Investment Office ANRS

Project Profile on the Establishment

of Milk Powder Production 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..............................2
3.1
Market Study...................................................................................................................2
3.1.1
Present Demand and Supply....................................................................................2
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
4.2

Availability and Source of Raw Materials.......................................................................5

Annual Requirement and Cost of Raw Materials and Utilities.......................................5

5. Location and Site...............................................................................................6

6. Technology and Engineering............................................................................6
6.1
6.2
6.3

Production Process...........................................................................................................6
Machinery and Equipment...............................................................................................7
Civil Engineering Cost....................................................................................................8

7. Human Resource and Training Requirement.................................................8

7.1
7.2

Human Resource..............................................................................................................8
Training Requirement......................................................................................................9

8. Financial Analysis............................................................................................10
8.1
8.2
8.3
8.4

Underlying Assumption.................................................................................................10
Investment......................................................................................................................11
Production Costs............................................................................................................11
Financial Evaluation......................................................................................................12

9. Economic and Social Benefits and Justification...........................................13

ANNEXES..............................................................................................................15

1. Executive Summary
This project profile deals with milk powder producing plant in Amhara National Regional State.
The following presents the main findings of the study.
Demand projection divulges that the domestic demand for milk powder is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 1000 tons of milk powder
and 100 tons of butter annually considering the raw material and market. The total investment
cost of the project including working capital is estimated at Birr 39.07 million and creates 59
jobs and Birr 681,120 of income
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 20.5% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years and 6 months. The result
further shows that the calculated IRR of the project is 31.7% with NPV of Birr 19,886,039.09.
In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution.
Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Milk powder contains all those components that make natural untreated milk such an important
drink for a healthy nutrition mainly proteins, carbohydrates, mineral and salts. Milk powder is
prepared by skimming the milk whereby a considerable but proportional cream substance is
extracted before it is powdered. The processed milk powder is packed in fully galvanized metal
cans with a standardized size of 400 grams, 900 grams, 1800 grams and 2500 grams. The
production of milk powder offers a chain of advantages. First, the volume of the milk is reduced
by which handling becomes much easier. Furthermore, when it is properly stored it keeps its
quality for a nearly unlimited time. When the powder is mixed with water it turns to liquid milk

and will be ready for use. The product is consumed by all age groups and therefore, indicates the
presence of huge demand.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

Milk is a highly demanded product by all age group of families in Ethiopia. Rapidly increasing
population size with expanding urban population both in Amhara region and in Ethiopia creates
even greater markets and growth of demand for dairy products. This increase in demand for milk
affords greater opportunities and potentials for milk producers and for development of the milk
production and processing industry. The major users of powdered milk are households,
institutions like hotels, universities and cafeterias where the type of milk powder demanded by
users depends on the target consumers.
In Ethiopia there are 3 pasteurized milk producing plants of which 1 is publicly owned and the
remaining 2 are privately owned (CSA, 2007). However, the demand of powder milk is met
totally from import as there is no local firm engaged in the production.
The level of import of powder milk for the last 10 years is presented in the table 1 below.
Table 1: Domestic Production and Import of Milk Powder (in ton)

Year
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07

Domestic
Production
-

Import
636.9
822.7
1,014.60
1,049.40
1,326.70
1,704.60
1,461.90
1,291.70
1,666.30
1,617

Effective
Demand
636.9
822.7
1,014.60
1,049.40
1,326.70
1,704.60
1,461.90
1,291.70
1,666.30
1,617
2

Average

1,259

1,259

Source: Customs authority, (various yeas)

The above table shows that the average annual demand for milk powder is 1,259 tons which is
totally met through import.

3.1.2 Projected Demand

Milk powder is consumed mainly by the middle and upper income group of the urban people.
Moreover, because of its long shelf life the product can be transported to any part of the country.
The above table shows that the demand for milk powder has improved substantially through
time. Thus the forecast of milk powder is performed using the linear time trend fitted on the data
presented on table 1. Accordingly, the following forecasting parameter is obtained.
Yi 668.3 107.4 X i

Where Y represents demand for milk powder in tons and X refers to the time trend.
Based on the obtained equation the forecast of demand for milk powder is presented in table 2
below:Table 2: Projected Demand for Milk Powder (in ton)
Year
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19

Projected Demand
1849.7
1957.1
2064.5
2171.9
2279.3
2386.7
2494.1
2601.5
2708.9
2816.3
2923.7
3031.1

3.1.3 Pricing and Distribution

Milk powder in the domestic market has different prices based on difference in brand names and
weight. A market research conducted in Addis Ababa and Bahir Dar revealed the following
average retail price.
Table 3: Average Retail Price for Milk Powder
Weight (in gm)
400
900
1800
2500

Average Price (in Br)

45
80
150
240

In other words, the average retail price is about Birr 92 for 1kg of milk powder
Based on the market research result and the capacity of the envisaged plant, the selling price of
powder milk has been estimated at 45,550 Birr/ton (which is about 50% of the current retail
price), and butter as byproduct is estimated at 17,500 Birr/ton. The available retail and wholesale
network shall be used by the envisaged plant.

3.2

Plant Capacity

In the preceding presentation of demand projection it was observed that the level of demand in
2007/08 will be about 1850 tons and it will grow 3031 tons where the whole demand would be
met from import. The quantity of raw milk required to produce milk powder is roughly 10 times
higher. Thus, given the expected demand for milk powder presented earlier, the raw milk needed
and the planned technology, the envisaged plant is set to produce 1000 tons of powder milk and
100 tons of fresh butter as a byproduct. This planned production is roughly 40% of the average
projected demand for milk powder stated earlier.

3.3

Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 2 shifts, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 70 percent capacity and then it grows to 85
percent in the 2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This
consideration is developed based on the assumption that market and logistics barriers would take
place for the first two years of operation.
4

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

As indicated earlier the basic raw material in the production of milk powder and fresh butter is
cow milk where Amhara region is highly endowed. A study by Ministry of Agriculture and Rural
Development in 2000 projected the total milk production in the country to reach 1.34 million
tons in 2005. In view of this projection, the share of Amhara region adequately covers the milk
demand of the envisaged plant. The plant, therefore, shall acquire the supply of fresh milk by
integrating its activity with the cooperatives that are engaged in the production and supply of
milk. On the other hand, some imported additive (vitamin, flavors etc) will be included in the
production process.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
in table 4 here under shown.
Table 4 Material and Utility Requirement

Material and Input

Cow Milk
Additives
Packing Material
Total Material Cost

Quantity
10,000 tons
0.1 tons
1 million pcs

L.C.

Total Cost
F.C.

25,000,000
250,000
1,500,000
26,500,000

250,000

Utility
Electricity
Furnace Oil
Water
Total Utility Cost

150 mwh
80 ton
10,000m3

82,500
560,000
26,500
669,000

The total cost of material and utility at full capacity of operation is estimated to be Birr
27,419,000.

5. Location and Site

The appropriate locations for the envisaged project, in view of the availability of input as well as
market for the output are Bahir Dar or Debre Birhan.

6. Technology and Engineering

6.1

Production Process

The envisaged plant shall have three milk collection centers with a total capacity of 37 thousand
liters per day so as to produce roughly 3.6 tons of milk powder. On arrival at the centre, the milk
is tested for hygiene and adulteration using organoleptic and lactometer readings. Milk is
weighed using graduated aluminum milk gauges and a volume-based payment is made to
suppliers. Then the collected milk will be transported to the plant. The plant is designed for both
the reception of milk in cans as well as in road tankers. After reception, the milk is filtered and
cooled. The production process involved with milk powder plant is discussed as follows. After
reception of the milk, it is filtered and cooled down to 6 Celsius and stored in a raw milk storage
tank. The milk, transported to the plant by means of road tankers is additionally pulled through a
degasser to remove air from the milk. From the storage tank the milk is transferred to the first
section of a pasteurizer, to give the product the required temperature for standardizing and
clarifying.
The standardized milk is now returned to the pasteurizer for pasteurization and recoiling. The
product cooled to 6 Celsius is then stored in storage silos. Some vitamins are added where sugar
can be added to the silos on request. The silos are provided with high energy mixers to ensure
that the sugar will be completely dissolved. By a transfer pump the standardized milk is then fed
through pre heaters, a regeneration section and a pasteurizer to the first effect of a four-effect
falling film evaporator. In this section the milk is concentrated to 47% total solid or, when sugar
is added, to about 52.5% total solid. The concentrate is then filtered and by a high pressure pump
transferred to the atomizer nozzles of the spray dryer. The concentrate is atomized into hot
drying air. The hot air evaporates the water contained in the atomized concentrate. The milk
powder leaves the spray dryer to a two stage fluid bed drying and cooling unit for the final
6

drying. Between the two stages of the drying and cooling unit a lecithin dosing system is
provided. The lecithin gives the milk powder the instant quality. From the dryer and cooler the
milk powder is conveyed to a packaging section. The milk powder is then packed by a
volumetric-type filling machine into cans.
The alternative technology is designed to reduce the loss of the output emanating from high heat
treatment of the milk and the subsequent evaporation. To reduce this the alternative way of
producing whole milk powder requires additional investment that is not cost effective for a scale
of production envisaged by the proposed plant.

6.2

Machinery and Equipment

The machineries and equipment required for producing milk powder is detailed in table 5 below.
Table 5: Machinery and Equipment
Machinery and Equipment
Milk reception for milk cans
Milk reception for road tankers
Standardizing / skimming and pasteurization
Evaporator
Spray dryer
Shaking fluid bed
Cleaning in place Section
Packaging Machine
Piping and Insulation
Cooling Machine

Quantity
1
1
2
2
2
2
1
1
set
2

The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 19 million.
The following are some of the machineries suppliers address for the envisaged project
SSP Private Limited, Faridabad
19-DLF Industrial Area, Phase-II, 13/4-Mathura Road,
Faridabad, Haryana - 121 001, India
Phone: +(91)-(129)-2277442/2275968/2277730/2275441

Fax: +(91)-(129)-2277441/2254956
Website: http://www.dairy-equipments.com/
Chadha Electro Industries, New Delhi
137, Rajinder Market, Tis Hazari,
New Delhi, Delhi - 110 054, India
Phone: +(91)-(11)-3944840
Fax: +(91)-(11)-3914211

6.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 5,000m 2 of which 4000m2 is
allocated for the production space and shade and the remaining space is left for stores (500m 2),
office buildings and facilities (500m2).

7. Human Resource and Training Requirement

7.1

Human Resource

The required manpower for the envisaged plant is stated in table 6 below.

Table 6: Human Resource Requirement

Position
Manager
Production Manager
Administrator/Finance Head
Accountant
Secretary
Sales Clerk
Chemist
Store Keeper
Technician
Supervisor
Operators
Daily Laborers
Cleaners
Messengers
Driver
Guards
20% Benefit
Total

No.
Required
1
1
1
2
2
4
3
2
6
3
15
6
3
1
3
6

Monthly
Salary
5000
4000
2500
1000
850
600
1000
600
1000
1000
600
300
600
300
600
300

59

Total Annual
Salary
60000
48000
30000
24000
20400
28800
36000
14400
72000
36000
108000
21600
21600
3600
21600
21600
113520
681120

The envisaged plant therefore, creates 59 jobs and about Birr 681,120 of income. The
professionals and support staffs for the envisaged plant shall be recruited from Amhara region.

7.2

Training Requirement

Since there is no milk powder producing plant in Ethiopia, training of key personnel shall be
conducted abroad. This can be arranged with the suppliers of the plant machineries. The training
should primarily focus on the production technology and machinery maintenance and trouble
shooting. Birr 200,000 will be allocated as training expense.

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of milk powder producing plant is based on the data provided in the
preceding sections and the following assumptions.
A. Construction and Finance
Construction period
Source of finance
Tax holidays
Bank interest rate
Discount for cash flow
Value of land
Spare Parts, Repair & Maintenance

2 years
40% equity and 60% loan
2 years
12%
18%
Based on lease rate of ANRS
3% of fixed investment

B. Depreciation
Building
Machinery and equipment
Office furniture
Vehicles
Pre-production (amortization)

5%
10%
10%
20%
20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local
Raw Material-Foreign
Factory Supplies in Stock
Spare Parts in Stock and Maintenance
Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

8.2

30 days
120 days
30 days
30 days
10 days
15 days
30 days
30 days
30 days

Investment

10

The total investment cost of the project including working capital is estimated at Birr 39.07
million as shown in table 7 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 7: Total initial investment
Items
Land
Building and civil works
Office equipment
Vehicles
Plant machinery & equipment
Total fixed investment cost
Pre production capital
expenditure*
Total initial investment
Working capital at full capacity
Total

L.C

F.C

15,000
10,000,000
100,000
2,500,000
12,615,000

19,000,000
19,000,000

1,580,750
14,195,750
5,765,106
19,960,856

Total
15,000
10,000,000
100,000
2,500,000
19,000,000
31,615,000
1,580,750

19,000,000
109,091
19,109,091

33,195,750
5,874,197
39,069,947

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for companys establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component accounts for 49% of the total investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 34.5 million as detailed in
table 8 below.

11

Table 8: Production Cost

Items
1.
2.
3.
4.

Raw materials
Utilities
Wages and Salaries
Spares and Maintenance
Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

8.4

Cost
26,750,000
669,000
681,120
316,150
28,416,270
3,226,150
2,813,036
34,455,456

Financial Evaluation
I.

Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 9%, 20% and 25%
respectively in the first year and are gradually rising. Furthermore, the income statement and
other profitability indicators show that the project is viable.
II.

Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 20.5% 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 2 years and 6
months.
IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 27.6%.

12

V.

Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
31.7% and the net present value at 18 % discount is Birr 19,886,039.09.
VI.

Sensitivity Analysis

The envisaged plant is attractively profitable even with considerable cost increment. That is, the
plant maintains to be profitable starting from the first year when 10% cost increment takes place
in the sector. This result is accompanied with payback period of 2 years and 6 month.

9. Economic and Social Benefits and Justification

The envisaged project possesses wide range of benefits that promote the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. It also boosts
the inter sectorial linkage between the agricultural (livestock) and industrial sector. At the same
time, therefore, it helps diversify the economic activity of the region. The other major benefits
are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 9.30 million per
year and Birr 93.01million 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 34.6 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.

13

C. Import Substitution and Foreign Exchange Saving

As there is no local production of milk powder 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 44.65 million will be saved as a result of the
proposed project. This will create room for the saved hard currency to be allocated to other vital
and strategic sectors.
D. Employment and Income Generation
The proposed project is expected to create employment opportunity for several citizens of the
country. That is, it will provide permanent employment to 59 professionals as well as support
staff. Consequently the project creates income of Birr per year. This would be one of the
commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

14

ANNEXES

15

Annex 1: Total Net Working Capital Requirements (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

Capacity Utilization (%)

0.0

0.0

70%

85%

100%

100%

1. Total Inventory

0.00

0.00

6108838.08

7417874.82

8726911.55

8726911.55

0.00

0.00

2100000.00

2550000.00

3000000.00

3000000.00

Raw Material-Local

0.00

0.00

2023636.36

2457272.73

2890909.09

2890909.09

Raw Material-Foreign

0.00

0.00

76363.64

92727.27

109090.91

109090.91

Factory Supplies in Stock

0.00

0.00

24163.30

29341.15

34519.00

34519.00

Spare Parts in Stock and Maintenance

0.00

0.00

72427.09

87947.18

103467.27

103467.27

Work in Progress

0.00

0.00

604082.56

733528.83

862975.09

862975.09

Finished Products

0.00

0.00

1208165.13

1467057.65

1725950.18

1725950.18

2. Accounts Receivable

0.00

0.00

3570000.00

4335000.00

5100000.00

5100000.00

3. Cash in Hand

0.00

0.00

103100.07

125192.95

147285.82

147285.82

0.00

0.00

7681938.16

9328067.76

10974197.37

10974197.37

4. Current Liabilities

0.00

0.00

3570000.00

4335000.00

5100000.00

5100000.00

Accounts Payable

0.00

0.00

3570000.00

4335000.00

5100000.00

5100000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

4111938.16

4993067.76

5874197.37

5874197.37

Raw Materials in Stock- Total

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

0.00

0.00

4111938.16

881129.61

Annex 1: Total Net Working Capital Requirements (in Birr)

881129.61

0.00

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

8726911.55

8726911.55

8726911.55

8726911.55

8726911.55

8726911.55

3000000.00

3000000.00

3000000.00

3000000.00

3000000.00

3000000.00

Raw Material-Local

2890909.09

2890909.09

2890909.09

2890909.09

2890909.09

2890909.09

Raw Material-Foreign

109090.91

109090.91

109090.91

109090.91

109090.91

109090.91

Factory Supplies in Stock

34519.00

34519.00

34519.00

34519.00

34519.00

34519.00

Spare Parts in Stock and Maintenance

103467.27

103467.27

103467.27

103467.27

103467.27

103467.27

Work in Progress

862975.09

862975.09

862975.09

862975.09

862975.09

862975.09

Finished Products

1725950.18

1725950.18

1725950.18

1725950.18

1725950.18

1725950.18

2. Accounts Receivable

5100000.00

5100000.00

5100000.00

5100000.00

5100000.00

5100000.00

3. Cash in Hand

147285.82

147285.82

147285.82

147285.82

147285.82

147285.82

10974197.37

10974197.37

10974197.37

10974197.37

10974197.37

10974197.37

4. Current Liabilities

5100000.00

5100000.00

5100000.00

5100000.00

5100000.00

5100000.00

Accounts Payable

5100000.00

5100000.00

5100000.00

5100000.00

5100000.00

5100000.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total

CURRENT ASSETS

TOTAL NET WORKING CAPITAL REQUIRMENTS

INCREASE IN NET WORKING CAPITAL

5874197.37

5874197.37

5874197.37

5874197.37

5874197.37

5874197.37

0.00

0.00

0.00

0.00

0.00

0.00

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

16597875.00

22472072.37

36295000.00

40502500.00

47515000.00

46750000.00

16597875.00

22472072.37

3570000.00

765000.00

765000.00

0.00

Total Equity

6639150.00

8988828.95

0.00

0.00

0.00

0.00

Total Long Term Loan

9958725.00

13483243.42

0.00

0.00

0.00

0.00

0.00

0.00

3570000.00

765000.00

765000.00

0.00

2. Inflow Operation

0.00

0.00

32725000.00

39737500.00

46750000.00

46750000.00

Sales Revenue

0.00

0.00

32725000.00

39737500.00

46750000.00

46750000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

16597875.00

16597875.00

34110746.57

32843498.12

40369090.57

38394773.41

4. Increase In Fixed Assets

16597875.00

16597875.00

0.00

0.00

0.00

0.00

15807500.00

15807500.00

0.00

0.00

0.00

0.00

790375.00

790375.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

7681938.16

1646129.61

1646129.61

0.00

6. Operating Costs

0.00

0.00

20214855.94

24477337.57

28739819.20

28739819.20

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

3731950.19

3872602.00

8. Interest Paid

0.00

0.00

6213952.47

2813036.21

2344196.84

1875357.47

9.Loan Repayments

0.00

0.00

0.00

3906994.74

3906994.74

3906994.74

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

Fixed Investments
Pre-production Expenditures

Surplus(Deficit)

0.00

5874197.37

2184253.43

7659001.88

7145909.43

8355226.59

Cumulative Cash Balance

0.00

5874197.37

8058450.80

15717452.68

22863362.10

31218588.70

Annex 2: Cash Flow Statement (in Birr): Continued

PRODUCTION
5
46750000.00

6
46750000.00

7
46750000.00

8
46750000.00

9
46750000.00

10
46750000.00

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

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

Sales Revenue

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

38066585.85

37983243.29

37655055.73

33419873.44

33419873.44

33419873.44

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

0.00

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

28739819.20

28739819.20

28739819.20

28739819.20

28739819.20

28739819.20

7. Corporate Tax Paid

4013253.81

4398750.62

4539402.43

4680054.24

4680054.24

4680054.24

8. Interest Paid

1406518.11

937678.74

468839.37

0.00

0.00

0.00

9. Loan Repayments

3906994.74

3906994.74

3906994.74

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

8683414.15

8766756.71

9094944.27

13330126.56

13330126.56

13330126.56

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets

5. Increase in Current Assets

10.Dividends Paid
Surplus(Deficit)

Cumulative Cash Balance

39902002.85

48668759.55

57763703.82

71093830.38

84423956.94

97754083.50

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

32725000.00

39737500.00

46750000.00

46750000.00

1. Inflow Operation

0.00

0.00

32725000.00

39737500.00

46750000.00

46750000.00

Sales Revenue

0.00

0.00

32725000.00

39737500.00

46750000.00

46750000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

16597875.00

16597875.00

24326794.10

25358467.18

29620948.81

32612421.20

3. Increase in Fixed Assets

16597875.00

16597875.00

0.00

0.00

0.00

0.00

Fixed Investments

15807500.00

15807500.00

0.00

0.00

0.00

0.00

790375.00

790375.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

4111938.16

881129.61

881129.61

0.00

5. Operating Costs

0.00

0.00

20214855.94

24477337.57

28739819.20

28739819.20

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

3731950.19

3872602.00

NET CASH FLOW

-16597875.00

-16597875.00

8398205.90

14379032.82

17129051.19

14137578.80

CUMMULATIVE NET CASH FLOW

-16597875.00

-33195750.00

-24797544.10

-10418511.27

6710539.92

20848118.72

Net Present Value (at 18%)

-16597875.00

-14065995.76

6031460.72

8751523.30

8834974.05

6179665.99

Cumulative Net present Value

-16597875.00

-30663870.76

-24632410.05

-15880886.75

-7045912.70

-866246.71

2. Other Income

Pre-production Expenditures

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

1. Inflow Operation

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

Sales Revenue

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

32753073.01

33138569.82

33279221.63

33419873.44

33419873.44

33419873.44

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

0.00

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

28739819.20

28739819.20

28739819.20

28739819.20

28739819.20

28739819.20

6. Corporate Tax Paid

4013253.81

4398750.62

4539402.43

4680054.24

4680054.24

4680054.24

NET CASH FLOW

13996926.99

13611430.18

13470778.37

13330126.56

13330126.56

13330126.56

CUMMULATIVE NET CASH FLOW

34845045.72

48456475.90

61927254.27

75257380.83

88587507.39

101917633.95

Net Present Value (at 18%)

5184903.21

4272968.67

3583741.14

3005357.96

2546913.53

2158401.29

Cumulative Net present Value

4318656.50

8591625.17

12175366.31

15180724.27

17727637.80

19886039.09

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

19,886,039.09

31.7%
6

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1

70%

85%

100%

100%

100%

32725000.00

39737500.00

46750000.00

46750000.00

46750000.00

32725000.00

39737500.00

46750000.00

46750000.00

46750000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

19700867.34

23922481.77

28144096.20

28144096.20

28144096.20

13024132.66

15815018.23

18605903.80

18605903.80

18605903.80

39.80

39.80

39.80

39.80

39.80

3740138.60

3781005.80

3821873.00

3821873.00

3821873.00

9283994.06

12034012.43

14784030.80

14784030.80

14784030.80

28.37

30.28

31.62

31.62

31.62

4. Less Cost of Finance

6213952.47

2813036.21

2344196.84

1875357.47

1406518.11

5. GROSS PROFIT

3070041.59

9220976.22

12439833.96

12908673.33

13377512.69

0.00

0.00

3731950.19

3872602.00

4013253.81

3070041.59

9220976.22

8707883.77

9036071.33

9364258.89

Gross Profit/Sales

9%

23%

27%

28%

29%

Net Profit After Tax/Sales

9%

23%

19%

19%

20%

Return on Investment

25%

32%

28%

28%

28%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax

7. NET PROFIT
RATIOS (%)

Return on Equity

20%

59%

56%

58%

60%

Annex 4: NET INCOME STATEMENT (in Birr): Continued

PRODUCTION
6

10

100%

100%

100%

100%

100%

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

46750000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

28144096.20

28144096.20

28144096.20

28144096.20

28144096.20

18605903.80

18605903.80

18605903.80

18605903.80

18605903.80

39.80

39.80

39.80

39.80

39.80

3005723.00

3005723.00

3005723.00

3005723.00

3005723.00

15600180.80

15600180.80

15600180.80

15600180.80

15600180.80

33.37

33.37

33.37

33.37

33.37

937678.74

468839.37

0.00

0.00

0.00

5. GROSS PROFIT

14662502.06

15131341.43

15600180.80

15600180.80

15600180.80

6. Income (Corporate) Tax

4398750.62

4539402.43

4680054.24

4680054.24

4680054.24

7. NET PROFIT

10263751.44

10591939.00

10920126.56

10920126.56

10920126.56

Gross Profit/Sales

31%

32%

33%

33%

33%

Net Profit After Tax/Sales

22%

23%

23%

23%

23%

Return on Investment

29%

28%

28%

28%

28%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance

RATIOS (%)

Return on Equity

66%

68%

70%

70%

70%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable

Year 1
16597875.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
16597875.00
0.00
15807500.00
790375.00
0.00
0.00
0.00
16597875.00
0.00
0.00
0.00
9958725.00
9958725.00
0.00
6639150.00
6639150.00
0.00
0.00
0.00
0.00
0.00

Year 2
39069947.37
5874197.37
0.00
0.00
0.00
0.00
0.00
5874197.37
0.00
33195750.00
15807500.00
15807500.00
1580750.00
0.00
0.00
0.00
39069947.37
0.00
0.00
0.00
23441968.42
23441968.42
0.00
15627978.95
15627978.95
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
45709988.95
15740388.95
2196590.39
604082.56
1208165.13
3570000.00
103100.07
8058450.80
0.00
29969600.00
31615000.00
0.00
1580750.00
3226150.00
0.00
0.00
45709988.95
3570000.00
3570000.00
0.00
23441968.42
23441968.42
0.00
15627978.95
15627978.95
0.00
0.00
0.00
3070041.59
0.00

2
51788970.44
25045520.44
2667288.33
733528.83
1467057.65
4335000.00
125192.95
15717452.68
0.00
26743450.00
31615000.00
0.00
1580750.00
6452300.00
0.00
0.00
51788970.44
4335000.00
4335000.00
0.00
19534973.68
19534973.68
0.00
15627978.95
15627978.95
0.00
0.00
3070041.59
9220976.22
0.00

3
57354859.47
33837559.47
3137986.28
862975.09
1725950.18
5100000.00
147285.82
22863362.10
0.00
23517300.00
31615000.00
0.00
1580750.00
9678450.00
0.00
0.00
57354859.47
5100000.00
5100000.00
0.00
15627978.95
15627978.95
0.00
15627978.95
15627978.95
0.00
0.00
12291017.81
8707883.77
0.00

4
62483936.06
42192786.06
3137986.28
862975.09
1725950.18
5100000.00
147285.82
31218588.70
0.00
20291150.00
31615000.00
0.00
1580750.00
12904600.00
0.00
0.00
62483936.06
5100000.00
5100000.00
0.00
11720984.21
11720984.21
0.00
15627978.95
15627978.95
0.00
0.00
20998901.58
9036071.33
0.00

Retained Profits

0.00

0.00

3070041.59

Annex 5: Projected Balance Sheet (in Birr):

9220976.22

8707883.77

9036071.33

Continued

PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

5
67941200.21
50876200.21
3137986.28
862975.09
1725950.18
5100000.00
147285.82
39902002.85
0.00
17065000.00
31615000.00
0.00
1580750.00
16130750.00
0.00
0.00
67941200.21
5100000.00
5100000.00
0.00
7813989.47
7813989.47
0.00
15627978.95
15627978.95
0.00
0.00
30034972.91
9364258.89
0.00
9364258.89

6
74297956.92
59642956.92
3137986.28
862975.09
1725950.18
5100000.00
147285.82
48668759.55
0.00
14655000.00
31615000.00
0.00
1580750.00
18540750.00
0.00
0.00
74297956.92
5100000.00
5100000.00
0.00
3906994.74
3906994.74
0.00
15627978.95
15627978.95
0.00
0.00
39399231.79
10263751.44
0.00
10263751.44

7
80982901.19
68737901.19
3137986.28
862975.09
1725950.18
5100000.00
147285.82
57763703.82
0.00
12245000.00
31615000.00
0.00
1580750.00
20950750.00
0.00
0.00
80982901.19
5100000.00
5100000.00
0.00
0.00
0.00
0.00
15627978.95
15627978.95
0.00
0.00
49662983.24
10591939.00
0.00
10591939.00

8
91903027.75
82068027.75
3137986.28
862975.09
1725950.18
5100000.00
147285.82
71093830.38
0.00
9835000.00
31615000.00
0.00
1580750.00
23360750.00
0.00
0.00
91903027.75
5100000.00
5100000.00
0.00
0.00
0.00
0.00
15627978.95
15627978.95
0.00
0.00
60254922.24
10920126.56
0.00
10920126.56

9
102823154.31
95398154.31
3137986.28
862975.09
1725950.18
5100000.00
147285.82
84423956.94
0.00
7425000.00
31615000.00
0.00
1580750.00
25770750.00
0.00
0.00
102823154.31
5100000.00
5100000.00
0.00
0.00
0.00
0.00
15627978.95
15627978.95
0.00
0.00
71175048.80
10920126.56
0.00
10920126.56

10
113743280.87
108728280.87
3137986.28
862975.09
1725950.18
5100000.00
147285.82
97754083.50
0.00
5015000.00
31615000.00
0.00
1580750.00
28180750.00
0.00
0.00
113743280.87
5100000.00
5100000.00
0.00
0.00
0.00
0.00
15627978.95
15627978.95
0.00
0.00
82095175.36
10920126.56
0.00
10920126.56

10

11