chemical and construction input industry development

Chemical and Construction Input

Industry Development Institute

Project Profile on the Establishment of

Cement Tiles

Information Technology and Technical Service

Directorate

Technical Service Team

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 .............................................................................. 4

3.2 Plant Capacity ..................................................................................................... 5

3.3 Production Program ............................................................................................ 6

4. Raw Materials and Utilities ................................................................... 6

4.1 Availability and Source of Raw Materials .......................................................... 6

4.2 Annual Requirement and Cost of Raw Materials and Utilities ........................... 6

5. Location and Site .................................................................................... 7

6. Technology and Engineering ................................................................. 8

6.1 Production Process .............................................................................................. 8

6.2 Machinery and Equipment ................................................................................ 10

6.3 Civil Engineering Cost ...................................................................................... 11

7. Human Resource and Training Requirement ................................... 11

7.1 Human Resource ............................................................................................... 11

7.2 Training Requirement ....................................................................................... 12

8. Financial Analysis ................................................................................. 12

8.1 Underlying Assumption .................................................................................... 12

8.2 Investment ......................................................................................................... 13

8.3 Production Costs ............................................................................................... 14

8.4 Financial Evaluation ......................................................................................... 14

9. Economic and Social Benefit and Justification.................................. 15

ANNEXES ................................................................................................... 17

1

1. Executive Summary

This profile envisages the opportunity of establishing cement tile manufacturing plant

especially for domestic consumption.

The present demand for the product is estimated at 1.19 million m2 per annum.

The plant will have a capacity of producing 55,000m2 of cement tiles per annum. The

machinery and equipments required are mixer moulds and press and they can be supplied

from both local and foreign sources. The cost of machinery & equipment is estimated at

Birr 2.8 million.

The unit will generate employment opportunities for 16 people.

The total investment cost including working capital is about of Birr 5.1 million. The net

present value (NPV) of the project is Birr 596,158 at annual discount rate of 18% and the

internal rate of return (IRR) is 21.3%.

2. Product Description and Application

Cement tiles are wall & floor tiles made from of cement together with sand, gravel &

optionally adding marble chips to the ingredient. The process of manufacturing is called

the “LENOBE” process, which at present is used in many factories. Equipments used to

produce are rubber moulds, vibrators, mixers and other items. The installation can be

made mobile. Tiles of various sizes can be produced. The most common ones rage from

surface sizes of 20 cm x 20 cm to 60cm x 40 cm having thickness in the rage of 1 to 3

cm.

2

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Cement tiles are not imported from abroad. The demand for cement tiles are supplied by

local private & public cement tiles manufacturing units. According to the Central

Statistics Authority publications, the annual production of cement tiles for the last five

years ranges between

Table 1: Local Production of Cement Tiles

Eth Year SQ M

1994 221,801

1995 395,916

1996 245,696

1997 485,868

1998 953,011

1999 465,779

2000 287,257

2001 112,616

2002 199,092

2003 413,731 Source: The CSA data

The demand for cement tiles is directly related to the increasing demand for housing

needs and demand of new construction. Thus, for the purpose of estimating present

demand, it was necessary to project the demand for housing and work backwards to

arrive at a corresponding demand.

3

3.1.2 Projected Demand

Time Trend Analysis

The future demand is projected using the linear projection formula. This formula assumes

that the current rapid growth in the demand of cement tiles will continues to rise in the

coming years as well.

The model summary is shown below in fig 1.1

Fig. 1

Trend Analysis Model Summary

The model summary shows that the demand project is reduced to 0.212 million square

meters in 2004 E.C. from 0.331 million square meters in 2018 E.C.

2

)

XX

YYXXb

and

xbya

where

bXaY

4

Table 2: Cement Tile projection using trend analysis

Year Forecast

(m2)

2004 331,447.93

2005 322,969.98

2006 314,492.02

2007 306,014.06

2008 297,536.10

2009 289,058.15

2010 280,580.19

2011 272,102.23

2012 263,624.27

2013 255,146.32

2014 246,668.36

2015 238,190.40

2016 229,712.44

2017 221,234.48

2018 212,756.53

However, the demand projection doesn’t show the real market scenario as the market was

suppressed by local supply of cement tiles. Hence, the major demand drivers are the real

GDP growth of the country. The country has registered a double digit growth of real

GDP. Accordingly, cement tile demand shall be estimated to grow at 10% each year

which is a conservative approach. Therefore, the projection is estimated as shown below

in fig.2.The demand is estimated to be 0.6 million square meter in 2025 E.C.

5

Table 2: Demand Projection of Cement Tiles

2004 325,265

2005 294,351

2006 295,912

2007 336,237

2008 366,409

2009 355,998

2010 362,760

2011 377,810

2012 395,827

2013 408,937

2014 418,293

2015 431,998

2016 447,230

2017 462,503

2018 477,171

2019 492,183

2020 508,439

2021 525,256

2022 542,421

2023 560,003

2024 578,226

2025 597,156

3.1.3 Pricing and Distribution

The average production price of cement tile per m2 in the year 1998 eth cal was Birr

39.89, according to CSA data. The current price is about Birr 75. Deducting 29% for

distributors’ margin of the cement tiles proposed in this project are expected to sell at

Birr 60 per m2.

3.2 Plant Capacity

A small scale plant having an annual production capacity of 55,000 m2 is more

appropriate. It is believed that the product will have adequate local market.

6

It is considered that the plant will operate single shift 275 days a year subtracting the

Sundays, National holidays (amounting to 65 days a year) and stoppages for maintenance

etc. Working in two or three shifts a day is possible to increase the supply.

3.3 Production Program

The plant will be made to start operation at 75% of its capacity during the first year.

Production will be made to rise to 85% of its capacity in the second year, and to full

capacity (100%) in the third year. It is assumed that full scale production will be

maintained starting from third year up to the fifteenth year.

As the plant is new and is equipped with new machinery production build-up is made to

start at reduced capacity and gradually rise to full capacity. This lower production level at

the initial stage is to develop substantial market outlets for the product. Machinery

operators will also get enough time to develop the required skills and experience.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Raw materials used by the plant are of local and foreign origin. Local raw materials are

sand, cement (grey), gravel and marble chips. Foreign materials include resins and

lubricants. The principal raw materials together with annual requirements and costs are

given in Table 2.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

An auxiliary material required by the plant consists of pigment, resins and packing

material. The quantity required for each material and costs incurred annually are

indicated in Table 3.

7

Table 2: Raw and Auxiliary Material Requirements at Full Capacity

No Item Qty

(tons)

Birr (in ‘000)

F. C L. C Total

1. Sand 843 - 110 110

2. Grey cement 477 - 458 458

3. Aggregate 1488 - 230.64 230.64

4. Marble chips 162 - 32 32

5. Pigments 10 278 - 278

6. Resins 7 75.6 - 75.6

7. packing material - 30 30

Total - 353.6 860.64 1214.24

The pigments are used to give different colours to the product, while the resins are used

to stick together the different layers of the tile and finally give compactness to the

product.

The pigments are used to give different colours to the product, while the resins are used

to stick together the different layers of the tile and finally give compactness to the

product.

Table 3: Annual Utilities Requirements (at full capacity)

No. Items Annual Consumption Cost in Birr

F.C L.C Total

1. Electricity 123750 Kwh - 68062.5 68062.5

2. Water 4500m3 11925.0 11925.0

3. Lubricants Lump sum 1,000.0 1000.0

4 Consumable ” 2000.00 2000.0

Total 1,000.00 81987.5 82987.5

5. Location and Site

Cement product manufacturing plant has to be located in towns that have abundant raw

material of sand /aggregate and demand for modern houses. The cement roof tile has to

start manufacturing in major towns like Bahir Dar.

8

6. Technology and Engineering

6.1 Production Process

The production of cement tiles (wall and floor type) use rubber moulds and vibrating

tables. The different materials such as sand, grey cement, aggregates (gravel) and marble

chips are assumed to be ready at the site of the plant. Aggregate and sand preparations are

not assumed to be part of the activity of this plant.

The ready made raw materials together with water are mixed in the right proportion by a

mixer and measured amounts are poured into the flexible moulds. This is done manually

for the purpose of this study. However, mixing and pouring can be done automatically.

Each mould containing the measured mix is made to travel the length of the vibrating

table for about one minute.

Allowing the concrete mix in the rubber mould to travel along, the vibrating table has the

advantage of eliminating air bubbles and water veins. In addition to this, the mix is

pressed with tiles press. This will create an exceptionally high compactness of the

aggregates and the cement in the mix.

After a period varying from one to two hours, a second and thicker layer of concrete is

added to the first, and the moulds are vibrated again. The result of the vibrations is a

perfect compaction and firm hold between the two layers. The tile hardens in the mould

and is then demoulded on the following day without the need of any demoulding

products. The concrete then dries in controlled conditions of temperature and humidity.

It is to be noted that during preparation of mix, pigments are added to give different

colours to the product.

Alternative technologies:

1. Using manual brick making machine

The machine imparts a compressive effort of not less than 3/Nmm2 on 4% cement-

stabilized laterite blocks to achieve a strength of not less than 1.6 N/mm2 which is

9

suitable and adequate for cost-effective bungalows. The machine is light-weight and can

readily be transported and used at sites especially in rural areas.

2. Fibre Concrete Roofing Tiles (Mador Tiles)

The production capacity is 600 to 700 bricks per an eight hour working day. Two bricks

are produced in one operation and the standard size of the product is 190 x 140 x 100

(mm) size. During the production and use of cement-stabilized bricks and blocks, great

economy is achieved because less cement than would normally be required in sandcrete

blocks is used. However, in the production of burnt bricks and blocks, the machine

produces unstabilized bricks which are then burnt in clamp kilns. An appropriate level of

technology is applied in the construction of clamp kilns using unskilled and semi-skilled

labour with the advantage of utilizing communal self help spirit of the rural areas.

10

3. Electrohydraulic Brick making Machine

With the desire to improve on and mechanize the brick production process, developed an

electro hydraulic brick making machine which produces two bricks in one single

operation. Due to its semi-automatic nature, the machine allows for mass production of

bricks to meet the high demand required on sites over short periods. This is in addition to

ensuring.

6.2 Machinery and Equipment

Machinery and equipments required by cement tile plant consists of a mixer, tile press,

vibrating tables, rubber moulds and fork lift trucks. The complete list of machinery and

equipment together with costs are shown in table 5.

Table 4: Machinery and Equipments

No

Item

Qty

(Pcs)

Cost (‘000 Birr)

F.C L.C Total

1. Vibrating Tables 2 90 - 90

2. Rubber Moulds 4500 1412 - 1412

3 Mixers 2 105 - 105

4. Tile press 1 316 - 316

5. Fork lift Trucks 2 600 - 600

6. Pallets 20 20

Sub-Total - 2,523 20 2543

freight, insurance,

Inland Transportation,

Bank charges, etc.

- - 254 254

Grand Total - 2,523 274 2797

Supplier Address

Contact person: Rachel Lei

Ningbo Hualong Machinery Factory

ShenXiShan JiShiGang Town,Yinzhou District,Ningbo,ZheJiang,China

Ning Bo China (Mainland) 315172

Tel: 86-574-88003997

Fax: 86-574-88000985

[email protected]

11

6.3 Civil Engineering Cost

Land requirement by the plant including provision for open space is estimated at 1200

m2. Land lease price is Birr 72000. For building, an ordinary shed of corrugated iron

sheet walling and ceiling is envisaged. The floor will be reinforced concrete, having a

strong foundation. Part of the building will be used to allow storage of the product to dry

properly. Open storage is also used for the already dried product and ready for dispatch.

The total building area estimated is 600 m2.at the unit cost (per m

2) of Birr 2000;

therefore, the total cost estimate of building will be Birr 1,200,000.

Land value is estimated at the rate of Birr 206 per m2. Thus, the total payment for land

holding will be birr 12,000.

7. Human Resource and Training Requirement

7.1 Human Resource

Table 5: Human Resource Requirement

No

Description

Qty. Monthly Annual

(No) Salary

Cost

(Birr)

A. Administration

1 Plant Manager 1 4500 54,000

2 Secretary 1 850 10,200

3 Accountant 1 1200 14,400

4 Sales man 1 1200 14,400

5 Clerk 1 750 9,000

6 General Service 3 300 10,800

B. Production

1 Technician 1 1500 18,000

2 Semi Skilled workers 3 850 30,600

3 Unskilled Workers 4 450 21,600

183,000

Benefits (20%) 36,600

Grand Total 219,600

12

7.2 Training Requirement

On job training can be provided curing and after the construction period. Birr 25,000 is

allotted in working capital to finance training.

8. Financial Analysis

8.1 Underlying Assumption

The financial analysis of milk powder producing plant is based on the data provided in

the preceding chapters and the following assumptions.

A. Construction and Finance

Box 1: Construction and Finance

Construction period 1 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 fixed investment

B. Depreciation

Box 2: Depreciation

Building 5%

Machinery and equipment 10%

Office furniture 10%

Vehicles 20%

Pre-production (amortization) 20%

13

C. Working Capital (Minimum Days of Coverage)

Box 3: Working Capital

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 initial investment and working capital at full capacity are shown in Table 7

below.

Table 6: Production Costs

Total Initial Investment

Item Cost Land 3,600.00

Building and civil works 1,200,000.00

Office equipment 50,000.00

Vehicles 250,000.00

Plant machinery & equipment 2,797,000.00

Total Fixed Investment 4,300,600.00

Pre production capital expenditure 215,030.00

Total Initial Investment 4,515,630.00

Working capital at full capacity 633,956.14

Total 5,149,586.14

*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.

14

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 2.45 million as

detailed in Table 8 below.

Table 7: Production Costs

Total Production Cost at Full Capacity

Items Cost

1. Raw materials 1,214,240.00

2. Utilities 82,987.50

3. Wages and Salaries 219,600.00

4. Spares and Maintenance 129,018.00

Factory costs 1,645,845.50

5. Depreciation 437,706.00

6. Financial costs 370,770.20

Total Production Cost 2,454,321.70

8.4 Financial Evaluation

I. Profitability

The project is profitable starting from the first year of operation. During the first year

Gross Profit/Sales equals 0.66% and then steady increases to reach 41.60% at the 8th

year

and then after. Likewise, Net Profit after Tax/Sales rises from 0.66% to 29.12%; Return

on Investment from 16.82% to 18.66% and Return on Equity from 0.80% to 46.66%.

II. Breakeven Analysis

The project wills break-even at 30.82% of capacity.

III. Payback Period

The project will payback at the 4th

year of operation.

IV. Simple Rate of Return

The simple rate of return is 18.5%.

15

V. Internal Rate of Return and Net Present Value

The internal rate of return is 21.3% and the NPV at 18% annual discounting rate is Birr

596,158.

VI. Sensitivity Analysis

The project will remain profitable during the first year even if the input prices increase up

to 15 %.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project

possesses wide range of benefits that complement the financial feasibility obtained

earlier. In general the envisaged project promotes the socio-economic goals and

objectives stated in the strategic plan of the Amhara National Regional State. These

benefits are listed as follows

A. Profit Generation

The project is found to be financially viable and earns a net profit of about Birr 7.5

million within the project life. Such result induces the project promoters to reinvest the

profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect Birr 2.9 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

That is, based on the projected figure we learn that in the project life an estimated amount

of Birr 31.6 million worth of import will be saved as a result of the proposed project. This

will create room for saving hard currency to be allocated on other vital and strategic

sectors

16

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 16 professionals as well as

support staffs..

E. Pro Environment Project

The proposed production process is environment friendly.

F. Diversification

The project accelerates industrialization and diversification of the economy.

17

ANNEXES

1

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 0 756,557 857,432 1,008,743 1,008,743

Raw Materials in Stock- Total 0 0 310,595 352,008 414,127 414,127

Raw Material-Local 0 0 28,931 32,788 38,575 38,575

Raw Material-Foreign 0 0 281,664 319,219 375,552 375,552

Factory Supplies in Stock 0 0 1,642 1,861 2,190 2,190

Spare Parts in Stock and Maintenance 0 0 10,556 11,963 14,075 14,075

Work in Progress 0 0 41,056 46,531 54,742 54,742

Finished Products 0 0 82,113 93,061 109,484 109,484

2. Accounts Receivable 0 0 270,000 306,000 360,000 360,000

3. Cash in Hand 0 0 18,510 20,978 24,680 24,680

CURRENT ASSETS 0 0 734,473 832,402 979,297 979,297

4. Current Liabilities 0 0 270,000 306,000 360,000 360,000

Accounts Payable 0 0 270,000 306,000 360,000 360,000

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 464,473 526,402 619,297 619,297

INCREASE IN NET WORKING CAPITAL 0 0 464,473 61,930 92,895 0

2

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 1,008,743 1,008,743 1,008,743 1,008,743 1,008,743 1,008,743

Raw Materials in Stock-Total 414,127 414,127 414,127 414,127 414,127 414,127

Raw Material-Local 38,575 38,575 38,575 38,575 38,575 38,575

Raw Material-Foreign 375,552 375,552 375,552 375,552 375,552 375,552

Factory Supplies in Stock 2,190 2,190 2,190 2,190 2,190 2,190

Spare Parts in Stock and Maintenance 14,075 14,075 14,075 14,075 14,075 14,075

Work in Progress 54,742 54,742 54,742 54,742 54,742 54,742

Finished Products 109,484 109,484 109,484 109,484 109,484 109,484

2. Accounts Receivable 360,000 360,000 360,000 360,000 360,000 360,000

3. Cash in Hand 24,680 24,680 24,680 24,680 24,680 24,680

CURRENT ASSETS 979,297 979,297 979,297 979,297 979,297 979,297

4. Current Liabilities 360,000 360,000 360,000 360,000 360,000 360,000

Accounts Payable 360,000 360,000 360,000 360,000 360,000 360,000

TOTAL NET WORKING CAPITAL REQUIREMENTS 619,297 619,297 619,297 619,297 619,297 619,297

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

3

Annex 2: Cash Flow Statement (in Birr)


Year 1 Year 2 1 2 3 4

TOTAL CASH INFLOW 2,257,815 2,877,112 2,745,000 2,841,000 3,354,000 3,300,000

1. Inflow Funds 2,257,815 2,877,112 270,000 36,000 54,000 0

Total Equity 903,126 1,150,845 0 0 0 0

Total Long Term Loan 1,354,689 1,726,267 0 0 0 0

Total Short Term Finances 0 0 270,000 36,000 54,000 0

2. Inflow Operation 0 0 2,475,000 2,805,000 3,300,000 3,300,000

Sales Revenue 0 0 2,475,000 2,805,000 3,300,000 3,300,000

Interest on Securities 0 0 0 0 0 0

3. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,257,815 2,257,815 2,695,553 2,267,320 2,788,428 2,598,400

4. Increase In Fixed Assets 2,257,815 2,257,815 0 0 0 0

Fixed Investments 2,150,300 2,150,300 0 0 0 0

Pre-production Expenditures 107,515 107,515 0 0 0 0

5. Increase in Current Assets 0 0 734,473 97,930 146,895 0

6. Operating Costs 0 0 1,140,128 1,286,183 1,505,266 1,505,266

7. Corporate Tax Paid 0 0 0 0 314,680 333,166

8. Interest Paid 0 0 820,952 369,715 308,096 246,476

9.Loan Repayments 0 0 0 513,493 513,493 513,493

10.Dividends Paid 0 0 0 0 0 0

Surplus (Deficit) 0 619,297 49,447 573,680 565,572 701,600

Cumulative Cash Balance 0 619,297 668,744 1,242,424 1,807,995 2,509,595

4

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

PRODUCTION

5 6 7 8 9 10


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 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000

Sales Revenue 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000




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 1,505,266 1,505,266 1,505,266 1,505,266 1,505,266 1,505,266

7. Corporate Tax Paid 351,651 398,039 416,525 435,010 435,010 435,010

8. Interest Paid 184,857 123,238 61,619 0 0 0

9. Loan Repayments 513,493 513,493 513,493 0 0 0

10. Dividends Paid 0 0 0 0 0 0

Surplus (Deficit) 744,733 759,965 803,098 1,359,724 1,359,724 1,359,724

Cumulative Cash Balance 3,254,328 4,014,293 4,817,391 6,177,115 7,536,839 8,896,563

5

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED


Year 1 Year 2 1 2 3 4

TOTAL CASH INFLOW 0 0 2,475,000 2,805,000 3,300,000 3,300,000

1. Inflow Operation 0 0 2,475,000 2,805,000 3,300,000 3,300,000

Sales Revenue 0 0 2,475,000 2,805,000 3,300,000 3,300,000




3. Increase in Fixed Assets 2,257,815 2,257,815 0 0 0 0

Fixed Investments 2,150,300 2,150,300 0 0 0 0

Pre-production Expenditures 107,515 107,515 0 0 0 0

4. Increase in Net Working Capital 0 0 464,473 61,930 92,895 0

5. Operating Costs 0 0 1,140,128 1,286,183 1,505,266 1,505,266

6. Corporate Tax Paid 0 0 0 0 314,680 333,166

NET CASH FLOW -2,257,815 -2,257,815 870,399 1,456,887 1,387,160 1,461,569

CUMULATIVE NET CASH FLOW -2,257,815 -4,515,630 -3,645,231 -2,188,344 -801,184 660,385

Net Present Value (at 18%) -2,257,815 -1,913,403 625,107 886,707 715,482 638,865

Cumulative Net present Value -2,257,815 -4,171,218 -3,546,110 -2,659,404 -1,943,922 -1,305,057

6

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION

5 6 7 8 9 10


1. Inflow Operation 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000

Sales Revenue 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000




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 1,505,266 1,505,266 1,505,266 1,505,266 1,505,266 1,505,266

6. Corporate Tax Paid 351,651 398,039 416,525 435,010 435,010 435,010

NET CASH FLOW 1,443,083 1,396,696 1,378,210 1,359,724 1,359,724 1,359,724

CUMULATIVE NET CASH FLOW 2,103,468 3,500,164 4,878,374 6,238,098 7,597,822 8,957,546

Net Present Value (at 18%) 534,564 438,458 366,656 306,558 259,795 220,165

Cumulative Net present Value -770,493 -332,036 34,621 341,179 600,974 821,139

Net Present Value (at 18%) 821,139.00

Internal Rate of Return 22.5%

7

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION

1 2 3 4 5

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

1. Total Income 2475000 2805000 3300000 3300000 3300000

Sales Revenue 2475000 2805000 3300000 3300000 3300000

Other Income 0 0 0 0 0

2. Less Variable Cost 1052437 1192762 1403250 1403250 1403250

VARIABLE MARGIN 1422563 1612238 1896750 1896750 1896750

(In % of Total Income) 57 57 57 57 57

3. Less Fixed Costs 525397 531127 539722 539722 539722

OPERATIONAL MARGIN 897166 1081111 1357028 1357028 1357028


4. Less Cost of Finance 820952 369715 308096 246476 184857

5. GROSS PROFIT 76214 711396 1048933 1110552 1172171

6. Income (Corporate) Tax 0 0 314680 333166 351651

7. NET PROFIT 76214 711396 734253 777386 820520

RATIOS (%)

Gross Profit/Sales 3.08% 25.36% 31.79% 33.65% 35.52%

Net Profit After Tax/Sales 3.08% 25.36% 22.25% 23.56% 24.86%

Return on Investment 18.02% 21.44% 20.30% 19.94% 19.58%

Return on Equity 3.71% 34.64% 35.75% 37.85% 39.95%

8

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

PRODUCTION

6 7 8 9 10

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

1. Total Income 3300000 3300000 3300000 3300000 3300000

Sales Revenue 3300000 3300000 3300000 3300000 3300000

Other Income 0 0 0 0 0

2. Less Variable Cost 1403250 1403250 1403250 1403250 1403250

VARIABLE MARGIN 1896750 1896750 1896750 1896750 1896750


3. Less Fixed Costs 446716 446716 446716 446716 446716

OPERATIONAL MARGIN 1450034 1450034 1450034 1450034 1450034


4. Less Cost of Finance 123238 61619 0 0 0

5. GROSS PROFIT 1326796 1388415 1450034 1450034 1450034

6. Income (Corporate) Tax 398039 416525 435010 435010 435010

7. NET PROFIT 928757 971891 1015024 1015024 1015024

RATIOS (%)

Gross Profit/Sales 40.21% 42.07% 43.94% 43.94% 43.94%

Net Profit After Tax/Sales 28.14% 29.45% 30.76% 30.76% 30.76%

Return on Investment 20.49% 20.13% 19.77% 19.77% 19.77%

Return on Equity 45.22% 47.32% 49.42% 49.42% 49.42%

9

Annex 5: Projected Balance Sheet (in Birr)


Year 1 Year 2 1 2 3 4

TOTAL ASSETS 2,257,815 5,134,927 5,481,141 5,715,044 5,989,804 6,253,698

1. Total Current Assets 0 619,297 1,403,217 2,074,826 2,787,292 3,488,892

Inventory on Materials and Supplies 0 0 322,793 365,832 430,391 430,391

Work in Progress 0 0 41,056 46,531 54,742 54,742

Finished Products in Stock 0 0 82,113 93,061 109,484 109,484

Accounts Receivable 0 0 270,000 306,000 360,000 360,000

Cash in Hand 0 0 18,510 20,978 24,680 24,680

Cash Surplus, Finance Available 0 619,297 668,744 1,242,424 1,807,995 2,509,595

Securities 0 0 0 0 0 0

2. Total Fixed Assets, Net of Depreciation 2,257,815 4,515,630 4,077,924 3,640,218 3,202,512 2,764,806

Fixed Investment 0 2,150,300 4,300,600 4,300,600 4,300,600 4,300,600

Construction in Progress 2,150,300 2,150,300 0 0 0 0

Pre-Production Expenditure 107,515 215,030 215,030 215,030 215,030 215,030

Less Accumulated Depreciation 0 0 437,706 875,412 1,313,118 1,750,824

3. Accumulated Losses Brought Forward 0 0 0 0 0 0

4. Loss in Current Year 0 0 0 0 0 0

TOTAL LIABILITIES 2,257,815 5,134,927 5,481,141 5,715,044 5,989,804 6,253,698

5. Total Current Liabilities 0 0 270,000 306,000 360,000 360,000

Accounts Payable 0 0 270,000 306,000 360,000 360,000

Bank Overdraft 0 0 0 0 0 0

6. Total Long-term Debt 1,354,689 3,080,956 3,080,956 2,567,463 2,053,971 1,540,478

Loan A 1,354,689 3,080,956 3,080,956 2,567,463 2,053,971 1,540,478

Loan B 0 0 0 0 0 0

7. Total Equity Capital 903,126 2,053,971 2,053,971 2,053,971 2,053,971 2,053,971

Ordinary Capital 903,126 2,053,971 2,053,971 2,053,971 2,053,971 2,053,971

Preference Capital 0 0 0 0 0 0

Subsidies 0 0 0 0 0 0

8. Reserves, Retained Profits Brought Forward 0 0 0 76,214 787,610 1,521,863

9.Net Profit After Tax 0 0 76,214 711,396 734,253 777,386

Dividends Payable 0 0 0 0 0 0

Retained Profits 0 0 76,214 711,396 734,253 777,386

10

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

PRODUCTION

5 6 7 8 9 10

TOTAL ASSETS 6,560,725 6,975,990 7,434,388 8,449,412 9,464,436 10,479,460

1. Total Current Assets 4,233,625 4,993,590 5,796,688 7,156,412 8,516,136 9,875,860

Inventory on Materials and Supplies 430,391 430,391 430,391 430,391 430,391 430,391

Work in Progress 54,742 54,742 54,742 54,742 54,742 54,742

Finished Products in Stock 109,484 109,484 109,484 109,484 109,484 109,484

Accounts Receivable 360,000 360,000 360,000 360,000 360,000 360,000

Cash in Hand 24,680 24,680 24,680 24,680 24,680 24,680

Cash Surplus, Finance Available 3,254,328 4,014,293 4,817,391 6,177,115 7,536,839 8,896,563

Securities 0 0 0 0 0 0

2. Total Fixed Assets, Net of Depreciation 2,327,100 1,982,400 1,637,700 1,293,000 948,300 603,600

Fixed Investment 4,300,600 4,300,600 4,300,600 4,300,600 4,300,600 4,300,600

Construction in Progress 0 0 0 0 0 0

Pre-Production Expenditure 215,030 215,030 215,030 215,030 215,030 215,030

Less Accumulated Depreciation 2,188,530 2,533,230 2,877,930 3,222,630 3,567,330 3,912,030

3. Accumulated Losses Brought Forward 0 0 0 0 0 0

4. Loss in Current Year 0 0 0 0 0 0

TOTAL LIABILITIES 6,560,725 6,975,990 7,434,388 8,449,412 9,464,436 10,479,460

5. Total Current Liabilities 360,000 360,000 360,000 360,000 360,000 360,000

Accounts Payable 360,000 360,000 360,000 360,000 360,000 360,000

Bank Overdraft 0 0 0 0 0 0

6. Total Long-term Debt 1,026,985 513,493 0 0 0 0

Loan A 1,026,985 513,493 0 0 0 0

Loan B 0 0 0 0 0 0

7. Total Equity Capital 2,053,971 2,053,971 2,053,971 2,053,971 2,053,971 2,053,971

Ordinary Capital 2,053,971 2,053,971 2,053,971 2,053,971 2,053,971 2,053,971

Preference Capital 0 0 0 0 0 0

Subsidies 0 0 0 0 0 0

8. Reserves, Retained Profits Brought Forward 2,299,249 3,119,769 4,048,526 5,020,417 6,035,441 7,050,465

9. Net Profit After Tax 820,520 928,757 971,891 1,015,024 1,015,024 1,015,024

Dividends Payable 0 0 0 0 0 0

Retained Profits 820,520 928,757 971,891 1,015,024 1,015,024 1,015,024

chemical and construction input industry development

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