Investment Office ANRS

Project Profile on the Establishment

of Orange & Other Citrus Fruits
Plantation

Development Studies Associates (DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary ........................................................................................... 1

2. Product Description and Application .............................................................. 1
3. Market Study, Plant Capacity and Production Program .............................. 1
3.1 Market Study................................................................................................................... 1
3.1.1 Present Demand and Supply ................................................................................... 1
3.1.2 Projected Demand ................................................................................................... 2
3.1.3 Pricing and Distribution .......................................................................................... 3
3.2 Plant Capacity ................................................................................................................. 3
3.3 Production Program ........................................................................................................ 3
4. Raw Materials and Utilities .............................................................................. 3
4.1 Availability and Source of Raw Materials ...................................................................... 3
4.2 Annual Requirement and Cost of Raw Materials and Utilities....................................... 3
5. Location and Site ............................................................................................... 4
6. Technology and Engineering ............................................................................ 4
6.1 Production Process .......................................................................................................... 4
6.2 Machinery and Equipment .............................................................................................. 4
6.3 Civil Engineering Cost .................................................................................................... 5
7. Human Resource and Training Requirement ................................................ 5
7.1 Human Resource ............................................................................................................. 5
7.2 Training Requirement ..................................................................................................... 6
8. Financial Analysis .............................................................................................. 6
8.1 Underlying Assumption .................................................................................................. 6
8.2 Investment ....................................................................................................................... 7
8.3 Production Costs ............................................................................................................. 8
8.4 Financial Evaluation ....................................................................................................... 8
9. Economic and Social Benefit and Justification ............................................... 9
ANNEXES............................................................................................................... 11
 1. Executive Summary
This project envisages the production of 6000 quintal citrus fruits per annum. The total
investment requirement of the project including the working capital is estimated at about Birr
764 thousand; of which Birr 100,000 is for machinery and equipments and Birr 274 is pre
production cost while Birr 80 thousand is the cost of the working capital. Based on the cash flow
statement, the calculated internal rate of return (IRR) and simple rate of return (SRR) of the
project are 45.6 % and 67.2 %, respectively. The net present value (NPV) at 18 % discounting
rate is about Birr 1192 thousand. The plant is expected to create employment opportunities for
about 36 persons.

2. Product Description and Application

Citrus fruits can be useful both as home-produced sources of very important nutrients, and as a
valuable cash crop. Well-established trees grow satisfactorily in favorable environments even
when given little care. However, in most environments young trees die if neglected; and mature
trees grow and produce well only when cultivated carefully. With proper management the trees
grow and produce fruit indefinitely. Therefore, they should be treated as a lifetime investment
deserving constant care.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

At present banana is being produced by private peasant and some commercial holdings in many
suitable areas in the country. In this connection, the Agricultural Sample Survey of CSA (July,
2007-Vol I) report that in Ethiopia there are about 561,790 private peasants cultivating citrus on
3298.2 hectares of land. These farmers produced about 526,663 quintals of citrus in 1999 E.C.
The average yield, therefore, was 160 quintal per hectare (90 quintals for lemons and 180
quintals for orange). Such average production is very low and can be increased to at least to 600
quintals per hectare if cultivated in a standard manner.

1
At the same time there is a potential of high consumption of citrus fruits, particularly orange,
provided that the fruit is supplied to the market at affordable prices. According to CSA, Annual
Abstract (2008), the number of population in July 2007 has reached 77.1 million in the country
of which 12.7 million resides in the urban places while the remaining 64.4 million dwells in the
rural part of the country. If we assume that at least 25 % percent of the urban and 1% of the rural
residents can afford to consume 0.5 Kg of orange per head per week if it is sold at an affordable
price, the annual consumption of the fruit will amounts to 992,940 quintal (248,235 quintal for
Amhara region). This creates a demand gap of 527,109 quintals of which the share of Amhara
region is estimated to be 25 % (or 131,777 quintals). This excludes the use of orange for making
marmalade, jam and jelly.

3.1.2 Projected Demand

The future demand for orange is promising due to two main factors. First, an increase in
population in general and urbanization in particular is expected to amplify the domestic
consumption of the output. At the same time, an increase in income inevitably improves the per
capita consumption of orange in the future. Consequently, with a conservative growth rate of 3%
per annum, the future demand for orange is forecasted as shown in Table 3.1 below.
TABLE 3.1
DEMAND PROJECTION FOR ORANGE
IN (QUINTALS)

Year E.C At National Level At ANRS Level

1999 992940 248235
2000 1042587 260647
2001 1094716 273679
2002 1149452 287363
2003 1206925 301731
2004 1267271 316818
2005 1330635 332659
2006 1397166 349292
2007 1467025 366756
2008 1540376 385094
2009 1617395 404349
Table 3.1 shows that there is substantial and growing demand for orange in the coming years. At
the same time, it suggests the relevance of establishing an orange plantation plant so as to meet
the future demand.

2
 3.1.3 Pricing and Distribution

Based on the market research result and the cost of the envisaged plantation, the selling price of a
quintal of orange is set to be Birr 200. In distributing the output the envisaged plant shall make
use of the available sales network.

3.2 Plant Capacity

Thus, given the expected demand for orange as presented earlier, and the planned technology,
the envisaged plantation plans to produce 6,000 quintal of orange per annum on 10 hectares of
land.

3.3 Production Program

The production during the first three years is 0 % of the plantation capacity. In the fourth year,
there will be production at 75 % of the plantation capacity. Starting from the fifth year, 100 % of
capacity utilization is assumed. The capacity build up is established by considering the time
required for maturity the tree.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

In the production of orange the main inputs are fertilizer, chemicals for killing insects, water as
well as semi-skilled and unskilled labor. While fertilizer and chemicals can be purchased from
domestic suppliers operating in the region, the firm shall make use of water pump equipments to
pump water from the nearby river or other source.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

Raw material for requirement for a full capacity single shift operation of the plant and the
corresponding cost estimates are given in Table 4.1.

3
 TABLE 4.1
RAW MATERIALS REQUIREMENT

Total Cost
Material and Input Quantity L.C. F.C.
Fertilizer (Urea) 7,500 kg 22,500
Chemicals 625 kg 6,250
Total Material Cost 28,750
Utility
Electricity 20,000kwh 11,000
Furnace Oil 8,000 lit 56,000
Water 1000m3 2,650
Total Utility Cost 69,650

According to the above table the annual cost of input and utility is estimated to be Birr 98,400.

5. Location and Site

For its good environment to produce orange, Shewa-Robit is an appropriate choice for the
establishment of citrus fruit plantation in the Amhara region.

6. Technology and Engineering

6.1 Production Process

The main stages of producing orange are preparing and producing seedlings, planting the
seedlings on the plantation, watering, seeding and in general nurturing the stands of orange trees,
harvesting and packing the orange for distribution. The cultivation process of the orange tree
involves the following: keeping the soil clean; applying fertilizers; pruning the plants; preventing
the plants from falling; looking after the fruit; and protecting the plants from diseases and insects

6.2 Machinery and Equipment

Basically, the planting and harvesting of orange do not require much machinery and equipment.
Tractor is used while preparing the land for the first planting period and therefore, the envisaged
plantation shall use hired tractor while preparing the land. The plant however, needs to acquire

4
10 medium capacity water pumps and the associated equipments for irrigation purpose. In
addition various hand tools are also demanded. The cost of the machinery and equipment is
estimated to be Birr 100,000. The water pumps and equipments can be purchased from local
suppliers.

6.3 Civil Engineering Cost

The envisaged orange plantation requires 10 hectares of land only. And this can be obtained by
renting land from the local government at a rate of Birr 48 per hectare per year. This rate is the
average rent for rural land of North Shewa. Except a small house for guards and for storage of
raw materials, it does not require any office. This is estimated to cost Birr 50,000.

7. Human Resource and Training Requirement

7.1 Human Resource

Details of the manpower requirement of the plant is shown in Table 7.1

TABLE 7.1
MANPOWER REQUIREMENT

No. Monthly Total Annual

Position Required Salary Salary
Manager/Agronomist 1 3000 36000
Personnel Officer 1 2000 24000
Accountant/Casher 1 1200 14400
Store Keeper 1 600 7200
Supervisor 2 750 18000
Driver 1 600 7200
Laborers 25 300 90000
Guards 4 300 14400
Benefit (20%) 42,240
Total 36 253,440

The total annual wages and salary, including 20 % benefits, amount to Birr 253,440.

5
 7.2 Training Requirement

On job training of personnel shall be conducted with the aim of production technology
machinery maintenance and trouble shooting.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Orange Plantation is based on the data provided in the preceding
chapters and the following assumptions.

A. Construction and Finance

Land Preparation Period 6 months

Source of Finance 40 % Equity and 60 % Loan
Tax Holidays 2 Years
Bank Interest Rate 12 %
Discount for Cash Flow 18 %
Based on Land Rent Rate of
Value of Land ANRS
Spare Parts, Repair & Maintenance 3 % of the Fixed Investment

B. Depreciation

Building 5%
Machinery and Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-Production (Amortization) 20%

6
 C. Working Capital (Minimum Days of Coverage)

Spare Parts In Stock and Maintenance 30 Days

Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 764
thousand as shown in Table 8.1 below. The owner shall contribute 40 % of the finance in the
form of equity while the remaining 60 % is to be financed by bank loan.

TABLE 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
0 0
Building And Civil Works
50,000 50,000
Office Equipment
10,000 10,000
Vehicles
250,000 250,000
Plant Machinery & Equipment
100,000 0 100,000
Total Fixed Investment Cost
410,000 0 410,000
Pre Production Capital
Expenditure* 273,940 0 273,940
Total Initial Investment
683,940 0 683,940
Working Capital at Full Capacity
79,722 0 79,722
Total 763,662 0 763,662
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project amounts zero.

7
 8.3 Production Costs
The total production cost at full capacity operation is estimated at Birr 537 thousand (See Table
8.2). Raw materials and utilities account for 18.3 %.
TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 28,750
2. Foreign Raw Materials 0
Total Production Cost at full Capacity
Items Cost
1. Raw Materials 28,750
2. Utilities 69,650
3. Wages and Salaries 253,440
4. Spares and Maintenance 12,300
Factory Costs 364,140
5. Depreciation 118,288
6. Financial Costs
54,984
Total Production Cost 537,412

8.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the fourth year after plantation (the first year of production) and increases on
wards. The income statement and other profitability indicators also show that the project is
viable.
II. Breakeven Analysis
The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 23.7 % of capacity utilization

8
 III. Payback Period
Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in fith years
after plantation.

IV. Simple Rate of Return

The project’s simple rate of return (SRR) is given by the formula:
SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.
The SRR would be 67.2 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 45.6 % and the net present value (NPV) at 18 % discount is Birr 1192 thousands.

VI. Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general, the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows:

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 430 thousand
per year and Birr 4.3 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

9
 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 1.8 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 36 professionals as well as support
stuffs. Consequently the project creates income of Birr 253 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

10
ANNEXES

11
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 0% 60% 85% 100%

1. Total Inventory 0.00 0.00 0.00 28567.33 40470.38 47612.21

Raw Materials in Stock- Total 0.00 0.00 0.00 1881.82 2665.91 3136.36

Raw Material-Local 0.00 0.00 0.00 1881.82 2665.91 3136.36

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 0.00 315.77 447.34 526.29

Spare Parts in Stock and Maintenance 0.00 0.00 0.00 805.09 1140.55 1341.82

Work in Progress 0.00 0.00 0.00 7894.28 11183.56 13157.13

Finished Products 0.00 0.00 0.00 15788.55 22367.12 26314.25

2. Accounts Receivable 0.00 0.00 0.00 78545.45 111272.73 130909.09

3. Cash in Hand 0.00 0.00 0.00 21147.71 29959.25 35246.18

CURRENT ASSETS 0.00 0.00 0.00 126378.67 179036.45 210631.12

4. Current Liabilities 0.00 0.00 0.00 78545.45 111272.73 130909.09

Accounts Payable 0.00 0.00 0.00 78545.45 111272.73 130909.09

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 0.00 47833.22 67763.73 79722.03

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 47833.22 19930.51 11958.30

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 47612.21 47612.21 47612.21 47612.21 47612.21 47612.21

Raw Materials in Stock-Total 3136.36 3136.36 3136.36 3136.36 3136.36 3136.36

Raw Material-Local 3136.36 3136.36 3136.36 3136.36 3136.36 3136.36

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 526.29 526.29 526.29 526.29 526.29 526.29

Spare Parts in Stock and Maintenance 1341.82 1341.82 1341.82 1341.82 1341.82 1341.82

Work in Progress 13157.13 13157.13 13157.13 13157.13 13157.13 13157.13

Finished Products 26314.25 26314.25 26314.25 26314.25 26314.25 26314.25

2. Accounts Receivable 130909.09 130909.09 130909.09 130909.09 130909.09 130909.09

3. Cash in Hand 35246.18 35246.18 35246.18 35246.18 35246.18 35246.18

CURRENT ASSETS 210631.12 210631.12 210631.12 210631.12 210631.12 210631.12

4. Current Liabilities 130909.09 130909.09 130909.09 130909.09 130909.09 130909.09

Accounts Payable 130909.09 130909.09 130909.09 130909.09 130909.09 130909.09

TOTAL NET WORKING CAPITAL REQUIRMENTS 79722.03 79722.03 79722.03 79722.03 79722.03 79722.03

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 341970.00 421692.03 0.00 798545.45 1052727.27 1219636.36
1. Inflow Funds 341970.00 421692.03 0.00 78545.45 32727.27 19636.36
Total Equity 136788.00 168676.81 0.00 0.00 0.00 0.00
Total Long Term Loan 205182.00 253015.22 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 78545.45 32727.27 19636.36
2. Inflow Operation 0.00 0.00 0.00 720000.00 1020000.00 1200000.00
Sales Revenue 0.00 0.00 0.00 720000.00 1020000.00 1200000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 341970.00 341970.00 126536.45 475827.11 646696.64 710668.51
4. Increase In Fixed Assets 341970.00 341970.00 0.00 0.00 0.00 0.00
Fixed Investments 205000.00 205000.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 136970.00 136970.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 126378.67 52657.78 31594.67
6. Operating Costs 0.00 0.00 4100.00 218098.57 307264.64 360764.28
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 164588.29 205287.58
8. Interest Paid 0.00 0.00 122436.45 54983.67 45819.72 36655.78
9. Loan Repayments 0.00 0.00 0.00 76366.20 76366.20 76366.20
10. Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
-
Surplus(Deficit) 0.00 79722.03 126536.45 322718.34 406030.64 508967.85
Cumulative Cash Balance 0.00 79722.03 -46814.41 275903.93 681934.57 1190902.42

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00
1. Inflow Funds 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00
Sales Revenue 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 672659.08 697680.72 691265.96 608485.00 608485.00 608485.00
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 360764.28 360764.28 360764.28 360764.28 360764.28 360764.28
7. Corporate Tax Paid 208036.77 242222.35 244971.53 247720.72 247720.72 247720.72
8. Interest Paid 27491.83 18327.89 9163.94 0.00 0.00 0.00
9. Loan Repayments 76366.20 76366.20 76366.20 0.00 0.00 0.00
10. Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 527340.92 502319.28 508734.04 591515.00 591515.00 591515.00
Cumulative Cash Balance 1718243.34 2220562.62 2729296.66 3320811.66 3912326.66 4503841.67

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 0.00 720000.00 1020000.00 1200000.00

1. Inflow Operation 0.00 0.00 0.00 720000.00 1020000.00 1200000.00

Sales Revenue 0.00 0.00 0.00 720000.00 1020000.00 1200000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 341970.00 341970.00 4100.00 265931.79 327195.15 578010.17

3. Increase in Fixed Assets 341970.00 341970.00 0.00 0.00 0.00 0.00

Fixed Investments 205000.00 205000.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 136970.00 136970.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 47833.22 19930.51 11958.30

5. Operating Costs 0.00 0.00 4100.00 218098.57 307264.64 360764.28

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 0.00 205287.58

NET CASH FLOW -341970.00 -341970.00 -4100.00 454068.21 692804.85 621989.83

CUMMULATIVE NET CASH FLOW -341970.00 -683940.00 -688040.00 -233971.79 458833.07 1080822.90

Net Present Value (at 18%) -341970.00 -289805.08 -2944.56 276359.93 357341.04 271877.49

Cumulative Net present Value -341970.00 -631775.08 -634719.64 -358359.71 -1018.67 270858.82

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00

1. Inflow Operation 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00

Sales Revenue 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 568801.05 602986.63 605735.81 608485.00 608485.00 608485.00

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 360764.28 360764.28 360764.28 360764.28 360764.28 360764.28

6. Corporate Tax Paid 208036.77 242222.35 244971.53 247720.72 247720.72 247720.72

NET CASH FLOW 631198.95 597013.37 594264.19 591515.00 591515.00 591515.00

CUMMULATIVE NET CASH FLOW 1712021.85 2309035.23 2903299.41 3494814.42 4086329.42 4677844.42

Net Present Value (at 18%) 233816.00 187417.44 158096.95 133360.65 113017.50 95777.54

Cumulative Net present Value 504674.82 692092.26 850189.21 983549.86 1096567.36 1192344.90

Net Present Value (at 18%) 1,192,344.90

Internal Rate of Return 45.6%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 0% 60% 85% 100% 100%

1. Total Income 0.00 720000.00 1020000.00 1200000.00 1200000.00

Sales Revenue 0.00 720000.00 1020000.00 1200000.00 1200000.00

Other Income 0.00 0.00 0.00 0.00 0.00

2. Less Variable Cost 0.00 153172.97 216995.04 255288.28 255288.28

VARIABLE MARGIN 0.00 566827.03 803004.96 944711.72 944711.72

(In % of Total Income) #DIV/0! 78.73 78.73 78.73 78.73

3. Less Fixed Costs 122388.00 183213.60 208557.60 223764.00 223764.00

OPERATIONAL MARGIN -122388.00 383613.43 594447.36 720947.72 720947.72

(In % of Total Income) #DIV/0! 53.28 58.28 60.08 60.08
4. Less Cost of Finance 122436.45 54983.67 45819.72 36655.78 27491.83

5. GROSS PROFIT -244824.45 328629.77 548627.64 684291.94 693455.89

6. Income (Corporate) Tax 0.00 0.00 164588.29 205287.58 208036.77
7. NET PROFIT -244824.45 328629.77 384039.35 479004.36 485419.12

RATIOS (%)

Gross Profit/Sales #DIV/0! 45.64% 53.79% 57.02% 57.79%

Net Profit After Tax/Sales #DIV/0! 45.64% 37.65% 39.92% 40.45%

Return on Investment -17.89% 52.42% 57.18% 67.52% 67.16%

Return on Equity -80.15% 107.58% 125.72% 156.81% 158.91%

7
 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00

Sales Revenue 1200000.00 1200000.00 1200000.00 1200000.00 1200000.00

Other Income 0.00 0.00 0.00 0.00 0.00

2. Less Variable Cost 255288.28 255288.28 255288.28 255288.28 255288.28

VARIABLE MARGIN 944711.72 944711.72 944711.72 944711.72 944711.72
(In % of Total Income) 78.73 78.73 78.73 78.73 78.73

3. Less Fixed Costs 118976.00 118976.00 118976.00 118976.00 118976.00

OPERATIONAL MARGIN 825735.72 825735.72 825735.72 825735.72 825735.72
(In % of Total Income) 68.81 68.81 68.81 68.81 68.81

4. Less Cost of Finance 18327.89 9163.94 0.00 0.00 0.00

5. GROSS PROFIT 807407.83 816571.78 825735.72 825735.72 825735.72

6. Income (Corporate) Tax 242222.35 244971.53 247720.72 247720.72 247720.72

7. NET PROFIT 565185.48 571600.24 578015.00 578015.00 578015.00
RATIOS (%)

Gross Profit/Sales 67.28% 68.05% 68.81% 68.81% 68.81%

Net Profit After Tax/Sales 47.10% 47.63% 48.17% 48.17% 48.17%

Return on Investment 76.41% 76.05% 75.69% 75.69% 75.69%

Return on Equity 185.02% 187.12% 189.22% 189.22% 189.22%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 341970.00 763662.03 763662.03 849646.60 1190047.02 1612321.54
1. Total Current Assets 0.00 79722.03 -46814.41 402282.60 860971.02 1401533.54
Inventory on Materials and Supplies 0.00 0.00 0.00 3002.68 4253.80 5004.47
Work in Progress 0.00 0.00 0.00 7894.28 11183.56 13157.13
Finished Products in Stock 0.00 0.00 0.00 15788.55 22367.12 26314.25
Accounts Receivable 0.00 0.00 0.00 78545.45 111272.73 130909.09
Cash in Hand 0.00 0.00 0.00 21147.71 29959.25 35246.18
Cash Surplus, Finance Available 0.00 79722.03 -46814.41 275903.93 681934.57 1190902.42
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 341970.00 683940.00 565652.00 447364.00 329076.00 210788.00
Fixed Investment 0.00 205000.00 410000.00 410000.00 410000.00 410000.00
Construction in Progress 205000.00 205000.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 136970.00 273940.00 273940.00 273940.00 273940.00 273940.00
Less Accumulated Depreciation 0.00 0.00 118288.00 236576.00 354864.00 473152.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 244824.45 0.00 0.00 0.00
TOTAL LIABILITIES 341970.00 763662.03 763662.03 849646.60 1190047.02 1612321.54
5. Total Current Liabilities 0.00 0.00 0.00 78545.45 111272.73 130909.09
Accounts Payable 0.00 0.00 0.00 78545.45 111272.73 130909.09
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 205182.00 458197.22 458197.22 381831.02 305464.81 229098.61
Loan A 205182.00 458197.22 458197.22 381831.02 305464.81 229098.61
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 136788.00 305464.81 305464.81 305464.81 305464.81 305464.81
Ordinary Capital 136788.00 305464.81 305464.81 305464.81 305464.81 305464.81
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 -244824.45 83805.32 467844.67
9. Net Profit After Tax 0.00 0.00 0.00 328629.77 384039.35 479004.36
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 0.00 328629.77 384039.35 479004.36

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 2021374.46 2510193.74 3005427.78 3583442.78 4161457.79 4739472.79
1. Total Current Assets 1928874.46 2431193.74 2939927.78 3531442.78 4122957.79 4714472.79
Inventory on Materials and Supplies 5004.47 5004.47 5004.47 5004.47 5004.47 5004.47
Work in Progress 13157.13 13157.13 13157.13 13157.13 13157.13 13157.13
Finished Products in Stock 26314.25 26314.25 26314.25 26314.25 26314.25 26314.25
Accounts Receivable 130909.09 130909.09 130909.09 130909.09 130909.09 130909.09
Cash in Hand 35246.18 35246.18 35246.18 35246.18 35246.18 35246.18
Cash Surplus, Finance Available 1718243.34 2220562.62 2729296.66 3320811.66 3912326.66 4503841.67
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 92500.00 79000.00 65500.00 52000.00 38500.00 25000.00
Fixed Investment 410000.00 410000.00 410000.00 410000.00 410000.00 410000.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 273940.00 273940.00 273940.00 273940.00 273940.00 273940.00
Less Accumulated Depreciation 591440.00 604940.00 618440.00 631940.00 645440.00 658940.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 2021374.46 2510193.74 3005427.78 3583442.78 4161457.79 4739472.79
5. Total Current Liabilities 130909.09 130909.09 130909.09 130909.09 130909.09 130909.09
Accounts Payable 130909.09 130909.09 130909.09 130909.09 130909.09 130909.09
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 152732.41 76366.20 0.00 0.00 0.00 0.00
Loan A 152732.41 76366.20 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 305464.81 305464.81 305464.81 305464.81 305464.81 305464.81
Ordinary Capital 305464.81 305464.81 305464.81 305464.81 305464.81 305464.81
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 946849.03 1432268.15 1997453.63 2569053.87 3147068.88 3725083.88
9. Net Profit After Tax 485419.12 565185.48 571600.24 578015.00 578015.00 578015.00
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 485419.12 565185.48 571600.24 578015.00 578015.00 578015.00

10