290.

PROFILE ON CITRUS JUICE EXTRACTOR

 290 - 2

TABLE OF CONTENTS

PAGE

I. SUMMARY 290 - 3

II. PRODUCT DESCRIPTION AND APPLICATION 290 - 3

III. MARKET STUDY AND PLANT CAPACITY 290 - 4

A. MARKET STUDY 290 - 4

B. PLANT CAPACITY AND PRODUCTION

PROGRAMME 290 - 5
IV. MATERIALS AND INPUTS 290 - 5

A. MATERIALS 290 - 5

B. UTILITIES 290 - 6

V. TECHNOLOGY AND ENGINEERING 290 - 6

A. TECHNOLOGY 290 - 6

B. ENGINEERING 290 - 6

VI. MANPOWER AND TRAINING REQUIREMENT 290 - 7

A. MANPOWER REQUIREMENT 290 - 7

B. TRAINING REQUIREMENT 290 - 7

VII. FINANCIAL ANALYSIS 290 - 9

A. INVESTMENT 290 - 9

B. PRODUCTION COSTS 290 - 10

C. FINANCIAL EVALUATION 290 - 10

D. ECONOMIC BENEFITS 290 - 11

 290 - 3
I. SUMMARY

This profile envisages the establishment of a plant for the production of 30,000 units of citrus
juice extractors per year.

The present demand for citrus juice extractor is estimated at 220,040 per annum. The demand
is expected to grow to 248,637 Nos and 380,425 Nos by 1999 and 2006 respectively.

The total investment requirement is estimated at Birr 3403.47 thousand out of which Birr
968.32 thousand is for machinery and equipment.

The plant will create employment opportunities for 18 persons.

The project is financially viable with an internal rate of return (IRR) of 11.63% and a
net present value (NPV) of is Birr 197.22 thousand at 10.5% discount factory

II. PRODUCT DESCRIPTION AND APPLICATION

Electric juice extractor is a high speed motor driven home appliance used for extraction of juice
from citrus fruits like oranges lemons etc. It consists of a high speed electric motor which drives
the needled cutter disc which on revolving, crushes the contents fed by virtue of sharp needles.
The contents are pushed from the top on speedily revolving motor.

The major parts (components) of the citrus juice extractor are:-

- moulded main body including motor

- needled cutter disc
- plastimesh
- waste container
- juice outlet and
- inner plastic plate.

Citrus juice extractor can be made in two models i.e. 1/2 litre and 1 litre capacity. Being
electrically operated system, the citrus juice extractor is a home appliance for which the utmost
care has to be exercised to provide safe operating system to the customers. Electrical juice
extractor has advantages over traditional type extractors as:

- extraction of juice to the extent possible

- ease in operation
- in-built filler system
- two-directional motor which creates remaining action for better juicing
of varying the pulp content in the juice
- access for removing the pulp strainer, juice reservoir etc. for convenient cleaning

Citrus juice extractors as a household appliances are widely used both by urban population and
rural working class.
 290 - 4
III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Present Demand and Supply

Since juice preses are not currently produced in the country, import is the only source of supply.
However, due to aggregation problem the historical supply figure could not be identified in the
External Trade Statistics of the customs office. For this reason the following assumptions are
used to determine the present demand.

- By considering the price of the product and its use, only urban households are
assumed to be the target market.
- Of the total urban households only 10% are assumed to buy the product every
year.
- For households who have acquired the product the need for replacement is
considered. Accordingly, it is assumed that 1% of the preceeding year’s new
demand to be required for replacement in the following year.

According to the urban population forecast of CSO, 1992, the total urban population of Ethiopia
during 1995 and 1996 was 8,681,400 and 9,228,150 respectively. In terms of households this is
equivalent to 1,929,200 and 2,050,700 respectively in 1995 and 1996. By applying the above
assumptions the demand for juice press in 1995 and 1996 is estimated to be 192,920 and
205,070 units, respectively. Demand for replacement, assuming to exist 1% of the new demand,
is calculated at about 1900 units. Therefore, total current effective demand for juice press will
be 206,970 Nos.

2. Demand Projection

To determine the future demand, the urban population forecast of CSO, 1992, was utilized. By
applying the same assumption used to determine the present demand, the forecasted demand up
to the year 2006 is presented in Table 3.1.
Table 3.1
PROJECTED DEMAND FOR JUICE PRESS

Total Projected * New Demand Replacement Total Demand

Year household ('000) (Nos.) Demand (Nos)
1996 2050.7 205070 1900 206970
1997 2179.9 217990 2050 220040
1998 2317.3 231730 2180 233910
1999 2463.2 246320 2317 248637
2000 2611.9 261190 2463 263653
2001 2776.5 277650 2612 280262
2002 2951.4 295140 2776 297916
2003 3137.3 313730 2951 316681
2004 3335.0 333500 3137 336637
2005 3545.1 354510 3335 357845
2006 3768.8 376880 3545 380425

* Urban population forecast of CSO, 1992, is converted into households by dividing the average
number of persons in a family i.e. 4.5
 290 - 5
As shown in Table 3.1, the demand for juice press will grow from 263653 Nos. in the year 2000
to about 380,425 Nos. in the year 2006.

3. Pricing and Distribution

The average retial price of juice press is Birr 225 per pc. Allowing 15% for distributors and
retailers profit an ex-factory price of Birr 195 is proposed for this project. The product will be
marketed through the existing household good enterprises.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

Based on the outcome of the marekt study for citrus juice extractors, the annual full production
of the envisaged plant on a single shift a day and 300 days a year basis is 30,000 units. The
working days are set by deducting sundays and public holidays. Production can be doubled or
tripled by introducing two or three shift operation.

2. Production Programme

The production is scheduled in such a way that the plant starts operation at 75% of the total
installed capacity. This is planned by taking into consideration the need for developing
production skill, managerial skill, market penetration etc. Thus the plant will operate at 85% of
its rated capacity during the second year and full production will be achieved during the third
year and onwards. The production programme is set by deducting Sundays and public holidays
in a year and assuming that repair and maintenance works will be carried out during off-
production hours.

IV MATERIAL AND INPUTS

A. MATERIAL

Yearly material requirement at full capacity operation of the plant and the corresponding cost
estimates are shown in Table 4.1. All the raw materials will be imported.
Table 4.1
RAW MATERIAL REQUIREMENT

Raw Material Unit Cost ('000 Birr)

FC LC Total
1 Plastic granules 25 ton 281.393 112.557 393.95
2 Electric motor 30,000 pcs. 2,383.56 953.424 3,336.984
3 Plastic parts and other 30,000 sets 595.89 238.356 834.246
miscellaneous items (off switches,
indicators etc.)
4 Consumable and packing materials ls 397.26 158.904 556.164
Total 3,658,103 1,463,241 5,121,344
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B. UTILITIES

The major utilities required for the operation of the plant are electricity and water. The total
installed electric power is 40 kw. Annual consumption of electric power under a full capacity
operation of the plant in a single shift a day and 300 days a year will be 96,000 kwh. Total cost
of electricity will amount to Birr 24,605 per annum. yearly water consumption is 300 cubic
metres, the total cost of which is estimated at Birr 336 per annum.

V TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Process Description

The process of manufacture and assembly of citrus juice extractors essentially involves the
following operations:

- the major items like body and other plastic parts etc. are moulded, in house, as
per design
- motors and other parts are soured from outside
- all the items and components are assembled as per design requirement
- finally the appliance is tested and packed.

2. Source of Technology

The technical data and information are compiled from a document provided by the National
Research Development Corporation of India.

B. ENGINEERING

1. Machinery and Equipment

The list of plant machinery and equipment required for the manufacture and assembly of citrus
juice extractor is given in Table 5.1. The total cost of machinery and equipment is estimated at
Birr 968.321 thousand out of which Birr 827.625 thousand will be in foreign currency.
Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT

No. Description Qty

1 Injection moulding machine 1
2 Cooling system equipment 1set
3 Scrap grinder 1 set
4 Mould and dies 1 set
5 Hand grinder, bench grinder drilling 1 set
machine etc. 1 set
6 Testing equipment
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2. Building and civil Works

The entire land requirement of the plant including provision for open spaces is 400 sq. metres.
The value of land as per Region 14 lease rate is Birr 104,000. Total built-up area is estimated to
be 250 sq. metres. The total cost of building at the rate of Birr 1,400 per sq. metre is estimated
at Birr 350,000.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

Total requirement for both direct and indirect manpower is 18 person. Manpower required for a
single shift operation of the plant and the corresponding estimated labour cost is shown in Table
6.1.

B. TRAINING REQUIREMENT

Nine technical personnels (manufacturing & maintenance) need on-the-job training on the
manufacturing process and on how to use the plant machinery and equipment. The training
should be given by skilled technician of the suppliers of machinery and equipment during the
factory start - up and commissioning period. Total cost of training is estimated at Birr 20,000.

Table 6.1
MANPOWER REQUIREMENT

Manpower No. Monthly Salary Annual

(Birr) Salary(Birr)
1 Manager 1 1,200 14,400
2 Engineer/supervisor 1 1,000 12,000
3 Operators 3 900 10,800
4 Labourers 6 900 10,800
5 Accountant/clerk 1 600 7,200
6 Store keeper 1 300 3,600
7 Sales clerk 1 300 3,600
8 Driver 1 200 2,400
9 Watchman 3 360 4,320
Sub total 18 5,760 69,120
Employee's Benefit (25% of Basic 1,440 17,280
Salary
Total 7,200 86,400
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VII. FINANCIAL ANALYSIS

The financial analysis of citrus juice extractor project is based on the data provided in the
previous chapters and the following assumptions.

Construction period 2 years

Source of capital 40% equity
60% loan
Tax holidays 3 years
Bank interest rate 10.5%
Discount Cash flow 10.5%
Value of land Based on lease rate of Region 14
Repair & maintenance 2% of fixed investment
Spare part 2% " " "

Depreciation
Machinery & equipment 10%
Vehicle 20%
Office furniture 10%
Pre-production costs 20%
Buildings 5%

Working Capital Minimum days of coverage

Accounts receivable 30 days
Cash in hand 30 "
Raw material
Foreign 120 "
Local 45 "
Work in progress 11 "
Finished products 15 "
Accounts payable 30 "

A. INVESTMENT

The total investment cost of the project including working capital (See Table 7.l) is estimated at
Birr 3,403.47 thousand. Owners are assumed to contribute 40% of the finance in the form of
equity while the remaining 60% is expected to be financed by long term bank loan.
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Table 7.l
TOTAL INITIAL INVESTMENT
IN '000 BIRR

No. Items L.C F.C Total %

1 Land 34.33 - 34.33 1.0
2 Building & civil works 350.00 - 350.00 10.3
3 Office equipment 75 - 75 2.2
4 Vehicles 300 - 300 8.8
5 Plant machinery & equipment 140.696 827.625 968.32 28.4
Total fixed investment cost 900.026 827.625 1,727.65 50.7
6 Pre-production capital expenditure* 141.748 - 141.748 4.2
7 Working capital at full capacity 1534.072 1,534.07 45.1
Total 2,575.846 827.625 3,403.47 100

The major component of the investment are plant machinery and equipment, building and civil
works, pre production expenses accounting for 28.4%, 10.3%, and 4.2%, respectively. The
foreign component of the project accounts for 24.3% of the total investment.

B. PRODUCTION COSTS

The total production cost at full capacity operation is estimated at Birr 5601.521 thousand (see
Table 7.2). Raw materials and utilities account for 91.87 % and repair and maintenance for
0.6 % of the production costs.
Table 7.2
PRODUCTION COST
'OOO Birr

Items Year 3 4 5
Raw Materials 3,840.975 4353.105 5,121.3
Utilities 25.00 25.00 25.00
Energy - - -
Labour, direct 27.00 27.00 27.00
Repair, maintenance 36.00 36.00 36.00
Spares - - -
Factory overhead 15.00 15.00 15.00
Factory costs 3,943.975 4,456.105 5224.30
Administrative overhead 79.4 79.4 79.4
Depreciation 201.493 201.493 202.493
Financial costs 114.176 110.608 96.336

* Pre-production capital expenditure include all pre-investment expenditure consultancy

fee during investment, pre-production marketing commissioning and start up, wages
and salaries of project management team, interest during construction etc.

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C. FINANCIAL EVALUATION
1. Profitability

According to the projected income statement (see Table 7.A.1) the project will generate profit
beginning from the first year of operation. Important ratios such as the percentage of net profit
to total sales, net profit to equity (Return on equity) and net profit and interest on total
investment (return on total investment) are all positive and gradually rising. The income
statement and other profitability indicators show that the project is viable.

2. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.

BEP = Fixed Cost = 344.807 = x 100 = 344.807 x 100

Sales - Variable cost 5850-5721.3 728.7

The project will break even at 47.3 % of capacity utilization.

3. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period.

4. Simple Rate of Return

Simple rate of return is the ratio of net profit after tax plus interest to the total capital invest for
one year at full capacity operation.

SRR = 248.471 + 96.336 = 344.807

3,403.47 3,403.47

The simple rate of return at full capacity is 10.1%.

5. Internal Rate of Return and Net Present Value

Based on cash flow statement (see Table 7.A.2) the calculated IRR of the project is 11.63% and
the net present value at 10.5% discount is Birr 197.22 thousand.

D. ECONOMIC BENEFITS

The project can create employment opportunities for 18 people. In addition to increasing the
supply of goods to the domestic market, the project will generate Birr 1,812.177 thousand in
terms of tax revenue. Moreover the regional government can collect employment and income
tax and sales tax from the project thereby increasing its tax base. The project will have a
backward linage with plastic producing sub-sector and forward linkage with hotels, juice houses
and household units.
APPENDIX 7.A
FINANCIAL ANALYSIS SUPPORTING
TABLES