Chemical and Construction Input Industry Development Institute. Project Profile on the Establishment of Burned. Clay Producing plant

Transcription

1 Chemical and Construction Input Industry Development Institute Project Profile on the Establishment of Burned Clay Producing plant Information Technology and Technical Service Directorate Technical Service Team Addis Ababa

2 Table of Contents 1. Executive Summary Product Description and Application Market Study, Plant Capacity and Production Program Market Study Present Demand and Supply Projected Demand Pricing and Distribution Plant Capacity Production Program Raw Materials and Utilities Availability and Source of Raw Materials Annual Requirement and Cost of Raw Materials and Utilities Location and Site Technology and Engineering Production Process Machinery and Equipment Civil Engineering Cost Human Resource and Training Requirement Human Resource Training Requirement Financial Analysis Underlying Assumption Investment Production Costs Financial Evaluation Economic and Social Benefit and Justification ANNEXES... 16

3 Executive Summary This project profile deals with the establishment of burned clay producing plant in Ethiopia. The following presents the main findings of the study Demand projection divulges that the domestic demand for burned clay is substantial and is increasing with time. Accordingly, the planned plant is set to produce 20,000 ton annually. The total investment cost of the project including working capital is estimated at Birr million and creates 95 jobs. The financial result indicates that the project will generate profit beginning from the first year of operation. Moreover, the project will break even at 10.20% of capacity utilization and it will payback fully the initial investment less working capital in three years. The result further shows that the calculated IRR of the project is 41.6% and the net present value at 18 % discount is Birr million. In addition to this, the proposed project possesses wide range of economic and social benefits such as increasing the level of investment, tax revenue, and employment creation. 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 Clay bricks are major inputs in the building industry. They are mainly used to construct outside and inside (partition) walls of small and large buildings. Brick products are also used for roof tiles. Common wall bricks have standard dimension of 25X12X6.5 cm. Most wall bricks are solid, but there are also hollow bricks with different dimensions. Hollow bricks are relatively light and have good insulating properties. In general buildings made of clay bricks are cool in summer and warm in winter. Compared to building materials such as hollow blocks asbestos, and other synthetic wall making products, clay bricks have long durability. 1

4 3. Market Study, Plant Capacity and Production Program 3.1 Market Study Local Import The local import of ceramic products has reached to annual average of 97,087.6 tons and million USD during the period The average annual growth during the same period has reached to around 27% (please see table 3.1). Table 3.1 Import of Ceramic products '6908 '6907 '6910 '6902 Code Product label Imported quantity, Tons Imported quantity, Tons Imported quantity, Tons Imported quantity, Tons Imported quantity, Tons Glazed ceram flags&paving,hearth/wall tiles; mosaic cube Unglazed ceram flags&paving,hearth/wall tiles; mosaic cube Ceramic sink,wash basin,bath,bidet &similar sanitary fixture Refractory bricks,blocks,tile etc&sim refractory ceram const good ne '6904 Ceramic building bricks, flooring blocks support/filler tiles '6911 Tableware,kitchenware, of porcelain/china '6905 Roofing tiles,chimney pots,cowl etc&other ceramic constructional good '6914 Ceramic articles, nes '6912 Code Ceramic tableware,kitchenware, othar than porcelain/china Product label Imported quantity, Tons Imported quantity, Tons Imported quantity, Tons Imported quantity, Tons Imported quantity, Tons 2

5 '6903 Refractory ceramic goods nes '6913 Statuettes and other ornamental ceramic articles '6909 Ceramic ware for labor.,chemical or techinal use, etc '6901 Bricks, blocks, ceramic goods of siliceous fossil meals '6906 Ceramic pipes, conduits, gutterings and pipe fittings Total (Ton) 59,614 67,311 78, , ,691 Total (000 USD) Growth in Quantity (% Local Production The local gross value of structural clay products has reached to annual average of 19.4 thousand birr during the period 2006/7-2010/1. The average annual decreasing growth during the same period has reached to around 11% in value and -8.9% in quantity (please see table 3.2). Table 3.2 GVP of Structural cement Product Type Gross Value of Production (Thousands Birr) 2006/7 2007/8 2008/9 2009/ /11 Manufacture of structural clay products 23,540 20,243 21,770 17,110 14,157 Annual Growth Bricks of clay ( 000 pcs) 44,957 13,909 13,087 17,645 18, Present Demand and Supply Clay bricks are made from clay soil which can be found in many localities in the Ethiopia.. Almost all the bricks requirement of the country is transported form Addis Ababa. Clay bricks 3

6 are one of those construction materials which are expensive to transport long distances. They are usually produced in location close to major construction sites such as main urban centers. Building construction has been expanding during the last few years; and it seems this trend will continue during the coming years. Taking the size of new constructions in the country, the current regional demand for burned clay is set at 250,000 tons. To be self-sufficient in this important building material two or three clay bricks making factories should be established in the country. Projected Demand The demand is expected grow at average annual rate of 10%, the rate of growth of the building construction in the region. The projected demand is depicted in Table 1. Year Table 1: Projected Demand Country Demand (ton) , , , , , , , , , ,

7 3.1.4 Pricing and Distribution Since bricks are widely produced, especially in and around Addis Ababa, the pricing is based on the exiting market prices. The existing average market price is Birr 10,000/ton. Based on the market research result and the capacity of the envisaged plant, the selling price has been estimated at Birr per ton. Major contractors will purchase at factory gate. 3.2 Plant Capacity Thus, given the expected demand for burned clay presented earlier, and the planned technology, the envisaged plant is set to produce 20,000 tons annually with the objectives of taking 10% market share. 3.3 Production Program The program is scheduled based on the consideration that the envisaged plant will work 275 days in a year, where the remaining days will be holidays and for maintenance. During the first year of operation the plant will operate at 40 percent capacity and then it grows to 50, 60, 70 and 80 percents in the 2 nd, 3 rd, 4 th, 5 th years. The capacity will grow to 100 percent starting from the 6 th year. This consideration is developed based on the assumption that market and logistics barriers would take place for the first five years of operation. Mode of operation: Table 2: Mode of Operation Sections No. Shifts Preparation and forming 2 Stacking and transport 2 Drying Section 3 Counter travel kiln 3 Loading and unloading 2 4. Raw Materials and Utilities 4.1 Availability and Source of Raw Materials Sufficient clay soil is available in many parts of ANRS. 5

8 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 3 & 4. Table 3: Raw Material Requirements at Full Capacity Price (Birr) No. Material Qty Unit Total 1 Clay (ton) 250, ,000,000 Total 250,000 50,000,000 5 Location and Site Table 4: Utility Requirements at Full Capacity Unit Unit Price Total Price Electricity Kwh ,000 Fuel ton 675 2,025,000 Compressed air Cum/hr ,560 Water M 3 10,000 26,500 Total 2,622,060 The appropriate locations for the envisaged project in view of the availability of input, infrastructure as well as market for the output are Addis Ababa, Hawassa, Bahir Dar, Dessie, Gondar, Debre Markos 6 Technology and Engineering 6.1 Production Process According to the nature of the available clay, the incoming raw material must be ground down to a maximum grain size of 1.5 mm, which is done by a roller crusher and a finishing mill. Then water is added to the clay until the material has reached a humidity degree of 20-25%. After an intermediate storage the treated clay is homogenized under vacuum in a de-airing extrusion thus preventing air-inclusions in the product. The preformed mass is cut to proper size and taken to a drier via a conveying system. The drying takes about 42 hours eventually resulting 6

9 in a loss of weight of approx. 7%. The dry product is taken from the conveying system and set onto kiln cars by hand. Burning in the kiln is done at 1,000 C, which takes approx. 60 hours. After the burning process, the final product is manually unloaded from the kiln cars and put on palets or directly on trucks. The reject material that results from the first steps up to the outlet of the drying stage, can be completely re-conveyed to the process via the mill. Burnt material, too, can be added to the process-flow again, at a portion of 10% of the quantity of raw material. Finally, reject material may well be used for instance as an additive material for road construction. There are two alternative technological processes promoted to revolutionaries the production burned clay: One utilizes a more energy efficient kiln to produce burnt clay bricks, and the other replaces burnt clay brick with fly ash bricks which are manufactured without the use of thermal energy. Using automated machineries is an alternative technology that is more productive but costly. 6.2 Machinery and Equipment The machineries and equipment required for producing burned clay is detailed in Table 5. Table 5: Machineries and Equipments Item Description Qty. 1 Box feeder 1 2 Roller crusher 1 3 Finishing mill 1 4 Double-shaft mixer 1 5 Box feeder for intermediate storage 1 6 Circular feeder 1 7 De-airing extrusion machine 1 8 Cutter for bricks 1 9 Conveying and stacking system 1 10 Drier 1 11 Counter travel kiln 1 Total 7

10 12 Loading and unloading system 1 FOB Price 43,500,000 Installation 20% Total 52,200,000 The, total cost of machinery and equipment including freight insurance and bank cost is estimated to be about Birr 52.2 million. Supplier Address: J.R.Trade Impex Pvt. Ltd. Deals in clay brick, manufacturing machine Address: 1Bh/35 Dum Dum Road, Kolkata, West Bangal India Phone No.: Fax :

11 6.3 Civil Engineering Cost The total site area for the envisaged plant is estimated to be 5,980 m2 (raw material shelter 2,000 sq.m, workshop 800 sq.m, administration 180 sq.m). Total lease price is estimated at Birr 358,800 and the costs of Building and civil works at Birr 1,960, Human Resource and Training Requirement 7.1 Human Resource The list of required manpower for the envisaged plant is stated in Table 6. 9

12 Table 6: Human Resource Requirement Salary/Wage (Birr) Job Title Monthly Annual 1 General Manager 1 5,000 60,000 2 Secretary 1 1,000 12,000 Production 0 1 Production Head 1 3,500 42,000 2 Preparation and forming - skilled workers 2 1,200 28,800 3 Preparation and forming - unskilled workers ,800 4 Stacking and transport - skilled workers 2 1,100 26,400 5 Stacking and transport -unskilled workers ,000 6 Drier - skilled workers 3 1,000 36,000 7 Drier - unskilled workers ,000 8 Counter travel kiln - skilled workers 3 1,000 36,000 9 Counter travel kiln - unskilled workers , Loading and unloading - skilled workers , Loading and unloading - unskilled workers ,000 Administration 1 Administration Head 1 2,500 30,000 2 Secretary ,600 3 Accountant 1 1,500 18,000 4 Marketing Officer 1 1,500 18,000 5 Casher ,600 6 Driver 6 1, ,000 7 Security /5th grade license/ ,200 8 Clerks ,000 9 Genitor ,000 Total ,000 Employment Benefits 20% of Annual Salary 168,600 1,011,600 No. The envisaged plant, therefore, creates 95 jobs. 10

13 7.2 Training Requirement Training of key personnel shall be conducted. The training should primarily focuses on the production technology and machinery maintenance and trouble shooting. Birr 80,000 will be allocated as training expense. 8 Financial Analysis 8.1 Underlying Assumption The financial analysis of burnet clay producing plant is based on the data provided in the preceding chapters and the following assumptions. A. Construction and Finance Construction period 2 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 Building 5% Machinery and equipment 10% Office furniture 10% Vehicles 20% Pre-production (amortization) 20% 11

14 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 Investment The total investment cost of the project including working capital is estimated at Birr million as shown in Table 7. The Owner shall contribute 40% of the finance in the form of equity while the remaining 60% is to be financed by bank loan. Table 7: Total Initial Investment & Working Capital Total Initial Investment Item Cost Land 17, Building and civil works 1,960, Office equipment 100, Vehicles* 5,000, Plant machinery & equipment 52,200, Total Fixed Investment 59,277, Pre production capital expenditure** 2,963, Total Initial Investment 62,241, Working capital at full capacity 11,212, Total 73,454, * Five Heavy Trucks are important for the project **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. 12

15 8.3 Production Costs The total production cost at full capacity operation is estimated at Birr 67.5 million as detailed in Table 8 below. Items Table 8: Production Cost at Full Capacity Cost 1. Raw materials 50,000, Utilities 2,622, Wages and Salaries 890, Spares and Maintenance 1,778, Factory costs 55,291, Depreciation 6,920, Financial costs 5,287, Total Production Cost 67,498, Financial Evaluation I. Profitability According to the projected income statement attached in the annex part (see annex 4) the project will generate profit beginning from the first year of operation. Gross Profit/Sales, Net Profit after Tax/Sales, Return on Investment and Return on Equity are 14.79%, 14.79%, 28.14%, 24.15% in the first year and are gradually rising to 49.84%, 34.89%, 57.00%, and %, respectively. 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 10.20% of capacity utilization. 13

16 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 the third year of operation. IV. Simple Rate of Return For the envisaged plant the simple rate of return equals to 44.0%. 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 41.6% and the net present value at 18 % discount is Birr 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. 9 Economic and Social Benefit and Justification The envisaged project possesses wide range of benefits where it promotes the socio-economic goals and objectives stated in the strategic plan of the Amhara National Regional State. These benefits are listed as follows. A. Profit Generation The project is found to be financially viable and earns Birr 308 million within the project life. Such result induces the project promoters to reinvest the profit which, therefore, increases the investment magnitude in the region. 14

17 B. Tax Revenue In the project life under consideration, the region will collect about Birr 120 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. Employment and Income Generation The proposed project is expected to create employment opportunity to 95 citizens of the region. This would be one of the commendable accomplishments of the project. D. Diversification/ Integration The plant contributes to industrialization of the economy and enhances intersectional linkages. 15

18 ANNEXES 16

19 Annex 1: Total Net Working Capital Requirements (in Birr) CONSTRUCTION PRODUCTION Year 1 Year Capacity Utilization (%) % 50% 60% 70% 1. Total Inventory 0 0 6,508,418 8,135,523 9,762,627 11,389,732 Raw Materials in Stock- Total 0 0 2,181,818 2,727,273 3,272,727 3,818,182 Raw Material-Local 0 0 2,181,818 2,727,273 3,272,727 3,818,182 Raw Material-Foreign Factory Supplies in Stock ,200 34,000 40,800 47,600 Spare Parts in Stock and Maintenance ,600 97, , ,800 Work in Progress , ,992 1,019,991 1,189,989 Finished Products 0 0 1,359,988 1,699,985 2,039,982 2,379, Accounts Receivable 0 0 4,189,091 5,236,364 6,283,636 7,330, Cash in Hand , , , ,479 CURRENT ASSETS 0 0 8,674,251 10,842,813 13,011,376 15,179, Current Liabilities 0 0 4,189,091 5,236,364 6,283,636 7,330,909 Accounts Payable 0 0 4,189,091 5,236,364 6,283,636 7,330,909 TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 4,485,160 5,606,450 6,727,740 7,849,029 INCREASE IN NET WORKING CAPITAL 0 0 4,485,160 1,121,290 1,121,290 1,121,290 1

20 Annex 1: Total Net Working Capital Requirements (in Birr) (continued) PRODUCTION Capacity Utilization (%) 80% 100% 100% 100% 100% 100% 1. Total Inventory 13,016,836 16,271,045 16,271,045 16,271,045 16,271,045 16,271,045 Raw Materials in Stock-Total 4,363,636 5,454,545 5,454,545 5,454,545 5,454,545 5,454,545 Raw Material-Local 4,363,636 5,454,545 5,454,545 5,454,545 5,454,545 5,454,545 Raw Material-Foreign Factory Supplies in Stock 54,400 67,999 67,999 67,999 67,999 67,999 Spare Parts in Stock and Maintenance 155, , , , , ,001 Work in Progress 1,359,988 1,699,985 1,699,985 1,699,985 1,699,985 1,699,985 Finished Products 2,719,976 3,399,970 3,399,970 3,399,970 3,399,970 3,399, Accounts Receivable 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 8,378, Cash in Hand 317, , , , , ,399 CURRENT ASSETS 17,348,501 19,591,081 19,591,081 19,591,081 19,591,081 19,591, Current Liabilities 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 Accounts Payable 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 TOTAL NET WORKING CAPITAL REQUIREMENTS 8,970,319 11,212,899 11,212,899 11,212,899 11,212,899 11,212,899 INCREASE IN NET WORKING CAPITAL 1,121,290 2,242,

21 Annex 2: Cash Flow Statement (in Birr) CONSTRUCTION PRODUCTION Year 1 Year TOTAL CASH INFLOW 31,120,919 42,333,818 52,189,091 61,047,273 73,047,273 85,047, Inflow Funds 31,120,919 42,333,818 4,189,091 1,047,273 1,047,273 1,047,273 Total Equity 12,448,367 16,933, Total Long Term Loan 18,672,551 25,400, Total Short Term Finances 0 0 4,189,091 1,047,273 1,047,273 1,047, Inflow Operation ,000,000 60,000,000 72,000,000 84,000,000 Sales Revenue ,000,000 60,000,000 72,000,000 84,000,000 Interest on Securities Other Income TOTAL CASH OUTFLOW 31,120,919 31,120,919 42,656,383 42,532,572 55,331,747 62,112, Increase In Fixed Assets 31,120,919 31,120, Fixed Investments 29,638,970 29,638, Pre-production Expenditures 1,481,949 1,481, Increase in Current Assets 0 0 8,674,251 2,168,563 2,168,563 2,168, Operating Costs ,304,096 27,729,795 33,155,494 38,581, Corporate Tax Paid ,254,933 10,491, Interest Paid ,678,036 5,288,741 4,407,284 3,525,827 9.Loan Repayments ,345,474 7,345,474 7,345, Dividends Paid Surplus (Deficit) 0 11,212,899 9,532,708 18,514,701 17,715,526 22,934,557 Cumulative Cash Balance 0 11,212,899 20,745,608 39,260,308 56,975,834 79,910,391 3

22 Annex 2: Cash Flow Statement (in Birr): Continued PRODUCTION TOTAL CASH INFLOW 97,047, ,000, ,000, ,000, ,000, ,000, Inflow Funds 1,047, Total Equity Total Long Term Loan Total Short Term Finances 1,047, Inflow Operation 96,000, ,000, ,000, ,000, ,000, ,000,000 Sales Revenue 96,000, ,000, ,000, ,000, ,000, ,000,000 Interest on Securities Other Income TOTAL CASH OUTFLOW 68,893,686 83,624,495 80,764,895 72,802,402 72,802,402 72,802, Increase In Fixed Assets Fixed Investments Pre-production Expenditures Increase in Current Assets 2,168,563 2,242, Operating Costs 44,006,891 54,858,289 54,858,289 54,858,289 54,858,289 54,858, Corporate Tax Paid 12,728,388 17,415,239 17,679,676 17,944,113 17,944,113 17,944, Interest Paid 2,644,371 1,762, , Loan Repayments 7,345,474 7,345,474 7,345, Dividends Paid Surplus (Deficit) 28,153,587 36,375,505 39,235,105 47,197,598 47,197,598 47,197,598 Cumulative Cash Balance 108,063, ,439, ,674, ,872, ,069, ,267,381 4

23 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED CONSTRUCTION PRODUCTION Year 1 Year TOTAL CASH INFLOW ,000,000 60,000,000 72,000,000 84,000, Inflow Operation ,000,000 60,000,000 72,000,000 84,000,000 Sales Revenue ,000,000 60,000,000 72,000,000 84,000,000 Interest on Securities Other Income TOTAL CASH OUTFLOW 31,120,919 31,120,919 26,789,256 28,851,085 34,276,783 50,194, Increase in Fixed Assets 31,120,919 31,120, Fixed Investments 29,638,970 29,638, Pre-production Expenditures 1,481,949 1,481, Increase in Net Working Capital 0 0 4,485,160 1,121,290 1,121,290 1,121, Operating Costs ,304,096 27,729,795 33,155,494 38,581, Corporate Tax Paid ,491,660 NET CASH FLOW -31,120,919-31,120,919 21,210,744 31,148,915 37,723,217 33,805,857 CUMULATIVE NET CASH FLOW -31,120,919-62,241,837-41,031,093-9,882,177 27,841,039 61,646,897 Net Present Value (at 18%) -31,120,919-26,373,660 15,233,226 18,958,191 19,457,215 14,776,852 Cumulative Net present Value -31,120,919-57,494,578-42,261,352-23,303,160-3,845,945 10,930,907 5

24 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued) PRODUCTION TOTAL CASH INFLOW 96,000, ,000, ,000, ,000, ,000, ,000, Inflow Operation 96,000, ,000, ,000, ,000, ,000, ,000,000 Sales Revenue 96,000, ,000, ,000, ,000, ,000, ,000,000 Interest on Securities Other Income TOTAL CASH OUTFLOW 57,856,569 74,516,108 72,537,965 72,802,402 72,802,402 72,802, Increase in Fixed Assets Fixed Investments Pre-production Expenditures Increase in Net Working Capital 1,121,290 2,242, Operating Costs 44,006,891 54,858,289 54,858,289 54,858,289 54,858,289 54,858, Corporate Tax Paid 12,728,388 17,415,239 17,679,676 17,944,113 17,944,113 17,944,113 NET CASH FLOW 38,143,431 45,483,892 47,462,035 47,197,598 47,197,598 47,197,598 CUMULATIVE NET CASH FLOW 99,790, ,274, ,736, ,933, ,131, ,329,049 Net Present Value (at 18%) 14,129,530 14,278,532 12,626,713 10,640,985 9,017,784 7,642,190 Cumulative Net present Value 25,060,437 39,338,969 51,965,682 62,606,667 71,624,451 79,266,640 Net Present Value (at 18%) 79,266, Internal Rate of Return 41.6% 6

25 Annex 4: NET INCOME STATEMENT ( in Birr) PRODUCTION Capacity Utilization (%) 40% 50% 60% 70% 80% 1. Total Income 48,000,000 60,000,000 72,000,000 84,000,000 96,000,000 Sales Revenue 48,000,000 60,000,000 72,000,000 84,000,000 96,000,000 Other Income Less Variable Cost 21,540,939 26,926,174 32,311,409 37,696,643 43,081,878 VARIABLE MARGIN 26,459,061 33,073,826 39,688,591 46,303,357 52,918,122 (In % of Total Income) Less Fixed Costs 7,683,936 7,724,400 7,764,864 7,805,328 7,845,792 OPERATIONAL MARGIN 18,775,125 25,349,426 31,923,727 38,498,028 45,072,329 (In % of Total Income) Less Cost of Finance 11,678,036 5,288,741 4,407,284 3,525,827 2,644, GROSS PROFIT 7,097,089 20,060,685 27,516,443 34,972,201 42,427, Income (Corporate) Tax ,254, ,491, ,728, NET PROFIT 7,097,089 20,060,685 19,261,510 24,480,541 29,699,571 RATIOS (%) Gross Profit/Sales 14.79% 33.43% 38.22% 41.63% 44.20% Net Profit After Tax/Sales 14.79% 33.43% 26.75% 29.14% 30.94% Return on Investment 28.14% 37.36% 34.32% 39.96% 45.42% Return on Equity 24.15% 68.28% 65.56% 83.32% % 7

26 Annex 4: NET INCOME STATEMENT (in Birr): Continued PRODUCTION Capacity Utilization (%) 100% 100% 100% 100% 100% 1. Total Income 120,000, ,000, ,000, ,000, ,000,000 Sales Revenue 120,000, ,000, ,000, ,000, ,000,000 Other Income Less Variable Cost 53,852,348 53,852,348 53,852,348 53,852,348 53,852,348 VARIABLE MARGIN 66,147,652 66,147,652 66,147,652 66,147,652 66,147,652 (In % of Total Income) Less Fixed Costs 6,333,941 6,333,941 6,333,941 6,333,941 6,333,941 OPERATIONAL MARGIN 59,813,711 59,813,711 59,813,711 59,813,711 59,813,711 (In % of Total Income) Less Cost of Finance 1,762, , GROSS PROFIT 58,050,798 58,932,254 59,813,711 59,813,711 59,813, Income (Corporate) Tax 17,415,239 17,679,676 17,944,113 17,944,113 17,944, NET PROFIT 40,635,558 41,252,578 41,869,598 41,869,598 41,869,598 RATIOS (%) Gross Profit/Sales 48.38% 49.11% 49.84% 49.84% 49.84% Net Profit After Tax/Sales 33.86% 34.38% 34.89% 34.89% 34.89% Return on Investment 57.72% 57.36% 57.00% 57.00% 57.00% Return on Equity % % % % % 8

27 Annex 5: Projected Balance Sheet (in Birr) CONSTRUCTION 9 PRODUCTION Year 1 Year TOTAL ASSETS 31,120,919 73,454,736 84,740,916 98,503, ,466, ,649, Total Current Assets 0 11,212,899 29,419,858 50,103,121 69,987,210 95,090,329 Inventory on Materials and Supplies 0 0 2,286,618 2,858,273 3,429,927 4,001,582 Work in Progress , ,992 1,019,991 1,189,989 Finished Products in Stock 0 0 1,359,988 1,699,985 2,039,982 2,379,979 Accounts Receivable 0 0 4,189,091 5,236,364 6,283,636 7,330,909 Cash in Hand , , , ,479 Cash Surplus, Finance Available 0 11,212,899 20,745,608 39,260,308 56,975,834 79,910,391 Securities Total Fixed Assets, Net of Depreciation 31,120,919 62,241,837 55,321,058 48,400,278 41,479,499 34,558,719 Fixed Investment 0 29,638,970 59,277,940 59,277,940 59,277,940 59,277,940 Construction in Progress 29,638,970 29,638, Pre-Production Expenditure 1,481,949 2,963,897 2,963,897 2,963,897 2,963,897 2,963,897 Less Accumulated Depreciation 0 0 6,920,779 13,841,559 20,762,338 27,683, Accumulated Losses Brought Forward Loss in Current Year TOTAL LIABILITIES 31,120,919 73,454,736 84,740,916 98,503, ,466, ,649, Total Current Liabilities 0 0 4,189,091 5,236,364 6,283,636 7,330,909 Accounts Payable 0 0 4,189,091 5,236,364 6,283,636 7,330,909 Bank Overdraft Total Long-term Debt 18,672,551 44,072,842 44,072,842 36,727,368 29,381,894 22,036,421 Loan A 18,672,551 44,072,842 44,072,842 36,727,368 29,381,894 22,036,421 Loan B Total Equity Capital 12,448,367 29,381,894 29,381,894 29,381,894 29,381,894 29,381,894 Ordinary Capital 12,448,367 29,381,894 29,381,894 29,381,894 29,381,894 29,381,894 Preference Capital Subsidies Reserves, Retained Profits Brought Forward ,097,089 27,157,773 46,419,283 9.Net Profit After Tax 0 0 7,097,089 20,060,685 19,261,510 24,480,541 Dividends Payable Retained Profits 0 0 7,097,089 20,060,685 19,261,510 24,480,541

28 Annex 5: Projected Balance Sheet (in Birr): Continued PRODUCTION TOTAL ASSETS 153,050, ,340, ,247, ,117, ,986, ,856, Total Current Assets 125,412, ,030, ,265, ,463, ,660, ,858,462 Inventory on Materials and Supplies 4,573,236 5,716,545 5,716,545 5,716,545 5,716,545 5,716,545 Work in Progress 1,359,988 1,699,985 1,699,985 1,699,985 1,699,985 1,699,985 Finished Products in Stock 2,719,976 3,399,970 3,399,970 3,399,970 3,399,970 3,399,970 Accounts Receivable 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 Cash in Hand 317, , , , , ,399 Cash Surplus, Finance Available 108,063, ,439, ,674, ,872, ,069, ,267,381 Securities Total Fixed Assets, Net of Depreciation 27,637,940 22,309,940 16,981,940 11,653,940 6,325, ,940 Fixed Investment 59,277,940 59,277,940 59,277,940 59,277,940 59,277,940 59,277,940 Construction in Progress Pre-Production Expenditure 2,963,897 2,963,897 2,963,897 2,963,897 2,963,897 2,963,897 Less Accumulated Depreciation 34,603,897 39,931,897 45,259,897 50,587,897 55,915,897 61,243, Accumulated Losses Brought Forward Loss in Current Year TOTAL LIABILITIES 153,050, ,340, ,247, ,117, ,986, ,856, Total Current Liabilities 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 Accounts Payable 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 8,378,182 Bank Overdraft Total Long-term Debt 14,690,947 7,345, Loan A 14,690,947 7,345, Loan B Total Equity Capital 29,381,894 29,381,894 29,381,894 29,381,894 29,381,894 29,381,894 Ordinary Capital 29,381,894 29,381,894 29,381,894 29,381,894 29,381,894 29,381,894 Preference Capital Subsidies Reserves, Retained Profits Brought Forward 70,899, ,599, ,234, ,487, ,357, ,226, Net Profit After Tax 29,699,571 40,635,558 41,252,578 41,869,598 41,869,598 41,869,598 Dividends Payable Retained Profits 29,699,571 40,635,558 41,252,578 41,869,598 41,869,598 41,869,598 10