165.

PROFILE ON PRODUCTION OF REGISTERS, ACCOUNT BOOK, ORDER & RECEIPT BOOK

165-2 TABLE OF CONTENTS

PAGE

I.

SUMMARY

165-3

II.

PRODUCT DESCRIPTION & APPLICATION

165-3

III.

MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY B. PLANT CAPACITY & PRODUCTION PROGRAMME

165-4 165-4 165-6

IV.

MATERIALS AND INPUTS A. RAW & AUXILIARY MATERIALS B. UTILITIES

165-7 165-7 165-8

V.

TECHNOLOGY & ENGINEERING A. TECHNOLOGY B. ENGINEERING

165-9 165-9 165-10

VI.

MANPOWER & TRAINING REQUIREMENT A. MANPOWER REQUIREMENT B. TRAINING REQUIREMENT

165-12 165-12 165-12

VII.

FINANCIAL ANALYSIS A. TOTAL INITIAL INVESTMENT COST B. PRODUCTION COST C. FINANCIAL EVALUATION D. ECONOMIC BENEFITS

165-14 165-14 165-15 165-16 165-17

165-3

I.

SUMMARY

This profile envisages the establishment of a plant for the production of profile on production of registers, account book, order & receipt book with a capacity of 500 tonnes per annum.

The present demand for the proposed product is estimated at 607.1 tonnes per annum. The demand is expected to reach at 2060.8 tonners by the year 2017.

The plant will create employment opportunities for 20

persons.

The total investment requirement is estimated at Birr 2.91million, out of which Birr 545,000 is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 23 % and a net present value (NPV) of Birr 3.12 million, discounted at 8.5%.

II.

PRODUCT DESCRIPTION & APPLICATION

A register is a book in which is written a record containing regular entries of items or details. It can be an official or formal enumeration, description or record of particulars. It is prepared in the form of books or system whereby municipal records of births, marriages and deaths are prepared. It can also be used as a means of recording landed property, a record containing the names of dwellers in kebele, sub city, towns and regional states.

An Account Book: is a book in which orders from debit and credit entries are chronologically posted.

165-4 Order Book: is a book in which orders from customers are entered. It is a book specially printed for making multiple copies of orders including one for the customer.

Receipt Book: is a book containing forms to be used in giving receipts for payment of money.

All these items are prepared from paper of varying grades and quality. Some are of thin sheets of paper while the others are relatively thick.

Registers can be used in schools, business and government offices, by merchants, in industries, in banks and insurance companies, in post offices, etc. It is used to keep the record of daily activities of offices, maintaining the accounts and other necessary information. These items are one of the basic sources for formal education and

conveying and recording the ideas by writing.

Account book, order and receipt book are all paper based stationery items used in the field of accounting. They find application in all commercial businesses, government

offices, and in various socio-economic activities, either small business or large businesses. The development of micro and small enterprises in the region demands the use of these items.

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET STUDY

1.

Past Supply and Present Demand

Registers and account books are used for recording. A register is a formal or official recording book of items, names or actions. It is a book in which names and transactions are listed.

165-5 Registers and account books are produced locally, the main supply being import. The supply of imported registers and account books is presented in Table 3.1. The average annual supply of registers, account books and order and receipt books is 376.1 tons at an annual average growth rate of 13%.

Domestic production of registers and account books is estimated as 30% of the total supply. The current effective demand is therefore estimated at 607.1 tons.

Table 3.1 IMPORTED REGISTERS, ACCOUNT BOOK, ORDER AND RECEIPT BOOKS (TONNES) Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Import 332.6 199.5 194.1 207.4 373.5 492.8 431.6 382.0 487.2 666.2

Source: Customs Authority. 2. Projected Demand

The demand for register and account books is related with business and social activities which require the listings and registration of names, items, actions and entries.

Projected demand based on 13% annual growth rate of imported registers in 1997-2006 is presented in Table 3.2. The demand for register books will attain 2,060 tonnes by the year 2017.

165-6 Table 3.2 PROJECTED DEMAND FOR REGISTER AND ACCOUNT BOOKS (TONNES)

Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Projected Demand 686.0 775.2 876.0 990.0 1,118.5 1,264.0 1,428.3 1,613.9 1,823.7 2,060.8

3.

Pricing and Distribution

The price of commonly used register book having 200 sheets is Birr 17. recommended price for the new project is Birr 13.

The

Distribution of the product will be handled through stationeries.

B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

The market study for registers, account and receipt books indicate that the demand in 2008 will be 686 tonnes. This demand will grow to about 1,614 tonnes and 2,061 tonnes by the year 2015 and 2017, respectively. It is anticipated that business will substantially grow in the region due to conducive environment created for private sector in particular and all socio-economic activities in general. It is therefore proposed that a plant be

165-7 established in the region with an annual production capacity of 500 tonnes. This is equivalent to 100,000 registers, 200,000 Nos. for account book, order book and receipt book, each. The plant will operate single shift 8 hours a day and 300 days a year.

2.

Production Programme

Production will start at lower capacity to given time for development of production skill and for establishment of potential market outlets. Hence, the plant will operate at 65% capacity during the first year, and then production will grow to 75%, 85% and 100% during the 2nd , 3rd and 4th year and then after, respectively. programme is shown in Table 3.3 below. Production build up

Table 3.3 PRODUCTION PROGRAMME

Year Capacity utilization (%) Production (pcs) a) Register b) Account book c) Order book d) Receipt book Total

1 65

2 75

3 85

4 100

65,000 130,000 130,000 130,000 455,000

75,000 150,000 150,000 150,000 525,000

85,000 170,000 170,000 170,000 595,000

100,000 200,000 200,000 200,000 700,000

IV.

MATERIALS AND INPUTS

A.

RAW AND AUXILIARY MATERIALS

The major raw materials required for the production of the assorted paper products are white paper, greyish paper and thin paper sheets for receipt book.

165-8

Auxiliary materials include grey board, cardboard, stitching wires, gum, printing ink, etc. Annual requirement of raw and auxiliary materials with related cost at full capacity is given in Table 4.1.

Table 4.1 RAW AND AUXILIARY MATERIALS REQUIREMENT AND COST

Sr. No.

Description

Qty (Tonnes)

Cost (000 Birr)

A. Raw Materials 1 2 Paper white (for register) Paper white, light green Sub-total B. Auxiliary Materials 1 2 Grey board (cardboard) Stitching wires; gum; printing ink, others Sub-total Total 58.40 4,896.40 5 tonnes Reqd 46.4 12 145.5 355.5 501.0 1,673.54 3,160.46 4,838

B.

UTILITIES

Electricity and water are utilities required for the production of registers, account book, order and receipt books. Electricity is used to operate production equipment, and for lighting and power sockets. Water is used for human consumption, sanitation and other purposes. It is estimated that a total of 5400 kWh of electricity is required per annum. At the rate of Birr 0.474 per kWh, annual electricity cost will be Birr 2,560. Annual consumption of water is estimated to be 200 m3, and at the rate of Birr 10.0 per m3, the annual water cost will be Birr 2000. Thus, the total annual expenditure on utilities will be Birr 4560.

165-9

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

The assorted paper products are available in variety of dimensions and number of pages. Registers commonly are approximately 18 inches by 9 inches size. Account books can be of similar size or sizes as determined by manufactures or customers. Order and receipt books are normally of smaller size than registers. Number of pages in them are mainly dependent on demand. Registers however can be made of 76,120, and 144 pages. Order and receipt books can be made of 50,100 and 200 pages.

The process of manufacture of registers, account book, order and receipt books consist of the following steps.

a) b) c) d) e) f) g)

Raw material preparation Cutting of paper Ruling (Line printing) Printing of covers (if necessary) Stapling (punching) Binding Finishing.

Paper is first ruled on the ruling machine according to the requirements. The ruled paper is then cut to sizes of registers, account books, order and receipt books. Required

number of pages are then increased to the required size, stitched with cover page or gummed as required. These are packed in numbers for sale. maintained as per customers specifications. Quality of the product is

165-10 2. Source of Technology

The machinery for the production of assorted paper products can be manufactured and supplied by companies in Europe and Asia. Address of a renowned company that can supply machinery and equipment is given below.

Maneklal and Sons (Exports), 237/239 Perin Nariman Street Fort Mumbai 400 001, INDIA Tel. (+91 22) 22618951 / 22618962 Fax: (+91 22) 22618903 / 22679573 E-mail: Sales@maneklal exports. Com

B.

ENGINEERING

1.

Machinery and Equipment

Machinery and equipment required by the envisaged plant, and related costs in local and foreign components is given in Table 5.1.

165-11

Table 5.1 MACHINERY AND EQUIPMENT REQUIREMENT AND COST

Sr. No. 1 Double

Description

Qty (ton) LC

Cost (000 Birr) FC TC

sided

disc

ruling

machine; size 36, suitable to rule on both sides of the paper in one direction in one or two colours at a time with two stop 1 arrangements 2 Paper cutting machine 42 size 1 with 1 HP motor 3 Platen type printing machine 1 10x5 4 Wire stitching machine, power 1 operated HP motor 5 Gumming operated 6 7 Hand press Testing balance, gauges, etc) 8 Auxiliary items (wooden racks, cases, etc) FOB price Freight, insurance, bank, 100 445 445 100 10 10 equipment measuring (physical scales, Reqd 10 10 2 30 30 machine, hand 1 25 25 25 25 65 65 30 30 250 250

customs, materials handling CIF Land Cost 100 445 545

165-12 2. Land, Building and Civil Works

Total land requirement of the project is estimated at 1000 m2, out of which 400 m2 is built-up area. Cost of building construction at the rate of Birr 2000 per m2 is estimated at Birr 800,000. At a land lease rate of Birr 1.0 per m2 for a period of 80 years, the total land lease value will be Birr 80,000. Thus, the total investment cost for land, building and civil work will be Birr 880,000.

3.

Proposed Location

Location of a plant is determined on the basis of proximity to raw materials, availability of infrastructure and distance from potential market outlets. Moreover, fair distribution of projects among SNNPRS woredas is also considered to determine plant location. Accordingly, three woredas namely Awassa zuria, Wonago and Arbaminch zuria are identified as potential locations. Of these Wonago woreda is selected as appropriate woreda. It is therefore suggested that the envisaged plant be located in Dilla town.

VI.

MANPOWER AND TRAINING REQUIREMENTS

A.

MANPOWER REQUIREMENT

The envisaged plant requires both production workers and administrative staff. Details of manpower and related monthly and annual salaries are shown in Table 6.1 below.

B.

TRAINING REQUIREMENT

The operation of production equipment for the manufacture of paper products is simple and can be handled easily by TVET graduates. therefore required. Special training programme is not

165-13

Table 6.1 MANPOWER REQUIREMENT AND LABOUR COST (BIRR)

Sr. No.

Position

Req. No.

Monthly Salary

Annual Wages

A. Administration 1 2 3 4 5 6 7 8 Plant manager Secretary Salesman Store man Cashier Personnel officer Clerk General services Sub-total B. Production 1 2 3 4 Production head Skilled workers Unskilled workers Technician Sub-total Workers Benefit (25% BS) Total 1 5 2 1 9 20 1,200 600 250 600 14,400 360,000 6,000 7,200 63,600 36,450 182,250 1 1 1 1 1 1 1 4 11 2,000 600 700 700 600 800 450 250 24,000 7,200 8,400 8,400 7,200 9,600 5,400 12,000 82,200

165-14

VII.

FINANCIAL ANALYSIS

The financial analysis of the profile on production of registers, account book, order & receipt book project is based on the data presented in the previous chapters and the following assumptions:-

Construction period Source of finance

1 year 30 % equity 70 % loan

Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Raw material, import Work in progress Finished products Cash in hand Accounts payable

3 years 8% 8.5% 30 days 30 days 90 days 1 days 30 days 5 days 30 days

A.

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 2.91 million, of which 27 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.

165-15

Table 7.1 INITIAL INVESTMENT COST

Sr. No. 1 2 3 4 5 6 7 Cost Items Land lease value Building and Civil Work Plant Machinery and Equipment Office Furniture and Equipment Vehicle Pre-production Expenditure* Working Capital Total Investment cost Foreign Share

Total Cost (000 Birr) 80.0 800.0 545.0 100.0 200.0 290.4 902.1 2,917.4 27

* N.B Pre-production expenditure includes interest during construction ( Birr 140.37 thousand ) training and Birr 150 thousand costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc.

B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr

5.48

million (see Table 7.2). The material and utility cost accounts for 89.41 per cent, while repair and maintenance take 1.37 per cent of the production cost.

165-16 Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Raw Material and Inputs Utilities Maintenance and repair Labour direct Factory overheads Administration Costs Total Operating Costs Depreciation Cost of Finance Total Production Cost

Cost 4,896.40 4.56 75 109.35 36.45 72.9 5,194.66 174.5 111.98 5,481.14

% 89.33 0.08 1.37 2.00 0.67 1.33 94.77 3.18 2.04 100

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.

165-17

2.

Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full capacity ( year 3) is estimated by using income statement projection.

BE =

Fixed Cost Sales Variable Cost

33 %

3.

Pay Back Period

The investment cost and income statement projection are used to project the pay-back period. The projects initial investment will be fully recovered within 5 years.

4.

Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 23 % and the net present value at 8.5% discount rate is Birr 1.71 million.

D.

ECONOMIC BENEFITS

The project can create employment for 20 persons.

In addition to supply of the

domestic needs, the project will generate Birr 1.31 million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports.