Investment Office ANRS

Project Profile on the Establishment

of Electric Bulb 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..................................................................2
3.1 Market Study.................................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................................2
3.1.2 Projected Demand....................................................................................................................2
3.1.3 Pricing and Distribution..........................................................................................................3
3.2 Plant Capacity...............................................................................................................................3
3.3 Production Program.......................................................................................................................3
4. Raw Materials and Utilities..................................................................................................................3
4.1 Availability and Source of Raw Materials....................................................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities.....................................................4
5 Location and Site...................................................................................................................................4
6 Technology and Engineering................................................................................................................5
6.1 Production Process........................................................................................................................5
6.2 Machinery and Equipment............................................................................................................6
6.3 Civil Engineering Cost..................................................................................................................7
7 Human Resource and Training Requirement....................................................................................7
7.1 Human Resource...........................................................................................................................7
7.2 Training Requirement....................................................................................................................8
8 Financial Analysis.................................................................................................................................8
8.1 Underlying Assumption.................................................................................................................8
8.2 Investment.....................................................................................................................................9
8.3 Production Costs.........................................................................................................................10
8.4 Financial evaluation....................................................................................................................10
9 Economic and Social Benefit and Justification................................................................................11
ANNEXES.....................................................................................................................................................13
 1. Executive Summary
This project profile deals with the establishment of electric bulb producing plant in Amhara
National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for electric bulb is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 3 million annually. The
total investment cost of the project including working capital is estimated at Birr 5.83 million
and creates 61 jobs and Birr 573,120 of income annually.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project breaks even at 27.8% of capacity utilization and payback fully
the initial investment less working capital in second year of operation. The result further show
that the calculated IRR of the project is 26.8%

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

Electric bulbs are devices for producing a steady light while connected to an electric flow. They
are essentially used as daily necessities for providing light in houses, offices, factories, streets,
commercial buildings, schools, libraries, etc. Among the various types of electric bulbs, this
project idea is to manufacture general lighting service (GLS) lamps as they are the most
dominant bulbs in the Ethiopian market.

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 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

The demand for electric bulbs depends on the expansion of electricity in the country. During the
last 10 years, many urban areas are provided with electric power increasing the consumption of
electric bulbs. Currently, there is a program to provide electric power to many rural areas in the
country. In 2006, consumption of electric bulbs is estimated to be about 14.66 million; and this
consumption is projected to grow to 18.71 million in 2011. With the expansion of electric power
to rural areas, demand for electric bulbs could be larger than the projected figures.

3.1.2 Projected Demand

Table 1: Projected Demand for Electric Bulb

Year Projected
Demand for
Electric Bulb
2007/08 15,393,000
2008/09 16,162,650
2009/10 16,970,782
2010/11 17,819,321
2011/12 18,710,287
2012/13 19,645,802
2013/14 20,628,092
2014/15 21,659,496
2015/16 22,742,471
2016/17 23,879,595
2017/18 25,073,575
2018/19 26,327,253

3.1.3 Pricing and Distribution

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Based on the market research result the average retail price bulb is Birr 2.50. Deducting 20%
Margin for retailer and 10% for wholesaler and by taking the capacity of the envisaged plant in
to account, the selling price of Birr 1.75 has been estimated for the projection of the revenue of
the plant. The available retail and wholesale network shall be used by the envisaged plant to
reach its customer.

3.2 Plant Capacity

Thus, given the expected demand for electric bulb presented earlier, and the planned technology,
the envisaged plant is set to produce 3 million electric bulbs annually at full capacity.

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 85 percent capacity and then it grows to 95
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. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Raw materials or inputs to produce electric bulbs include flaring tube, exhausting tube, solid gas
rod, glass shell, filament, lead in wires (electrodes), cap (aluminum), capping, cement, solder
wire, argon gas, oxygen gas, and LPG gas. Most of these raw materials will be imported.

3
 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
are listed in Table 2 hereunder.

Table 2: Material and Utility Requirement

Total Cost
(Birr)
Material and Input Quantity L.C. F.C.
Claring tube 472,500
Exhausting tube 236,250
Solid gas rod 590mm/bulb 189,000
Glass shell 70,875
Filament 108,675
Lead in wires 118125 269,325
Cap (aluminum)
Capping, cement, 189,000
Solder wire 236,250
Argon oxygen and LPG gas 51%, 45%, 4% 472,500
Total Material Cost 118125 2,244,375
Utility 6000
Electricity 26,400
2400
Furnace Oil
Water 5,300
Total Utility Cost 40,100

5 Location and Site

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

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6 Technology and Engineering
6.1 Production Process

Manufacturing of electric bulbs passes through the following processing stages.

 Shell washing and drying;
 Glass tubes and rod cutting;
 Flaring;
 Stem making;
 Pig tailing with gas burner;
 Mounting;
 Guttering;
 Sealing;
 Exhausting;
 Ageing;
 Capping;
 Soldering; and
 Testing.

Alternative technology
The molten glass produced by melting raw materials is supplied by a plunger pump to the orifice
installed in the spout at the end of the feeder to form a gob. The formed gob is placed in the
mold to be molded in the form of mold by blowing in air. The molded bulb is annealed in the
annealing lehr to be followed by inspection and packing for delivery.

In this process, diverse products including bottles, tumblers, jars and electric bulbs are
manufactured depending upon the form of mold in the blowing machine.

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 6.2 Machinery and Equipment

Main machinery and equipment required to produce electric bulb include flare machine, stem
making machine, capping machine, glass preparation machine, mounting press, ageing machine,
vacuum pump, air flower. The quantities of machineries and equipment required for producing
the product is detailed in Table 3 below.

Table 3: Machinery and Equipment

Machinery and Equipment Quantity

Flare machine 2
Stem making machine 2
Capping machine 2
Glass preparation machine 2
Mounting press 1
Ageing machine 3
Vacuum pump 3
air flower 2
Total 15

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 1.12 million.

Suppliers Addresses
1. Maufacturer : Baiker AG
Alpenstrasse 1
Opfikon
Bülach, Zürich 8152
Switzerland Web site
Phone: 41 43-2116272

2. Manufacturer: Xebec Technology Company, Ltd.

-3-3, Koujimachi
Chiyoda, Tokyo
Japan
Phone: 81 332-393481

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 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 5,000m 2 where 1200m2 is allocated
to the building place. The cost of which is estimated at Birr 300,000 and 2.4 million respectively.
The estimated space is assumed to be sufficient to allow movement of operators and future
expansion.

7 Human Resource and Training Requirement

7.1 Human Resource
The list of required manpower for the envisaged plant is stated in Table 4 below

Table 4: Human Resource Requirement

Total
Monthly Annual
No. Salary/Wage Salary
Position Required (in Birr) (in Birr)
General Manager 1 3,500.00 42,000.00
Mechanical Engineer 1 2,500.00 30,000.00
Administration 1 2,000.00 24,000.00
Accountant 2 1,200.00 28,800.00
Secretary 2 850.00 20,400.00
Sales Clerk 4 600.00 28,800.00
Chemist 2 1,200.00 28,800.00
Store Keeper 2 600.00 14,400.00
Mechanic and Electrician 3 750.00 27,000.00
Supervisor 3 1,000.00 36,000.00
Operators 12 800.00 115,200.00
Daily Laborers 8 350.00 33,600.00
Cleaners 3 300.00 10,800.00
Messengers 2 250.00 6,000.00
Driver 2 700.00 16,800.00
Guards 3 400.00 14,400.00
Total 477,000.00
Employment Benefit (App 20%) 96,120.00
Grand Total 573,120.00
The envisaged plant therefore, creates 61 jobs and about Birr 573,120 of household income.

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 7.2 Training Requirement

Training of key personnel shall be conducted during early launch of the business. This can be
arranged with the suppliers of the plant machineries. The training should primarily focuses on the
production technology and machinery maintenance and trouble shooting. Birr 70,000 will be
allocated as training expense.

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of electric bulb producing plant is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

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 fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

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 Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 5.83
million as shown in Table 5 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 5: Total Initial Investment

Total Initial Investment

Item Cost
Land
15,000.00
Building and civil works 2,400,000.00
Office equipment 120,000.00
Vehicles 600,000.00
Plant machinery & equipment 1,120,000.00
Total Fixed Investment 4,255,000.00
Pre production capital expenditure 212,750.00
Total Initial Investment 4,467,750.00
Working capital at full capacity 1,364,076.46
Total 5,831,826.46
*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.

9
 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 3.93 million as detailed in
Table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1. Raw materials 2,362,500.00
2. Utilities 40,100.00
3. Wages and Salaries 573,120.00
4. Spares and Maintenance 127,650.00
Factory costs 3,103,370.00
5. Depreciation 406,550.00
6. Financial costs
419,891.50
Total Production Cost 3,929,811.50

8.4 Financial evaluation

I. Profitability

According to the projected income statement attached in the annex part 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 11.95%, 25.72% and 22.85% 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 27.8% of capacity utilization.

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 III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in second year.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 22.5%.

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
26.8% and the net present value at 18 % discount is Birr 1.7 million.

VI. Sensitivity Analysis

The envisaged plant is 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 by IRR value of 27.68% with payback period of third year.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it promotes the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. These
benefits are listed as follows

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 954453 per
year and Birr 9.5 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

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 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 3.54 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

Based on the projected figure we learn that in the project life an estimated amount of US Dollar
5.14 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
region. That is, it will provide permanent employment to 61 professionals as well as support
stuffs. Consequently the project creates income of Birr 573,120 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.

F. Diversification and InterSectoral Linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the ANRS as well as the country as a whole. It also has a potential to
strengthen the linkage between the manufacturing and the trade sub-sectors.

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ANNEXES

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

Capacity Utilization (%) 0 0 85% 95% 100% 100%

1. Total Inventory 0 0 1,946,015 2,174,958 2,289,430 2,289,430

Raw Materials in Stock- Total 0 0 843,413 942,638 992,250 992,250

Raw Material-Local 0 0 10,953 12,242 12,886 12,886

Raw Material-Foreign 0 0 832,459 930,395 979,364 979,364

Factory Supplies in Stock 0 0 3,255 3,638 3,829 3,829

Spare Parts in Stock and Maintenance 0 0 11,837 13,229 13,925 13,925

Work in Progress 0 0 81,366 90,939 95,725 95,725

Finished Products 0 0 162,733 181,878 191,450 191,450

2. Accounts Receivable 0 0 486,818 544,091 572,727 572,727

3. Cash in Hand 0 0 56,862 63,552 66,897 66,897

CURRENT ASSETS 0 0 1,646,283 1,839,964 1,936,804 1,936,804

4. Current Liabilities 0 0 486,818 544,091 572,727 572,727

Accounts Payable 0 0 486,818 544,091 572,727 572,727

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 1,159,465 1,295,873 1,364,076 1,364,076

INCREASE IN NET WORKING CAPITAL 0 0 1,159,465 136,408 68,204 0

 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 2,289,430 2,289,430 2,289,430 2,289,430 2,289,430 2,289,430

Raw Materials in Stock-Total 992,250 992,250 992,250 992,250 992,250 992,250

Raw Material-Local 12,886 12,886 12,886 12,886 12,886 12,886

Raw Material-Foreign 979,364 979,364 979,364 979,364 979,364 979,364

Factory Supplies in Stock 3,829 3,829 3,829 3,829 3,829 3,829

Spare Parts in Stock and Maintenance 13,925 13,925 13,925 13,925 13,925 13,925

Work in Progress 95,725 95,725 95,725 95,725 95,725 95,725

Finished Products 191,450 191,450 191,450 191,450 191,450 191,450

2. Accounts Receivable 572,727 572,727 572,727 572,727 572,727 572,727

3. Cash in Hand 66,897 66,897 66,897 66,897 66,897 66,897

CURRENT ASSETS 1,936,804 1,936,804 1,936,804 1,936,804 1,936,804 1,936,804

4. Current Liabilities 572,727 572,727 572,727 572,727 572,727 572,727

Accounts Payable 572,727 572,727 572,727 572,727 572,727 572,727

TOTAL NET WORKING CAPITAL REQUIREMENTS 1,364,076 1,364,076 1,364,076 1,364,076 1,364,076 1,364,076

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

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 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 2,233,875 3,597,951 4,949,318 5,044,773 5,278,636 5,250,000
1. Inflow Funds 2,233,875 3,597,951 486,818 57,273 28,636 0
Total Equity 893,550 1,439,181 0 0 0 0
Total Long Term Loan 1,340,325 2,158,771 0 0 0 0
Total Short Term Finances 0 0 486,818 57,273 28,636 0
2. Inflow Operation 0 0 4,462,500 4,987,500 5,250,000 5,250,000
Sales Revenue 0 0 4,462,500 4,987,500 5,250,000 5,250,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 2,233,875 2,233,875 5,169,104 4,106,708 4,520,340 4,374,513
4. Increase In Fixed Assets 2,233,875 2,233,875 0 0 0 0
Fixed Investments 2,127,500 2,127,500 0 0 0 0
Pre-production Expenditures 106,375 106,375 0 0 0 0
5. Increase in Current Assets 0 0 1,646,283 193,680 96,840 0
6. Operating Costs 0 0 2,608,871 2,909,953 3,060,494 3,060,494
7. Corporate Tax Paid 0 0 0 0 429,914 450,908
8. Interest Paid 0 0 913,950 419,892 349,910 279,928
9.Loan Repayments 0 0 0 583,183 583,183 583,183
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 1,364,076 -219,786 938,065 758,296 875,487
Cumulative Cash Balance 0 1,364,076 1,144,290 2,082,355 2,840,651 3,716,138

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 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000
Sales Revenue 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 4,325,526 4,325,303 4,276,316 3,644,146 3,644,146 3,644,146
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 3,060,494 3,060,494 3,060,494 3,060,494 3,060,494 3,060,494
7. Corporate Tax Paid 471,903 541,663 562,657 583,652 583,652 583,652
8. Interest Paid 209,946 139,964 69,982 0 0 0
9. Loan Repayments 583,183 583,183 583,183 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 924,474 924,697 973,684 1,605,854 1,605,854 1,605,854
Cumulative Cash Balance 4,640,613 5,565,309 6,538,993 8,144,848 9,750,702 11,356,556

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 4,462,500 4,987,500 5,250,000 5,250,000

1. Inflow Operation 0 0 4,462,500 4,987,500 5,250,000 5,250,000

Sales Revenue 0 0 4,462,500 4,987,500 5,250,000 5,250,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,233,875 2,233,875 3,768,336 3,046,361 3,558,612 3,511,403

3. Increase in Fixed Assets 2,233,875 2,233,875 0 0 0 0

Fixed Investments 2,127,500 2,127,500 0 0 0 0

Pre-production Expenditures 106,375 106,375 0 0 0 0

4. Increase in Net Working Capital 0 0 1,159,465 136,408 68,204 0

5. Operating Costs 0 0 2,608,871 2,909,953 3,060,494 3,060,494

6. Corporate Tax Paid 0 0 0 0 429,914 450,908

NET CASH FLOW -2,233,875 -2,233,875 694,164 1,941,139 1,691,388 1,738,597

CUMULATIVE NET CASH FLOW -2,233,875 -4,467,750 -3,773,586 -1,832,447 -141,059 1,597,538

Net Present Value (at 18%) -2,233,875 -1,893,114 498,538 1,181,437 872,399 759,957

Cumulative Net present Value -2,233,875 -4,126,989 -3,628,452 -2,447,015 -1,574,615 -814,659

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000

1. Inflow Operation 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000

Sales Revenue 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 3,532,397 3,602,157 3,623,151 3,644,146 3,644,146 3,644,146

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 3,060,494 3,060,494 3,060,494 3,060,494 3,060,494 3,060,494

6. Corporate Tax Paid 471,903 541,663 562,657 583,652 583,652 583,652

NET CASH FLOW 1,717,603 1,647,843 1,626,849 1,605,854 1,605,854 1,605,854

CUMULATIVE NET CASH FLOW 3,315,141 4,962,984 6,589,833 8,195,687 9,801,541 11,407,395

Net Present Value (at 18%) 636,254 517,299 432,804 362,050 306,822 260,018

Cumulative Net present Value -178,404 338,895 771,699 1,133,748 1,440,570 1,700,588

Net Present Value (at 18%) 1,700,588.29

Internal Rate of Return 26.8%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 85% 95% 100% 100% 100%

1. Total Income 4,462,500 4,987,500 5,250,000 5,250,000 5,250,000

Sales Revenue 4,462,500 4,987,500 5,250,000 5,250,000 5,250,000
Other Income 0 0 0 0 0
2. Less Variable Cost 2,364,336 2,642,493 2,781,571 2,781,571 2,781,571
VARIABLE MARGIN 2,098,164 2,345,007 2,468,429 2,468,429 2,468,429
(In % of Total Income) 47.02 47.02 47.02 47.02 47.02
3. Less Fixed Costs 651,086 674,011 685,473 685,473 685,473
OPERATIONAL MARGIN 1,447,079 1,670,997 1,782,956 1,782,956 1,782,956
(In % of Total Income) 32.43 33.50 33.96 33.96 33.96
4. Less Cost of Finance 913,949.75 419,891.50 349,909.59 279,927.67 209,945.75
5. GROSS PROFIT 533,128.93 1,251,105.26 1,433,046.21 1,503,028.13 1,573,010.05
6. Income (Corporate) Tax 0.00 0.00 429,913.86 450,908.44 471,903.01
7. NET PROFIT 533,128.93 1,251,105.26 1,003,132.35 1,052,119.69 1,101,107.03
RATIOS (%)
Gross Profit/Sales 11.95% 25.08% 27.30% 28.63% 29.96%
Net Profit After Tax/Sales 11.95% 25.08% 19.11% 20.04% 20.97%
Return on Investment 25.72% 28.99% 23.20% 22.84% 22.48%
Return on Equity 22.85% 53.63% 43.00% 45.10% 47.20%

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

1. Total Income 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000

Sales Revenue 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000
Other Income 0 0 0 0 0
2. Less Variable Cost 2,781,571 2,781,571 2,781,571 2,781,571 2,781,571
VARIABLE MARGIN 2,468,429 2,468,429 2,468,429 2,468,429 2,468,429
(In % of Total Income) 47.02 47.02 47.02 47.02 47.02
3. Less Fixed Costs 522,923 522,923 522,923 522,923 522,923
OPERATIONAL MARGIN 1,945,506 1,945,506 1,945,506 1,945,506 1,945,506
(In % of Total Income) 37.06 37.06 37.06 37.06 37.06
4. Less Cost of Finance 139,964 69,982 0 0 0
5. GROSS PROFIT 1,805,542 1,875,524 1,945,506 1,945,506 1,945,506
6. Income (Corporate) Tax 541,663 562,657 583,652 583,652 583,652
7. NET PROFIT 1,263,879 1,312,867 1,361,854 1,361,854 1,361,854
RATIOS (%)
Gross Profit/Sales 34.39% 35.72% 37.06% 37.06% 37.06%
Net Profit After Tax/Sales 24.07% 25.01% 25.94% 25.94% 25.94%
Return on Investment 24.07% 23.71% 23.35% 23.35% 23.35%
Return on Equity 54.18% 56.28% 58.38% 58.38% 58.38%
Annex 5: Projected Balance Sheet (in Birr)

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 CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 2,233,875 5,831,826 6,851,774 7,576,969 8,025,555 8,494,492
1. Total Current Assets 0 1,364,076 2,790,574 3,922,319 4,777,455 5,652,942
Inventory on Materials and Supplies 0 0 858,504 959,504 1,010,004 1,010,004
Work in Progress 0 0 81,366 90,939 95,725 95,725
Finished Products in Stock 0 0 162,733 181,878 191,450 191,450
Accounts Receivable 0 0 486,818 544,091 572,727 572,727
Cash in Hand 0 0 56,862 63,552 66,897 66,897
Cash Surplus, Finance Available 0 1,364,076 1,144,290 2,082,355 2,840,651 3,716,138
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 2,233,875 4,467,750 4,061,200 3,654,650 3,248,100 2,841,550
Fixed Investment 0 2,127,500 4,255,000 4,255,000 4,255,000 4,255,000
Construction in Progress 2,127,500 2,127,500 0 0 0 0
Pre-Production Expenditure 106,375 212,750 212,750 212,750 212,750 212,750
Less Accumulated Depreciation 0 0 406,550 813,100 1,219,650 1,626,200
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 2,233,875 5,831,826 6,851,774 7,576,969 8,025,555 8,494,492
5. Total Current Liabilities 0 0 486,818 544,091 572,727 572,727
Accounts Payable 0 0 486,818 544,091 572,727 572,727
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1,340,325 3,499,096 3,499,096 2,915,913 2,332,731 1,749,548
Loan A 1,340,325 3,499,096 3,499,096 2,915,913 2,332,731 1,749,548
Loan B 0 0 0 0 0 0
7. Total Equity Capital 893,550 2,332,731 2,332,731 2,332,731 2,332,731 2,332,731
Ordinary Capital 893,550 2,332,731 2,332,731 2,332,731 2,332,731 2,332,731
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 533,129 1,784,234 2,787,367
9.Net Profit After Tax 0 0 533,129 1,251,105 1,003,132 1,052,120
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 533,129 1,251,105 1,003,132 1,052,120

Annex 5: Projected Balance Sheet (in Birr): Continued

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 PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 9,012,416 9,693,113 10,422,797 11,784,651 13,146,505 14,508,359
1. Total Current Assets 6,577,416 7,502,113 8,475,797 10,081,651 11,687,505 13,293,359
Inventory on Materials and Supplies 1,010,004 1,010,004 1,010,004 1,010,004 1,010,004 1,010,004
Work in Progress 95,725 95,725 95,725 95,725 95,725 95,725
Finished Products in Stock 191,450 191,450 191,450 191,450 191,450 191,450
Accounts Receivable 572,727 572,727 572,727 572,727 572,727 572,727
Cash in Hand 66,897 66,897 66,897 66,897 66,897 66,897
Cash Surplus, Finance Available 4,640,613 5,565,309 6,538,993 8,144,848 9,750,702 11,356,556
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 2,435,000 2,191,000 1,947,000 1,703,000 1,459,000 1,215,000
Fixed Investment 4,255,000 4,255,000 4,255,000 4,255,000 4,255,000 4,255,000
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 212,750 212,750 212,750 212,750 212,750 212,750
Less Accumulated Depreciation 2,032,750 2,276,750 2,520,750 2,764,750 3,008,750 3,252,750
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 9,012,416 9,693,113 10,422,797 11,784,651 13,146,505 14,508,359
5. Total Current Liabilities 572,727 572,727 572,727 572,727 572,727 572,727
Accounts Payable 572,727 572,727 572,727 572,727 572,727 572,727
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1,166,365 583,183 0 0 0 0
Loan A 1,166,365 583,183 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2,332,731 2,332,731 2,332,731 2,332,731 2,332,731 2,332,731
Ordinary Capital 2,332,731 2,332,731 2,332,731 2,332,731 2,332,731 2,332,731
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 3,839,486 4,940,593 6,204,473 7,517,339 8,879,193 10,241,047
9. Net Profit After Tax 1,101,107 1,263,879 1,312,867 1,361,854 1,361,854 1,361,854
Dividends Payable 0 0 0 0 0 0
Retained Profits 1,101,107 1,263,879 1,312,867 1,361,854 1,361,854 1,361,854

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