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PROJECT PROPOSAL FOR THE ESTABLISHMENT OF

MODERN CONSTRUCTION MATERIALS (MARBLE


TILES, GRANITE, MAGNESIUM OXIDE AND OTHER
CONSTRUCTION MATERIALS) MANUFACTURING

PROJECT TO BE IMPLEMENTED IN BURA YU TOWN


OF OROMIA REGION

Promoter: - Abdulselam Fayisa

October, 2007

Addis Ababa Ethiopia

1
Contents
Executive Summary...................................................................................................................................3
1. Introduction.......................................................................................................................................4
1.1. Background....................................................................................................................................4
1.2. Profile of the Promoter.................................................................................................................5
1.3. Purpose of the document..............................................................................................................5
1.4. Objectives of the Project...............................................................................................................5
1.5. Description of the Project.............................................................................................................6
1.6. Project Rationale...........................................................................................................................6
1.7. Physical Characteristic of Project Area.........................................................................................9
1.7.1. Location:'................................................................................................................................9
1.7.2. The Economic Base of Burayu................................................................................................9
1.7.4. premisesrequired..............................................................................................................10
1.8. Benefit of the Project:.................................................................................................................11
1.8.1. Source of Employment.........................................................................................................11
1.8.2. Source of Government Revenue..........................................................................................11
1.8.3. Sources of Social Service......................................................................................................11
2. THE MARKET DEMAND POTENTIAL.....................................................................................................12
2.1.1. Demand factors for the construction materials....................................................................12
2.2. Customer Definition.....................................................................................................................15
2.3. Product Type................................................................................................................................16
2.3.1 Type of product per year......................................................................................................16
2.4. Competition.................................................................................................................................17
3. THE PRODUCTION PROCESS AND ENGINEERING................................................................................17
3.1. Manufacturing Process.................................................................................................................17
3.1.1. Batching................................................................................................................................18
3.1.2. Mixing and grinding...............................................................................................................18
3.1.3. Spray drying...........................................................................................................................18
3.1.3. Forming.................................................................................................................................19
3.1.4. Drying....................................................................................................................................20
3.1.5. Glazing...................................................................................................................................20
3.1.6. Firing.....................................................................................................................................21

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3.2. Quality Control.............................................................................................................................21
3.3. The Production Plan.....................................................................................................................22
3.4. Sales Plan (Sales in Birr)................................................................................................................23
4. ORGANIZATIONAL STRUCTURE...........................................................................................................24
4.1. The General Manager’s Duties and responsibilities.....................................................................25
4.2. General Administration and Finance Department.......................................................................25
4.3. The Marketing Department..........................................................................................................25
4.4. The production Department........................................................................................................26
5. FINANCIAL REQUIREMENT..................................................................................................................26
5.1. Fixed Investment..............................................................................................................................27
5.1.1. Building & Construction........................................................................................................27
5.1.2. Factory Machineries.................................................................................................................27
5.1.3. Office Equipments.....................................................................................................................28
5.2. Expenses.....................................................................................................................................29
5.2.1. Raw Material Purchase Projected......................................................................................29
5.2.2. Salary Expense.....................................................................................................................29
5.2.3. Other Operating Expenses.....................................................................................................30
5.4. Pre-service Expense.....................................................................................................................31
5.5. Summary of financial requirement and source of fund................................................................31
5.6. Financial statement..................................................................................................................34
6. Environmental impact of the project..............................................................................................38

3
Executive Summary

1 Modern Construction Materials


Project Type
Manufacturing Industry
2 Project Owners Abdulselam Fayisa
3 Nationality Ethiopian
4 Oromia region, Oromia Special Zone in
.Project location
Burayu
5 Magnesium Oxide board, ceramic tiles,
Project Composition ~ marble tiles, granite tiles, hydra foam and
other construction materials
6 Premises Required 10,000 m2
7 Startup Capital For implementing this project a total of
60,337,260 Eth Birr is required. From
this 70% or 42,236,082 birr will be
covered by bank loan and 30% or
18,101,178 birr will be contributed by
the promoter of the project
8 Employment Opportunity Total permanent workers are 180 and
temporary 460 workers totally 640
workers. From 180 , 75 are skilled, 105
are unskilled, and from 460, 60 are
skilled and 400 are unskilled
9 Form the region/ country Source of government revenue through
taxation and in the government
development pin producing different
construction mutation sector

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1. Introduction
1.1. Background
.
Ethiopia is one of the East African countries with the diversified climatic
conditions, natural scenery and resource bases. Currently the country has
a total population of about 80 million of which more than 3trmillion is
found in Oromia regional state. Oromia is one of the regional states of
Ethiopia with very fertile land, very conducive weather condition both for
crop production and animal husbandry.
The government of the country has been excreting its maximum effort to
expand investment opportunities in the country by designing different
policies and strategies that will facilitate investment through attracting
both domestic and foreign investors. Likewise, the Roomier regional state
government has been working day and night to make poverty history by
making its door open to investors both (domestic and foreign) to come and
invest in the region. Therefore, it is this ample opportunity and cumulative
experience which makes the owner of the project, the promoter envisaged
this integrated construction material manufacturing industries in Bureau
town.
C
onstruction materials so as to bridge the gap of market demand of such
products in the contra. The present which is highly inviting the private
sector to work on import substitution is highly motivating the private sector
to respond to the government invitation, there by contributing their share
to the development process. The project is identified because the highly
growing sectors of the economy are highly in need of this type of
products.

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1.2. Profile of the Promoter

The promoter of the project Abdulselam Fayisa is a business man engaged in


supplying construction materials for long period of time. The promoter does
have ample experience in this regard which can make him to penetrate the
market in the shortest possible time. He also accumulated diversified-skills in
the area and also adopted working with many people. Thus, it is these
experiences which primarily motivated this young investor to develop the
inception
of this project idea.

1.3. Purpose of the document

The objective of the feasibility study is primarily to facilitate potential


entrepreneurships in project identification for investment. The project
feasibility may form the basis of an important investment decision and in order
to serve this objective; the document/study covers various aspects of project
concept development, start-up, production, marketing, and finance and
business management. The document also provides sectoral information, brief
on
Government policies and international scenario, which have some bearing on
the project itself. This particular feasibility is regarding the establishment of
integrated construction material manufacturing industries for commercial
purpose.

1.4. Objectives of the Project

Therefore, this construction material production has the following


objectives:
 To undertake the production of the different construction materials
though scientific methods and modem technology in more
environmentally benign way.
 To serve as the source of government revenue through business

6
income tax.
 To serve as a role model for other investors who wants to invest in
similar business undertakings
 To contribute somewhat to the governments Objectives of reducing
the problem of un-employment through crating employment
opportunities to the citizens both on permanent and temporary
basis.
 To bridge the demand gap of construction material production in the
country
 To contribute in the import substation policy of the government by
locally producing the different construction materials products that
were imported earlier.

1.5. Description of the Project

The envisaged manufacturing plant is one which is going to be established


as partnership type of business enterprise as per commercial code of the
country. The basic trust of the organization is to intervene in the
community markets through supplying standard and quality products in
the short.nll1 and various construction materials in the long run.
It is planning to supply its products to markets to be sold for reasonable
price which will take into account the purchasing power of customers as
per their economic status .
. During its operation the organization will be extending different
opportunities for the country. Regarding to the exact location of the
factory is located in Oromia region Burayu town. As to the financial
capacity the founders of the organization is having eighteen million
Ethiopian birr to be allocated from the owner equity and the rest from
bank loan. Besides, the organization recognizes that it is duty bound to
carry out its operations within the framework of commercial laws and
regulations and other dedications of the country, Ethiopia. It also promises

7
that all of its activities will be economically fair, socially acceptable and
environmentally sound.

1.6. Project Rationale


Internationally the economic growth this country experiencing, the good
governance created and even if the town is at a nascent stage of
development this project is the first in its kind in the town are feasible and
would be a model development in promoting and attracting different
investments. In order to respond to the created environment the town is in
need of
major basic and feasible urban projects to be developed.

The rapid growth in construction sector further demands industrial


linkages (vertical and like raw materials, inputs, auxiliary materials, inputs,
auxiliary material, technology, market and others that make them to be
efficiene and successful in their operation. The establishment of new
firms and expansion of the existing one can have the advantage to provide
those facilities.

Although the acceleration of construction in puts in Ethiopia is not as such


enough availing quality products that assists holding of both the exported
items and other products in the country
The government of Ethiopia has developed a conducive investment policy
packages and other sectoral reforms at federal and regional level to
attract a huge private investment for the wellbeing of the nation and its
citizens as a whole. Besides, it is also currently implementing the five
years growth and transformation plan that gave a space for
industrialization.
The existing promising investment opportunities, the demands of
service needs along with relatively sound investment support made by the
government in such kinds of feasible projects compelled the project
promoters to initiate the this Integrated construction material

8
. Manufacturing Industry.
Despite the promising business opportunities of the area the trend on such
kinds of investment found to be minimal and none-existing. The mismatch
between the demand for supply and supply of such kind of products is
easily observed in the country.
Nowadays there is high usage of construction materials in the country has
been intensified. In the proposed area Burayu has no single plants that
produce modem Integrated Construction Materials Manufacturing
industries and it is necessary to establish a factory that serves the
potential and existing demand.
Therefore the existing shortage or absence in the supply of these
products, along with its commercial and administrative access, better
location and infrastructure access, escalating

9
Demanded significantly. Thus it is with such proposes and assumed to be more
profitable. Trend of urbanization and business has given the opportunity for the
project to be reason that this project is identified and proposes and assumed to
be more profitable.

1.7. Physical Characteristic of Project Area


1.7.1. Location:'

The envisaged construction materials production project is planned to be located


in Oromia region Burayu town. The- area is very conducive for establishing such
project for its proximity to the center and good infrastructure because; it is only
about 25 km from Addis.

1.7.2. The Economic Base of Burayu


Trade is one of the major economic activities of urban centers. It acts as bases
for growth of Towns. Currently, trade has gone more than economic benefit. It
plays a great role in the area of politics, transfer of technologies and
information. It grows strongly with the development of transport and other
communication technologies. In the age of globalization where there are great
interdependence between several states, the task of trade requires high skill.
This is particularly true in a country where international trade has strong
influence on the domestic trade. Basically, trade can be divided into many
groups.
At preset however thanks to the effective free market economic policy which has
opened broad opportunities for the private sector; numerous investments are
taking place in the area, Particularly, Real estate developers which started
building houses. More others are expected from the conducive investment
environment. Small scale industries are also growing in numbers. The population
of the area is expected to double every year. This indicates that there is strong
need for construction materials in the proposed area.
Other than being employed in government and private organization,most of the
population of the town is engahed in trade, be it formal or informal. Unlik the
urbae people, the rural population is engaged in farming. Therefore aside with
all other project which aer Undertaken so far by private and government, this
proect is deemed to provide employment opportunities for many individuals at
the initial period and will continue employing every year.

10
W

1.7.4. premisesrequired

For the proposed set up of electric material manufacturing plant, a total of


10,000 square meters is required. This land' requirement includes space for the
installation of plant and machinery, management office and store for finished
product and parking.

Description Land
Ns
Requirement(m2)
1 Production hall
1.1 Workshop 300
1.2 Inspection room 100
0
Total production area 4000
0
2 Warehouse
2.2 Raw materials and inputs 100
2.3 Finished products 120
0
Total warehouse area 2200
0
3 Office and worker homes building
3.1 Office Il>
400
.
3.2 Showroom '~Il, 150
~
,0
3.2 Worker 600
Total office and worker homes bulg.
homes 2000
Area
4 Waste accumulation area ' 300
'
5 Green area, garage, parking and ~

~
Expansion' 150 ~
Total 10,000
'~

, 0

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1.8. Benefit of the Project:
The envisaged project deemed to contribute to the economic development of
the country in the following ways:

1.8.1. Source of Employment


One of the problems that our country is faced is unemployment. Therefore, the
cobjective of our government is working on tackling the problem of
unemployment either through creating self employment or employment in other
organization. Hence, the envisaged manufacturing plant deemed to contribute
somewhat to solve the problem of unemployment. Upon completion, the project
assumed to generate employment opportunities for about 107 individuals on
permanent bases and 560 on temporary basis.

1.8.2. Source of Government Revenue


To redistribute income, the government collects different forms of taxes
from different business undertakings and individuals as income tax. Among the
different forms of taxes, business income taxes are collected from undertaking
business activities. Therefore, the project will serve as sources of revenue for the
regional state of Roomier.

1.8.3. Sources of Social Service


In addition to serving as a source of employment and income for the region,
the project renders social services for different group of people. Hence, it is also
provide the following services:
 Serves as a source of mental satisfaction for the different users,
 It deemed to minimize the demand for construction materials and other
bundles of services in the area.
Furthermore, it serves as the pilot experience and ground for other
investor to enter in to such kinds of industrial development.

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2. THE MARKET DEMAND POTENTIAL
2.1. MARKET POTENTIAL & DEMAND GAP
Currently our country Ethiopia is among different other countries that has been
registering an impetrative growth in Africa. Hence, different construction
industries, individuals have in need of large quantities of construction products.
Therefore, the existing supply in the market is currently
unable to satisfy the demand. Thus, this will exert it maximum effort to contribute
some to the demand gap currently observed. Although there is clear data on the
production of construction materials, the majority of tiles are imported from
abroad, the envisaged project will domestically produce these tiles.

2.1.1. Demand factors for the construction materials


i. Fast Economy Growth (Booming in the Construction Sector)
The Ethiopian economy has been experiencing dynamic and double digit growth
that experienced annual average growth of 11.4% in past 8 years. According to
Ministry of Finance and Economic Development (MOFED), the forecasted
economic growth the economic growth (GDP at constant basic price) for
2011/2012 is estimated to be 10.4 %. As per the estimates, annual growth rates
of the major sectors, i.e. Agriculture, industry and service were 7.6 %, 10.6 %
and 13.0 %; respectively and their shares out of the total GDP were 42%, 13%
and 45 %, respectively. This continuous and a-two-digit high growth would place
Ethiopia among the fast growing countries in the world.

As sectors Of the economy, the agriculture and construction sector also grows with
double digit with the average annual growth 10.31% and 12% respectively in the
past 8 years. As shown in the table below the growth of sectors directly
related with the economy as parts of the economy.

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Table major Economic Indicators

Trends in Performance of the Economy: Growth Rates (%)

Item 2002/03 2003/04 2004/0 2005/06 2006/07 2007/08 2008/09 2009/10


GDP in
Prices -2.1 11.7 12.6 11.5 11.5
11.6 10 10.4
Agriculture -10.5 16.9 13.5 10.9 9.4 7.5 6.4 7.6
Industr 6.5 11.6 9.4 10.2 10.2 10.4
y
O/
Manufactur 0.8 6.6 12.8 10.6 8.3 7.1
Constructio 13.6 19.5 7.5 10.5 10.9 11.3 11.7 10.9
n
Servic 6 6.3 12.8 13.3 14.3 17
es
O/w:
and 10.8 19.7 24.2 28.7 15.1 24.9 16.5 13.7
Distributive
service 5.5 6.4 14.7 14.2 16 15.2
Other 6.5 6.1 10.9 12.5 13.1 14.2
servicesGDP
Real
capita GDP -4.6 10.7 9 8 7.5 7.6
Inflatio 15.1 8.6 6.1 10.6 15.8 25.3
n

Source: MOFED & NBE

This fast growth of these sectors resulted from different bodies like government,
non government and private activities in Ethiopia is growing in the fastest rate.
Moreover, the current five years Ethiopian Growth and transformation plan will
expand the current agriculture, infrastructure, residential (Condominium) and
buildings in paramount level.
In Economics, there exists direct relationship between sectoral development and
complementary equipments and materials. As economic science proved the
demand for complementary goods (goods that will consume together like fuel
and car) have positive relationship. This means when the demand for one good
increase the corresponding complementary good demand also increase

14
automatically with different rate depending on the nature of goods.

The fastest growth of constriction sector created the fast and bulk demand for
construction (building) materials. Since magnesium oxide board, ceramic tiles,
marble tiles, hydra foam and curbstone are among the main complementary
materials for this sector particularly, the corresponding demands for these
products are also increase. Therefore, roof nails and corrugated iron sheet have
the highest demand.

The national growth rate coupled with ruiral to urban migration has increased
the housing problem with the construction material in most of the town in
Ethiopia and especially in most of the town in Ethiopia and especially in satellite
towns. Studies conducted pertaining to urban housing problem have emphasized
on

-
the gap between the overcrowding of major towns like the above mentioned and
the fact that the majority of urban population that live in slums manifests the
housing problem with quality of construction materials. However it is important
to note the demand of construction material for a commercial & residential
building.

ii. Population growth

The rate of growth of the urban population is increasing from year to year. The
latest report of the United Fund for Population Agency revealed that Ethiopia's
population has reached 73 million in July 2005, which puts Ethiopia as the
second most populous country in Africa. According to the Central Statistics
Authority (CSA), current population growth is estimated
to be 2.8% per annum, and the growth rate is expected to remain above 2% for
the next 20 years. Rural population is growing at about 3.0% while the urban
population is growing at about 4.3%. Total population is projected to reach 129
million by 2030. In Ethiopia, of the total population, about 16.0% is estimated to
reside in the urban areas. The trend suggests that the size of urban population is
likely to continue to grow at a high speed in the future.
The share of urban population will rise from 16.0% in 2005 to about 23% by

15
2030. Nearly 30 million of the total 129 million will live in cities and towns by
2030.As a result from big population growth and urbanization demand for
construction materials will be increase.

2.2. Customer Definition

Hence the customers of these products are:


 Government construction( condominium, Offices, Business Centers, etc)
 Private investors and other incorporated and unincorporated businesses.
 Individuals living around the project area and nearby areas.
The future demand for marble, like many other construction materials is a
function of a number of interrelated variables. These variables that are essential
in determining the magnitude and trend of demand for cement are:-
 The overall economic development level and growth trend of the country,
 The pattern and growth trend of the construction industry, Government
policies and regulations that have impact on the future level and trend of
construction activities, and
 Size of population and its growth rate.

Considering all the above factors and the growth trend in supply observed from
the historical data (both local and export), future demand for the product is
conservatively projected to grow at a rate of 10%, annually.

Table
PROJECTED DEMAND AND UNSATISFIED DEMAND (M2)

Total
Projected Domestic Unsatisfie
d
Year Demand Supply Demand
2008 232,377 208,695 23,682
2009 255,615 208,695 46,920
2010 281,176 208,695 72,481
2011 309,294 208,695 100,599
2012 340,223 208,695 131,528
2013 374,245 208,695 165,550
16
2014 411,670 208,695 202,975
2015 452,837 208,695 244,142
2016 498,121 208,695 289,426
2017 547,933 208,695 339,238
2018 602,726 208,695 394,031
2019 662,999 208,695 454,304
2020 729,299 208,695 520,604

2.3. Product Type

The project will be to produce magnesium oxide board, ceramic tiles, granite
tiles, marble tiles, hydra form and other different construction materials, hence
the project has objectives of earning income for the promoter, minimizing the
acute shortage and quality of service of construction materials in the mean time
creating additional source of revenue and job opportunity for the area.
The project will produce multiple benefits to the promoter, employees and user
community at large. The promoter will stand to gain the financial income while
the project generates potential employees.

The project will also add up a big value towards the supply of quality
construction materials for the area. The whole functions of the project are
managed by the promoter himself. Selling of the construction material and
collection of fees and other duties related to running the production center will
be handled by the employees of the project.

2.3.1 Type of product per year

Item Type of Product inl'on Total Production Per Year


No
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6-10
1 Granite tiles 50,000 100,000 124,800 159,120 213,200 213,200
2 Marble Tiles 17256 34512 51768 69,024 86,280 86,280
3 Mg Oxide board 6824 13648 20472 27296 34,120 34,120
4 Ceramic tiles 7,200 14400 21600 28800 36,000 36,000
5 Hydra foam 23280 46560 69840 93120 116,400 116,400
6 Others flooring Materials 15200 30400 45600 60800 76,000 76,000
Total 119,760 239,520 334,080 438,160 562,000 562,000
17
2.4. Competition

There are different competitors in the market computing with this envisaged
project tin the market.
1. Those importing from abroad
2. Those producing in the domestic market
3. The potential competitors who deemed do engage in similar production line.
Therefore, there are different forms of competition that may face this project.
These are price and non price based competition. Moreover, the different
competitors may compete with the project under discussion either directly or
indirectly. But the project under discussion has diversified marketing strategies
that could enable it come up with the different competitors in the market. In
addition, it will frequently conduct competitors research which focuses on, the
strength and the weaknesses, the different competitor's strategies, the tenures
they use in rendering the service, their customer handling methods, and others,
then it will devise different strategies like;
1. Diversification of product and product lines
2. Diversified promotional tools
3. Lowering pikes by increasing production which will result in the decrease in
the per unit cost of production.
4. Diversified customer centric marketing strategies,

3. THE PRODUCTION PROCESS AND ENGINEERING


3.1. Manufacturing Process
Once the raw materials are processed, a number of steps take place to obtain
the finished product. These steps include batching, mixing and grinding,
spray-drying, forming, drying, glazing, and firing. Many of these steps are
now accomplished using automated equipment.

18
3.1.1. Batching

 For many ceramic products, including tile, the body composition is


determined by the amount and type of raw materials. The raw materials
also determine the color of the tile body, which can be red or white in
color, depending on the amount of iron-containing raw materials used.
Therefore, it is important to mix the right amounts together to achieve the
desired properties. Batch calculations are thus required, which must take
into consideration both physical properties and chemical compositions of
the raw materials. Once the appropriate weight of each raw material is
determined, the raw materials must be mixed together.

3.1.2. Mixing and grinding

 Once the ingredients are weighed, they are added together into a shell
mixer, ribbon mixer, or intensive mixer. A shell mixer consists of two
cylinders joined into a V, which rotates to tumble and mix the material. A
ribbon mixer uses helical vanes, and an intensive mixer uses rapidly
revolving plows. This step further grinds the ingredients, resulting in a
finer particle size that improves the subsequent forming process.

Sometimes it is necessary to add water to improve the mixing of multiple


ingredient batch as well as to achieve fine grinding. This process is called
wet milling and is other performs using a ball mill. The resulting water-
filled mixture is called a slurry or slip The water is then removed from the
slurry by filter pressing ( which removes 40-50 percent of the moisture) ,
followed by dry milling.

1.
3.1.3. Spray drying

 If wet milling is first used, the excess water is usually removed via spray
drying. This involves pumping the slurry to an atomizer consisting of a
rapidly rotating disk or nozzle. Droplets of the slip are dried as they are
19
heated by a rising hot air column, forming small, free flowing granules that
result in a powder suitable for forming.
Tile bodies can also be prepared by dry grinding followed by granulation.
Granulation uses a machine in which the mixture of previously dry-ground
material is mixed with water in order to form the particles into granules, which
again form a powder ready for forming.

3.1.3. Forming

 Most tiles are formed by dry pressing. In this method, the free flowing
powder- containing organic binder or a low percentage of moisture-flows from
a hopper into the forming die. The material is compressed in a steel cavity by
steel plungers and is then ejected by the bottom plunger. Automated presses
are used with operating pressures as high as 2,500 tons.

Several other methods are also used where the tile body is in a wetter, more
moldable form. Extrusion plus punching is used to produce irregularly shaped
tile and thinner tile faster and more economically. This involves compacting a
plastic mass in a high-pressure cylinder and forcing the material to flow out of
the cylinder into short slugs. These slugs are then punched into one or more
tiles using hydraulic or pneumatic punching presses.

Ram pressing is often used for heavily profiled tiles. With this method,
extruded slugs of the tile body are pressed between two halves of a hard or
porous mold mounted in a hydraulic press. The formed part is removed by first
applying vacuum to the top half of the mold to free the part from the bottom
half, followed by forcing air through the top half to free the top part, Excess
material must be removed from the part and additional finishing may be needed.

Another process, called pressure glazing has recently been developed. This
process combines glazing and shaping simultaneously by pressing the glaze ( in
spray- dried powder form) directly in the die filled with the tile body powder.
Advantages include the elimination.

20
of glazing lines, as well as the glazing waste material (called sludge) that is
produced with the conventional method.

3.1.4. Drying

 Ceramic tile usually must be dried (at high relative humidity) after forming,
especially if a wet method is used. Drying, which can take several days,
removes the water at a slow enough rate to prevent shrinkage cracks.
Continuous or tunnel driers are used that are
heated using gas or oil, infrared lamps, or microwave energy. Infrared
drying is better suited for thin tile, whereas microwave drying works better
for thicker tile. Another method, impulse drying, uses pulses of hot air
flowing in the transverse direction instead of continuously in the material
flow direction.

3.1.5. Glazing

 To prepare the glaze, similar methods are used as for the tile body. After a
batch formulation is calculated, the raw materials are weighed, mixed and
dry or wet milled. The milled glazes are then applied using one of the many
methods available. In centrifugal glazing or discing, the glaze is fed through a
rotating disc that flings or throws the glaze onto the tile. In the bell/waterfall
method, a stream of glaze falls onto the tile as
it passes on a conveyor underneath. Sometimes, the glaze is simply sprayed
on. For multiple glaze applications, screen printing on, under, or between tile
that have been wet glazed is used. In this process, glaze is forced through a
screen by a rubber squeegee or other device.

Dry glazing is also being used. This involves the application of powders, crushed
frits (glass materials), and granulated glazes onto a wet-glazed tile surface. After
firing, the glaze articles melt into each other to produce a surface like granite.

3.1.6. Firing

 After glazing the tile must be heated intensely to strengthen it and give it the
desired porosity. Two types of ovens, of kilns, are use for firing tile, wall tile,
or tile that is prepared by dry grinding instead of wet milling usually requires
a two- step process. In this process, the goes through a low- temperature

21
firing called bisque firing before glazing . This step removes the volatiles from
the material and most or all of the shrinkage. The body and glaze are then
fired together in a process called gloss firing.

Both firing processes take place in a tunnel or continuous kiln, which consists
of a chamber through which the ware is slowly moved on a conveyor on
refractory batts- shelves built of materials that are resistant to high
temperatures-or in containers called saggers. Firing in a tunnel kiln can take
two to three days, with firing temperatures around 2,372 degrees Fahrenheit
(1,300 degrees Celsius).

For tile that only requires a single firing-usually tile that is prepared by wet
milling-roller kilns are generally used. These kilns move the wares on a roller
conveyor and do not require kiln furniture such as butts or staggers. Firing times
in roller kilns can be as low as 60 minutes, with firing temperatures around
2,102 degrees Fahrenheit (1,150 degrees Celsius) or
more.

• After firing and testing, the tile is ready to be packaged and shipped.

3.2. Quality Control

Most tile manufacturers now use statistical process control (SPC) for each step
of the manufacturing process. Many also work closely with their raw material
suppliers to ensure that specifications are met before the material is used.
Statistical process control consists of charts that are used to monitor various
processing parameters, such as particle size, milling
time, drying temperature and time, compaction pressure, dimensions after
pressing, density, firing temperature and time, and the like. These charts
identify problems with equipment, out of spec conditions, and help to improve
yields before the final product is finished.

The Final product must meet certain specifications regarding physical and
chemical properties, These properties are determined by standard tests

22
established by the American society of Testing and Materials (ASTM).
Properties measured include mechanical strength, abrasion resistance, chemical
resistance, water absorption dimensional stability, frost resistance, and linear
coefficient of thermal expansion. Mere recently, the sip resistance, which can be
determined by measuring the confident other factors has become a concern.
However, no standard has yet been established because other factors ( such as
proper floor design and care) can make results meaningless.

3.3. The Production Plan

The company will operate for 16 working hour per day for 26 days per month
and by further assuming also that the machine sets are using 20% capacity in
the first year, 40% in 2nd year, 60% in 3rd year, 80 in the 4th year and 100% or
full capacity over the rest year. Moreover,
the project year is assumed to be 10 years. After 10 years the owner of the
project will diversify its project to different another businesses as different
competitors are coming to the market and saturating the marker. Therefore, by
taking in to account the above information, the company will produce and sale
the different product types which are aggregated together
on the average basis as follows.
Production plan for the project life (lOyears)
The envisaged company will produces Mg Oxide, Granite tiles, Hydra foam,
marble tiles and other floors tiles.

Years Product Type Quantity


1 Mg Oxide Board, Granite tiles, 119,760
2 Hydra
foam, , Marble, tiles and others 239,520
3 334,080
4 438,160

23
5 562,000
6-10 562,000

3.4. Sales Plan (Sales in Birr)

The sales revenue for this company will be generated from the production of the
products like Mg Oxide Board, Granite tiles, Hydra foam, marble, tiles and others
different type of tiles and the sales price is taken of average all products in M 2

Years Qty Av. Price Sales Sales


In birr
180 21556800
1
119,760 215568

43113600
2 239,520 180 431136

3 334,080 190 634752 83250400

10678000
4 190 8325040
438,160 0
106780000
5 562,000 190 106780000

6-10 562,000 190 106780000 106780000

24
4. ORGANIZATIONAL STRUCTURE
The organizational structure of the project is designed by including all the
necessary personnel under the right division. At the top of the organizational
structure, there will be a general manager with the responsibility of
supervising the overall activity of the plant. Depending up on the nature of
the center and the amount of work to be performed; there will
be auxiliary units under the general manager. Employees under each unit
will be supervised by the unit head that is accountable for the general
manager.

CEO

Advisor General Manager Internal Auditing &


Inspection

Production General
Marketing
Department Administration
Department
Department

As clearly shown in the organizational structure, of the Iron and Steel


industry has CEO three Departments under the general manager, Advisor
and the internal Auditing and Inspection. These departments are the
Production Department, The Marketing Department, and The General Service
Department. Under each Department there are different sections which are
undertaking different activities.

25
Hench are following section deals with the duties and responsibilities of
each division,

4.1. The General Manager’s Duties and responsibilities


 He will devise policies and strategies that will enable the project to be
profitable. Center.
 He will devise policies and strategies that will enable the project to
profitable.
 He will incorporate modern technogical innovation that will facilitate the
service delivery of the project increase customer’s satiation.

 He will plan, organize, direct and control the human and non-human
resources of the hotel so as to achieve the short and long run objectives
ofthe organization.

4.2. General Administration and Finance Department


Is responsible for undertaking the following activities
 Will plan, organize direct and control the financial transaction of the
project by using necessary document.
 Will develop sound financial control system by developing modern
financial control systems.
 Will prepare the annual financial statements and prepare condensed
reports for both the General Manager and other concerned government
body.
 Will control the human and non human resources of the project, which
include: effective handling of the different inventories of the project, and
devise strategies of controlling against fraud and damage.

4.3.
 The Marketing Department
 ~ Will handle the overall marketing activities of the organization which

 include planning, organizing, directing, and controlling.


 Will develop the marketing strategies for future Integrated the project

 center's development.

26
 Conduct both foreign and domestic market research for expanding the

 sales of the company


 Will develop effective customer handling strategies

4.4. The production Department


It is the core department of the project as it handles and administer over all
the production scheme of the company and responsible for the following
activities.
 Producing production methods, will boost production and proponent.
 Use modern production methods, will boost production and
productivities.
 Produce quality product that will enable the center to competent in the
domestic market.
 Control on the quality of raw materials, quality of the product and also
the overall production process.
 Produce products in least so that the profitability of the center is
guaranteed.
 Since producing good quality is based on using good input, the
department will use strategies and polices that will link the polices that
will link the selected raw materials production centers with the production
center and help in the adoption of new technologies,

5. FINANCIAL REQUIREMENT
The financial resource is a prime resource for undertaking any activities.
Hence for implementing this project a total of 60,337,260 Eth birr is
required. From this 70% or 42,236,082 birr will be coveted by bank loan and 30%
or 18,101,178 birr will be contributed by the promoter of the project.
Therefore the said amount of finance is needed for undertaking the
following:

27
5.1. Fixed Investment
5.1.1. Building & Construction

SN Description Total cost in


Br.
1 Workshop 7800000
2 Inspection room 560000
3 Raw Materials and Inputs
warehouse 1950000
4 Finished Products 1500000
5 warehouse
Office 1400000
6 Showrooms 450000
7 Worker homes 1800000

8 Waste Accumulation area 600000


Green Area, Garage,
9
Parking 7000
and Expansion
10 Fences 1000,0

11 Site development 10,000

12 Design and Supervision 100,00

13 Waterline and electric

installation 50,000
14 Land lease Initial Fee 165000
Total 17860000

5.1.2. Factory Machineries

The machineries or the plants for these construction materials producing


plants are imported from abroad. The cost of required machinery and
equipment for different kinds of product intended to produce with all
workshop accessories and the total machine cost is estimated to be br.
14,350,000 based on the current exchange rate.

28
Vehicles
No. Commodity Description Qty Unit Cost Total Cost
1 Truck, 18-20m3 1 2,000,000 1,000,000
2 Truck with Crane Fixed, 10Ton 1 800,000 800,000
3 Pick up car 1 600,000 600,000
4 Workers 'Service Car, Minibus 1 1,000,000 1,000,000
Total 2,400,000
FOB 400,000
SHIPING 150,000
INSURANCE 220,000
TRANSPORT FROM PORT TO SITE 140,000
Grand Total 6,710,000

5.1.3. Office Equipments

No Description Qty Unit cost Total cost


1 Managerial Tables 4 6,000 24,000
2 Managerial chairs 4 1,500 6,000
3 Computer Tables 3 700 2,100
4 Secretarial chairs 2 450 900

5 Computer with its accessories 4 11,000 44,000


6 Shelf 4 4000 16,000
7 Filing Cabinets 4 1,500 6,000

8 Guest chairs 16 500 500" ."


8.00

9 Assembly Halls tables 2 800 16,000

10 Assembly hall chairs 20 500 10,000


1

11 Cash register 2 15,00


5000
12 TV set 3 50 15,000

13 Photo copy Machine 1 15,000 15,000

Total 175,000

29
5.2. Expenses
5.2.1. Raw Material Purchase Projected

The envisaged project will use different raw materials for production of
Mg Oxide board. granite tile, marble tiles ceramic tiles and slabs. The
raw materials used to form tile consist of clay minerals mined forty the
earth's crust, natural minerals such as feldspar that are used to
lower the firing temperature, and chemical additives required for the
shaping process. The raw material cost is the general estimation of all
ingredients for all products on annual basis. The salary of 460 workers is
included in this because they are directly working here on
loading and unloading.

5.2.2. Salary Expense


N Position No Qualification Monthly salary Annual
o Require in Birr Salary
d
1 General manager 1 BA in Mgt 3000 36,000
2 Produce ion Head 1 Bsc in Chem 2000 24,000
3 Purchase and store 2 Din inn purch 12000 28,800
workers
4 Production workers 50 10+1 1200 360,000
5 Marketing Head 1 BA in mktng 2000 24,000
6 Marketing Experts 2 Din in Maktng 1000 24,000
7 Sales workers 10 Dip in Mktng 1000 72,000
8 Guards 6 Basic 400 19,200
9 Administration &Finan 1 BA in Acct 2000 24,000
ce Head
10 Public relation worker 1 Din in HR 1500 18,000

11 Accountants 4 Dip in Acct 1500 36,000


12 Cashers 2 10 + 1 1200 28,800

30
13 Drivers 4 8th grade 2000 96,000
14 Semi skilled labors 105 8th grade 1000 720,000
Total 180 1,510,800
15 Temporal employer 460
Empolyee Benefit (20%) 302,160
Total 1812960

The salary Expense is only for permanent employees of the company and
does not include the daily laborers wages which already included within the
production cost as the direct labor

Cost. Total permanent workers are 180 and temporary 460 workers
totally 640 workers. From
180 , 75 are skilled, 105 are unskilled, and from 460, 60 are skilled
and 400 are unskilled.

5.2.3. Other Operating Expenses

No List of Items Qty Unit of Unit cost Total cost Per annum
Measure
1 Computer paper 10 Pack 45 1450
2 Staples 10 " 7 270
3 Pens, pencils, and others 20 Pack 75 1,500
4 Detergents 1000 Pcs 30 30,000
5 Uniforms 20 Pes 200 44,000
6 Water - - - 8,000
7 Electricity - - - 178000
8 Transportation cost
- - - 100,000
9 Telephone - - - 12,000
10 Fuel
- - - 340,000
11 Miscellaneous Costs - - - 50000
Total 765220

31
5.4. Pre-service Expense
Unit Cost in Total Cost
No. Cost Items Unit Qty Br. in Br.
1 Business Plan Set 1 4865 4865
14577.
2 Feasibility Study Set 1 14577.5
5
3 Environmental Impact Assessment Set 1 14577. 14577.5
5
4 Market Study and processing with suppliers Set 2 48,615 97230
5 Import processing 2 24,308 48615
6 License and other processing 2 24,308 48615
7 Billboards 2 1452.5 14525

8 Management and Financial manuals and systems 10 34,020 34020


Developing Administrative, logistics and
9 financial formats 1 14,577.50
1
Total 291,602.

5.5. Summary of financial requirement and source of fund


No Description Cost in birr
1 Fixed Investment
1.1 Building &Construction 17,860,000
1.2 Machinery 14,350,000
1.3 Office Equipment 175,000
1.4 Vehicles 9,710,000
Total Fixed Investment Cost 42,095,000
2 Operating Expenses
2.1 Raw Material Purchase 12160000
2.2 Salary Expense 1,812,960
2.3 Other operating Expense 765,220
2.4 Pre- Service Expense 291,602.50
Total operating cost 15029782.5
Total 57124782
Contingency (10%) 5712478.2
Grand Total cost 62,837,260.2

32
The contingent costs will used for covering all other costs which are not
stated in the financial summary in addition to price fluctuation. For example,
the salaries of the contractual workers, promotional costs and any other
costs which are not visible in the project.
Sources of Fund: source of fund to finance the project is planned to be
from two sources. These are promoter's equity and bank loan. The loan is
expected to be obtained from one of the local lending institutions. Since the
project is expected to take some times take .to times to be repay all its
debts, the bank loan is assumed to obtain on long term credit basis. Taking
the financial position of the promoter into account, equity contribution and
bank loan to finance the total investment outlays of the project are assumed
to be 30% and 70% respectively. Accordingly the total financial requirement
from the sources will be
No Description 0/0 Amount
share
1 Owners Share 30% 18851178
2 Bank Loan 70% 43986082
Total 100% 62,837,260

Bank Loan Repayment Schedule

Interest Total Remaining


year principal (10%) payment Balance
0 0 0 0 43986082
1 4398608.2 4398608.2 8797216.4 39587473.8
2 4398608.2 3958747.38 8357355.58 35188865.6
3 4398608.2 3518886.56 7917494.76 30790257.4
4 4398608.2 3079025.74 7477633.94 26391649.2
5 4398608.2 2639164.92 7037773.12 21993041
6 4398608.2 2199304.1 6597912.3 17594432.8
7 4398608.2 1759443.28 6158051.48 13195824.6
8 4398608.2 1319582.46 5718190.66 8797216.4
9 4398608.2 879721.64 5278329.84 4398608.2
10 4398608.2 439860.82 4838469.02 0

33
34
5.6. Financial statement
Revenue 1 2 3 4 5 6-10
Sales 21556800 43113600 63475200 83250400 106780000 106780000
Purchase of Raw 12160000 24320000 36480000 48640000 60,800,000 60,800,000
Material
Gross profit 9396800 18793600 26995200 34610400 45980000 45980000
Expenses
Salary Expense 1812960 1812960 1994256 1994256 1994256 1994256
Operating Expenses 765,220 765,220 841742 841742 841742 841742
Pre-operating 291,602 0 0 0 0 0
Expense
Deprecation Building 893000 893000 893000 893000 893000 893000
Deprecation Vehic1es 1942000 1942000 1942000 1942000 1942000 1942000
Deprecation office 35,000 35,000 35,000 35,000 35,000 35,000
Equip
Deprecation Machine 1435000 1435000 1435000 1435000 1435000 1435000

Lease expense 165000 165000 165000 165000 165000 165000


Interest Expense 4398608.2 3958747.38 3518886.56 3079025.74 7037773.12 5718190.66
Total Expense 11738390 11006927 10824885 10385024 14343771 13024189
prorfit Before Tax 2 7786673 16 24225376 31636229 32955811 prorfit Before 2341590
Tax(30% ) 3 17
23 4851094.5 7267612.8 9490868.7 Tax
Tax(30% )
Net Profit ~
-2341590 5450671.1 11319220. 16957763.2 22145360.3 23069067.7

1. INCOME LOSS STATEMENT

35
Year Year 0 1 2 3 4 5 6-10
Equity Capital ca 18851178
Loan principal pit 43986082
Net sale 0 21556800 43113600 63475200 83250400 10678000 106780000
Total cash in flow 62,837,260 21556800 43113600 63475200 83250400 106780000 106780000
Cash payment 0
PPurchase 0 12160000 24320000 36480000 48640000 60,800,00 60,800,000
S
uSalary expense 0 1812960 1812960 1994256 1994256 19942560 1994256
IInvestment 42,095,000 0 0 0 0 0 0
a
O
nOperating cost 0 765,220 765,220 841742 841742 841742 841742
Loan repayment 08797216.4 8357355.5 7917494. 7477633.94 7037773.1 5718190.66
p
Tax payment X 0 - 2336001.98 4851094.
76 7267612.8 9490868.72 9886743.3
23535396. 37591537. 520845875 66221244.7 80,164,64
Total payment ~ 79,240,932
42095000 4 48 .26 4 0
Cash surplus/Deficit 20742260 -1978596.4 5522062.5 11390612 17029155.2 26615360 27539068
Cumulative balance 1891082 -87514.4 2 16825160 6 60469676 88008744
Year Year 0 1 2 3 .86 4 5 6-10
Equity Capital ca 18851178
Loan principal pit 43986082
Net sale 0 21556800 43113600 63475200 83250400 10678000 106780000
Total cash in flow 62,837,260 21556800 43113600 63475200 83250400 106780000 106780000
Cash payment 0
PPurchase 0 12160000 24320000 36480000 48640000 60,800,00 60,800,000
S
uSalary expense 0 1812960 1812960 1994256 1994256 19942560 1994256
IInvestment 42,095,000 0 0 0 0 0 0
a
O
nOperating cost 0 765,220 765,220 841742 841742 841742 841742
Loan repayment 08797216.4 8357355.5 7917494. 7477633.94 7037773.1 5718190.66
p
Tax payment X 0 - 2336001.98 4851094.
76 7267612.8 9490868.72 9886743.3
23535396. 37591537. 520845875 66221244.7 80,164,64
Total payment ~ 79,240,932
36 42095000 4 48 .26 4 0
Cash surplus/Deficit 20742260 -1978596.4 5522062.5 11390612 17029155.2 26615360 27539068
Cumulative balance 1891082 -87514.4 2 16825160 6 60469676 88008744
37
As clearly indicated in the project income statement part the project will
return its initial cost soon
Assumptions
Salary expense increased by 10% after 3rd onwards, operating expenses
increased by 10% from 3rd onwards. """,,--
Depreciation expense is assumed on straight line method
 For office equipment life time assumed to be 5 years and
rate of dep.20%
 For Building with the life time of25 years with dep. rate 5%
 For Vehicles life 5 years dep. Rate of20%
From the income statement, the promoter of the project has sufficient
amount of money that enables him pays the bank loan with in short period of
time and invests in other business of his interest.
In general, the financial statement of the project shows that the project
under discussion will cover its entire investment costs with in short period of
time.
Profitability
According to the projected income statement, the recreation resort will start
generating profit in the 2nd year of operation. Important ratios such as profit
to total sales, net profit to equity (Return on equity) and net profit plus
interest on total investment (return on total investment) show an increasing
trend during the lifetime of the project.
The income statement and the other indicators of profitability show that the
project is viable.
Pay-BackPeriod
The investment cost and income statement projection are used to project the
pay –back period. The projects. initial investment will be fully recovered
within This shows that this project is a long term business.
Future development& exit strategies
Every business undertakings be it large or small should have to have future
development Plan. It is a plain fact that business activities are undertook in a
38
dynamic and turbulent environment. Hence, to overcome or minimize the
risks of uncertain future businesses should devise effective strategies that
enable them to be successful in their operation. Likewise, the envisaged
project has devised strategies to overcome the future risk of operation. The
first strategy is diversification of its activities to different other business
forms. The second future development plan of the project is expanding its
branches in many other parts of the region. The third strategy of the center
is making a joint venture with other similar business undertakings either in
the domestic country or from abroad. The final strategy of the center is
selling to other organization or individuals.

6. Environmental impact of the project

A variety of pollutants are generated during the various manufacturing


steps; these emissions must be controlled to meet air control standards.
Among the pollutants produced in tile manufacture are fluorine and lead
compounds, which are produced during firing and glazing. Lead compounds
have been significantly reduced with the recent development of no-lead or
low-lead glazes. Fluorine emissions can be controlled with scrubbers, devices
that basically
spray the gases with water to remove harmful pollutants. They can also be
controlled with dry processes, suchas fabric filters coated with lime. This
lime can be recycled as a raw material for future tile. Dry processes, such as
fabric filters coated with lime. this lime can be recycled as a raw Material for
future tile.
The tile industry is also developing processes to recycled wastewater and
sludge produced during milling, glazing, and spray-drying. Already some
plants recycle the excess powder generated during dry-pressing as well as
the overspray produced during glazing. Waste glaze and rejected tile are
also returned to the body preparation process for reuse

39

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