Investment Office ANRS

PROJECT PROFILE ON THE ESTABLISHMENT

OF FORMICA SHEETS MAKING 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.............................................................................. 2
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........................... 3
5. Location and Site .................................................................................... 5
6. Technology and Engineering................................................................. 5
6.1 Production Process.............................................................................................. 5
6.2 Machinery and Equipment.................................................................................. 5
6.3 Civil Engineering Cost........................................................................................ 7
7. Human Resource and Training Requirement ..................................... 7
7.1 Human Resource................................................................................................. 7
7.2 Training Requirement ......................................................................................... 7
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 profile envisages the establishment of Formica sheet producing plant. The plant has
a capacity of producing 330 tons of formaica sheets per year.

The present countrywide demand is estimated at 200 tons per annum. The annual future
countrywide demand is expected to grow to 326 tons in the year in the year 2018. The
envisage plant will start operating below half capacity because of the limitation in
demand.

The Total Initial Investment including working capital is estimated at Birr 15.83 million
of which Birr 2.8 million is for plant machinery and equipments.

The plant will create employment opportunities for 52 persons.

The project is financially viable with an internal rate of return (IRR) of 28.8% and a net
present value (NPV) of Birr 11,996,152 at 18 % annual discount rate.

2. Product Description and Application

Formica (veneer) sheets or decorative laminate are characterized by a hard surface which
is highly resistant to damage by scratching, heat and moisture. Formica sheets are mainly
used in the furniture and joinery industry. Many table tops, cupboards, drawers, and other
similar furniture are made from Formica sheets. In the furniture industry, Formica sheets
are replacing plywood or veneer made from wood. Formica sheets come in various
colours and designs including wood grain and abstract patterns. The most popular
decorative Formica sheets have one millimetres thickness of 1.2 m x 2.44m size.

High Pressure Laminate Formica sheets resist cigarette and fire, environment friendly,
can be produced in any colours.

1
 3. Market Study, Plant Capacity and Production
Program

3.1 Market Study

3.1.1 Present Demand and Supply

All the Formica sheet requirements of the country are imported. The current demand is
estimated to be equal to 200 tons per year. It is expected to grow at about 5% each year.

3.1.2 Projected Demand

The projected demand is shown in Table 1.

Table 1: Projected Demand

Projected
Demand
Year (ton)
2008 200
2009 210
2010 221
2011 232
2012 243
2013 255
2014 268
2015 281
2016 295
2017 310
2018 326

3.1.3 Pricing and Distribution

After consulting knowledgeable people and making comparison with actual import parity
quotations, the current price of Formica sheet is considered to be Birr 80, 000 per ton.
Distribution of the item could be undertaken thought existing wholesale and retail

2
 3.2 Plant Capacity

The minimum possible plant capacity is 330 tons of Formica per annum; and therefore
the plant capacity is predetermined by the technology itself. It is assumed that the plant
will operate in one shift a day for 275 working days per annum. The working days are set
by deducting Sundays, public holidays and considering maintenance.

3.3 Production Program

Based on the nature of the demand discussed in Section 3, Production should start at low
capacity level. It starts at 45% capacity and increases its capacity by 5% per annum until
the seventh year. Starting from the eighth year, it will produce at capacity. However, if
there exits opportunities to export, the plant may increase its capacity at earlier stages.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The main raw materials are papers such as Kraft, base and tissue papers; phenol,
formaldehyde, melamine formaldehyde and industrial alcohol. The paper inputs could be
obtained from local sources and the other inputs will be imported.

4.2 Annual Requirement and Cost of Raw Materials and

Utilities

The main raw materials are papers such as Kraft, base and tissue papers; Bopp film,
phenol formaldehyde, melamine formaldehyde and industrial alcohol. The paper inputs
could be obtained from local sources and the other inputs will be imported.

3
 Table 2: Annual Raw Material Requirement at Full Capacity
Items Unit Quantity Price
Unit FC
Base paper (50-80
gm) ton
Kraft paper (150-
160 gm 5 layers) ton
T
i
s
s
u
e
p
a
p
e
r
(
3
0
g
m
) ton 16 90000
Bopp film pcs
Phenol
formaldehyde ton
M
e
l
a
m
i
n
e
f
o
r
m
a
l
d
e
h
y
d
e ton 61 15752 960,872
139 6000 834,000

Total
Note: The FCs are Customs Authority’s 2007 data (CIF value + 20%), the LCs – on market study

4
The annual electricity, water and fuel requirement, at full capacity production, is about
1,080,000 kwh, 400m2 1t.respectively and the total cost of utilities is estimated to be Birr
594,000 and Birr 1060, respectively.

5. Location and Site

Either Combolcha or Debre Birhan can be appropriate location for the plant. These cities
are selected based of the availability of infrastructure and vicinity to greater market.

6. Technology and Engineering

6.1 Production Process

Resin preparation, impregnation, assembling, curing and finishing are the major
production processes. Phenol formaldehyde and melamine formaldehyde are prepared; in
the preparation plant to impregnate the Kraft paper and the decorative base paper
respectively. The impregnated paper is then stored in specified conditions. The barrier
paper (Kraft paper), the decorative and the tissue papers are stacked in a specified manner
on 55 press plates and the curing process is carried out under controlled parameters on
hydraulic press. Finally the finishing operations take place.

The available alternative technologies are based on varying degrees of automations.

6.2 Machinery and Equipment

Main machinery and equipment needed include resin preparation plant, hydraulic press,
impregnating plant, curing and trimming machines, material handling equipment, vacuum
press plates and laboratory and testing equipments. The details are shown in Table 3.

Table 3: Required Machineries & Equipments

No. Description Qty.

1 Resin preparation plant 2
2 Hydraulic press with automatic loading and 1

5
 unloading attachment
3 Impregnating plant 1
4 Curing and trimming machine 2
5 Material handling(push-pull arrangement,
1set
moving trolleys, pallet trucks/forklift, etc
6 Vacuum press plates (moulds, lifting device
1set
at book preparation and break down station)
7 Vacuum cleaning arrangement 1set
8 Lab.& Testing equipments 1set

The total cost of machinery and equipment is about Birr 2,794,000. The machines and
equipments can be imported from China.

Supplier Address:
Company Name: Maanshan Hudong Machine Tool Manufacturing Co., Ltd.
Street Address: Bowang Economic Special Zone
City: ma'anshan
Province/State: Anhui
Country/Region: China
Zip: 243131
Telephone: 86-0555-6769191
Mobile Phone: 13721222144
Fax: 86-0555-6767858
Website: http://www.ahhudong.com, http://hudong.en.alibaba.co

6
 6.3 Civil Engineering Cost

A total of 6000 m2 area is required, of the 4000 m2 is built up area for production, stores
and offices. The total lease value of the land is estimated at Birr 360,000 and construction
and installation cost at Birr 8,000,000.

7. Human Resource and Training Requirement

7.1 Human Resource

The human resource requirement at full capacity is given in Table 4.

Table 4: Human Resource Requirements at Full Capacity

Job Title No. Monthly Annual

1 General Manger 1 4,500.00 54,000.00
2 Secretary 1 1,100.00 13,200.00
3 Production Supervisor 1 2,500.00 30,000.00
4 Accountant 1 1,600.00 19,200.00
5 Casher 1 800.00 9,600.00
6 Skilled (Operators and technicians) 10 1,800.00 216,000.00
7 Unskilled (Labourers) 20 300.00 72,000.00
8 Clerks 4 500.00 24,000.00
9 Personnel Head 1 1,600.00 19,200.00
10 Security 6 300.00 21,600.00
11 Genitor 6 300.00 21,600.00
12 Total 52 500,400.00
Employment Benefits 20% of Annual
13 Salary 100,080.00
Grand Total 600,480.00

7.2 Training Requirement

Trainings are important. Birr 60,000 is allotted in working capital for financing the
trainings.

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 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of this 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 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

Box 2: Depreciation

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

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 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 is estimated at Birr 15.83 million of which Birr 2.79 million
is for plant machinery and equipments. The detail is shown in Table 5.

Table 5: Initial Investment and Working Capita

Total Initial Investment

Item Cost
Land 18,000.00
Building and civil works
8,000,000.00
Office equipment
50,000.00
Vehicles
250,000.00
Plant machinery & equipment
2,794,000.00
Total Fixed Investment
11,112,000.00
Pre production capital expenditure*
555,600.00
Total Initial Investment
11,667,600.00
Working capital at full capacity
4,159,752.80
Total 15,827,352.80
*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 is estimated at Birr 19.95 million. The details
are shown at Table 6.

Table 6: Production Costs at Full Capacity

Total Production Cost at Full Capacity

Items Cost
1. Raw materials 15,104,492.00
2. Utilities 595,060.00
3. Wages and Salaries 600,480.00
4. Spares and Maintenance 333,360.00
Factory costs 16,633,392.00
5. Depreciation 845,520.00
6. Financial costs
2,467,664.49
Total Production Cost 19,946,576.49

8.4 Financial Evaluation

I. Profitability
The income statement shows that the proposed project generates profit starting from the
first year of operation. Profits starts at undiscounted Birr 1.03 million in first year and
reach at about 6.38 million in the eight year of the project life. Gross Profit to Sales starts
at 8.70% and reach at 34.55% at eight year. The total profit to be earned during the whole
ten years of operation is about Birr 40.48 million. These indicators prove that the project
is profitable.

II. Breakeven Analysis

The breakeven analysis shows that the Total Revenue equals the Total Cost at 7.1% of
capacity which is achieved at the first year of operation.

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 III. Payback Period

The project pays back its initial investment at the fourth year of its operation.

IV. Simple Rate of Return

The simple interest rate is 25.3%.

V. Internal Rate of Return and Net Present Value

The Internal Rate of Return is 28.8% and the Net Present Value at 18% discount rate per
annum is Birr 11,996,152.

VI. Sensitivity Analysis

A 10% reduction on sales reduced the total profit to Birr 26.42 million; while a 10%
increase in priced reduces it to Birr 31.83 million.

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 total profit of Birr 40.48 million
within the project life.

B. Tax Revenue

In the project life under consideration, the government will collect about Birr 12.64
million from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT).

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 C. Import Substitution and Foreign Exchange Saving

The project has strong import substitution effect. Furthermore, there is a possibility to
engage in international market since the product has sustainable international demand.

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to 52 citizens of the

country. That is, it will provide permanent employment to professionals as well as
support staffs. Consequently the project creates income of Birr 600480 per year for its
workers. This would be one of the commendable accomplishments of the project.

E. Diversification and InterSectoral linkage.

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

12
ANNEXES

13
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
Capacity Utilization (%) 0 0 45% 50% 55% 60%
1. Total Inventory 0 0 4,205,836 4,673,151 5,140,466 5,607,781
Raw Materials in Stock- Total 0 0 1,768,674 1,965,194 2,161,713 2,358,232
Raw Material-Local 0 0 399,100 443,444 487,788 532,133
Raw Material-Foreign 0 0 1,369,575 1,521,750 1,673,925 1,826,100
Factory Supplies in Stock 0 0 8,581 9,534 10,487 11,441
Spare Parts in Stock and Maintenance 0 0 16,365 18,183 20,002 21,820
Work in Progress 0 0 214,514 238,349 262,184 286,019
Finished Products 0 0 429,028 476,698 524,367 572,037
2. Accounts Receivables 0 0 842,400 936,000 1,029,600 1,123,200
3. Cash in Hand 0 0 58,690 65,211 71,732 78,254
CURRENT ASSETS 0 0 3,338,252 3,709,169 4,080,085 4,451,002
4. Current Liabilities 0 0 842,400 936,000 1,029,600 1,123,200
Accounts Payable 0 0 842,400 936,000 1,029,600 1,123,200
TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 2,495,852 2,773,169 3,050,485 3,327,802
INCREASE IN NET WORKING CAPITAL 0 0 2,495,852 277,317 277,317 277316.85

1
 Annex 1: Continued
PRODUCTION YEARS
5 6 7 8 9 10
Capacity Utilization (%) 65% 70% 75% 100% 100% 100%
1. Total Inventory 6,075,096 6,542,411 7,009,726 9,346,302 9,346,302 9,346,302
Raw Materials in Stock-Total 2,554,752 2,751,271 2,947,790 3,930,387 3,930,387 3,930,387
Raw Material-Local 576,477 620,822 665,166 886,888 886,888 886,888
Raw Material-Foreign 1,978,275 2,130,450 2,282,625 3,043,499 3,043,499 3,043,499
Factory Supplies in Stock 12,394 13,348 14,301 19,068 19,068 19,068
Spare Parts in Stock and Maintenance 23,638 25,457 27,275 36,367 36,367 36,367
Work in Progress 309,853 333,688 357,523 476,698 476,698 476,698
Finished Products 619,707 667,377 715,046 953,395 953,395 953,395
2. Accounts Receivables 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800
3. Cash in Hand 84,775 91,296 97,817 130,423 130,423 130,423
CURRENT ASSETS 4,821,919 5,099,236 5,376,553 6,763,137 6,763,137 6,763,137
4. Current Liabilities 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800
Accounts Payable 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800
TOTAL NET WORKING CAPITAL REQUIREMENTS 3,605,119 3,882,436 4,159,753 5,546,337 5,546,337 5,546,337
INCREASE IN NET WORKING CAPITAL 277316.85 277316.85 277316.85 1386584.3 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 5,833,800 9,993,553 12,722,400 13,293,600 14,613,600 15,933,600
1. Inflow Funds 5,833,800 9,993,553 842,400 93,600 93,600 93600
Total Equity 2,333,520 3,997,421 0 0 0 0
Total Long Term Loan 3,500,280 5,996,132 0 0 0 0
Total Short Term Finances 0 0 842,400 93,600 93,600 93600
2. Inflow Operation 0 0 11,880,000 13,200,000 14,520,000 15,840,000
Sales Revenue 0 0 11,880,000 13,200,000 14,520,000 15,840,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 5,833,800 5,833,800 13,339,256 11,450,302 13,147,320 13,986,989
4. Increase In Fixed Assets 5,833,800 5,833,800 0 0 0 0
Fixed Investments 5,556,000 5,556,000 0 0 0 0
Pre-production Expenditures 277,800 277,800 0 0 0 0
5. Increase in Current Assets 0 0 3,338,252 370,917 370,917 370916.85
6. Operating Costs 0 0 7,533,340 8,357,081 9,180,822 10,004,563
7. Corporate Tax Paid 0 0 0 0 1,063,205 1,269,061
8. Interest Paid 0 0 2,467,664 1,139,569 949,641 759,713
9.Loan Repayments 0 0 0 1,582,735 1,582,735 1,582,735
10.Dividends Paid 0 0 0 0 0 0
Surplus Deficit) 0 4,159,753 -616,856 1,843,298 1,466,280 1,946,611
Cumulative Cash Balance 0 4,159,753 3,542,897 5,386,195 6,852,475 8,799,086

3
4
 Annex 2: Continued
PRODUCTION YEARS
5 6 7 8 9 10
TOTAL CASH INFLOW 17,253,600 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000
1. Inflow Funds 93600 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 93600 0 0 0 0 0
2. Inflow Operation 17,160,000 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000
Sales Revenue 17,160,000 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 14,826,658 15,621,063 16,460,732 20,717,408 19,330,824 19,330,824
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 370916.85 277316.85 277316.85 1386584.3 0 0
6. Operating Costs 10,828,304 11,652,045 12,475,786 16,594,491 16,594,491 16,594,491
7. Corporate Tax Paid 1,474,917 1,729,110 1,934,966 2,736,333 2,736,333 2,736,333
8. Interest Paid 569,785 379,856 189,928 0 0 0
9. Loan Repayments 1,582,735 1,582,735 1,582,735 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus Deficit) 2,426,942 2,858,937 3,339,268 5,682,592 7,069,176 7,069,176
Cumulative Cash Balance 11,226,028 14,084,965 17,424,233 23,106,825 30,176,001 37,245,177

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 Annex 3: Discounted Cash Flow-Total Capital Invested (Birr)
CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 11,880,000 13,200,000 14,520,000 15,840,000
1. Inflow Operation 0 0 11,880,000 13,200,000 14,520,000 15,840,000
Sales Revenue 0 0 11,880,000 13,200,000 14,520,000 15,840,000
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 5,833,800 5,833,800 10,029,191 8,634,397 9,458,138 11,550,941
3. Increase in Fixed Assets 5,833,800 5,833,800 0 0 0 0
Fixed Investments 5,556,000 5,556,000 0 0 0 0
Pre-production Expenditures 277,800 277,800 0 0 0 0
4. Increase in Net Working Capital 0 0 2,495,852 277,317 277,317 277316.8534
5. Operating Costs 0 0 7,533,340 8,357,081 9,180,822 10,004,563
6. Corporate Tax Paid 0 0 0 0 0 1,269,061
NET CASH FLOW -5,833,800 -5,833,800 1,850,809 4,565,603 5,061,862 4,289,059
CUMULATIVE NET CASH FLOW -5,833,800 -11,667,600 -9,816,791 -5,251,189 -189,327 4,099,732
Net Present Value (at 18%) -5,833,800 -4,943,898 1,329,222 2,778,767 2,610,852 1,874,787
Cumulative Net present Value -5,833,800 -10,777,698 -9,448,476 -6,669,710 -4,058,858 -2,184,070

6
 Annex 3: Continued
PRODUCTION YEARS
5 6 7 8 9 10
TOTAL CASH INFLOW 17,160,000 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000
1. Inflow Operation 17,160,000 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000
Sales Revenue 17,160,000 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 12,580,538 13,658,471 14,688,068 20,717,408 19,330,824 19,330,824
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 277316.8534 277316.8534 277316.8534 1386584.267 0 0
5. Operating Costs 10,828,304 11,652,045 12,475,786 16,594,491 16,594,491 16,594,491
6. Corporate Tax Paid 1,474,917 1,729,110 1,934,966 2,736,333 2,736,333 2,736,333
NET CASH FLOW 4,579,462 4,821,529 5,111,932 5,682,592 7,069,176 7,069,176
CUMULATIVE NET CASH FLOW 8,679,194 13,500,723 18,612,654 24,295,246 31,364,422 38,433,599
Net Present Value (at 18%) 1,696,377 1,513,599 1,359,969 1,281,175 1,350,668 1,144,634

Cumulative Net present Value -487,693 1,025,905 2,385,874 3,667,049 5,017,717 6,162,352
Net Present Value (at 18%) 11996151.65
Internal Rate of Return 29%

7
 Annex 4: NET INCOME STATEMENT (in Birr)
PRODUCTION YEARS
1 2 3 4 5
Capacity Utilization (%) 45% 50% 55% 60% 65%
1. Total Income 11,880,000 13,200,000 14,520,000 15,840,000 17,160,000
Sales Revenue 11,880,000 13,200,000 14,520,000 15,840,000 17,160,000
Other Income 0 0 0 0 0
2. Less Variable Cost 7,305,583 8,117,315 8,929,046 9,740,777 10,552,509
VARIABLE MARGIN 4,574,417 5,082,685 5,590,954 6,099,223 6,607,491
(In % of Total Income) 38.5 38.5 38.5 38.5 38.5
3. Less Fixed Costs 1,073,276 1,085,286 1,097,296 1,109,305 1,121,315
OPERATIONAL MARGIN 3,501,140 3,997,399 4,493,658 4,989,917 5,486,176
(In % of Total Income) 29.5 30.3 30.9 31.5 32.0
4. Less Cost of Finance 2,467,664 1,139,569 949,641 759,713 569,785
5. GROSS PROFIT 1,033,476 2,857,830 3,544,017 4,230,204 4,916,392
6. Income (Corporate) Tax 0 0 1063205.165 1,269,061 1,474,917
7. NET PROFIT 1,033,476 2,857,830 2,480,812 2,961,143 3,441,474
RATIOS (%)
Gross Profit/Sales 8.70% 21.65% 24.41% 26.71% 28.65%
Net Profit After Tax/Sales 8.70% 21.65% 17.09% 18.69% 20.06%
Return on Investment 24.72% 27.68% 23.31% 24.81% 26.26%
Return on Equity 16.32% 45.14% 39.19% 46.77% 54.36%

8
 Annex 4: Continued
PRODUCTION YEARS
6 7 8 9 10
Capacity Utilization (%) 70% 75% 100% 100% 100%

1. Total Income 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000

Sales Revenue 18,480,000 19,800,000 26,400,000 26,400,000 26,400,000

Other Income 0 0 0 0 0
2. Less Variable Cost 11,364,240 12,175,972 16,234,629 16,234,629 16,234,629
VARIABLE MARGIN 7,115,760 7,624,028 10,165,371 10,165,371 10,165,371
(In % of Total Income) 38.5 38.5 38.5 38.5 38.5
3. Less Fixed Costs 972,204 984,214 1,044,262 1,044,262 1,044,262
OPERATIONAL MARGIN 6,143,555 6,639,814 9,121,109 9,121,109 9,121,109
(In % of Total Income) 33.2 33.5 34.5 34.5 34.5
4. Less Cost of Finance 379,856 189,928 0 0 0
5. GROSS PROFIT 5,763,699 6,449,886 9,121,109 9,121,109 9,121,109
6. Income (Corporate) Tax 1,729,110 1,934,966 2,736,333 2,736,333 2,736,333
7. NET PROFIT 4,034,589 4,514,920 6,384,776 6,384,776 6,384,776
RATIOS (%)

Gross Profit/Sales 31.19% 32.58% 34.55% 34.55% 34.55%

Net Profit After Tax/Sales 21.83% 22.80% 24.18% 24.18% 24.18%
Return on Investment 28.39% 29.73% 37.09% 37.09% 37.09%
Return on Equity 63.73% 71.32% 100.85% 100.85% 100.85%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 5,833,800 15,827,353 17,703,229 19,071,924 20,063,600 21,535,608
1. Total Current Assets 0 4,159,753 6,881,149 9,095,364 10,932,560 13,250,088
Inventory on Materials and Supplies 0 0 1,793,620 1,992,911 2,192,202 2,391,493
Work in Progress 0 0 214,514 238,349 262,184 286,019
Finished Products in Stock 0 0 429,028 476,698 524,367 572,037
Accounts Receivables 0 0 842,400 936,000 1,029,600 1,123,200
Cash in Hand 0 0 58,690 65,211 71,732 78,254
Cash Surplus, Finance Available 0 4,159,753 3,542,897 5,386,195 6,852,475 8,799,086
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 5,833,800 11,667,600 10,822,080 9,976,560 9,131,040 8,285,520
Fixed Investment 0 5,556,000 11,112,000 11,112,000 11,112,000 11,112,000
Construction in Progress 5,556,000 5,556,000 0 0 0 0
Pre-Production Expenditure 277,800 555,600 555,600 555,600 555,600 555,600
Less Accumulated Depreciation 0 0 845,520 1,691,040 2,536,560 3,382,080
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 5,833,800 15,827,353 17,703,229 19,071,924 20,063,600 21,535,608
5. Total Current Liabilities 0 0 842,400 936,000 1,029,600 1,123,200
Accounts Payable 0 0 842,400 936,000 1,029,600 1,123,200
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 3,500,280 9,496,412 9,496,412 7,913,676 6,330,941 4,748,206
Loan A 3,500,280 9,496,412 9,496,412 7,913,676 6,330,941 4,748,206
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2,333,520 6,330,941 6,330,941 6,330,941 6,330,941 6,330,941
Ordinary Capital 2,333,520 6,330,941 6,330,941 6,330,941 6,330,941 6,330,941
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 1,033,476 3,891,306 6,372,118
9.Net Profit After Tax 0 0 1,033,476 2,857,830 2,480,812 2,961,143
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 1,033,476 2,857,830 2,480,812 2,961,143

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 Annex 5: Continued
PRODUCTION YEARS
5 6 7 8 9 10
TOTAL ASSETS 23,487,947 25,939,801 28,871,986 35,256,762 41,641,538 48,026,314
1. Total Current Assets 16,047,947 19,184,201 22,800,786 29,869,962 36,939,138 44,008,314
Inventory on Materials and Supplies 2,590,784 2,790,075 2,989,366 3,985,822 3,985,822 3,985,822
Work in Progress 309,853 333,688 357,523 476,698 476,698 476,698
Finished Products in Stock 619,707 667,377 715,046 953,395 953,395 953,395
Accounts Receivables 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800 1,216,800
Cash in Hand 84,775 91,296 97,817 130,423 130,423 130,423
Cash Surplus, Finance Available 11,226,028 14,084,965 17,424,233 23,106,825 30,176,001 37,245,177
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 7,440,000 6,755,600 6,071,200 5,386,800 4,702,400 4,018,000
Fixed Investment 11,112,000 11,112,000 11,112,000 11,112,000 11,112,000 11,112,000
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 555,600 555,600 555,600 555,600 555,600 555,600
Less Accumulated Depreciation 4,227,600 4,912,000 5,596,400 6,280,800 6,965,200 7,649,600
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 23487947 25939801 28871986 35256762 41641538 48026314
5. Total Current Liabilities 1216800 1216800 1216800 1216800 1216800 1216800
Accounts Payable 1216800 1216800 1216800 1216800 1216800 1216800
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 3,165,471 1,582,735 0 0 0 0
Loan A 3,165,471 1,582,735 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 6,330,941 6,330,941 6,330,941 6,330,941 6,330,941 6,330,941
Ordinary Capital 6,330,941 6,330,941 6,330,941 6,330,941 6,330,941 6,330,941
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 9,333,261 12,774,735 16,809,324 21,324,245 27,709,021 34,093,797
9. Net Profit After Tax 3,441,474 4,034,589 4,514,920 6,384,776 6,384,776 6,384,776
Dividends Payable 0 0 0 0 0 0
Retained Profits 3,441,474 4,034,589 4,514,920 6,384,776 6,384,776 6,384,776

11