Investment Office ANRS

Project Profile on the Establishment

of Print ink making plant

Development Studies
Associates (DSA)

October 2008
Addis Ababa

Table of Contents
1.Executive Summary..............................................................................................3
2.Product Description and Application.................................................................3
3.Market Study, Plant Capacity and Production Program.................................4
3.1Market Study...........................................................................................................................4
3.1.1Present Demand and Supply............................................................................................4
3.1.2Projected Demand............................................................................................................5
3.1.3Pricing and Distribution...................................................................................................8
3.2Plant Capacity.........................................................................................................................8
3.3Production Program................................................................................................................8

4.Raw Materials and Utilities.................................................................................8

4.1Availability and Source of Raw Materials..............................................................................8
4.2Annual Requirement and Cost of Raw Materials and Utilities...............................................9

5.Location and Site................................................................................................12

6.Technology and Engineering ............................................................................12
6.1Production Process................................................................................................................12
6.2Machinery and Equipment....................................................................................................12
6.3Civil Engineering Cost..........................................................................................................13

7.Human Resource and Training Requirement..................................................14

7.1Human Resource ..................................................................................................................14
7.2Training Requirement...........................................................................................................15

8.Financial Analysis...............................................................................................16
8.1Underlying Assumption .......................................................................................................16
8.2Investment.............................................................................................................................17
8.3Production Costs...................................................................................................................17
8.4Financial Evaluation.............................................................................................................18

9.Economic and Social Benefit and Justification................................................19

ANNEXES..............................................................................................................21

1. Executive Summary
This project profile deals with print ink manufacturing plant in Amhara National Regional State.
The following presents the main findings of the study
Demand projection divulges that the domestic demand for printing ink is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 90 ton annually. The total
investment cost of the project including working capital is estimated at Birr 2.76 million and
creates 25 job opportunity and 267.84 Birr of income
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 19.5% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years. The result further show that
the calculated IRR of the project is 35.7% with NPV discounted at 18% of Birr 1,643,461.25
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

Printing inks are one of the most important ingredients of printing industry and with the
advancement of printing industry, need for the development of new type of printing inks has also
enhanced considerably. Printing ink is a combination of pigments, vehicles, and binders
(extenders) plasticizers to give desirable properties.
Printing inks are basically made in the form of paste and liquid ink depending upon the type of
application. For letter press, offset and screen printing the paste type of printing ink is required
3

while flexographic, gravure and rotary newsprint requires liquid form of ink for printing. The
different constituents of printing ink have different functions. For example the pigments import
the basic coloring effect, vehicle provide the facility of transporting the coloring pigments to the
plate of the printing machine. Similarly to produce printing inks for specific purpose other
additives like binders, extenders and plasticizers are added.
Printing inks are used in every type of printing activity. This includes die, newspapers, books,
magazines, periodicals, advertisement materials, packaging and labeling.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

The whole demand for printing ink is met through import. The major sources are Japan, China,
United Kingdom, Netherland and United Arab Emirates. The annual demand for the last 10 years
is presented in table 1 below.
Table 1: Import of Printing Ink (in ton)

Year

Import of Printing Ink

1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07

106.4
86.2
95.4
117.6
145.2
160.6
307.2
415.9
379.8
403.9

Source: Customs Authority, (various yeas)

The above table shows that the demand for printing ink has shown a continuous increase except
for two years (1998/99 and 2005/06). The average growth in demand do not exhibit similar
pattern. For instance, if we take the whole data of table 1 the average demand growth will be
about 19%. On the other hand, demand has grown by 6.3% in 2006/07 when compared from
2005/06. Whatever consideration is employed the trend clearly indicates the presence of ample
and growing demand to the product and the promising future of establishing a small producing
plant.

3.1.2 Projected Demand

The demand for printing ink is a derived demand. That is, it is a function of the demand for
newspapers, books, magazines, advertisement materials, packaging, labeling etc. With an
increase in the number of students the demand for books also increases. In this regard, it is
estimated that there are more than 11 million students enrolled in elementary and high schools
throughout the country. With the current huge investment in the education sector and the move to
increase education coverage throughout the country, the number of students is expected to
increase in the coming years. Thus, the demand for printing ink in producing books also
increases substantially in the years ahead. Similarly, with education, modernization and
urbanization the demand for newspapers, magazines etc also increases which in turn amplifies
the demand for printing ink. Furthermore, the growth of modern trade and competition being
witnessed in the country requires advertisement (including billboard, posters etc) and packaging
that will result in growing demand for printing ink. In general, the demand for the product will
increase in the coming years due to the factors stated above.
The future demand for printing ink is forecasted using the linear time trend fitted on the data
presented on table 1. In order to reflect the recent performance only the data between 2003/04 to
2006/07 is used in the forecasting. Accordingly, the following result is obtained.
Yi = 313.2 + 25.4 X i

Where Yi = Demand for printing ink and Xi = time trend

5

Accordingly, the projected demand for printing ink is given in table 2 below.

Table 2: Projected Demand for Printing Ink

Year
2007/08

Projected Demand

2008/09

465.6

2009/10

491

2010/11

516.4

2011/12

541.8

2012/13

567.2

2013/14

592.6

2014/15

618

2015/16

643.4
668.8
694.2
719.6

2016/17
2017/18
2018/19

440.2

The projected demand presented in table 2 show that demand for print ink will be 491 ton in
2009/10 and reaches 719.6 within 10 years time. Furthermore, the table indicates that demand
grows on average by about 4.5% which can be considered conservative groth rate in view of the
whole figure given in table1

3.1.3 Pricing and Distribution

Information obtained from Customs Authority reveal that the average CIF price for a kilogram of
printing ink varies on average between Birr 35 to 44 in 2006/07. The overall price importers
have to pay (which is equivalent to producers price) is expected to be far higher than the above
range (at least by about 20%) when customs duty, transit port handling, inland transport and
bank charge is taken in to account.
Thus, based on the market research result and the capacity of the envisaged plant, the selling
price of printing ink is set to be Birr 40 per a kg of the product. Moreover, the available
wholesale network shall be used by the envisaged plant.

3.2

Plant Capacity

Given the expected demand for print ink as presented earlier, and the planned technology, the
envisaged plant is set to produce 90 tons of print ink annually.

3.3

Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 65 percent capacity and then it grows to 80
percent in the 2nd year and 90% in the 3rd year. The capacity will grow to 100 percent starting
from the 4th year. This consideration is developed based on the assumption that market and
logistics barriers would take place for the first two years of operation.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

The major raw materials for the production of printing ink are carbon black, ester gum, oils,
calcium carbonates resins, pigments tin containers and other materials. Most of the materials are
imported from abroad

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 here under.

Table 3 Material and Utility Requirement

Material and Input

Carbon Black
Victoria Blue
Phlocyanine Blue
Phenolic Resin
Metallic Resin
Alkyd Resin
Prussian Blue
Ester Gum
Bitumen
Calcium Carbonate
Linseed Oil
Stand Oil
Aromax Solvent
Aluminum Hydrate
White Spirit
Chrome Pigment
Cobalt Drier
Other oils (Grease and machine oil)
Tin Container (for 10 kg pack)
Total Material Cost

Quantity
10,800 kg
6000 kg
1632 kg
1680 kg
1680 kg
960 kg
624 kg
18,000 kg
5784 kg
10,200 kg
7320 kg
768 kg
252 kg
252 kg
24 lt
528 kg
708 kg
12,000 kg
9000 pcs

Total Cost (Birr)

L.C.
F.C.
162,000
288,000
89,760
13,776
28,560
16,224
84,240
360,000
26,896
17,340
164,700
11,520
5,292
630
288
39,600
212,400
228,000
36,000
280,224

1,505,002

Utility
Electricity
Water
Total Utility Cost

137500 kwh
5000m3

75,625
6,625
82,250

10

Based on the above table the total material and utility requirement at full capacity of operation is
estimated to be Birr 1,867,476

11

5. Location and Site

The appropriate locations for the envisaged project in view of the availability of infrastructure as
well as proximity to the market for the output are major towns of the region mainly Bahir Dar,
Kombolcha and Debre Birhan.

6. Technology and Engineering

6.1

Production Process

The process of printing ink manufacturing is simple. It involves first mixing of the ingredients
with additives in stainless steel planetary mixer. After completing mixing, the combination is
passed to triple role mill and 7 to 8 passes are given to achieve the required fineness. Then the
paste form of ink is tested and packed in tin containers.
The technological option available is related to the production capacity of the machineries. That
is, high capacity of operation is accompanied by automated machineries in vehicles preparation
and color dispersion activities. For the envisaged plant, however, the semi automated plant is
more appropriate and relatively cost effective.

6.2

Machinery and Equipment

The machineries and equipment required for manufacturing print ink is detailed in table 4 below.

12

Table 4: Machinery and Equipment

Machinery and Equipment

Quantity

Ball Mill size 4'dia x4'x6' length made of M.S plate with refractory
Lining and 10HP motor
Triple Roll Mill with hollow chilled cast iron roll of 12'x26' size with
water cooling arrangements and 12.5 HP motor
Varnish Kettle 250 kgs. Cap made of stainless steel
Planetary Mixer made of S.S. capacity 250 lts. With dual speed and 5
H.P motor
Pot Mill having 3 Porcelain Pot of capacity 2 lts, each with 2 HP motor
Storage and Potting Vessel, 100 kgs capacity each
Weighing Scale Platform type with capacity 300 kgs
Weighing Scale 10 kg capacity
Laboratory Equipment
Colloid mils
Other Equipment and Tolls

1
1
1
1
1
1
1
1
1 set
1

The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 660,000.
The following is machineries supplier address for the envisaged project
S.S. Engineering
31/1/B, A.C. PAUL STREET, KOLKATA
700057, WEST BENGAL, INDIA
Tel: 91-33-25532564
Mob. +919831094800
Fax: 91-33-25532564
Website: http://www.ssenggworks.com

6.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 600m 2 of land with covered area of
400m2. Of this 300m2 is allocated to the production place stores (50m 2) and office buildings and
facilities (50m2). The remaining space is left for parking and for future expansions
13

7. Human Resource and Training Requirement

7.1

Human Resource

The list of required manpower for the envisaged plant is stated in table 5 below
Table 5: Human Resource Requirement
Position
Manager
Accountant/Cashier
Secretary
Sales Clerk
Chemist
Store Keeper
Technician
Supervisor
Operators
Daily Laborers
Cleaners
Messengers
Driver
Guards
Benefit (20%)
Total

No. Required
1
1
1
1
1
1
2
1
6
3
2
1
1
3
25

Monthly
Salary
4,000
1,200
800
600
1,500
600
1,000
1,000
600
300
300
300
600
300

Total Annual
Salary
48,000
14,400
9,600
7,200
18,000
7,200
24,000
12,000
43,200
10,800
7,200
3,600
7,200
10,800
44,640
267,840

14

The envisaged plant therefore, creates 25 job opportunity and about Birr 267.84 thousand of
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 in collaboration with the suppliers of the plant
machineries. The training should primarily focuses on the production technology and machinery
maintenance and trouble shooting. Birr 25,000 will be allocated as training expense.

15

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of printing ink manufacturing 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

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%

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
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

10
15
30
30
30

16

8.2

Investment

The total investment cost of the project including working capital is estimated at Birr 2.76
million as shown in table 6 below. 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 6: Total initial investment
Items
Land
Building and civil works
Office equipment
Vehicles
Plant machinery & equipment
Total fixed investment cost
Pre production capital
expenditure*
Total initial investment
Working capital at full capacity
Total

L.C
1,800
800,000
35,000
250,000
0
1,086,800

F.C

660,000
660,000

87,340
1,174,140
267,636
1,441,776

Total
1,800
800,000
35,000
250,000
660,000
1,746,800
87,340

660,000
656,728
1,316,728

1,834,140
924,364
2,758,504

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for companys establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project accounts for 47.7% of the total investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 2.52 million as detailed in
table 7 below.

17

Table 7: Production Cost

Items
1.
2.
3.
4.

Raw materials
Utilities
Wages and Salaries
Spares and Maintenance
Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

8.4

Cost
1,785,226
82,250
267,840
17,468
2,152,784
176,968
198,612
2,528,364

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. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 14%, 29% and 30% 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 19.5% of capacity utilization.
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 2 years time.

18

IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 32.7%
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
35.7% and the net present value at 18 % discount is Birr 1,643,461.25
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 more or less unchanged IRR and payback period.

9. Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It also
plays positive role in diversifying the economic activity by enhancing the industrial sector of the
region. The other major benefits are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns a profit of Birr 7.8 million within the
project life. Such result induces the project promoters to reinvest the profit which, therefore,
increases the investment magnitude in the region.
B. Tax Revenue
In the project life under consideration, the region will collect about Birr 2.9 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

19

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
3.36 will be saved as a result of the proposed project. This will create 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 25 professionals as well as support
stuffs. Consequently the project creates income of Birr 267.84 thousands per year. This would be
one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

20

ANNEXES

21

Annex 1: Total Net Working Capital Requirements (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

Capacity Utilization (%)

0%

0%

65%

80%

90%

100%

1. Total Inventory

0.00

0.00

1022755.82

1258776.39

1416123.44

1573470.49

0.00

0.00

446743.72

549838.43

618568.23

687298.04

Raw Material-Local

0.00

0.00

19870.43

24455.91

27512.90

30569.89

Raw Material-Foreign

0.00

0.00

426873.29

525382.52

591055.33

656728.15

Factory Supplies in Stock

0.00

0.00

1652.01

2033.24

2287.39

2541.55

Spare Parts in Stock and Maintenance

0.00

0.00

3715.92

4573.44

5145.12

5716.80

Work in Progress

0.00

0.00

41300.15

50830.95

57184.82

63538.69

Finished Products

0.00

0.00

82600.30

101661.91

114369.64

127077.38

2. Accounts Receivable

0.00

0.00

255272.73

314181.82

353454.55

392727.27

3. Cash in Hand

0.00

0.00

24824.56

30553.31

34372.47

38191.64

0.00

0.00

856109.39

1053673.09

1185382.23

1317091.37

4. Current Liabilities

0.00

0.00

255272.73

314181.82

353454.55

392727.27

Accounts Payable

0.00

0.00

255272.73

314181.82

353454.55

392727.27

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

600836.66

739491.27

831927.68

924364.09

INCREASE IN NET WORKING CAPITAL

0.00

0.00

600836.66

138654.61

92436.41

92436.41

Raw Materials in Stock- Total

CURRENT ASSETS

Annex 1: Total Net Working Capital Requirements (in Birr)

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

1573470.49

1573470.49

1573470.49

1573470.49

1573470.49

1573470.49

687298.04

687298.04

687298.04

687298.04

687298.04

687298.04

Raw Material-Local

30569.89

30569.89

30569.89

30569.89

30569.89

30569.89

Raw Material-Foreign

656728.15

656728.15

656728.15

656728.15

656728.15

656728.15

Factory Supplies in Stock

2541.55

2541.55

2541.55

2541.55

2541.55

2541.55

Spare Parts in Stock and Maintenance

5716.80

5716.80

5716.80

5716.80

5716.80

5716.80

Work in Progress

63538.69

63538.69

63538.69

63538.69

63538.69

63538.69

Finished Products

127077.38

127077.38

127077.38

127077.38

127077.38

127077.38

2. Accounts Receivable

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

3. Cash in Hand

38191.64

38191.64

38191.64

38191.64

38191.64

38191.64

1317091.37

1317091.37

1317091.37

1317091.37

1317091.37

1317091.37

4. Current Liabilities

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

Accounts Payable

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

TOTAL NET WORKING CAPITAL REQUIRMENTS

924364.09

924364.09

924364.09

924364.09

924364.09

924364.09

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

917070.00

1841434.09

2595272.73

2938909.09

3279272.73

3639272.73

917070.00

1841434.09

255272.73

58909.09

39272.73

39272.73

Total Equity

366828.00

736573.64

0.00

0.00

0.00

0.00

Total Long Term Loan

550242.00

1104860.46

0.00

0.00

0.00

0.00

0.00

0.00

255272.73

58909.09

39272.73

39272.73

2. Inflow Operation

0.00

0.00

2340000.00

2880000.00

3240000.00

3600000.00

Sales Revenue

0.00

0.00

2340000.00

2880000.00

3240000.00

3600000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

917070.00

917070.00

2702055.18

2417240.22

2815078.94

3051010.45

4. Increase In Fixed Assets

917070.00

917070.00

0.00

0.00

0.00

0.00

Fixed Investments

873400.00

873400.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

43670.00

43670.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

856109.39

197563.70

131709.14

131709.14

6. Operating Costs

0.00

0.00

1421421.79

1745213.82

1961075.17

2176936.52

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

280933.98

334106.19

8. Interest Paid

0.00

0.00

424524.00

198612.29

165510.25

132408.20

9.Loan Repayments

0.00

0.00

0.00

275850.41

275850.41

275850.41

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

924364.09

-106782.45

521668.87

464193.79

588262.28

Cumulative Cash Balance

0.00

924364.09

817581.64

1339250.51

1803444.30

2391706.58

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

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

PRODUCTION
5
3600000.00

6
3600000.00

7
3600000.00

8
3600000.00

9
3600000.00

10
3600000.00

0.00

0.00

0.00

0.00

0.00

0.00

Total Equity

0.00

0.00

0.00

0.00

0.00

0.00

Total Long Term Loan

0.00

0.00

0.00

0.00

0.00

0.00

Total Short Term Finances

0.00

0.00

0.00

0.00

0.00

0.00

2. Inflow Operation

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

Sales Revenue

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2896129.88

2893198.84

2870027.41

2571005.56

2571005.56

2571005.56

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

2176936.52

2176936.52

2176936.52

2176936.52

2176936.52

2176936.52

7. Corporate Tax Paid

344036.80

374207.81

384138.43

394069.04

394069.04

394069.04

8. Interest Paid

99306.15

66204.10

33102.05

0.00

0.00

0.00

9. Loan Repayments

275850.41

275850.41

275850.41

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

703870.12

706801.16

729972.59

1028994.44

1028994.44

1028994.44

Cumulative Cash Balance

3095576.70

3802377.86

4532350.45

5561344.89

6590339.33

7619333.76

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets

5. Increase in Current Assets

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

2340000.00

2880000.00

3240000.00

3600000.00

1. Inflow Operation

0.00

0.00

2340000.00

2880000.00

3240000.00

3600000.00

Sales Revenue

0.00

0.00

2340000.00

2880000.00

3240000.00

3600000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

917070.00

917070.00

2022258.45

1883868.43

2334445.55

2603479.11

3. Increase in Fixed Assets

917070.00

917070.00

0.00

0.00

0.00

0.00

Fixed Investments

873400.00

873400.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

43670.00

43670.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

600836.66

138654.61

92436.41

92436.41

5. Operating Costs

0.00

0.00

1421421.79

1745213.82

1961075.17

2176936.52

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

280933.98

334106.19

NET CASH FLOW

-917070.00

-917070.00

317741.55

996131.57

905554.45

996520.89

CUMMULATIVE NET CASH FLOW

-917070.00

-1834140.00

-1516398.45

-520266.88

385287.57

1381808.45

Net Present Value (at 18%)

-917070.00

-777177.97

228197.03

606276.43

467074.91

435588.46

Cumulative Net present Value

-917070.00

-1694247.97

-1466050.93

-859774.50

-392699.59

42888.87

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

1. Inflow Operation

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

Sales Revenue

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2520973.32

2551144.33

2561074.95

2571005.56

2571005.56

2571005.56

3. Increase in Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

2176936.52

2176936.52

2176936.52

2176936.52

2176936.52

2176936.52

6. Corporate Tax Paid

344036.80

374207.81

384138.43

394069.04

394069.04

394069.04

NET CASH FLOW

1079026.68

1048855.67

1038925.05

1028994.44

1028994.44

1028994.44

CUMMULATIVE NET CASH FLOW

2460835.13

3509690.80

4548615.85

5577610.29

6606604.72

7635599.16

Net Present Value (at 18%)

399705.51

329262.05

276393.71

231993.04

196604.27

166613.79

Cumulative Net present Value

442594.38

771856.43

1048250.14

1280243.19

1476847.46

1643461.25

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

1,643,461.25

35.7%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1

65%

80%

90%

100%

100%

2340000.00

2880000.00

3240000.00

3600000.00

3600000.00

2340000.00

2880000.00

3240000.00

3600000.00

3600000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1333460.39

1641182.02

1846329.77

2051477.52

2051477.52

1006539.61

1238817.98

1393670.23

1548522.48

1548522.48

43.01

43.01

43.01

43.01

43.01

264929.40

280999.80

291713.40

302427.00

302427.00

741610.21

957818.18

1101956.83

1246095.48

1246095.48

31.69

33.26

34.01

34.61

34.61

4. Less Cost of Finance

424524.00

198612.29

165510.25

132408.20

99306.15

5. GROSS PROFIT

317086.21

759205.89

936446.59

1113687.28

1146789.33

0.00

0.00

280933.98

334106.19

344036.80

317086.21

759205.89

655512.61

779581.10

802752.53

Gross Profit/Sales

14%

26%

29%

31%

32%

Net Profit After Tax/Sales

14%

26%

20%

22%

22%

Return on Investment

30%

37%

31%

33%

33%

Return on Equity

29%

69%

59%

71%

73%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax

7. NET PROFIT
RATIOS (%)

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

PRODUCTION
6

10

100%

100%

100%

100%

100%

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

3600000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

2051477.52

2051477.52

2051477.52

2051477.52

2051477.52

1548522.48

1548522.48

1548522.48

1548522.48

1548522.48

43.01

43.01

43.01

43.01

43.01

234959.00

234959.00

234959.00

234959.00

234959.00

1313563.48

1313563.48

1313563.48

1313563.48

1313563.48

36.49

36.49

36.49

36.49

36.49

66204.10

33102.05

0.00

0.00

0.00

5. GROSS PROFIT

1247359.38

1280461.43

1313563.48

1313563.48

1313563.48

6. Income (Corporate) Tax

374207.81

384138.43

394069.04

394069.04

394069.04

7. NET PROFIT

873151.57

896323.00

919494.44

919494.44

919494.44

Gross Profit/Sales

35%

36%

36%

36%

36%

Net Profit After Tax/Sales

24%

25%

26%

26%

26%

Return on Investment

34%

34%

33%

33%

33%

Return on Equity

79%

81%

83%

83%

83%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits

Year 1
917070.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
917070.00
0.00
873400.00
43670.00
0.00
0.00
0.00
917070.00
0.00
0.00
0.00
550242.00
550242.00
0.00
366828.00
366828.00
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
2758504.09
924364.09
0.00
0.00
0.00
0.00
0.00
924364.09
0.00
1834140.00
873400.00
873400.00
87340.00
0.00
0.00
0.00
2758504.09
0.00
0.00
0.00
1655102.46
1655102.46
0.00
1103401.64
1103401.64
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
3330863.03
1673691.03
452111.65
41300.15
82600.30
255272.73
24824.56
817581.64
0.00
1657172.00
1746800.00
0.00
87340.00
176968.00
0.00
0.00
3330863.03
255272.73
255272.73
0.00
1655102.46
1655102.46
0.00
1103401.64
1103401.64
0.00
0.00
0.00
317086.21
0.00
317086.21

2
3873127.60
2392923.60
556445.11
50830.95
101661.91
314181.82
30553.31
1339250.51
0.00
1480204.00
1746800.00
0.00
87340.00
353936.00
0.00
0.00
3873127.60
314181.82
314181.82
0.00
1379252.05
1379252.05
0.00
1103401.64
1103401.64
0.00
0.00
317086.21
759205.89
0.00
759205.89

3
4292062.53
2988826.53
626000.75
57184.82
114369.64
353454.55
34372.47
1803444.30
0.00
1303236.00
1746800.00
0.00
87340.00
530904.00
0.00
0.00
4292062.53
353454.55
353454.55
0.00
1103401.64
1103401.64
0.00
1103401.64
1103401.64
0.00
0.00
1076292.10
655512.61
0.00
655512.61

4
4835065.95
3708797.95
695556.38
63538.69
127077.38
392727.27
38191.64
2391706.58
0.00
1126268.00
1746800.00
0.00
87340.00
707872.00
0.00
0.00
4835065.95
392727.27
392727.27
0.00
827551.23
827551.23
0.00
1103401.64
1103401.64
0.00
0.00
1731804.71
779581.10
0.00
779581.10

Annex 5: Projected Balance Sheet (in Birr):

Continued

PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

5
5361968.07
4412668.07
695556.38
63538.69
127077.38
392727.27
38191.64
3095576.70
0.00
949300.00
1746800.00
0.00
87340.00
884840.00
0.00
0.00
5361968.07
392727.27
392727.27
0.00
551700.82
551700.82
0.00
1103401.64
1103401.64
0.00
0.00
2511385.81
802752.53
0.00
802752.53

6
5959269.23
5119469.23
695556.38
63538.69
127077.38
392727.27
38191.64
3802377.86
0.00
839800.00
1746800.00
0.00
87340.00
994340.00
0.00
0.00
5959269.23
392727.27
392727.27
0.00
275850.41
275850.41
0.00
1103401.64
1103401.64
0.00
0.00
3314138.34
873151.57
0.00
873151.57

7
6579741.82
5849441.82
695556.38
63538.69
127077.38
392727.27
38191.64
4532350.45
0.00
730300.00
1746800.00
0.00
87340.00
1103840.00
0.00
0.00
6579741.82
392727.27
392727.27
0.00
0.00
0.00
0.00
1103401.64
1103401.64
0.00
0.00
4187289.91
896323.00
0.00
896323.00

8
7499236.26
6878436.26
695556.38
63538.69
127077.38
392727.27
38191.64
5561344.89
0.00
620800.00
1746800.00
0.00
87340.00
1213340.00
0.00
0.00
7499236.26
392727.27
392727.27
0.00
0.00
0.00
0.00
1103401.64
1103401.64
0.00
0.00
5083612.91
919494.44
0.00
919494.44

9
8418730.69
7907430.69
695556.38
63538.69
127077.38
392727.27
38191.64
6590339.33
0.00
511300.00
1746800.00
0.00
87340.00
1322840.00
0.00
0.00
8418730.69
392727.27
392727.27
0.00
0.00
0.00
0.00
1103401.64
1103401.64
0.00
0.00
6003107.35
919494.44
0.00
919494.44

10
9338225.13
8936425.13
695556.38
63538.69
127077.38
392727.27
38191.64
7619333.76
0.00
401800.00
1746800.00
0.00
87340.00
1432340.00
0.00
0.00
9338225.13
392727.27
392727.27
0.00
0.00
0.00
0.00
1103401.64
1103401.64
0.00
0.00
6922601.78
919494.44
0.00
919494.44

10