289.

PROFILE ON MINIATURE CIRCUIT BREAKER

 289 - 2

TABLE OF CONTENTS

PAGE

I. SUMMARY 289 - 3

II. PRODUCT DESCRIPTION AND APPLICATION 289 - 3

III. MARKET STUDY AND PLANT CAPACITY 289 - 3

A. MARKET STUDY 289 - 3

B. PLANT CAPACITY AND PRODUCTION

PROGRAMME 289 - 5
IV. MATERIALS AND INPUTS 289 - 5

A. MATERIALS 289 - 5

B. UTILITIES 289 - 6

V. TECHNOLOGY AND ENGINEERING 289 - 6

A. TECHNOLOGY 289 - 6

B. ENGINEERING 289 - 6

VI. MANPOWER AND TRAINING REQUIREMENT 289 - 7

A. MANPOWER REQUIREMENT 289 - 7

B. TRAINING REQUIREMENT 289 - 7

VII. FINANCIAL ANALYSIS 289 - 8

A. INVESTMENT 289 - 9

B. PRODUCTION COSTS 289 - 9

C. FINANCIAL EVALUATION 289 - 10

D. ECONOMIC BENEFITS 289 - 11

 289 - 3
I. SUMMARY

This profile envisages the establishment of a plant for the production of 150,000 pcs. of
miniature circuit breakers per year.

The present demand for miniature circuit breakers is estimated at 10,026,681 pcs. per annum.
The demand is expected to grow to 12,129,136 and 23,641,610 pcs. by 1999 and 2006,
respectively.

The total investment requirement is estimated at Birr 1640.291 thousand out of which Birr
271.13 or 16.5% is for machinery and equipment.

The plant will create employment opportunities for 49 persons.

The project is financially viable an with internal rate of return (IRR) of 22.21% and a net present
value (NPV) of Birr 1120.05 thousand discounted at 10.5%.

II. PRODUCT DESCRIPTION AND APPLICATION

Miniature circuit breakers are household electrical products used for protection and control of
electrical circuits against overloads and short circuits in domestic installations, commercial &
industrial electrical distribution systems etc.

Miniature circuit breakers could interrupt the kind of fault levels which may be met in high fault
locations, reduce chances on shock or burn risk when an appliances is plugged into a fault and
reduce the strains on circuit and appliance due to fault current in the short period in which the
MCB trips. Miniature circuit breakers (MCB) replace conventional fuse and protect the
electrical wiring.

Essential parts of a MCB consist of plastic casting thermal time delay trip device, instantaneous
magnetic trip, contacts, toggle & lower mechanism. MCBs are housed in thermo-setting plastics
& have their mechanism operating between the plastic body and cover. To avoid dimensional
variance due to temperature and humidity, the better designed breakers increase the operating
mechanism between two metal plates as in watch mechanism. Thus, avoiding malfunction due
to environmental influence MCBs assure safety & protection to the lay user. A circuit breaker
has to work under different circumstances. Miniature circuit breakers are generally rated in
terms of rated voltage and current.

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Present Demand and Supply

Since miniature circuit breaker is not locally produced, the demand for the product is totally met
through imports. The quantity of circuit breakers imported to the country in the past 10 years is
presented in Table 3.1.
 289 - 4
Table 3.1
IMPORT OF ELECTRICAL APPARATUS FOR MAKING
AND BREAKING OR PROTECTING ELECTRICAL CIRCUITS

Year Quantity (tons) Value ('000 Birr)

1984 693.0 11906
1985 1236.2 11216
1986 658.2 16493
1987 1319.9 31932
1988 1506.0 20493
1989 2242.6 24473
1990 3031.7 28062
1991 160.5 5021
1992 1048.0 20510
1993 934.7 27022
Total 12830.8 197128
Average 1283.1 19712.8

Source:- Customs & Excise Administration, External Trade Statistics 1984-1993.

As shown in Table 3.1, the quantity of circuit breakers imported during the past 10 years has not
indicated any trend. Therefore, to determine the present demand the average quantity imported
during the past 10 years was calculated. By taking 1993 as a base year an annual average
growth rate of 10% is applied. Accordingly, the present demand is estimated to be 1708 tons.

2. Demand Projection

The method used in estimating the present demand is also used for projecting the future demand.
The projected demand at an annual 10% growth rate ranges from 2500 tons in the year 2000 to
4431 tons in the year 2006. Accordingly, the projected demand for circuit breakers is indicated
in Table 3.2.
Table 3.2
PROJECTED DEMAND FOR CIRCUIT BREAKERS

Year Quantity (tons)

1997 1879
1998 2067
1999 2273
2000 2500
2001 2751
2002 3026
2003 3328
2004 3661
2005 4027
2006 4431

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3. Pricing and Distribution
The average CIF price of circuit breakers in 1993 was about Birr 24 per kg. Assuming that duty
and other expenses to be 40% of CIF value, the landed cost per kg of circuit breakers is
estimated to be Birr 33.60 or Birr 14.20 per pcs. Thus, this price is adopted for the calculation of
the sales revenue. The product will find its market outlet through electrical goods enterprises.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

Considering the minimum economic size plants available in the market, the annual production of
the plant operating on three shifts a day and 300 days a year at 100% capacity utilization is
150,000 pcs. kg of miniature circuit breakers. (aver. weight of MCB - 0.44 kg/pcs). The
working days are set by deducting sundays and public holidays which are non-working days.

2. Production Programme

The production is scheduled in such a way that the plant operates at 75% and 85% of the total
installed capacity during the first and second year, respectively. Full production will be
achieved during the third year and onwards. The capacity build up is established by considering
the time required for development of skill in operation, market penetration and related technical
and technological factors.

IV MATERIAL AND INPUTS

A. MATERIAL

Annual raw material requirement of the plant operating on three shifts at its rated capacity and
the corresponding cost estimates are shown in Table 4.1. All the raw materials will be imported.
Table 4.1
RAW MATERIAL REQUIREMENT

Raw Material Unit Qty. Cost ('OOO Birr)

FC LC Total
1 Thermo setting moulding powder ton 4.2 1.668 0.666 2.334
2 Thermal time delay trip device, ls 150,000 993.15 397.26 1,390.41
magnetic trip contacts, toggles,
level mechanisms etc.
Total 994.818 397.926 1,392.744
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B. UTILITIES

The major required utilities are electricity and water. Total installed electric power is 10 kw.
Electric power required for three shifts yearly operation of the plant at 100% capacity utilization
will be 72,000 kwh. Total cost of electricity is estimated at Birr 18,454 per annum. Annual
water consumption of the plant is 900 cubic metres. Cost of water is estimated at Birr 1008 per
annum.

V TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Process Description

The process of manufacturing miniature circuit breakers involves the following operations:-

- moulds according to the articles are fixed between the platens of the hydraulic
press,

- moulding powder is put into the cavity of a preheated mould and pressed
between the platen of press,

- after certain period mould is opened and cleaned,

- various parts and components are assembled as per design, and

- finally the MCB are tested and packed.

2. Source of Technology

The technical data and information are compiled from the document provided by the National
Research Development Corporation of India.

B. ENGINEERING

1. Machinery and Equipment

The list of plant machinery and equipment required for the manufacture of miniature circuit
breaker is given in Table 5.1. The total cost of machinery and equipment is Birr 271.13
thousand out of which Birr 231.735 thousand will be in foreign currency.
 289 - 7
Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT

No. Description Qty

1 Semi automatic moulding machine 1

2 Testing equipment such as time relay, over

current relays & over voltage relays, wat
metres, ammeters, voltmeters etc ls

Dies & tools

3 ls
Miscellaneous equipment and ancillaries,
4 soldering iron etc.
ls

2. Building and civil Works

The entire site area required by the plant including provision for open space is 400 sq.metres.
The value of land as per Region 14 lease rate amounts to Birr 104,000. The requirement for
total built-up area is 300 sq. metres. Total cost of building at the rate of Birr 1,400 per sq. metre
is estimated at Birr 420,000.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The total direct and indirect manpower required by the envisaged plant is 49 person. Details of
the manpower required for three shifts operation of the plant and the corresponding labour cost
are shown in Table 6.1.

B. TRAINING REQUIREMENT

No special training as such is required, except a short-term job orientation of the technical
personnel during the factory start-up period.
 289 - 8
Table 6.1
MANPOWER REQUIREMENT

No. Manpower No. Monthly Salary Annual

(Birr) Salary(Birr)
1 Manager 1 1,200 14,400
2 Supervisor 1 700 8,400
3 Operators and Technicians 12 3,600 43,200
4 Ass. operators and technicians 12 2,400 28,800
5 Production workers 12 1,800 21,600
6 Accountant 1 600 7,200
7 Clerk/typist 1 300 3,600
8 Store keeper 1 300 3,600
9 Sales clerk 1 300 3,600
10 Driver 1 200 2,400
11 Watchman 6 720 8,640

Sub total 49 12,120 145,440

Employee's Benefit (25% of Basic 3,030 36,360
Salary
Total 15,150 181,800

VII. FINANCIAL ANALYSIS

The financial analysis of miniature circuit breaker is abased on the data provided in the previous
chapters and the following assumptions:-

Construction period 2 years

Source of capital 40% equity
60% loan
Tax holidays 3 years
Bank interest rate 10.5%
Discount Cash flow 10.5%
Value of land Based on lease rate of Region 14
Repair and maintenance 2% of fixed investment
Spare parts

Depreciation
Machinery & equipment 10%
Vehicle 20%
Office furniture 10%
Pre-production costs 20%
Buildings 5%
 289 - 9
Working Capital Minimum days of coverage
Accounts receivable 30 days
Cash in hand 30 "
Raw material
Foreign 120 "
Local 45 "
Work in progress 11 "
Finished products 15 "
Accounts payable 30 "

A. INVESTMENT

The total investment cost of the project including working capital (See Table 7.1) is estimated at
Birr 1,640.291 thousand. Owners are assumed to contribute 40% of the finance in the form of
equity while the remaining 60% is expected to be financed by long term bank loan.

Table 7.1
TOTAL INITIAL INVESTMENT
IN'000 BIRR

No. Items L.C F.C Total %

1 Land 34.33 - 34.33 2.00
2 Building & civil works 420.00 - 420.00 25.6
3 Office equipment 60.00 - 60.00 3.6
4 Vehicle 300.00 - 300.00 18.2
5 Plant machinery & equipment 39.395 231.735 271.13 16.5
6 Total fixed investment cost 853.725 231.735 1,085.46 66.10
7 Pre-production capital expenditure* 106.062 - 106.062 6.40
8 Working capital at full capacity 448.769 - 448.769 7.70
Total investment 1,408.556 231.735 1,640.291 100

The major component of the investment are plant machinery and equipment, building and civil
works, pre-production expenses accounting for 16.5%, 25.6% and 6.4 % respectively. The
foreign component of the project accounts for 14.17% of the total investment.

B. PRODUCTION COSTS

The total production cost at full capacity operation is estimated at Birr 1,823.3 thousand (see
Table 7.2). Raw materials and utilities account for 76.4% and repair and maintenance for one
percent of the production costs.

* Pre-production expenses include all pre investment expenses consultancy fee during
investment, salary and wages of project management team, pre-production marketing,
commission and start up expenses, interest during construction etc.
 289 - 10
Table 7.2
PRODUCTION COSTS ('000 BIRR)

Items Year 3 4 5
Raw materials 1044.6 1183.88 1392.8
Utilities 19.5 19.5 19.5
Energy - - -
Labour, direct 93.6 93.6 93.6
Repair, maintenance 22.1 22.1 22.1
Spares - - -
Factory overhead 8.4 8.4 8.4
Factory costs 1188.2 1327.48 1536.4
Administrative overhead 93.44 93.44 93.44
Depreciation 132.893 132.893 132.893
Financial costs 71.803 t69.559 60.584

C. FINANCIAL EVALUATION

1. Profitability

According to the projected income statement (See Table 7.A.1) the project will generate profit
beginning from 1st first year of operation. Important ratios such as the percentage of net profit to
total sales, net profit to equity (return on equity) and net profit and interest on total investment
(return on total investment) are all positive and gradually rising. The income statement and
other profitability indicators show that the project is viable.

2. Breakeven analysis

The breakeven point of the project is estimated by using income statement projection.

BEP = Fixed Cost = 369.933 = 369.933 = 50%

Sales-Variable Cost 2130 - 13928 737.2

The project will break even at 50% of capacity utilization.

3. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in three years.
 289 - 11
4. Simple Rate of Return

Simple rate of return (SRR) is the ratio of the net profit and interest rate on the total capital
invested calculated for a single year at full capacity operation.

SRR = NP + I = 306.683 + 60.584 = 367.267 =23.39

K 1640.291 1650.291

The simple rate of return at full capacity is 22.4%.

5. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Table 7.A.2) the calculated IRR of the project is 22.21% and
the net present value at 10.5% discount is Birr 1120.05 thousand.

D. ECONOMIC BENEFITS

The project can create employment opportunities for 49 people. In addition to increasing the
supply of goods to the domestic market, the project will generate Birr 1,816.50 thousand in
terms of tax revenue. Moreover the regional government can collect employment and income
tax and sales tax from the project thereby increasing its tax base. The project will have a foreign
exchange saving effect and forward linkage to the energy sector and backward linkages to the
engineering sector.
 Appendix 7.A
FINANCIAL ANALYSIS SUPPORTING
TABLES