Investment Office ANRS

Project Profile on the Establishment

of Tomato Ketchup Producing Plant

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 ....................................................................................... 3
3.1.3 Pricing and Distribution .............................................................................. 3
3.2 Plant Capacity ..................................................................................................... 4
3.3 Production Program ............................................................................................ 4
4. Raw Materials and Utilities ................................................................... 5
4.1 Availability and Source of Raw Materials .......................................................... 5
4.2 Annual Requirement and Cost of Raw Materials and Utilities........................... 5
5. Location and Site .................................................................................... 6
6. Technology and Engineering ................................................................. 6
6.1 Production Process .............................................................................................. 6
6.2 Machinery and Equipment .................................................................................. 7
6.3 Civil Engineering Cost ........................................................................................ 8
7. Human Resource and Training Requirement ..................................... 8
7.1 Human Resource ................................................................................................. 8
7.2 Training Requirement ......................................................................................... 9
8. Financial Analysis ................................................................................... 9
8.1 Underlying Assumption ...................................................................................... 9
8.2 Investment ......................................................................................................... 10
8.3 Production Costs ............................................................................................... 11
8.4 Financial Evaluation ......................................................................................... 11
9. Economic and Social Benefit and Justification.................................. 12
ANNEXES ................................................................................................... 14
 1. Executive Summary
This profile provides basic information on the production of 2,100 tons Tomato Sauce and 700
tons Tomato Ketchup. The total investment requirement of the project including the working
capital is estimated at about Birr 23.4 million; of which nearly Birr 8.1 million is the cost of the
working capital and Birr 9.5 million is for machinery and equipments. Based on the cash flow
statement, the calculated internal rate of return (IRR) and simple rate of return (SRR) of the
project are 28.2 % and 23.5 %, respectively. The net present value (NPV) at 18 % discounting
rate is about Birr 7,472 thousand. The plant is expected to create employment opportunities for
about 48 persons.

2. Product Description and Application

Tomato ketchup & sauce are processed products of fresh tomato which are nowadays consumed
in vast quantities in households as well as in restaurants and other places. Tomato has long been
processed into tomato ketchup in many countries including Italy, Germany, Greece and USA.
The quality of the ketchup that is produced is determined largely by the quality of the tomato
used as a raw material. Processing of tomato ketchup mainly depends on the availability of a
large and stable supply of fresh, quality tomato, and the availability of a vast supply of water. In
addition to fresh tomato, other inputs such as sugar, salt, vinegar and various types of spices are
needed to produce a tasty and appealing product. The production of tomato ketchup & sauce
involves the crushing of fresh tomato followed by concentration and filtration.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Tomato is consumed by the urban and rural population in various forms regardless of income.
On the other hand, tomato ketchup and sauces/paste are processed at industrial level and are
consumed by the urban population. Hotels, restaurants, training institutes, hospitals, snack bars
and etc are also major users of these commodities for food preparation. Besides, middle class and

1
upper class segments of the urban population regularly use such products. Tomato ketchup is
used as a direct application during the consumption of various food items while the sauces are
used for cooking purposes. The current major sources of supply of the above products are
imports and Merti Horticultural Processing Plant which is the sole producer in the country.
Though it is believed that it is through import that most of the tomato ketchup and sauces are
supplied in Ethiopia, the import data does not show the reality. This is because of the fact that
large amount of these items are smuggled in to the country through the boarder towns of
Hartshek, Moyale and others.

Table 3.1 shows the domestic production and legal imports of Tomato Ketchup and Sauces over
the past ten years.

TABLE 3.1
DOMESIC PRODUCTION AND IMPORTS OF TOMATO KETCHUP &SAUCES
(IN TONS)

Year E.C Imports Domestic Total

Production
1989 NA 825 NA
1990 482 951 1433
1991 483 1949 2432
1992 231 2424 2655
1993 139 1730 1869
1994 270 555 825
1995 550 2116 2666
1996 516 1846 2362
1997 902 1846 2748
1998 249 1790 2039
1999 821 1790 2611
2000* 2240 1790 4030
Source: Compiled from CSA’s Manufacturing and Import Data
* Estimation

The above import figure does not reflect the actual demand and supply in the country.
Assuming that Tomato Ketchup & Sauces are used exclusively by the urban population in the
hotels , restaurants, snack-bars, training institutions, hospitals and middle and upper class
houses, the current supply and demand at the country level would be very large. Of the total
77 million people of the country, around 20 % (15.4 million) is urban or semi-urban

2
 population. From the total urban population, at least 20 %( 3.1 million) can be categorized
under the middle and upper classes population. If we conservatively assume that an individual
in the later group consume 25 grams of tomato ketchup and sauces per week, the total annual
consumption would be 4,030 tons. Based on this demand estimation, the current actual
volume of import of the products is estimated to reach 2,240 tons. Other than the domestic
demand, there is huge export potential for tomato sauces and ketchup.

3.1.2 Projected Demand

The demand for the products under review is based on the above per capita consumption and an
8 % urban population growth rate. Accordingly, the projected demand is shown in Table 3.2.
TABLE 3.2
PROJECTED DEMAND FOR TOMAT PASTE & SAUCE
(IN TONS)

Year E.C Projected Demand

2001 4701
2002 5077
2003 5483
2004 5921
2005 6395
2006 6907
2007 7459
2008 8056
2009 8700
2010 9397

Table 3.2 shows that the demand for tomato ketchup & sauce is projected to reach 6395 tons in
2005 E.C and 9397 tons in 2010 E.C.

3.1.3 Pricing and Distribution

The current retail price of tomato sauce is Birr 20 per Kg and that of Ketchup is Birr 40 per Kg.
Allowing enough margins for whole sale and retail network, the average factory selling price is
estimated at Birr 14 per Kg for Tomato Sauce and Birr 28 per Kg for Tomato Ketchup. The
product can be distributed though the existing wholesale and retail trade networks.

3
 3.2 Plant Capacity

The manufacture of tomato ketch-up can be undertaken when two basic conditions are met-the
availability of a large and stable supply of fresh quality tomato, and the availability of a vast
supply of water. Since the quality of the ketchup that is produced will be determined largely by
the quality of the tomato used as raw material, great importance is attached to tomato cultivation
itself.

Tomato processing plant requires a large quantity of water. The peak harvesting time is generally
concentrated over a period of not more than 60 days. Then, it will be necessary to process a huge
amount of tomato quickly in a very short time. Water in large quantity is required both during
tomato plantation and also during collection for washing. Accordingly, constructing a new
tomato processing plant will be determined not only by the quantity of tomato available, but also
by the amount of water.

A plant that can process 250 tons per day of fresh tomato is envisaged here. The plant can
process 15,000 tons of fresh tomato to produce 2,800 tons of tomato pulp working for 60 days
per annum. Assuming that 25 % of tomato pulp will be used to produce ketchup, and 75 % for
tomato sauce, the plant will thus produce 700 tons of tomato ketchup and 2,100 tons of tomato
sauce. Other than the domestic demand there is huge export potential for tomato sauces and
ketchup; implies any excess over the domestic demand will be ear-marked for export.

3.3 Production Program

The production program of the tomato processing plant is designed in such a way that at the
initial year, it will operate at 75 % of its full capacity, and then raise its capacity to 85 % and 100
% in the subsequent years. Thus, from the third year onwards the plant will continuously operate
at 100 % of its installed capacity.

4
 4. Raw Materials and Utilities
4.1 Availability and Source of Raw Materials

There are many areas in the ANRS which are suitable for growing tomatoes. Areas around Lake
Tana especially the eastern, southern and northern shores of the Lake are considered as best areas
for growing tomatoes. Besides, these areas have enough water supplies if the processing plant is
located in a town located near the lake. Auxiliary materials required by the processing plant
consist of salt, sugar, vinegar, spices, and other ingredients and which are added to produce good
taste.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The basic raw material required by the processing plant is fresh tomato. The plant processes 250
tons of fresh tomato per day, or 15,000 tons per year. Auxiliary materials required by the
processing plant consist of salt, sugar, vinegar, spices, and other ingredients and which are added
to produce good taste.

Table 4.1 shows the various ingredients required for tomato sauce and ketchup production,
together with quantity requirements and costs.
TABLE 4.1
ANNUAL REQUIREMENT AND COST OF MATERIALS

No. Item For sauce For ketchup Total Cost

Production Production Requirement (Birr)
(in Kg) ( in Kg) (in Kg)
1 Fresh Tomato 11,250,000 3,750,000 15,000,000 30,000,000
2 Salt 100 22 122 122
3 Sugar 300 70 370 2960
4 Vinegar 100 70 170 3000
5 Spices 30 12 42 7000
6 Others 20 12 32 5000
7. Glass bottles - 3410000 pcs - 1705000
8. Cans 10227500 pcs - - 5113750
9. Cartons - - 570000 pcs 45600
Total - - - 36,882,432

Bottles and all other auxiliary materials can be procured locally except laminated cans which
have to be imported.

5
Utilities consist of electricity, water and fuel oil for boiler. The total annual requirement is shown
in the Table 4.2
TABLE 4.2
UTILITIES REQUIREMENT
No. Utility Requirement Unit Cost Cost (Birr)
(Annual)
1. Electricity 132MWH Birr 0.55 per KWH 72,600
2. Water 40,000 m3 Birr 2.65 per m3 106,000
3. Fuel Oil 300 tons Birr 7000 per ton 2,100,000
Total 2,278,600

5. Location and Site

Woreta or any other town near tomato growing areas; particularly around lake Tana are
appropriate places to establish tomato ketchup and sauce producing plant.

6. Technology and Engineering

6.1 Production Process

The processing of tomato ketchup, paste and juice involves the following major operations-
collection of ripened tomatoes, putting them on a washing line, washing the tomatoes, separating
good tomatoes from the crushed and rotten ones, crushing the tomatoes, concentration, filtration
homogenization, flavoring, bottling and cooling.

Fresh tomato transported to the plant will be cleaned by washing in water. To accomplish this
task, a special washing technique has been developed that allows for preservation of the fresh,
natural qualities of ripened tomato. Washed tomato is crushed into tomato pulp, which is strained
and filtered. This is followed by preheating and concentration to about one-third of its original
volume by means of a continuous concentrator, for which a boiler plant is used. Since the
concentration would be achieved in a very short time, a special technical know-how would be
employed. Instantaneous concentration is necessary; otherwise, heating the tomato pulp would
cause oxidization which gives it a dark-reddish, disagreeable color, as opposed to the color of
natural tomato. Concentrated tomato pulp is homogenized, and salt, sugar, spices, vinegar and
other ingredients are added in the seasoning room to give it the flavor associated with tomato
sauce and tomato ketchup. The products are then filled into bottles and cans. This is followed by
packing into dozen or gross cartons for delivery.

6
 6.2 Machinery and Equipment

Required machinery include: tomato charging machine, tomato washing and sorting machine,
concentrator, filter, homogenizer, seasoning mixer, bottling machine, cooler, labeler, packing
machine, water treatment facility, boiler and etc. The list of machinery and equipment required
by the tomato processing plant and the corresponding costs are presented in Table 6.1.
TABLE 6.1
MACHINERY & EQUIPMENT REQUIREMENT

No. Item Qty Cost (Birr)

(no)
1. Tomato charging m/c 1
2. Tomato washing 7 sorting m/c 1
3. Continuous concentrator 1
4. Filter 1
5. Homogenizer 1
6. Seasoning Mixer 1
7. Bottling m/c 2 Total Price
8. Cooler 1 Birr 8.5 million
9. Labeler 1
10. Packing m/c 1
11. Water Treatment Facility 1
12. Boiler 1
13. Other Auxiliary Equipment -
Sub-Total 8.5 million
Freight, Insurance, Transport, Bank
1 million
Charges and etc
Total Cost 9.5 million

The total cost of machinery and equipment is estimated to reach at Birr 9.5; of which Birr 8
million is in foreign currency.

Machinery Supplier’s Address:

Shiv Engineering
Patel Avenue, Plot No. 165, Right Bhusaria Colony,
Kothrud Bus Depot,Panda Road,Pune-411038,
Maharashatra, India

7
 6.3 Civil Engineering Cost
The building area required by the plant is estimated to be 2,500 m2; and it costs Birr 5000,000.
This would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 5000 m2 and its lease cost equals Birr 138,000. The cost of the
land lease is as per ANRS land lease rate for Woreta which is equal to Birr 27.60 per square
meter for industrial purpose. Of the total cost of the lease, 5 % is paid in the beginning while the
rest will be paid in 40years.

7. Human Resource and Training Requirement

7.1 Human Resource

The plant requires both skilled and unskilled labor to carryout production activities. Indirect
manpower will be engaged in carrying out administrative activities. The total manpower
requirement together with monthly and annual salaries/wages in presented in Table 7.1.
TABLE 7.1
MANPOWER REQUIREMENT

No. Description Qty. Monthly Salary Annual

(no) (Birr) Expenditures
(Birr)
A. Administration
1. Plant Manager 1 4000 48000
2. Secretary 1 800 9600
3. Accountant 1 1500 18000
4. Salesman 1 800 9600
5. Personnel Officer 1 1500 18000
6. Office Clerks 2 300 7200
7. General Services 4 300 14400
Sub-Total 11 124,800
B. Production
1. Production Supervisor 1 1500 18000
2. Technicians 2 1000 24000
3. Operators 7 600 50400
4. Daily Workers 25 300 90000
5. Chemists 2 2000 48000
Sub-Total 37 230,400
Workers’ Benefits (20 % of BS) 71,040
Total Cost 48 426,240
The total annual wages and salary, including 20 % benefits, amount to Birr 426,240 per annum.

8
 7.2 Training Requirement

Tomato ketchup and tomato sauce producing operations demand good knowledge of quality
control. Therefore, the proper on job training should be given to the workers at least for a month
by hiring one or more experts in the area.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Tomato Ketchup & Sauce producing plant is based on the data
provided in the preceding chapters and the following assumptions.

A. Construction and Finance

Construction Period 2 Years

Source Of Finance 40% Equity and 60% Loan
Tax Holidays 2 Years
Bank Interest Rate 12%
Discount For Cash Flow 18%
Value Of Land Based on Lease Rate of 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%

9
 C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 Days

Raw Material-Foreign 120 Days
Factory Supplies In Stock 30 Days
Spare Parts In Stock And Maintenance 30 Days
Work In Progress 10 Days
Finished Products 15 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 23.4
million 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
6,900 6,900
Building and Civil Works
5,000,000 5,000,000
Office Equipment
100,000 100,000
Vehicles
0 0
Plant Machinery & Equipment
1,500,000 8,000,000 9,500,000
Total Fixed Investment Cost
6,606,900 8,000,000 14,606,900
Pre Production Capital
Expenditure* 330,345 730,345
Total Initial Investment
6,937,245 8,000,000 15,337,245
Working Capital at Full Capacity
7,701,057 385,061 8,086,118
Total 14,638,302 8,385,061 23,423,363
*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.

10
The foreign component of the project accounts for Birr 8.3 million or 35.8 % of the total
investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 42.8 million (see Table
8.2). Raw materials and utilities account for 91.5 %.
TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 36,000,000
2. Foreign Raw Materials 882,432

Total Production Cost at full Capacity

Items Cost
1. Raw materials 36,882,432
2. Utilities 2,278,600
3. Wages and Salaries 426,240
4. Spares and Maintenance 438,207
Factory Costs 40,025,479
5. Depreciation 1,356,069
6. Financial Costs
1,405,402
Total Production Cost 42,786,950

8.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.

11
 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 18.3 % of capacity utilization.

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 three years.

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 23.5 % 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 28.2 % and the net present value (NPV) at 18 % discount is Birr 7,472 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

12
 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 4.6 million per
year and birr 45.6 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about Birr 16.9 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. Import Substitution and Foreign Exchange Saving

As there is no enough production of tomato ketchup and tomato sauce in the country, the
commencement of this project relieves a portion of the import burden. That is, based on the
projected figure we learn that in the project life an estimated amount of US Dollar 47 million
will be saved as a result of the proposed project. This will create room for the saved hard
currency to be allocated on other vital and strategic sectors

D. 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 48 professionals as well as support
stuffs. Consequently the project creates income of birr 426 thousands per year. This would be
one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

13
ANNEXES

14
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 75% 85% 100% 100%

1. Total Inventory 0.00 0.00 9077534.14 10287872.02 12103378.85 12103378.85

Raw Materials in Stock- Total 0.00 0.00 3234250.47 3665483.87 4312333.96 4312333.96

Raw Material-Local 0.00 0.00 2945454.55 3338181.82 3927272.73 3927272.73

Raw Material-Foreign 0.00 0.00 288795.93 327302.05 385061.24 385061.24

Factory Supplies in Stock 0.00 0.00 33857.63 38371.98 45143.51 45143.51

Spare Parts in Stock and Maintenance 0.00 0.00 35853.30 40633.74 47804.40 47804.40

Work in Progress 0.00 0.00 846440.75 959299.52 1128587.67 1128587.67

Finished Products 0.00 0.00 1692881.51 1918599.04 2257175.35 2257175.35

2. Accounts Receivable 0.00 0.00 4009090.91 4543636.36 5345454.55 5345454.55

3. Cash in Hand 0.00 0.00 221305.09 250812.44 295073.45 295073.45

CURRENT ASSETS 0.00 0.00 10073679.67 11416836.96 13431572.89 13431572.89

4. Current Liabilities 0.00 0.00 4009090.91 4543636.36 5345454.55 5345454.55

Accounts Payable 0.00 0.00 4009090.91 4543636.36 5345454.55 5345454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 6064588.76 6873200.59 8086118.34 8086118.34

INCREASE IN NET WORKING CAPITAL 0.00 0.00 6064588.76 808611.83 1212917.75 0.00

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 12103378.85 12103378.85 12103378.85 12103378.85 12103378.85 12103378.85

Raw Materials in Stock-Total 4312333.96 4312333.96 4312333.96 4312333.96 4312333.96 4312333.96

Raw Material-Local 3927272.73 3927272.73 3927272.73 3927272.73 3927272.73 3927272.73

Raw Material-Foreign 385061.24 385061.24 385061.24 385061.24 385061.24 385061.24

Factory Supplies in Stock 45143.51 45143.51 45143.51 45143.51 45143.51 45143.51

Spare Parts in Stock and Maintenance 47804.40 47804.40 47804.40 47804.40 47804.40 47804.40

Work in Progress 1128587.67 1128587.67 1128587.67 1128587.67 1128587.67 1128587.67

Finished Products 2257175.35 2257175.35 2257175.35 2257175.35 2257175.35 2257175.35

2. Accounts Receivable 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55

3. Cash in Hand 295073.45 295073.45 295073.45 295073.45 295073.45 295073.45

CURRENT ASSETS 13431572.89 13431572.89 13431572.89 13431572.89 13431572.89 13431572.89

4. Current Liabilities 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55

Accounts Payable 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 8086118.34 8086118.34 8086118.34 8086118.34 8086118.34 8086118.34

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 7668622.50 15754740.84 40759090.91 42184545.45 49801818.18 49000000.00
1. Inflow Funds 7668622.50 15754740.84 4009090.91 534545.45 801818.18 0.00
Total Equity 3067449.00 6301896.34 0.00 0.00 0.00 0.00
Total Long Term Loan 4601173.50 9452844.51 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 4009090.91 534545.45 801818.18 0.00
2. Inflow Operation 0.00 0.00 36750000.00 41650000.00 49000000.00 49000000.00
Sales Revenue 0.00 0.00 36750000.00 41650000.00 49000000.00 49000000.00
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 7668622.50 7668622.50 43822006.09 39522246.64 47739336.61 45527844.43
4. Increase In Fixed Assets 7668622.50 7668622.50 0.00 0.00 0.00 0.00
Fixed Investments 7303450.00 7303450.00 0.00 0.00 0.00 0.00
Pre-production
Expenditures 365172.50 365172.50 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 10073679.67 1343157.29 2014735.93 0.00
6. Operating Costs 0.00 0.00 30150162.11 34150270.86 40150433.98 40150433.98
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 1826428.57 1910752.67
8. Interest Paid 0.00 0.00 3598164.31 1686482.16 1405401.80 1124321.44
9.Loan Repayments 0.00 0.00 0.00 2342336.33 2342336.33 2342336.33
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 8086118.34 -3062915.18 2662298.81 2062481.57 3472155.57
Cumulative Cash Balance 0.00 8086118.34 5023203.16 7685501.98 9747983.54 13220139.11

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00
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 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00
Sales Revenue 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00
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 45331088.18 45178152.62 44981396.37 42442303.79 42442303.79 42442303.79
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 40150433.98 40150433.98 40150433.98 40150433.98 40150433.98 40150433.98
7. Corporate Tax Paid 1995076.78 2123221.59 2207545.70 2291869.81 2291869.81 2291869.81
8. Interest Paid 843241.08 562160.72 281080.36 0.00 0.00 0.00
9. Loan Repayments 2342336.33 2342336.33 2342336.33 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 3668911.82 3821847.38 4018603.63 6557696.21 6557696.21 6557696.21
Cumulative Cash Balance 16889050.94 20710898.31 24729501.94 31287198.15 37844894.37 44402590.58

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 36750000.00 41650000.00 49000000.00 49000000.00

1. Inflow Operation 0.00 0.00 36750000.00 41650000.00 49000000.00 49000000.00

Sales Revenue 0.00 0.00 36750000.00 41650000.00 49000000.00 49000000.00

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 7668622.50 7668622.50 36214750.87 34958882.69 41363351.73 42061186.65

3. Increase in Fixed Assets 7668622.50 7668622.50 0.00 0.00 0.00 0.00

Fixed Investments 7303450.00 7303450.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 365172.50 365172.50 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 6064588.76 808611.83 1212917.75 0.00

5. Operating Costs 0.00 0.00 30150162.11 34150270.86 40150433.98 40150433.98

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 0.00 1910752.67

-
NET CASH FLOW 7668622.50 -7668622.50 535249.13 6691117.31 7636648.27 6938813.35
- - -
CUMMULATIVE NET CASH FLOW 7668622.50 15337245.00 14801995.87 -8110878.56 -474230.29 6464583.05
-
Net Present Value (at 18%) 7668622.50 -6498832.63 384407.59 4072420.57 3938898.22 3033019.26
- - -
Cumulative Net present Value 7668622.50 14167455.13 13783047.53 -9710626.97 -5771728.75 -2738709.48

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00

1. Inflow Operation 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00

Sales Revenue 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00

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 42145510.76 42273655.57 42357979.68 42442303.79 42442303.79 42442303.79

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 40150433.98 40150433.98 40150433.98 40150433.98 40150433.98 40150433.98

6. Corporate Tax Paid 1995076.78 2123221.59 2207545.70 2291869.81 2291869.81 2291869.81

NET CASH FLOW 6854489.24 6726344.43 6642020.32 6557696.21 6557696.21 6557696.21

CUMMULATIVE NET CASH FLOW 13319072.29 20045416.72 26687437.05 33245133.26 39802829.47 46360525.69

Net Present Value (at 18%) 2539119.00 2111567.90 1767030.89 1478472.42 1252942.73 1061815.87

Cumulative Net present Value -199590.49 1911977.41 3679008.30 5157480.73 6410423.46 7472239.33

Net Present Value (at 18%) 7,472,239.33

Internal Rate of Return 28.2%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 36750000.00 41650000.00 49000000.00 49000000.00 49000000.00

Sales Revenue 36750000.00 41650000.00 49000000.00 49000000.00 49000000.00

Other Income 0.00 0.00 0.00 0.00 0.00

2. Less Variable Cost 29872943.61 33856002.76 39830591.48 39830591.48 39830591.48

VARIABLE MARGIN 6877056.39 7793997.24 9169408.52 9169408.52 9169408.52

(In % of Total Income) 18.71 18.71 18.71 18.71 18.71

3. Less Fixed Costs 1633287.50 1650337.10 1675911.50 1675911.50 1675911.50

OPERATIONAL MARGIN 5243768.89 6143660.14 7493497.02 7493497.02 7493497.02

(In % of Total Income) 14.27 14.75 15.29 15.29 15.29
4. Less Cost of Finance 3598164.31 1686482.16 1405401.80 1124321.44 843241.08

5. GROSS PROFIT 1645604.58 4457177.98 6088095.22 6369175.58 6650255.94

6. Income (Corporate) Tax 0.00 0.00 1826428.57 1910752.67 1995076.78
7. NET PROFIT 1645604.58 4457177.98 4261666.65 4458422.91 4655179.16

RATIOS (%)

Gross Profit/Sales 4.48% 10.70% 12.42% 13.00% 13.57%

Net Profit After Tax/Sales 4.48% 10.70% 8.70% 9.10% 9.50%

Return on Investment 24.50% 27.66% 24.19% 23.83% 23.47%

Return on Equity 17.56% 47.57% 45.49% 47.59% 49.69%

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 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00

Sales Revenue 49000000.00 49000000.00 49000000.00 49000000.00 49000000.00

Other Income 0.00 0.00 0.00 0.00 0.00

2. Less Variable Cost 39830591.48 39830591.48 39830591.48 39830591.48 39830591.48

VARIABLE MARGIN 9169408.52 9169408.52 9169408.52 9169408.52 9169408.52
(In % of Total Income) 18.71 18.71 18.71 18.71 18.71

3. Less Fixed Costs 1529842.50 1529842.50 1529842.50 1529842.50 1529842.50

OPERATIONAL MARGIN 7639566.02 7639566.02 7639566.02 7639566.02 7639566.02
(In % of Total Income) 15.59 15.59 15.59 15.59 15.59

4. Less Cost of Finance 562160.72 281080.36 0.00 0.00 0.00

5. GROSS PROFIT 7077405.30 7358485.66 7639566.02 7639566.02 7639566.02

6. Income (Corporate) Tax 2123221.59 2207545.70 2291869.81 2291869.81 2291869.81

7. NET PROFIT 4954183.71 5150939.96 5347696.21 5347696.21 5347696.21
RATIOS (%)

Gross Profit/Sales 14.44% 15.02% 15.59% 15.59% 15.59%

Net Profit After Tax/Sales 10.11% 10.51% 10.91% 10.91% 10.91%

Return on Investment 23.55% 23.19% 22.83% 22.83% 22.83%

Return on Equity 52.88% 54.98% 57.08% 57.08% 57.08%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 7668622.50 23423363.34 29078058.83 31727445.93 34448594.43 36564681.00
1. Total Current Assets 0.00 8086118.34 15096882.83 19102338.93 23179556.43 26651712.00
Inventory on Materials and Supplies 0.00 0.00 3303961.40 3744489.59 4405281.87 4405281.87
Work in Progress 0.00 0.00 846440.75 959299.52 1128587.67 1128587.67
Finished Products in Stock 0.00 0.00 1692881.51 1918599.04 2257175.35 2257175.35
Accounts Receivable 0.00 0.00 4009090.91 4543636.36 5345454.55 5345454.55
Cash in Hand 0.00 0.00 221305.09 250812.44 295073.45 295073.45
Cash Surplus, Finance Available 0.00 8086118.34 5023203.16 7685501.98 9747983.54 13220139.11
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 7668622.50 15337245.00 13981176.00 12625107.00 11269038.00 9912969.00
Fixed Investment 0.00 7303450.00 14606900.00 14606900.00 14606900.00 14606900.00
Construction in Progress 7303450.00 7303450.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 365172.50 730345.00 730345.00 730345.00 730345.00 730345.00
Less Accumulated Depreciation 0.00 0.00 1356069.00 2712138.00 4068207.00 5424276.00
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 7668622.50 23423363.34 29078058.83 31727445.93 34448594.43 36564681.00
5. Total Current Liabilities 0.00 0.00 4009090.91 4543636.36 5345454.55 5345454.55
Accounts Payable 0.00 0.00 4009090.91 4543636.36 5345454.55 5345454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 4601173.50 14054018.01 14054018.01 11711681.67 9369345.34 7027009.00
Loan A 4601173.50 14054018.01 14054018.01 11711681.67 9369345.34 7027009.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 3067449.00 9369345.34 9369345.34 9369345.34 9369345.34 9369345.34
Ordinary Capital 3067449.00 9369345.34 9369345.34 9369345.34 9369345.34 9369345.34
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 1645604.58 6102782.56 10364449.21
9.Net Profit After Tax 0.00 0.00 1645604.58 4457177.98 4261666.65 4458422.91
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 1645604.58 4457177.98 4261666.65 4458422.91

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 38877523.83 41489371.20 44297974.83 49645671.04 54993367.26 60341063.47
1. Total Current Assets 30320623.83 34142471.20 38161074.83 44718771.04 51276467.26 57834163.47
Inventory on Materials and Supplies 4405281.87 4405281.87 4405281.87 4405281.87 4405281.87 4405281.87
Work in Progress 1128587.67 1128587.67 1128587.67 1128587.67 1128587.67 1128587.67
Finished Products in Stock 2257175.35 2257175.35 2257175.35 2257175.35 2257175.35 2257175.35
Accounts Receivable 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55
Cash in Hand 295073.45 295073.45 295073.45 295073.45 295073.45 295073.45
Cash Surplus, Finance Available 16889050.94 20710898.31 24729501.94 31287198.15 37844894.37 44402590.58
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 8556900.00 7346900.00 6136900.00 4926900.00 3716900.00 2506900.00
Fixed Investment 14606900.00 14606900.00 14606900.00 14606900.00 14606900.00 14606900.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 730345.00 730345.00 730345.00 730345.00 730345.00 730345.00
Less Accumulated Depreciation 6780345.00 7990345.00 9200345.00 10410345.00 11620345.00 12830345.00
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 38877523.83 41489371.20 44297974.83 49645671.04 54993367.26 60341063.47
5. Total Current Liabilities 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55
Accounts Payable 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55 5345454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 4684672.67 2342336.33 0.00 0.00 0.00 0.00
Loan A 4684672.67 2342336.33 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 9369345.34 9369345.34 9369345.34 9369345.34 9369345.34 9369345.34
Ordinary Capital 9369345.34 9369345.34 9369345.34 9369345.34 9369345.34 9369345.34
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 14822872.12 19478051.28 24432234.98 29583174.95 34930871.16 40278567.37
9. Net Profit After Tax 4655179.16 4954183.71 5150939.96 5347696.21 5347696.21 5347696.21
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 4655179.16 4954183.71 5150939.96 5347696.21 5347696.21 5347696.21

10