000.00 11,671,337
Pre-operating Expenses 120,000 0.00 120,000
Working capital requirement 2,411,800 400,000.00 2,011,800
Grand Total 29,703,137 15,900,000.00 13,803,137
Table: Sources of Finance

Owner’s equity Bank Loan
Description Total Costs Amount % Amount %
Machineries & 6,371,337.00 0.00 0% 6,371,337.00 100%

equipment
Animal heads 8,000,000.00 8,000,000.00 100% 0.00 0%
Farm Building 7,500,000.00 7,500,000.00 100% 0.00 0%
Other Capital Goods 5,300,000.00 0.00 0% 5,300,000.00
Total 27,171,337.00 15,500,000.00 57% 11,671,337.00 43%
Pre-operating Expenses 120,000.00 120,000.00 100% 0.00
Working capital
2,411,800.00 2,411,800.00 100% 0%
requirement 0.00
Grand Total 29,703,137.00 18,031,800.00 61% 11,671,337.00 39%
Table: Loan Repayment Schedule

Loan Repayment Interest Outstanding
(12.5%) Balance
0 11,671,337
1 2,334,267 1,342,204 9,337,070
2 2,334,267 1,073,763 7,002,802
3 2,334,267 805,322 4,668,535
4 2,334,267 536,882 2,334,267
5 2,334,267 268,441 0
Table: Profit and Loss Statement

Project Years
Description
1 2 3 4 5
26,208,000 39,312,000 52,416,000 57,657,600 63,423,360
Sales
17,472,000 26,208,000 34,944,000 38,438,400 42,282,240
Direct cost of sales
Gross Profit 8,736,000 13,104,000 17,472,000 19,219,200 21,141,120
Gross argin(%) 33.33% 33.33% 33.33% 33.33% 33.33%
3,695,140 3,983,140 4,299,940 4,600,936 4,600,936

Operational expense
Profit before tax and
5,040,860 9,120,860 13,172,060 14,618,264 16,540,184
interest
3,517,134 3,517,134 3,517,134 3,517,134 3,517,134
Depreciation

EBITDA (Earning
before tax, interest 8,557,994 12,637,994 16,689,194 18,135,398 20,057,318
and depreciation)
1,342,204 1,073,763 805,322 536,882 268,441
Interest expense
0 0 0 4,834,530 5,601,156
Profit tax (35%)
3,698,656 8,047,097 12,366,738 9,246,853 10,670,587
Net profit
Table: Cash Flow Statement

Production Year
Cash in flow 0 1 2 3 4 5
Owners' equity 18,031,800
Existing Bank Loan 0
Additional Bank Loan 11,671,337
Net Profit 0 3,698,656 8,047,097 12,366,738 9,246,853 10,670,587
Depreciation 3,517,134 3,517,134 3,517,134 3,517,134 3,517,134
Total Cash in flow 29,703,137 7,215,790 11,564,231 15,883,871 12,763,987 14,187,721
Cash out flow
Replacement 0 0 0 0
loan repayment 2,334,267 2,334,267 2,334,267 2,334,267 2,334,267
Capital Expenditure 27,171,337 - - -
- -
Working capital 2,011,800 - - - - -
Existing Working
400,000
capital
Pre-operating
120,000
expenses
Total Cash out
29,703,137 2,334,267 2,334,267 2,334,267 2,334,267 2,334,267
flow
Net Cash Flow
0 4,881,522 9,229,963 13,549,604 10,429,719 11,853,454
Cash balance
7,293,322 16,523,286 30,072,890 40,502,609 52,356,063

Table: Balance Sheet Statement

Description Investment Production Year
ASSETS 0 1 2 3 4 5
Current Assets
Cash 2,411,800 7,293,322 16,523,286 30,072,890 40,502,609 52,356,063
Other Current
0 0 0 0 0
Assets
Total Current
2,411,800 7,293,322 16,523,286 30,072,890 40,502,609 52,356,063
Assets
Fixed Asset
Plant machineries 6,371,337.00 5,734,203 5,097,070 4,459,936 3,822,802 3,185,669
Animal heads 8,000,000.00 6,400,000 4,800,000 3,200,000 1,600,000 0

Farm Building 7,500,000.00 6,750,000 6,000,000 5,250,000 4,500,000 3,750,000
Other Capital Goods 5,300,000.00 4,770,000 4,240,000 3,710,000 3,180,000 2,650,000
Total Fixed Asset 27,171,337 23,654,203 20,137,070 16,619,936 13,102,802 9,585,669
Total Asset 29,583,137 30,947,526 36,660,355 46,692,825 53,605,411 61,941,731
LIABILITIES
Short term liability - - - - - -
Long term liability
11,671,337 9,337,070 7,002,802 4,668,535 2,334,267 0
(Bank Loan)
Sub Total 11,671,337 9,337,070 7,002,802 4,668,535 2,334,267 0
CAPITAL
Owner's Equity 18,031,800 18,031,800 18,031,800 18,031,800 18,031,800 18,031,800
Retained Earnings -120,000 3,578,656 11,625,753 23,992,491 33,239,344 43,909,931
Earnings 3,698,656 8,047,097 12,366,738 9,246,853 10,670,587
Sub Total 17,911,800 21,610,456 29,657,553 42,024,291 51,271,144 61,941,731
Total Liability &
29,583,137 30,947,526 36,660,355 46,692,825 53,605,411 61,941,731
Capital
Net Worth 17,911,800 21,610,456 29,657,553 42,024,291 51,271,144 61,941,731

9. Environmental Impact
The basic purpose of the Environmental and Social Impact Assessment

(ESIA) study is to identify, predict and analyze the magnitude of
environmental and social impacts and propose enhancement and/or
mitigation measures for significant environmental and social effects that are
likely to arise from the various activities of the project during construction
and operation phases.
It is also to ensure that the proposed project is environmentally sound and

socially acceptable, and hence contributes to the development of
environmental and social functions of local communities. It is also expected
to provide a means whereby the overall environmental performance and
social benefits of the project can be enhanced through defining positive
social and economic benefits local communities can derive from the
proposed project implementation and designing subsequent operation, and
preparation of plans and recommendations regarding measures that will
minimize adverse impacts and enhance beneficial impacts.
The methodology adopted for conducting the environmental impact

assessment study of the project follows the conventional methods that meet
the requirements of the Federal and Regional Environmental Protection
Organs’ Environmental Impact Assessment Guidelines.
The Government is constantly looking out to identify constraints to the

development of the Agriculture sector and advise on the best course of
action to facilitate investment in the sector. The private sector involvement
in investment activities has contributed to the above objectives in the
following ways:

 Generation and saving of foreign exchange
 Creating employment
 Provision of new opportunities for professionals and experts to develop

technical skills and careers in modern industry,
 Contribution to the government's objective of widening the tax base
 Contribution to social stability through provision of jobs, incomes,

public services and amenities to villages surrounding modern
industries
 Contribution to the development of other commercial activities in areas

adjacent to the industries (construction, building blocks, restaurant,
etc.).
 Development of local expertise through on-the-job training of

personnel,
 Contribution to absorbing rural-urban migration.
 The investment will have multiplier effect.
9.1. Beneficial Impacts

Establishment of the Project will have a number of positive impacts both at
the regional and local community levels. Some of the major positive impacts
include technological capacity building, economic development and creation
of employment opportunities. These potential positive impacts, their origin
and characteristics are presented below.

9.1.1. Economic Benefit

The implementation of the project has a range of economic benefits. It
provides consumer goods for domestic markets, generates employment
directly and indirectly, promotes skill development and disseminates new
technologies.
One of the main aims of the project is to provide additional volume of

consumer good for the community. Hence, the socio-economic impact of the
proposed project is mainly positive. The project will solve the problem of
shortage of the supply of milk products in the Eastern Hararghe area.
In addition, as a result of extended volume of production the project will

generate enormous profit in the future as clearly indicated on the project
document and hence the Region and the Federal Government shall benefit
through various forms of tax revenue.
The government not only benefits from tax revenue collected from the
project, but also volume of tax revenue also increases as a result of more
number of workers employed. Moreover, there is ultimate potential of
mobilizing saving from increased number of employees.
Beside the financial and economic development contributions, the new

project will be an opportunity for the introduction of new technologies to the
Country. Since the project uses a more technology intensive mode of
production, it is an opportunity for local experts to benefit from transfer of
new technological knowledge and skill.
Further, the enhanced waste water treating techniques can be used as a

lesson by other similar industries that release waste water from their

factories. Generally, impacts on the socio-economic conditions are mainly

positive, including a rise in employment opportunities to the host
communities and indirect stimulation of local development.
9.1.2. Employment
The direct and indirect employment opportunities to be created for citizens
are other economic benefits of the project beyond those economic outputs
discussed above. The project will be an opportunity for reducing
unemployment in the Wereda to a large extent.
An indirect employment is also expected as the project start to operate with

its full capacity. As the volume of production increases the number of local
dealers and service-providers increases and this is also an indispensable
indirect employment opportunity.
9.1.3. Investment
Establishment of the proposed project requires high level of investment,
particularly for purchasing of farm machineries, erection of the project
production units and installing of utility systems.
This will have a significant inducing power for establishment of other similar
projects as backward and forward linkages. It will also play great roll in
strengthening the investment capacity, most importantly at local level.

9.2. Social Benefits

9.2.1. Local Livelihood Improvement
The employment opportunity to be created by the project will have social
benefit beside the expected economic benefit. The employment income from
the project will have a substantial role for social livelihood improvement in
the project area. This local income generation related social benefit will have
short term as well as long term cumulative benefits.
9.2.2. Gender Equity and Employment

Opportunities
Women efficiency in carrying out some of the production processes (e.g.
product packaging, process control and sorting of product defects) make
them preferable for the Project. This gender specific opportunity will address
the historical disproportionate burden of unemployment on woman.
9.3. Adverse Impacts

It is at the utmost priority for the planned investment to ensure safety and
security for workers of the project, improve/ enhance labor conditions and
occupational health. The Company strictly complies with the country's Labor
law and regulations currently in force as regards occupational health and
safety of workers.
9.4. Conclusion
To summarize this, the proposed project can be said to have some
associated environmental aspects that might cause adverse impacts.
However most of these environmental effects can be reduced to acceptable
levels with implementation of pollution prevention and control techniques.

Therefore, it can be concluded that there will be no severe or irreversible

adverse impacts that will prevent the implementation of the proposed
project.
To have minimal and acceptable residual environmental impacts, it is

recommended that a full EIA Study should be conducted on areas
surrounding the project site. In general, the Consultant perceived that there
are no insurmountable environmental difficulties for the implementation of
the proposed Agri-Business development Project.

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Feasibility Study for Milk Processing (Pasteurization

& Packaging) Facility integrated with an Animal

By: Maya Dairy Farm

Submitted to: Development Bank of Ethiopia

Market Prospect & Technical Feasibility................................................... 5

Technical consideration ........................................................................ 5

Socio-Economic Benefits ...................................................................... 6

1.1. Facilities & Location ...................................................................... 8

1.2. Owner’s Profile ............................................................................. 9

1.3. Mission Statement ........................................................................ 9

2. Project Strategies ............................................................................ 9

3. Project Rationale ............................................................................. 9

4. Market Study ................................................................................ 10

4.1. Background ............................................................................... 10

4.2. Market Opportunity ..................................................................... 10

4.3. Competition ............................................................................... 10

4.4. Present supply and demand ......................................................... 11

4.5. Import ...................................................................................... 11

Table: Imports of Milk & Milk products in Ethiopia .................................. 11

4.6. Trends and growth potential ......................................................... 12

Owner: Fatuma Dawed Rashid 1|Page

4.7. Projected demand ....................................................................... 12

Table: Projected Demand Gap ............................................................. 13

4.8. Pricing ...................................................................................... 14

4.9. Marketing strategy ...................................................................... 14

5. SWOT Analysis .............................................................................. 15

6. Organization, Management and Manpower ........................................ 16

61. Organization ............................................................................... 16

Fig: Organizational set up of the project ............................................... 16

7. Technical study ............................................................................. 16

Table: Capacity_milk prcessing & packaging plant ................................. 17

Table: production by source of raw milk ............................................... 17

Table: Animal Feed production at full capacity ....................................... 17

Table: proportion of feed produce ........................................................ 17

8. Financial Considerations ................................................................. 18

Table: Table: Existing Asset Value ....................................................... 18

Table: Sales ..................................................................................... 18

Owner: Fatuma Dawed Rashid 2|Page

Table: Milk Sales Forecast .................................................................. 18

Table: income from Feed sales ............................................................ 18

Table: Feed Sales forecast .................................................................. 19

Table: Total sales forecast .................................................................. 19

Table: Costs of sales ......................................................................... 19

Table: Costs of sales forecast.............................................................. 20

Table: List of Machinery and Equipment ............................................... 20

Table: Other fixed asset ..................................................................... 20

Table: Summary of Capital Expenditure................................................ 20

Table: Depreciation ........................................................................... 21

Table: Repair and maintenance costs ................................................... 21

Table: Utilities Expense ...................................................................... 21

Table: Personnel plan ........................................................................ 22

Table: Operating Expenses ................................................................. 22

Table: Working Capital Determination .................................................. 23

Table: Existing + Planned Investment for the whole project .................... 23

Table: Sources of Finance .................................................................. 23

Table: Loan Repayment Schedule ........................................................ 24

Table: Profit and Loss Statement ......................................................... 24

Table: Cash Flow Statement ............................................................... 25

Owner: Fatuma Dawed Rashid 3|Page

Table: Balance Sheet Statement ......................................................... 26

9. Environmental Impact ................................................................... 27

9.1. Beneficial Impacts ...................................................................... 28

9.1.1. Economic Benefit ................................................................ 29