ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the Establishment of

Cosmetic product Producing plant

Development Studies Associates

(DSA)

July 2016 Revised

Bahir Dar
 Tables 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..................................................................................................................4
4.1 Availability and Source of Raw materials.....................................................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities.....................................................4
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..................................................................................................................6
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....................................................................................................................11
9. Economic and Social Benefit and Justification................................................................................12
ANNEXES.....................................................................................................................................................14
 1. Executive Summary

This project profile deals with the establishment of cosmetic product producing plant in Amhara
National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for this product is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 30,000 bottles of vanishing
cream, 120,000 Kg of Soap and 500kg of face powder annually. The total investment cost of the
project including working capital is estimated at Birr 43.04 million and creates 61 jobs and Birr
1,472,473 household income.

The financial result indicates that the project generates profit beginning from the second year of
operation. Moreover, the project breaks even at 30.7% of capacity utilization and it payback fully
the initial investment less working capital in fourth year of its operation. The results further show
that the calculated IRR of the project is 20.9%.

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

The word cosmetics refers to articles to be rubbed, poured, sprinkled or sprayed or introduced
into or otherwise applied to the human body or any part of it for cleansing, beautifying,
promoting attractiveness or altering the appearance. Generally, cosmetics can be divided into
four groups: skin, nail, hair and teeth cosmetics. Skin cosmetics include face powder, talcum
powder, vanishing cream, color cream, lipstick, cold cream, Vaseline. Nail cosmetics include
nail polishes. Hair cosmetics covers hair dye, hair shampoo, coconut oil shampoo, shaving
cream, hair fixer, after shave. Cosmetics for teeth include tooth powder and tooth paste.
Different cosmetics require different ingredients and different preparation formulas.
3. Market Study, Plant Capacity and Production Program

3.1Market Study

3.1.1 Present Demand and Supply

The Amhara Region is home to about 20 million people. In countries where the standard of
living is high, 20 million people could have supported a multi-million dodder cosmetics industry.
However, since the standard of living of the people in the Amhara Region is very low the market
for cosmetics is limited to few brands like Vaseline, vanishing cream, cold cream, hair oils.
These cosmetics products are widely used in the urban areas and to some extent in rural areas.
Other cosmetics products such as tooth paste, nail polish, after shave, shaving cream, etc. are
used by people of higher income in the urban areas of the Region. Women are the main
consumers of many types of cosmetics products. Potential customers of cosmetics products in
the Amhara Region are girls and women above age of 5. The number of female in this age group
in the Region is about 10.2 million of whom 14.7 percent or 1,748,196 live in urban areas. If we
assume that at least 70 percent of the urban potential customers and 40 percent of the rural
customers, total customers will be about 4.6 million. If on the average one consumer consumes
about 400gm of cosmetics per year, annual aggregate consumption of cosmetics in the Region
could be 1,400 tons. Up to now, all these cosmetics have been imported partly from Addis
Ababa and partly from abroad. The purpose of this project is to substitute imports by regional
production, and the regional demand is sufficient to absorb the production of a number of small
scale cosmetics producing plants.

3.1.2 Projected Demand

The demand for cosmetics consumption by region is projected following the above rationale and
3.5% annual growth which are the result of rural - urban migration and total population growth
of the region. Table 1 below indicates the projected demand for the coming ten years.

2
 Table 1: Projected Demand for Cosmetic Products

Projected Demand
Year for Cosmetics
(in tons)
2015/16 1844
2016/17 1908
2017/18 1975
2018/19 2044
2019/20 2115
3.1.3 2020/21 2189 Pricing and
2021/22 2266
Distribution
2022/23 2345
Based on market 2023/24 2427 research result
and the capacity 2024/25 2512 of the envisaged
2025/26 2500
plant, the selling price estimated
2026/27 2587
Birr 46 per bottle of Vanishing
Cream, Birr 1231 kg per face powder and Birr 77 per kg of Soap. The price is set after deduction
25% margin for distributors. The exiting retail and wholesale network shall be used as
distribution outlet.

3.2Plant Capacity
Thus, given the expected demand for cosmetic products presented earlier, and the planned
technology, the envisaged plant is set to produce 30,000 bottles of Vanishing cream, 120,000 Kg
of Soap and 500kg of face powder annually.

3.3Production 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 75 percent capacity and then it grows to 85
percent in the 2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This
consideration is developed based on the assumption that market and logistics barriers would take
place for the first two years of operation.

3
4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials

Different cosmetics use different types of inputs with varying proportions. Basically there are
about six types of inputs which constitute the components of many types of cosmetics. These are
waxes, fatty acids, vitamin zed oil, lecithin bentonite and petroleum jelly or Vaseline.
Depending on the type of cosmetics to be made, other inputs are also added to the basic
ingredients. Some of the main inputs such as wax, fatty acids can be obtained from domestic
sources; others have to be imported.

4.2 Annual Requirement and Cost of Raw Materials and

Utilities
The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in Table 2 hereunder are only assumed by taking the current experience of companies
working in the country. For this project purpose three main products are considered i.e. Soap,
face powder, Vanishing cream.

Table 2: Material and utility Requirements

Total Cost
Items Quantity ('000 Birr)
(Kg) L.C. F.C.
Waxes 55000 1755.144 0
Fatty acids 27500 1462.62 0
Vitamin zed oil 22000 0 2925.24
Lecithin bentonite 27500 0 3802.812
Petroleum jelly 30250 0 3217.764
Total Material Cost 3217.764 9945.816
Utility 6
Electricity 26.4
Furnace Oil 61.584
Water 5.3
Total Utility Cost 99.284

4
5. Location and Site
The appropriate locations for the envisaged project in view of the availability of input,
infrastructures as well as market for the output are Combolcha and Bahir Dar.

6. Technology and Engineering

6.1. Production Process

The formulation and production processes of different groups of cosmetics are different. Hence,
since there is no one common process for all cosmetics, no process description is given in this
section.

6.2. Machinery and Equipment

Machinery and equipment for cosmetics also differ based on the type of cosmetics to be
produced. The following are the basic types of machines used for different categories of
cosmetics. Heating equipment: electric heaters; boilers, steam stills, water baths and distilled
water heat stills. Equipment for creams: - meters for waxes, greases and fats, mixers for waxes,
greases, fats for milling and mixing operations. Equipment for liquids: - mixers, filters and filter
presses, liquid filling machines of vacuum type, bottle capping machine. There are also different
types of machines for powder cosmetics.

For a plant which will produce 300,000 bottles of vanishing cream, 5000kg of face powder,
12000kgs of scented coconut air, 300,000 bottles of shampoo, 120 ton of soap and 5000 tubes of
toothpaste per year, total investment will be: 43.04 million. However this plant is only planned to
produce three main products i.e. Soap, Vanishing Cream and Face powder.

The machineries and equipment required for producing the stated product is detailed in Table 3
below.

Table 3: Machinery and Equipments

Machinery and Equipment Quantity

Heating equipments 5
Equipment for creams 5
Equipment for liquids 4 5
Total 14
The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 26.94 million.

Suppliers Addresses
Distributor Abdulla Fouad Co. Ltd.
Dammam 257 Phone: 00966 3 8332600
Damman, Eastern Province 31411 / 257
Saudi Arabia
Manufacturer Akzo Nobel nv
Service Velperweg 76 Phone: +31 26 3664433
PO Box 9300
Arnhem, 6800 SB
Netherlands

6.3. Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 3,000m 2 where 1200m2 is allocated
to the production place and the remaining space is left for stores (900m 2), office buildings and
facilities (500m2).The land lease cost is estimated at Birr 180,000. The civil engineering and
building costs is estimated at Birr 6.1 million.

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 Requirements

Monthly Total
Salary/Wag Annual
Position No. Required e Salary

6
 (in Birr) (in Birr)
General Manager 1 8981 107772
Mechanical Engineer 1 6415 76980
Administration 1 5132 61584
Accountant 2 3079.2 73900.8
Secretary 3 2181.1 78519.6
Sales Clerk 5 1796.2 107772
Chemist 2 3079.2 73900.8
Store Keeper 2 1796.2 43108.8
Mechanic and Electrician 2 1924.5 46188
Supervisor 2 3849 92376
Operators 12 2052.8 295603.2
Daily Laborers 5 769.8 46188
Cleaners 3 769.8 27712.8
Messengers 2 641.5 15396
Driver 2 1796.2 43108.8
Guards 3 1026.4 36950.4
Total 0 1227061.2
Benefit (20%) 0 245412.24
Grand Total 61 0 1,472,473.44

The envisaged plant therefore, creates 61 jobs and about Birr 1.47 million of household income.
The professionals and support staffs for the envisaged plant shall be recruited from Amhara
region

7.2. Training Requirement

Training of key personnel shall be conducted. 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 230,940 is allocated as training expense in the
working capital.

7
8. Financial Analysis

8.1. Underlying Assumption

The financial analysis of Cosmetics 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 30% equity and 70% 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%

8
 C. Working Capital (Minimum Days of Coverage)

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 43 million
as shown in Table 5 below. The Owner shall contribute 30% of the finance in the form of equity
while the remaining 70% is to be financed by bank loan.

9
 Table 5: Total Initial Investments

Total Initial Investment

Item Cost
Land 90000
Building and civil works 6158400
Office equipment 256600
Vehicles 1283000
Plant machinery & equipment 26943000
Total Fixed Investment 34,731,000.00
Pre production capital expenditure 1733204.7
Total Initial Investment 36,464,204.70
Working capital at full capacity 6,585,236.14
Total 43,049,440.84

*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.

The foreign component of the project accounts for Birr 49.01 million or 72% of the total
investment cost.

8.3. Production Costs

The total production cost at full capacity operation is estimated at Birr 22.44 million as detailed
in Table 6 below.

10
 Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1. Raw materials
13,163,580.00
2. Utilities
40,100.00
3. Wages and Salaries
1,470,625.92
4. Spares and Maintenance
1,039,922.82
Factory costs
15,714,228.74
5. Depreciation
3,631,120.94
6. Financial costs
3,094,742.52
Total Production Cost
22,440,092.20

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 Second year of operation. Ratios such as the percentage of net profit to
total sales, return on equity and return on total investment are -0.37%, 16.33% and -0.47% 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 30.7% of capacity utilization.

11
 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 17.9%.

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
20.9% and the net present value at 18 % discount is Birr 4.30 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 21.55 % 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. It also
contributes to better health conditions of individuals, and introduces new skills and technology to
the Region. Some of the major specific benefits of this project are listed as follows:

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 4.90 million
per year and Birr 49.21 million within the project life. Such result induces the project promoters
to reinvest the profit which, therefore, increases the investment magnitude in the region.

12
 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 19.93 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
10.9 million will be saved as a result of the proposed project. This will create a 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 1,472,473 per year. 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 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.

13
ANNEXES

14
 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 8328450.804 9438910.398 11104601.07 11104601.07

Raw Materials in Stock- Total 0 0 3518265.694 3987368.984 4691020.07 4691020.07

Raw Material-Local 0 0 263271.6 298374.48 351028.8 351028.8

Raw Material-Foreign 0 0 3254994.094 3688994.504 4339991.27 4339991.27

Factory Supplies in Stock 0 0 15878.408 17997.924 21172.066 21172.066

Spare Parts in Stock and Maintenance 0 0 85083.428 96430.28 113445.426 113445.426

Work in Progress 0 0 396985.86 449917.308 529311.914 529311.914

Finished Products 0 0 793969.154 899832.05 1058626.394 1058626.394

2. Accounts Receivable 0 0 2393377.482 2712495.506 3191169.976 3191169.976

3. Cash in Hand 0 0 128743.918 145907.892 171657.702 171657.702

CURRENT ASSETS 0 0 7332306.51 8309944.812 9776406.114 9776406.114

4. Current Liabilities 0 0 2393377.482 2712495.506 3191169.976 3191169.976

Accounts Payable 0 0 2393377.482 2712495.506 3191169.976 3191169.976

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 4938926.462 5597451.872 6585236.138 6585236.138

INCREASE IN NET WORKING CAPITAL 0 0 4938926.462 658522.844 987784.266 0

1
 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 11104601.07 11104601.07 11104601.07 11104601.07 11104601.07 11104601.07

Raw Materials in Stock-Total 4691020.07 4691020.07 4691020.07 4691020.07 4691020.07 4691020.07

Raw Material-Local 351028.8 351028.8 351028.8 351028.8 351028.8 351028.8

Raw Material-Foreign 4339991.27 4339991.27 4339991.27 4339991.27 4339991.27 4339991.27

Factory Supplies in Stock 21172.066 21172.066 21172.066 21172.066 21172.066 21172.066

Spare Parts in Stock and Maintenance 113445.426 113445.426 113445.426 113445.426 113445.426 113445.426

Work in Progress 529311.914 529311.914 529311.914 529311.914 529311.914 529311.914

Finished Products 1058626.394 1058626.394 1058626.394 1058626.394 1058626.394 1058626.394

2. Accounts Receivable 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976

3. Cash in Hand 171657.702 171657.702 171657.702 171657.702 171657.702 171657.702

CURRENT ASSETS 9776406.114 9776406.114 9776406.114 9776406.114 9776406.114 9776406.114

4. Current Liabilities 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976

Accounts Payable 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976

TOTAL NET WORKING CAPITAL REQUIREMENTS 6585236.138 6585236.138 6585236.138 6585236.138 6585236.138 6585236.138

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 18198649.35 24783885.49 24332677.48 25183658.02 29731074.47 29252400
1. Inflow Funds 18198649.35 24783885.49 2393377.482 319118.024 478674.47 0
Total Equity 7279459.74 9913553.682 0 0 0 0
Total Long Term Loan 10919189.61 14870331.81 0 0 0 0
Total Short Term Finances 0 0 2393377.482 319118.024 478674.47 0
2. Inflow Operation 0 0 21939300 24864540 29252400 29252400
Sales Revenue 0 0 21939300 24864540 29252400 29252400
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 18198649.35 18198649.35 25721116.99 21419754.28 25958520.74 24131007.84
4. Increase In Fixed Assets 18198649.35 18198649.35 0 0 0 0
Fixed Investments 17332047 17332047 0 0 0 0
Pre-production Expenditures 866602.35 866602.35 0 0 0 0
5. Increase in Current Assets 0 0 7332306.51 977640.868 1466461.302 0
6. Operating Costs 0 0 11555998.96 13049115.87 15288795.09 15288795.09
7. Corporate Tax Paid 0 0 0 0 2326058.472 2480795.97
8. Interest Paid 0 0 6832814.082 3094742.262 2578953.168 2063161.508
9. Loan Repayments 0 0 0 4298252.714 4298252.714 4298252.714
10. Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 6585236.138 -1388439.506 3763903.742 3772553.728 5121392.156
Cumulative Cash Balance 0 6585236.138 5196796.632 8960700.374 12733254.1 17854648.82

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 29252400 29252400 29252400 29252400 29252400 29252400
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 29252400 29252400 29252400 29252400 29252400 29252400
Sales Revenue 29252400 29252400 29252400 29252400 29252400 29252400
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 23769953.68 23589871.8 23228820.21 18569513.33 18569513.33 18569513.33
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 15288795.09 15288795.09 15288795.09 15288795.09 15288795.09 15288795.09
7. Corporate Tax Paid 2635533.468 2971243.248 3125980.746 3280718.244 3280718.244 3280718.244
8. Interest Paid 1547372.414 1031580.754 515791.66 0 0 0
9. Loan Repayments 4298252.714 4298252.714 4298252.714 0 0 0
10. Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 5482446.318 5662528.198 6023579.794 10682886.67 10682886.67 10682886.67
Cumulative Cash Balance 23337095.14 28999623.34 35023203.13 45706089.8 56388979.04 67071865.71

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 21939300 24864540 29252400 29252400

1. Inflow Operation 0 0 21939300 24864540 29252400 29252400

Sales Revenue 0 0 21939300 24864540 29252400 29252400

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 18198649.35 18198649.35 16494925.42 13707641.28 18602640.39 17769591.06

3. Increase in Fixed Assets 18198649.35 18198649.35 0 0 0 0

Fixed Investments 17332047 17332047 0 0 0 0

Pre-production Expenditures 866602.35 866602.35 0 0 0 0

4. Increase in Net Working Capital 0 0 4938926.462 658522.844 987784.266 0

5. Operating Costs 0 0 11555998.96 13049115.87 15288795.09 15288795.09

6. Corporate Tax Paid 0 0 0 0 2326058.472 2480795.97

NET CASH FLOW -18198649.35 -18198649.35 5444374.576 11156898.72 10649759.61 11482808.94

CUMULATIVE NET CASH FLOW -18198649.35 -36397298.7 -30952924.12 -19796025.41 -9146265.8 2336543.148

Net Present Value (at 18%) -18198649.35 -15422583.76 3910065.668 6790434.026 5493028.502 5019242.262

Cumulative Net present Value -18198649.35 -33621233.11 -29711167.44 -22920735.98 -17427707.5 -12408465.22

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 29252400 29252400 29252400 29252400 29252400 29252400

1. Inflow Operation 29252400 29252400 29252400 29252400 29252400 29252400

Sales Revenue 29252400 29252400 29252400 29252400 29252400 29252400

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 17924328.55 18260038.33 18414775.83 18569513.33 18569513.33 18569513.33

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 15288795.09 15288795.09 15288795.09 15288795.09 15288795.09 15288795.09

6. Corporate Tax Paid 2635533.468 2971243.248 3125980.746 3280718.244 3280718.244 3280718.244

NET CASH FLOW 11328071.45 10992361.67 10837624.17 10682886.67 10682886.67 10682886.67

CUMULATIVE NET CASH FLOW 13664614.59 24656976.26 35494602.99 46177489.66 56860378.9 67543265.57

Net Present Value (at 18%) 4196274.742 3450777.328 2883221.75 2408522.014 2041119.568 1729763.694

Cumulative Net present Value -8212190.476 -4761413.148 -1878191.398 530330.616 2571450.184 4301213.878

Net Present Value (at 18%) 4301213.596

Internal Rate of Return 20.9%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 21939300 24864540 29252400 29252400 29252400

Sales Revenue 21939300 24864540 29252400 29252400 29252400
Other Income 0 0 0 0 0
2. Less Variable Cost 10757200.6 12191494.52 14342934.13 14342934.13 14342934.13
VARIABLE MARGIN 11182099.4 12673045.48 14909465.87 14909465.87 14909465.87
(In % of Total Income) 130.78902 130.78902 130.78902 130.78902 130.78902
3. Less Fixed Costs 4429919.306 4488744.856 4576981.898 4576981.898 4576981.898
OPERATIONAL MARGIN 6752180.098 8184303.188 10332483.97 10332483.97 10332483.97
(In % of Total Income) 78.98148 84.47272 90.63112 90.63112 90.63112
4. Less Cost of Finance 6832814.364 3094742.519 2578952.09 2063161.662 1547371.259
5. GROSS PROFIT -80633.88136 5089559.566 7753532.397 8269322.825 8785113.228
6. Income (Corporate) Tax 0 0 2326059.729 2480796.842 2635533.981
7. NET PROFIT -80633.88136 5089559.566 5427472.668 5788525.983 6149579.272
RATIOS (%)
Gross Profit/Sales -0.37% 20.47% 26.51% 28.27% 30.03%
Net Profit After Tax/Sales -0.37% 20.47% 18.55% 19.79% 21.02%
Return on Investment 16.33% 19.49% 18.63% 18.27% 17.91%
Return on Equity -0.47% 29.60% 31.57% 33.67% 35.77%

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

1. Total Income 29252400 29252400 29252400 29252400 29252400

Sales Revenue 29252400 29252400 29252400 29252400 29252400
Other Income 0 0 0 0 0
2. Less Variable Cost 14342934.13 14342934.13 14342934.13 14342934.13 14342934.13
VARIABLE MARGIN 14909465.87 14909465.87 14909465.87 14909465.87 14909465.87
(In % of Total Income) 130.78902 130.78902 130.78902 130.78902 130.78902
3. Less Fixed Costs 3973740.958 3973740.958 3973740.958 3973740.958 3973740.958
OPERATIONAL MARGIN 10935724.91 10935724.91 10935724.91 10935724.91 10935724.91
(In % of Total Income) 95.91708 95.91708 95.91708 95.91708 95.91708
4. Less Cost of Finance 1031580.754 515791.66 0 0 0
5. GROSS PROFIT 9904144.16 10419935.82 10935724.91 10935724.91 10935724.91
6. Income (Corporate) Tax 2971243.248 3125980.746 3280718.244 3280718.244 3280718.244
7. NET PROFIT 6932900.912 7293955.074 7655006.67 7655006.67 7655006.67
RATIOS (%)
Gross Profit/Sales 33.86% 35.62% 37.38% 37.38% 37.38%
Net Profit After Tax/Sales 23.70% 24.93% 26.17% 26.17% 26.17%
Return on Investment 18.53% 18.17% 17.81% 17.81% 17.81%
Return on Equity 40.32% 42.42% 44.52% 44.52% 44.52%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 18198649.35 42982534.84 45375912.32 46405702.01 48013596.1 49503869.88
1. Total Current Assets 0 6585236.138 12529100.58 17270645.19 22509660.22 27631054.94
Inventory on Materials and Supplies 0 0 3619230.096 4101794.622 4825640.128 4825640.128
Work in Progress 0 0 396985.86 449917.308 529311.914 529311.914
Finished Products in Stock 0 0 793969.154 899832.05 1058626.394 1058626.394
Accounts Receivable 0 0 2393377.482 2712495.506 3191169.976 3191169.976
Cash in Hand 0 0 128743.918 145907.892 171657.702 171657.702
Cash Surplus, Finance Available 0 6585236.138 5196796.632 8960700.374 12733254.1 17854648.82
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 18198649.35 36397298.7 32766177.76 29135056.82 25503935.88 21872814.94
Fixed Investment 0 17332047 34664094 34664094 34664094 34664094
Construction in Progress 17332047 17332047 0 0 0 0
Pre-Production Expenditure 866602.35 1733204.7 1733204.7 1733204.7 1733204.7 1733204.7
Less Accumulated Depreciation 0 0 3631120.94 7262241.88 10893362.82 14524483.76
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 80633.984 0 0 0
TOTAL LIABILITIES 18198649.35 42982534.84 45375912.32 46405702.01 48013596.1 49503869.88
5. Total Current Liabilities 0 0 2393377.482 2712495.506 3191169.976 3191169.976
Accounts Payable 0 0 2393377.482 2712495.506 3191169.976 3191169.976
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 10919189.61 25789521.42 25789521.42 21491266.14 17193013.42 12894760.71
Loan A 10919189.61 25789521.42 25789521.42 21491266.14 17193013.42 12894760.71
Loan B 0 0 0 0 0 0
7. Total Equity Capital 7279459.74 17193013.42 17193013.42 17193013.42 17193013.42 17193013.42
Ordinary Capital 7279459.74 17193013.42 17193013.42 17193013.42 17193013.42 17193013.42
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 -80633.984 5008926.942 10436399.28
9.Net Profit After Tax 0 0 0 5089558.36 5427472.334 5788526.496
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 0 5089558.36 5427472.334 5788526.496

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
51,355
TOTAL ASSETS ,195 53989843.45 56985543.25 64640552.48 72295559.15 79950568.39
1. Total Current Assets 33113501.26 38776029.45 44799609.25 55482498.48 66165385.15 76848274.39
Inventory on Materials and Supplies 4825640.128 4825640.128 4825640.128 4825640.128 4825640.128 4825640.128
Work in Progress 529311.914 529311.914 529311.914 529311.914 529311.914 529311.914
Finished Products in Stock 1058626.394 1058626.394 1058626.394 1058626.394 1058626.394 1058626.394
Accounts Receivable 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976
Cash in Hand 171657.702 171657.702 171657.702 171657.702 171657.702 171657.702
Cash Surplus, Finance Available 23337095.14 28999623.34 35023203.13 45706089.8 56388979.04 67071865.71
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 18241694 15213814 12185934 9158054 6130174 3102294
Fixed Investment 34664094 34664094 34664094 34664094 34664094 34664094
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 1733204.7 1733204.7 1733204.7 1733204.7 1733204.7 1733204.7
Less Accumulated Depreciation 18155604.7 21183484.7 24211364.7 27239244.7 30267124.7 33295004.7
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 51355195.26 53989843.45 56985543.25 64640552.48 72295559.15 79950568.39
5. Total Current Liabilities 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976
Accounts Payable 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976 3191169.976
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 8596507.994 4298252.714 0 0 0 0
Loan A 8596507.994 4298252.714 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 17193013.42 17193013.42 17193013.42 17193013.42 17193013.42 17193013.42
Ordinary Capital 17193013.42 17193013.42 17193013.42 17193013.42 17193013.42 17193013.42
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 16224923.21 22374503.86 29307404.78 36601359.85 44256366.52 51911375.76
9. Net Profit After Tax 6149578.092 6932900.912 7293955.074 7655006.67 7655006.67 7655006.67
Dividends Payable 0 0 0 0 0 0
Retained Profits 6149578.092 6932900.912 7293955.074 7655006.67 7655006.67 7655006.67

10