Working Capital To DBE Proposal 222
Working Capital To DBE Proposal 222
Roha Pack PLC is a company engaged in production of plastic packaging for beverages, detergent,
pharmaceutical, edible oil, chemical and cosmetics sectors.
The company was established in April, 2003. As part of its strategic plan, the company has planned
to expand its operation of plastic packaging manufacturing targeting the local market.
Ethiopian economy has been growing by double digit for more than ten years now. A lot of
industries that have forward and backward linkage with these sectors are being established. Among
these, plastic packaging manufacturing is one of them. Plastic packaging is bottles that pack water,
CSD, juice, soap, oil, alcohol, pharmaceutical and other liquid products. The PET pre-form is a
Plastic Sector, in which, the most convenience-size bottles are made from Polyethylene
Terephthalate. PET has become the material of choice for bottled beverages, because it is
lightweight and shatter resistant, and PET has been extensively tested for safety.
The major buyer of the plastic packing are, the prominent soft drink bottling companies like Pepsi
Cola, Coca Cola, Ambo mineral water, etc, has huge demand for the pet pre-form and caps every
year and has planned to expand their capacity substantially but the existing packing suppliers can
only supply 40% their requirement, showing that there will be large unsatisfied demand for the
plastic packaging in the country.
Roha Pack PLC is currently operating in its premises located at Addis Ababa city Nifas silk
lafto sub city in area of 4,136 meter square where the necessary infrastructure for the project
are easily available. The factory has the capacity of producing 14,495 tons of PET Pre-
form and 1,126 tons of closures/caps annually on three shifts.
Due to limitation of working capital, however, the factory is now working below capacity
(71%) which is below the industry average However, as our interim financial statement
prepared for the last year ended Sene 30, 2015 shows the net income of birr 129 million
is earned.
The company planned to 2016 budget year to achieve profit of 191 million birr by
utilizing the available capacity and market however sufficient working capital also
mandatory to attain the plan.
Now, therefore, looking the market potential as an opportunity to enhance its
performance and to contribute its part for the country and shareholders, the company
management has prepared the following workable business plan for the one year to come.
The plan mainly aims at increase the capacity by 32%. As a result of increase in
production capacity, both sales and profit level will grow during the planning period.
However, in achieving the sales and profit targets as indicated on the profit & loss and
cash flow projection in the remaining part of the plan, the factory is in need of additional
working capital of birr 313 million in the form of fresh overdraft facility renewable
annually. The facility will be backed by the company’s own movable and immovable
properties. The O/D facility shall be used mainly to cover cost of the raw materials and
conversation cost like power and labor costs.
1. Formation
Roha Pack PLC formerly known as Agere-Roha Plc, was established in April 2003 (1995
E.C) with Eight Shareholders, with an initial capital of Birr 5 million in Addis Ababa.
Through time this share distribution is raised to Birr 45,903,000, 86,372,000, Birr
112,642,000 and now the capital raised to Birr 135,482,000 divided in to 135,842 shares of
Birr 1,000 par value each. The existing factory is located at Addis Ababa city, Nefas-Silk
Lafto sub-city, Woreda 12, around Hana Mariam church, 100 meters off the ring road.
Major shareholders of the company Ato Samuel Getachew is an entrepreneur who has the
enthusiasm to invest in the development activity of the country by taking part on plastic
packaging manufacturing, which is believed to be one of the country’s huge potential both in
the form of import substitution, foreign currency generation through export and improving
the lives of local society though employment creation. Ato Samuel Getachew has BSC
Degree in Civil Engineering from Addis Ababa University and he has participated in various
trainings related to Packaging Industry. For the last 20 years he has been working in the
private sector by taking part on manufacturing, sales and import of different products.
The capital structure of the company is presented as follows.
Roha Pack Plc is engaged in the production of plastic packing materials for the last 20 years.
Roha primarily manufactures PET Preforms, Bottles, Closures and Jars. The end user of
Roha Pack products include manufactures in area of Soft Drinks, Mineral Water, Edible Oil,
Detergents, Cosmetics, Confectionery, Pharmaceuticals and Agro industries.
Being the pioneer in the PET /Plastic/ preforms, PET Bottles, HD containers and Closures
manufacturing in Ethiopia, Roha Pack has been close partner of a number of manufacturing
plants, agro-processing industries and cottage industries in the country meeting their plastic
packaging needs.
Roha Pack strongly believes in the proper way of doing business with integrity. To this end,
it extends tech support and trainings for bottling and packing companies. In doing so, the
process of PET supply to companies and bottling and packaging production from the user
end will be flawless.
Roha Pack strongly believes that safety is a global concern, not only because of public
health, but also because of its impact on international trade. In this regard Roha pack has
good Quality and safety management, Good manufacturing practice (GMP) and conducive
work place practices. Currently Roha has enhanced its effort to raise and meet Quality
standards, a Quality demand fundamental by the end users. Some of Roha Pack’s
accreditations are:-
ISO 9001:2015
ISO 22000:2015
PEPSICO Approved
Coca Cola Approved
With the ever-growing PET and preform demands in the country and interest in foreign
companies, Roha Pack is expanding its manufacturing
Under the Managing Director, there is a general manager cascaded down to the hierarchy: the
Finance
Operation
Marketing & sales
Procurement
Property administration
Engineering and
The service units are safety Health and quality management service units.
Since the success is dependent upon the collaborative effort and synergy of all the team
members, we planned to strive and create a working environment where motivated team
Each of the department is lead by qualified and experienced managers who in turn is
accountable to the General Manager. From the management pool all team members have
proven business experience, Thus, one can deduce that the associated management risk is
Electrical/ Electronics
Mohamed Lemma Marketing & sales manager B.S.C in Economics, >15 year
BSC in Accounting
service Head
Roha Pack plc is aspiring to become “The Leader in the Manufacturing of PET/PVC
Packaging!”
Mission
Roha Pack plc realizes its responsibility and commitment to produce PET/PVC
bottles with the specified quality according to its customers’ requirement and
expectations at competitive price. This is to be achieved through the following
strategy:
strategies, managing for the long- term with a diversified business model.
rewarding results.
responsible.
Buying Agents: Our supplier partners are our allies in serving the interest of our
customers by bringing to market the safest highest quality product available. We aim
to be the buying agents for our customers and not only the selling agents for our
factory.
3. Future Prospects
The factory has an excellent and promising future since the life style of the people
and urbanization is changing from day to day. Urbanization and development without
product easily. Particularly the following factors show the prospect whereby
4. Competitors
The company prefers the modern packing material manufacturing because of the
industrlization boom in the country, which results in a higher demand of the packing
materials and the prevalent gap in meeting the demand on top of that the factory will
have its own contribution in substituting import of Packing material ( preform and
The number of Modern Packing manufacturing factories in the country was eleven. Five
of the eleven packing factories, are fully owned by foreign investor of China and India.
Whereas, Major players Beteweded ,Mintu plast, and our factory Roha pack are the
Zixing Dukem
Biteweded Alemgena
Mintu Tatek
Finela Tulefa/D.Birhan
Supershine Kadisko
TruthWay Tatek
Sky Kality
Konjit Kality
5. Marketing strategy
The focus of the company is to avail its products to customers fulfilling the industry’
specification, set to get good market share the company planned to install different
strategies in order to exploit the intended capacity of the machine and to increase
As there are a number of competitors and options for our customers including imports
we are a price taker. Therefore, to get better profit margin, we should squeeze our
production cost via increasing the volume of production and raw material bulk
Distribution
The company used direct sales for customers by segmenting multinational and small bottlers
Product
The product of the company is standardized and hence the product needs high attention to
meet the specification. Thus, the company management will be serious to pass each product
Promotion
In order to create awareness, the company has planned for making advertisement by
In a nut shell, the company will use a mix of different marketing strategies as and when
appropriate.
Customers
Moha soft drinks
TOP water
GOLD Water
Dega Water
Alang Beverages
Selam Water
National alcohol
Suppliers
Soram Industries
Ekou Molding
Axcela
Bourge
1. Plant Capacity
Assuming 24 working hours per day and 300 working days per year the plant at full capacity
produces 16,500 tons of PET and 1350 ton HDPE products per annum. Currently due to
limitation, the factory is plan to utilize 14,425 ton which is 80 % of available capacity.
2. Production Program
The plan is prepared on the assumption of increasing the capacity by 20% to attain 80%
capacity of the installed capacity in the coming one year. That is production of 14,425 tons of
PET and HDPE for a total production cost of birr 1,685,795,898. The rationale behind such
production plan is that the production equipment is new, and expansion of water bottlers in
3. Production Cost
Production cost includes raw material, labor and overhead costs (conversion costs) the major
raw materials is Pet and HDPE .The cost break down prepared based on the account
relationship extracted from the projected Financial report for the planning year is presented
below.
D. material 1,402,833,097
D. labour 16,632,083
As shown in the table above, the company has planned to manufacture 14,425 tons of PET
and HDPE products with total manufacturing cost of birr 1,556,078,119 of which 90% is the
The projected profit and loss statement prepared for the following one year ended July 8,
2024 based on the assumptions and facts (shown under Table below) is presented below.
Profit and Loss statement
For the year ended February 28 2017
Description Amount in ETB
Revenue 1,877,597,532
Cost of goods sold (1,556,078,119)
D. material 1402833097
D. Labour 16632083
Manufacturing Over head 136612940
The above profit and loss statement prepared for the planning one year shows that the
The following cash flow forecasting or cash flow management prepared based on the above
profit and loss statement and following assumptions in part V below is a key aspect of
financial management of our factory planning our future cash requirements to avoid a crisis
It enables us to project our future cash income (receipts) and cash expenditure (payments)
The forecast can then be used as a management decision-making tool that allows us to
identify:-
When and for what the business will be able to spend cash etc
The above cash flow statement summarizes the net cash inflow available in the company at
the end of the planning period. It shows that the overdraft facility will show a credit balance
of birr -315,491,234 ETB.
clearing & see and inland transportation 120 days production 30 days, stock
We need to have adequate stock at times when price decline and apply the bulk
purchase policy .
Alternatively the working capital can be estimated under the following per unit of sales
method
Net W/C Per Unit of 1 Birr Sales per interim statement 0.69
As computed above the w/c required under this method is more than the first method.
Thus, to be conservative, we pursue the first method that substantiate the need for
additional working capital of birr 40 million in the form of fresh O/D facility, renewable
annual.
V. OPERATINAL AND FINANCIAL ASSUMPTIONS
Previous period audited and interim financial statement prepared for the year