Bny Trading Edited Project Proposal

BNY TRADING SOAP AND LIQUID DETERGENT MANFUCTURING PLANT
PROJECT PROPOSAL
ON
BNY TRADING PLC SOAP AND DETERGENT

PROCESSING PLANT
PROJECT TO BE ASSELA CITY ADMINISTRATION,

Kebele 09
PROMOTER: BNY TRADING PLC.
February 2017
ASSEllA, ETHIOPIA
TABLE OF CONTENTS
1 Introduction........................................................................................................................................4
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2 Back ground of project........................................................................................................................6

2.1 Location, Infrastructure and Premises Required..........................................................................6
2.1.1 Location...............................................................................................................................6
2.2 Physical Characteristics................................................................................................................7
2.2.1 Climate.................................................................................................................................7
2.2.2 Wind....................................................................................................................................7
2.2.3 Topography..........................................................................................................................8
2.2.4 Drainage...............................................................................................................................8
2.2.5 Soils......................................................................................................................................8
2.2.6 Vegetation...........................................................................................................................8
2.2.7 Wildlife.................................................................................................................................8
2.3 SOCIO-ECONOMIC CONDITION....................................................................................................9
2.3.1 POPULATION........................................................................................................................9
2.3.2 Social Livelihood..................................................................................................................9
2.3.3 Agriculture...........................................................................................................................9
2.3.4 Livestock..............................................................................................................................9
2.3.5 Poultry...............................................................................................................................10
2.3.6 Industry..............................................................................................................................10
2.4 Land required and use plan.......................................................................................................10
2.5 The Economic Significance of the Project..................................................................................10
2.5.1 Source of Employment.......................................................................................................10
2.5.2 Source of Government Revenue........................................................................................11
2.5.3 Source of Supply for sanitary and hygienic of the community...........................................11
3 Market Study and Plant Capacity......................................................................................................12
3.1 Market Demand Potential.........................................................................................................12
3.1.1 Past Supply and Present Demand......................................................................................12
3.1.2 Demand Projection............................................................................................................13
3.1.3 Pricing and Distribution.....................................................................................................14
3.2 Production Capacity...................................................................................................................15
3.3 Production Program...................................................................................................................15
3.4 Raw Materials and its inputs......................................................................................................15
3.4.1 Raw Materials for Laundry and Toilet Soap.......................................................................15
3.4.2 Materials for Liquid Detergent...........................................................................................16
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3.5 production process....................................................................................................................17

3.5.1 Laundry and Toilet Soap....................................................................................................17
3.5.2 Liquid Detergent................................................................................................................17
3.6 Machinery and equipment........................................................................................................18
3.6.1 Source of technology.........................................................................................................19
3.7 Manpower and Training Requirement.......................................................................................19
3.7.1 Manpower Requirement....................................................................................................19
3.7.2 Training Requirement........................................................................................................20
3.8 Land Building and Civil Work.....................................................................................................20
3.9 Utilities.......................................................................................................................................20
3.9.1 Pre project Cost.................................................................................................................21
3.10 Proposed Location envisage project..........................................................................................21
4 Financial ststement summery...........................................................................................................22
4.1 Source of the fund.....................................................................................................................23
4.2 Projected Cash Flow Statement.................................................................................................27
5 Organizational Structure...................................................................................................................29
6 Environmental and Social Impacts of the Project.............................................................................30
7 Project Implementation Plan............................................................................................................31
1 INTRODUCTION
This profile envisages the establishment of a plant for the production of Laundry Soap, Toilet Soap
and Liquid detergent with a capacity of 720, 720 and 1080 tons per annum respectively in Assella
Town. Both Soap and Liquid detergent is extensive used in households, guest houses, hotels,
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canteens, hospitals, schools, higher institutions, offices, etc. and at all community level, as a general
cleaning agent and Sanitary services.
The country`s requirement of Soap and detergents is largely met through import. The present (2016
G.C) demand for soap and detergents is estimated about 47400 tons while the local factories produce
only about 27,000. The demand for Soap and detergents is projected reaching 55,300 tons and 67,500
tons by the years 2020 and 2025, respectively.
The manufacture of soaps and detergents consist of a broad range of products. The principal forms of
products are bars, liquids and powders.
The manufacture of soaps involves the reaction of fats and oils with inorganic water soluble bases, this
process is also called saponification. Glycerin is also produced in the process. The resulting products
from the above process are separated and dried through vacuum driers to form dry soap pellets. In
the final step, the dry soap pellets are passed in a line mixer where fragrance and colorants are
added. The resulting mixture is then extruded and cut into bars.
For the manufacture of solid detergents, dry and liquid ingredients are combined into slurry, or thick
suspension, heated and pumped into a tower where is it sprayed under high pressure to produce small
droplets. The droplets fall through a current of hot air, forming hollow granules when they dry. The
granules are then sieved to achieve uniform size. Other heat sensitive ingredients may be added after
these processes.
The principal raw materials required for liquid detergent are fat or oils (blended or alone), caustic soda,
sodium chloride, fillers like sodium silicate, talc, soda ash, Linear Alkyl Benzene Sulfuric Acid (LABSA),
urea, perfume, caustic soda and colorant. Caustic soda can be obtained locally while the other raw
materials have to be imported.
The total investment cost of the project including working capital d u r i n g i n i ti a l y e a r is

estimated at Birr 15,000,000.00 million. From the total investment cost the highest share ( B i r r
8 , 7 5 7 , 4 9 5 . 0 0 ) i s i n i ti a l w o r k i n g c a p i t a l cost which is raw material purchase followed by fixed
Asset establishment(machinery and vehicle) birr 5,269450.00) capital and the rest Birr 97,3055.00
operating cost.
The project can create employment for 55 persons. The establishment of such factory will have a
foreign exchange saving effect to the country by substituting the current imports. The project will also
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create forward linkage with the service sector such as hotels, restaurants and hospitals and back ward
linkage with the chemical manufacturing sub sector and also generates income for the Government in
terms of tax revenue and payroll tax.
The initiators have formed a separate legal entity called “BNY TRADING PLC. SOAP AND DETERGENT
PRODUCTION PLANT.” The initiators hope to attract an outside equity investor and use the invested funds
to purchase specialized, high-quality, imported processing equipment that will enable them to produce
and package world-class Soap and Detergent products to be sold through both wholesalers and retailers
in the Ethiopia. The preparatory stage has been completed, and practically all key aspects have been
worked out by the initiators. They have a production site (Plant building store and other facilities) rented
from Chilalo Food Complex and they will purchase and install processing machines and related
equipment.
2 BACK GROUND OF PROJECT

BNY Trading PLC is newly establish private company in Oromia Regional state, Arsi Zone. The founder of
the firm has professional and have long period of work experience on factory administration and
business management. They were working for a long period of time in different sector.
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The initial Capital of this project is about 15,000,000.00 and 4,500,000.00 is the owner contribution
while the rest 10,000,000.00 is bank loan.
The members of organization is 2
Organized since 2009. E.C
Besides, the enterprises is envisioned factory have by using the accumulating experiences and skill to
diversified business.
2.1 LOCATION, INFRASTRUCTURE AND PREMISES REQUIRED

2.1.1 Location
Tiyo district is one of administrative units located in northwestern central part of Arsi zone. The district
shares boundary line with Digelu and Tijo district in the south and south east, Hetosa district in the east,
Ziwaya Dugda district in the West and north west and Munesa district in the south. The total area of the
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district is 665km and it has 21 administrative units of which 18 are farmers associations and 3 urban
administrative units. Asella is the capital of the district and located at 175km from Finfinne and 75km
from Adama. It is found on the main road to Bale and where the proposed project is situated in this City
(Assella), industrial zone.
The following Figure: shows the location of Request place.
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Assella Town
2.2 PHYSICAL CHARACTERISTICS

2.2.1 Climate
The district is divided into four ecological zones, namely high land (Dega) cover 31.7%, Mid-altitude
(weina Dega) 42.5%, the temperate highland (Wirch) 20.1% and the low land (kola) 5.7%. The district
has a tropical heavy and erosive rainfall as well as cool to moderate climate. The annual means of
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temperature ranges from 15 to 22 c and the mean annual rainfall ranges from 900 to 1100mm. The
rainfall pattern is bimodal which are short rainy season (Belg) and long rainy season (Meher). The
duration of Belg rainy season is from November to April and for Meher season from June to September.
2.2.2 Wind
The generally dominant wind direction in the dry seasons in North east to South east, during the rainy
seasons it is Southwest to Northeast. The mean annual wind velocity calculated over ten years (1990 to
1999) is about 2-3m/s with a slight increase in Meker, the transition period between the wet seasons.
Generally, the wind speed at Adama is very high during summer months, in ten years period the
maximum wind speed recorded was about 10m/sec.
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2.2.3 Topography
Undulating plain, hills, rift valley escarpment, Welkesa valley and mountain peak of Chilalo characterize
the topography of the district. The altitude of the district ranges from 1500 to 4105m. The highest peak
is Chilalo Mountain (4005m) in the district. The elevation of the district gradually reduces from Chilalo
mountain peak toward the West low land, to Rift valley. The district has a tropical high land climate
characterized by heavy and erosive rainfall with long wet season.
2.2.4 Drainage
The perennial rivers and springs of the district are Ketar, Kulumsa, Gonde, Dosha and Walkesa. All the
rivers originated from Chilalo Mountain and drained to the lake Ziway. The major uses of these rivers are
for drinking water, both modern and traditional irrigation activities on Kater River and Dosha Spring.
Gonde, Qulumsa and Walkessa are the most important rivers for waste disposal sites of Assella town
and Asella Malt Factory.
2.2.5 Soils
Concerning the soil types of the district there are two predominant types of soils, namely Chromic and
Pellic vertisols with texture ranging from black clay to loamy clay. The black clay soil constitutes 80%, red
clay soil 15% and loamy clay 5% of the total area of the district. The fertility status of the soil ranges
from fairly good to good, but has a limitation due to water lodging susceptibility to water erosion.
2.2.6 Vegetation
The Vegetation types of the district are divided into natural and man-made. Juniperus procera,
Podocarpus, Acacia trees and Hagenia Abyssinia are the major type of natural vegetation while
eucalyptuses tree is the most common type of manmade vegetation. However, presently, the forest
coverage of the district is declined due to clearing/cutting of trees for the expansion of farmland, fuel
woods, construction purposes and the like. Of the total area of the district, about 3939 hectares is
covered by vegetation of which 1940 hectar (49 %) are natural vegetation
2.2.7 Wildlife
The diversified climate conditions and topography of the district can provide a range of natural
environment consisting of various types of wildlife. But the indiscriminate cutting of natural forests
made to decrease the number and species of wild animals. The existing major types of wild animals in
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the district are Hyena, Tiger, bushbuck, Zebra, Leopard and Colobus Monkey and Karkaro. There are no
national park, game reserve and sanctuaries in the district.
2.3 SOCIO-ECONOMIC CONDITION

2.3.1 POPULATION
Based on the 1994 Population and Housing Census Report of the Central Statistics Authority on Oromia
region, the estimated population of the district was 94968 in 1997E.C, of which 7.8% is living in rural
and 92.2% are living in the urban area, indicates high degree of urbanization because the capital of the
zone, Asella is found in this district account about 92.2% urban population of the district. From the
total population of the district, about 50% are females, which is 52% for urban and 30% for rural areas.
Excess female population in the town indicates high female rural to urban migration. (OFEDB)
2.3.2 Social Livelihood
The Livelihood of the peoples around the project area is primarily bases on agriculture and to some
extent on livestock, and daily laborers and employee in many industries as there are various industries in
the project area.
2.3.3 Agriculture
In Tiyo district there were 4 modern and 4 traditional irrigation sites in 1995 E.C known by producing
cereals, pulse, Root crops, Vegetables, Fruits, Peppers & sugar cane. Under modern irrigation schemes,
about 558 hectares of lands were cultivated from which 23305 quintals of crops produced. Similarly
under traditional irrigation sites, about 81 hectares of lands were cultivated from which 7517 quintals of
crops produced. From both modern and traditional irrigation sites, about 2468 farmers/household
heads were benefited.
2.3.4 Livestock
The basic aim of livestock breeding is to satisfy the demand for dairy products, farm power, and source
of financial income and to be seen as prestige. In the district mixed agriculture is experienced i.e.,
livestock production as the main economic activity next to crop production. The low yielding capacity of
the local breeds enforces the farmers to increase the number of their livestock population. The number
and type of livestock population are indicated on the table below. The prevalent major livestock
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diseases could be easily controlled although regular vaccination and drenching. Moreover, the Zonal
and/or Woreda agricultural office gives veterinary services to the livestock farmers in the district.
2.3.5 Poultry
Poultry farming, which is one of the most important sources of family income and food, is widely
practiced in the district though traditional ways the highest concentration farming. There is no
modern Poultry activity in the district. Shortages of feed, disease problems and poor management are
the main bottlenecks to the development of this sub-sector.
2.3.6 Industry
Tiyo district is more advantageous in industrial development than other districts of the Zone. In 1995,
there were about 74 small-scale industries employing 376 labor forces with a total capital valued at
about 4482018 million birr. Moreover, there is one government owned medium scale industry that is
Asella Malt Factory in the district. Even if food processing small-scale manufacturing industries
account for large proportion, there are other types of small-scale industries in the district. For detail
see the table below.
2.4 LAND REQUIRED AND USE PLAN

The envisaged project will be no more land required and the plant will be installed on previously
constructed building on 3000m2.
2.5 THE ECONOMIC SIGNIFICANCE OF THE PROJECT

The envisaged project deemed to contribute to the economic development of the country in
general and to the Assella Town in particular in the following ways:
2.5.1 Source of Employment
One of the problems that our country currently faced is unemployment. Therefore, the objective
of our government is working on tackling the problem of unemployment either through creating
self-employment or employment in private investor. Hence, the envisaged factory deemed to
contribute somewhat to solve the problem of unemployment of the Town. Upon completion, the
project assumed to generate employment opportunities for about 55 individuals both on
permanent and temporary workers up on starting its operation.
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2.5.2 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 country.
2.5.3 Source of Supply for sanitary and hygienic of the community
The project under discussion will produce different Laundry Soap, Toilet soap and liquid detergent
which will play a complementary and supplementary role to social welfare.
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3 MARKET STUDY AND PLANT CAPACITY
3.1 MARKET DEMAND POTENTIAL

3.1.1 Past Supply and Present Demand
Laundry tasks are becoming easier with modern cleaner products. Washing clothes in water even with
agitation provided by hand or by machine will remove some but not all stains, dirt and particular soils.
Water alone cannot remove soils that are not water soluble, and water doesn’t have the capability to
keep removed soils suspended. Laundry soaps are therefore used in washing clothes and retreating
heavy soils or stains prior to washing
The supply of soaps in Ethiopia is both from domestic production and import. The average import of
soaps is about 57% while the domestic production covers 43%. Among the imported products, Indonesia
is the main supplier of soaps to the Ethiopian market followed by South Korea.
Since the total supply is dominated by imported products, at the right quality level and packaging there
is abundant demand for a new project to capture a reasonable share of the market.
In the past years the annual average imported soaps volume was 21,560 tons with an annual average
growth rate of 5%. On the other hand a linear trend equation on the same series reveals:
Y = 472.91X + 18,959
Estimating the current demand through applying the average annual growth rate and linear trend
approaches resulted in a current effective demand at 22,640 tons and 24,160 tons respectively. In this
study however a conservative estimate of 22,638 tons is considered as the current effective demand
unsatisfied by the present local production of soap detergent. Annual supply of Soap is displayed in
Table 3.1.
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Table 3.1 Supply of soap and Detergent in Tons
Year(E.C) Local Imported Total

1997 14,342 22,404 36,746
1998 10,874 14,302 25,176
1999 26,146 20,438 46,585
2000 17,194 18,043 35,237
2001 14,766 25,738 40,505
2002 19,249 27,290 46,539
2003 11,632 22,808 34,440
2004 14,975 16,443 31,419
2005 16,825 24,634 41,459
2006 N.A. 23,496 -
Source: CSA Annual Survey Manufacturing Industries Customs Authority
3.1.2 Demand Projection
Laundry soap and detergent are an everyday use product applied for washing. The low level standard of
living prevailing in the country was the main reason for the associated low level of soap consumption.
Economic development and the rise in income inevitably will lead to better suitable livelihood and usage
of soaps.
The demand for laundry soaps and detergent although basically depend on the population and other
substitute products; income also is detrimental for the proper and frequent usage of soaps by the
majority of the low income group of population. The change in the housing patterns of urban dwellers
from traditional outdoor kitchens and toilets to better water tapped kitchen and toilets will have a direct
impact on the demand for soaps. In addition to this, the rural population consumes more and more
laundry soaps with a growth in income.
In general the demand for soaps and detergent is related to the growth in income. Therefore the
estimation of the demand gap left out by the domestic suppliers, is made based on 8.7% annual gross
domestic product growth rate achieved in 2005 E.C and demand projected for Soap and Detergent can
displayed in table 3.2 below.
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Table 3.2 Projected Demand forecast of Soap and Detergent (Tons)
Projecte Market Share

Year(G.C) d Existing Unsatisfied
Demand Factorie Deman
2005 30701.0 s13508.4 d
17192.6
2006 31929.0 14048.8 17880.3
2007 33206.2 14610.7 18595.5
2008 34534.4 15195.2 19339.3
2009 35915.8 15803.0 20112.9
2010 37352.5 16435.1 20917.4
2011 38846.6 17092.5 21754.1
2012 40400.4 17776.2 22624.2
2013 42016.4 18487.2 23529.2
2014 43697.1 19226.7 24470.4
2015 45445.0 19995.8 25449.2
2016 47262.8 20795.6 26467.2
2017 49153.3 21664.4 27488.9
2018 51119.4 22492.5 28626.9
2019 53164.2 23392.2 29771.9
2020 55290.8 24364.9 30962.8
2021 57502.4 25301.0 32201.3
2022 59802.5 26313.1 33489.4
2023 62194.6 27365.6 34829.0
2024 64682.4 28460.2 36222.1
2025 67269.7 29598.6 37671.0
3.1.3 Pricing and Distribution
By considering the average imported price of detergent and adding costs of duty and other import
related expenses, a factory gate price of 32,000.00 and 62,500.00 birr per ton for Soap and liquid
detergent raw materials is recommended respectively.
Currently, the retail price of domestically produced laundry soaps ranges from Birr 2.00 to Birr 3.00
per 240 gm. Considering the minimum market price of Birr 11.00 per 250 gm. and allowing 30 per cent
for wholesale and retail margin, the envisaged plant is expected to sell its product at Birr 9 per 250 gm.
for laundry soap, 20 gram of Toilet soap at 1.80 to 2 birr and considering the above selling principle
1.26 birr per 20 gm. and again 1liter of liquid detergent sold at 25-30 birr at retail and considering 35
per cent for retail and wholesale, 23 per liter.
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By considering the average imported price of S o a p detergent and adding costs of duty and
other import related expenses, a factory gate price of Birr 32,450.00 per ton is recommended. The
product can be classified as a service item. The end users of the product are numerous and widely
distributed throughout the country. Hence, the factory has to appoint a number of distributors in
different locations of the country. The distributors will sell the products to the retailers to reach the
final consumers of the product.
As a new entrant in the market an attractive brand and packaging should be developed and supported
by visible advertisement like TV and posters. Plant Capacity and Production program
3.2 PRODUCTION CAPACITY

Based on the demand projection indicated above, the proposed plant will have production capacity of
1440 tons of Soap (Laundry and Toilet) and 1080 tons Liquid detergent per annum. The unit is
envisaged to operate under three shift working each 8 hours a day for 300 days per year.
3.3 PRODUCTION PROGRAM

In order to develop the operator’s skill in production and quality control, it is vital to have a gradual
capacity buildup. In addition to this, a period is required to penetrate into the market. Hence, it is
assumed that the plant will go into full capacity operation in four years’ time starting with 60% capacity
in the first year and progressively developing to 75%, 90% and 100% in the second, third and fourth year
respectively. The production program of the envisaged plant is given in Table 3.3 below.
Table 3.3 Production Program of the Envisaged Plant
Sr
Items Description 1st Year 2nd year 3rd year 4th -10th year
No
1 Laundry Soap (tons) 432 540 648 720
2 Toilet Soap (tons) 432 540 648 720
3 Liquid Detergent (tons) 640 810 972 1080
4 Capacity Utilization (%) 60 75 90 100
3.4 RAW MATERIALS AND ITS INPUTS

3.4.1 Raw Materials for Laundry and Toilet Soap
The raw materials required for the manufacture of laundry soap are: fat or oils (blended or
alone), caustic soda, sodium chloride, fillers like sodium silicate, talc, soda ash, etc. to impart good
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quality and lower the cost of additives like colorants, perfume. Most of the raw materials are
locally available and only some are imported. The total annual cost of raw material at full
capacity operation is estimated at Birr 46,728,000 Birr. The annual materials requirement and
their respective cost when the plant operates at full capacity is depicted on Table 3.4 below.
Table 3.3: Annual Raw Materials Requirement and Their Cost for Soap
No Description Quantity (tons) Cost in Birr (000)

1 Fat or oil (hollow, palm or 1008 26,748.26
coconut)
2 Caustic soda 720 10,996.50
3 Sodium Chloride (Salt) 288 1,288.48
4 Fillers (Bleaching Earth) 50.4 922.67
5 Additives ( coconut, perfume) 100.8 1,204.87
6 Packing Materials LS 2.44
Grand Total 46,728.00
3.4.2 Materials for Liquid Detergent
The principal raw materials required are Linear Alkyl Benzene Sulfuric Acid (LABSA), sodium hydroxide,
urea, perfume, and colorant. Caustic soda can be obtained locally while the other raw materials have to
be imported. Packing material is the only auxiliary material required by the envisaged plant. The total
annual cost of raw material at full capacity operation is estimated at Birr 35,046,000.00 Birr. Caustic
soda and packing materials will be sourced locally while the others have to be imported. The annual
requirement of raw material and their estimated costs are presented in Table 3.4 below.
Table 3.4 Annual Materials Requirements and Cost for Liquid Detergent
Cost (‘000
Sr .No. Item Description Quantity
Birr)
Linear Alkyl Benzene Sulfuric Acid, Texapon,
1
Alcopol or synthetic soap (tone) 850 32,500.00
2 sodium benzoate (kg) 36 2,452.40
3 Cooking Salt (tons) 120 8.80
4 Perfume (kg) 25 8.2
5 Colorant(kg) 60 3.80
6 Packing material LS 81.60
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3.5 PRODUCTION PROCESS
3.5.1 Laundry and Toilet Soap
The raw materials are melted slowly in a vessel. In order to eliminate the moisture, vacuum
dehydration process will be carried out at a certain temperature. Then bleaching earth is added and
the solution will be stirred vigorously. Fats & oils separated from the bleaching earth are pumped to
saponification kettle and caustic soda solution of a required concentration is then added in small
quantity at a time. The soap charged passes through different stage en-route to complete
saponification. When the saponification process is completed, a concentrated salt solution is
added to separate the lye. The liquid soap from the tank is heated and pumped to the vacuum spray-
drying unit.
The soap powder from the dryer is removed by a set of scrapers and directed to the plodder. Noodles
from the plodder are cut into pieces. The pieces are given further homogenization and together with
some additives, pressed into bars. The piece of soap is finally cut to the desired size by the cutter and
are then stamped and wrapped or packed and ready for distribution.
3.5.2 Liquid Detergent
The process of manufacture liquid detergent consists of neutralization of Linear Alkaline Benzene
Sulfuric Acid (LABSA). Measured quantity of LABSA is taken in stainless steel kettle and diluted with
known quantity of water with continuous stirring. The ingredients are blended in simple mixers fitted
with slow speed stirrer. A solution of caustic soda is prepared by dissolving measured quantity of
caustic soda in measured quantity of water.
The acid slurry is neutralized by a slow addition of caustic soda solution till it is neutralized. The pH of
the solution is maintained and acid slurry is taken in plastic containers. Then known quantity of urea is
added and kept for settling. Small quantity of perfume and colorant is added to liquid detergent before
packing.
Contact parts should be of Stainless Steel or other corrosion resistant material, to avoid contamination
of the products. Mixing Tanks can be of Mild Steel coated with epoxy resin, as well as of Stainless
Steel.
Liquid Detergents are packed usually in the containers viz. plastic bottles of various shapes and sizes
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and drums etc. The quality of the product can be controlled with help of a pH meter, viscometer and
basic analytical facilities.
3.6 MACHINERY AND EQUIPMENT

Most of the required machinery and equipment for the production of laundry and toilet soap plant
are imported. The list of required machinery and equipment is indicated in Table below will be leased
by Development Bank of Ethiopia. Total costs of these machineries and related Accessary for production
of all three kinds of Soap and Liquid detergent and transportation and installation is about 4,419,450.00
Ethiopia Birr. The cost of machinery and equipment including can be further discoursed between
the NBY Trading PLC and Development Bank of Ethiopia according to the rules and regulation of the
Bank. The list of machinery and equipment is given in Table 4.1
Table 4.1: List of Machinery Equipment for Liquid Detergent
Sr.N0 Description Quantity

1 Caustic soda tank 1
2 LABSA tank 1
3 Water tank 1
4 Liquid detergent tank 1
5 Mixing tank 1
6 Booster tank 1
7 Weighing balance 1
8 Pump 4
9 Packing machine 1
Table 4.2: List of Machinery Equipment for Laundry and Toilet Soap
Sr. No Description Quantity

1 Pump 10
2 Mixer with agitator & heating Coil 2
3 Boiling kettle 10
4 Filter press 4
5 Heat Exchanger 2
6 Booster Compressor 2
7 Screw Conveyor 2
8 Weight mixer 4
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9 Cutting machine 4
10 Stamper 4
11 Wrapper 4
3.6.1 Source of technology
The technology of flour milling and biscuit production is available in countries like India, China or
Europe. One supplier of machinery and equipment for the production of Soap and Detergent is stated as
follows:
1. Frigmaires International
Maharashtra -400 013, India
Tel: +91-22-24944108
Fax: +91-22-22186046
2. Noor Tech And feb (p)
Phone 91-0751-2328043
Fax 91-0751-2328043
Country Inida
Tansen road Industrial Area Gwalior India
3. SaS Mariani
E mail: Contact us
Phone: 39362-239988
Country Italy
Address via Toscanini 46
3.7 MANPOWER AND TRAINING REQUIREMENT

3.7.1 Manpower Requirement
A total of 55 employees is required to run the laundry soap producing plant with the envisaged
capacity. The detailed manpower required and their monthly salary is depicted on Table 6.1, below.
The total cost of manpower including fringe benefits is estimated to be Birr 724,500.00.
Table 4.3: Annual Manpower Requirements and annual Cost
Requirement
No Description Monthly Salary Annual Salary
No.
1 General manager 1 2500 30,000
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2 Executive secretary Casher 1 1200 14,400

3 Production and Technic manager 1 2000 24,000
4 Chemist 2 1500 36,000
5 Administrative and finance head 1 1800 21,600
6 Sells and Market Manager 1 1500 18,000
7 Supervisor 6 1200 86,400
8 Skilled operators 10 850 102,000
9 Unskilled Daily Workers 17 700 142,800
10 Personnel 1 900 10,800
11 Time keeper 2 450 10,800
12 Accountant 1 900 10,800
13 Purchaser 1 900 10,800
14 Sales person 1 900 10,800
15 Store keeper 1 500 6,000
16 Mechanic 2 600 14,400
17 Electrician 2 600 14,400
18 Driver 1 400 4,800
19 Guard 3 300 10,800
Sub-total 55 579,600
Employees benefit (25% of subtotal) 144,900
Grand Total 724,500
3.7.2 Training Requirement
Since the machinery and equipment are easy to operate, a special training arrangement is not needed.
But operators, chemists, mechanics & electricians need a two weeks training during erection,
commissioning period on the production process, raw material and product quality and operation and
maintenance of machinery and equipment by the expert of machinery supplier. The total cost of
training is estimated to be Birr 20,000.00.
3.8 LAND BUILDING AND CIVIL WORK

The Envisaged plant was rent 2000m2of land with all store and building for installation of the
machineries and related equipment with cost of 3000.00 Eth. Birr per Month and the total annual cost
will be 36,000.00 and no need for land lease and civil works.
20
3.9 UTILITIES
The utilities required by the plant are electricity, water fuel oil stationary, maintenance and
telephone. Approximately 18,000kWh of electricity, 25,000m 3 water and 15,000lts of fuel oil will be
consumed annually for the smooth running of the plant per annual. BNY Trading has fully equipped
with all office furniture and no need for additional and only stationary and some curtilages of printer.
The fore, the total annual cost of utilities is estimated to be Birr 326,000.00.
3.9.1 Pre project Cost
Pre project costs such as project appraising and proposal, Environmental Impact assessment conducting
by the consultant and licensing facilitation and other related activities have been carried out and
summarized on table below.
Table 4.4 Pre Project cost
No Description Total Cost

1 Project proposal 5,000.00
2 Environmental Impact Assessments 15,000.00
3 Licensing fee and others 2000,00
3.10 PROPOSED LOCATION ENVISAGE PROJECT

The plant is best located in an area where there is sufficient supply of raw material, water, electricity
and near by the market center. The envisaged plant is proposed to be located at Oromia Regional
Governmental State Arsi Zone Assella Town.
21
4 FINANCIAL STSTEMENT SUMMERY

Underlying Assumption
The financial analysis of the envisioned factory is based on the data provided in the preceding sections
and the following assumptions.
A. Construction and Finance
Construction period 1 year

Tax holiday 2 years
Source of finance 30% equity and 70% loan

Bank interest rate 10 %
Operating Costs and raw materials Increase by 15% during 1st 2nd year and by 10% after year 3
Salary and wages increase by 2% after year 1
Annual Sales revenue increased by 15% during 1st 2nd year and by 10% after year 3
Depreciation
Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
B. Working Capital
Accounts receivable 30 days
Raw material local 30days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
22
Accounts payable 30 days
Table 4.1 Yearly Expense Assumption
N Annual
o Expense description growth (%) Year 0 Year 1 year 2 Year3 Year 4
1 Salary and benefit 2% 724,500.00 738,990.00 753,769.80 768,845.20 784,222.10
2 Utility 5% 362,000.00 380,100.00 399,105.00 419,060.25 440,013.26

Machinery
3 Depreciation 10% 441,945.00 441,945.00 441,945.00 441,945.00 441,945.00
Vehicle
3 Depreciation 10% 85,000.00 85,000.00 85,000.00 85,000.00 85,000.00
4 pre project Service 22,000.00

Training
5 Requirement 20,000.00
Table 4.2 BNY Soap and Detergent processing project Balance Sheet February 30, 2017
Asset
Current Asset
Cash 6,752,550.00
Inventory of raw materials 2,953,000.00
Total Current Asset 9,705,550.00
Fixed Asset
Office Equipment 25,500.00
Machines and equipment`s 4,419,450.00
Vehicles and Motors 850,000.00
Total fixed Asset 5,294,450.00
Total Asset 15,000,000.00
Liability
Account payable 10,500,000.00
Owner capital 4,500,000.00
Total Liability & Owners' Equity 15,000,000.00
23
4.1 SOURCE OF THE FUND

Source of the 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 to the project is expected to take some times to repay all its debts, the bank loan is assumed to
obtain for 4 year 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 two sources will be: about
15,000,000.00 for starting of a project during first year. But when the project start production at full
capacity annual total working capital is assumed to be about 88,171,950.00 Eth Birr.
Therefore, one can summarize the starting capital of this project during first year is about 15,000,000.00
Birr.
From this 30% or 4,500,000.00 birr will be covered by project promoter while
the rest 70% or 10, 5000,000.00 birr will be covered by financial institutions.
From 70% about birr 4,420,000.00 machinery cost which is covered by Development Bank of Ethiopia
and the remaining birr 6,080,000.00 bank loan in cash.
Table 4.3 financial sources
SN Description % share Amount(in birr)

1 Owners Share 30 4,500,000.00
2 Bank Loan 70 10,500,000.00
Total 100 15,000,000.00
Table 4.4 Loan Repayment and interest Schedule for 4 years Loan period
S/No Principal Interest (10%) Repayment (10%) Total payment Remaining balance
0 0 0 0 0 10,500,000.00
1 10,500.000.00 1,050,000.00 2,625,000.00 3,675,000.00 7,875,000.00
2 7,875,000.00 787,500.00 2,625,000.00 3,412,500.00 5,250,000.00
3 5,250,000.00 525,000.00 2,625,000.00 3,150,000.00 2,625,000.00
4 2,625,000.00 262,500.00 2,625,000.00 2,887,500.00 0.00
Table 4.5 Depreciation Schedule
24
Original Depreciatio Depreciatio

SN Description
Value In Birr n rate in % n Per year
2 Machines & Equipment 4,419,450 10 441,945
3 Vehicle 850,000 10 85,000
Total 526,945.00
4.2 INCOME LOSS STATEMENT

The project revenue and production costs are listed and compared to evaluate whether the project
generate profit or loss. Accordingly, the forecasted income statement has shown that the project is
profitable throughout its life.
Table 4.6 Income –loss statement of NBY Trading PLC Soap and Liquid Detergent
Description year0 Year 1 Year 2 Year 3 Year 4

Sales of products 57,722,823.54 72,153,529.41 86,584,350.90 96205176.47
Cost of raw materials 49,064,400.00 61,330,500.00 73,596,660.00 81,774,400.00
Cost of direct labor 304,290.00 387,969.75 422,111.09 538,191.64
Total of raw materials and
49,368,690 61,718,470 74,018,771 82,312,592
labor costs
12,565,579.8
Gross profit 8,354,133.54 10,435,059.66 13,892,584.83
1
Gross margin 14.47 14.46 14.51 14.44
Expenses
Salary 130,410.00 166,272.75 180,904.75 230,653.56
other operating expenses 362,000.00 380,100.00 399,105.00 419,060.25
Annual depreciation 526,945.00 526,945.00 526,945.00 526,945.00
Profit from operations 7,334,778.54 9,361,741.91 11,458,625.06 12,715,926.02
Interest payment 1,050,000.00 787,500.00 525,000.00 262,500.00
Profit before tax 6,284,778.54 8,574,241.91 10,933,625.06 12,453,426.02
Tax (30%) 1,885,433.56 2,572,272.57 3,280,087.52 3,736,027.81
Net Income/loss 4,399,344.98 6,001,969.34 7,653,537.54 8,717,398.21
4.3 COMMERCIAL PROFITABILITY

The projected Annual Operating Statements (Year 1-4) are presented in table 4.7. The projections
indicate that the project returns profits starting from operations in the first year. The project also
25
achieves a return on investment (ROI) of 75.49 % over the 4 year analysis period. Estimated profits from
the factory’s operations for the first five years are summarized in Table below.
Table 4.7 Break-Even Analysis
Description Year 1 Year 1 Year 2 Year 3 Year 4
Income from
operations 57,722,823.54 72,153,529.41 86,584,350.90 96205176.47
Direct operating
Expenses 49,064,400.00 61,330,500.00 73,596,660.00 81,774,400.00
Gross profit 8,658,423.54 10,823,029.41 12,987,690.90 14,430,776.47
Gross margin 17.65 26.80 26.80 26.80
Indirect Expenses 3,117,410.00 3,171,372.75 3,205,009.75 3,274,713.81
Profit from
Operations 5,541,013.54 7,651,656.66 9,782,681.15 11,156,062.66
Interest payment 1,050,000.00 787,500.00 525,000.00 262,500.00
Profit After Financial

Charges 4,491,013.54 6,864,156.66 9,257,681.15 10,893,562.66
Return on investment 75.49%
Table 4, 8 project Finance Summary
S/N Description Total Cost in birr in Br.

1 Machines & equipment’s 4,419,450.00
2 Vehicles 850,000.00
Total Fixed Investment Cost 5,269,450.00
1 Pre service Expense 22,000.00
2 Raw Materials 81,774,000.00
3 Operation Cost 362,000.00
26
4 Salary of employees 744,500.00

Total Working Capital 82,902,500.00
Total Cost 88,171,950.00
Table 4.9 Income loss statement BNY processing project Profit /loss statement, Projected for 2017-2020
Revenue Year 0 Year 1 Year2 Year 3 Year 4-10

57,722,823.5
Sales Revenue 57,722,823.54 72,153,529.41 86,584,350.90 96,205,176.47
4
Purchase of Raw 49,064,400.0
49,064,400.00 61,330,500.00 73,596,660.00 81,774,400.00
Material 0
Gross profit 8,658,423.54 8,658,423.54 10,823,029.41 12,987,690.90 14,430,776.47
Expenses
Salary Expense 724,500.00 724,500.00 738,990.00 753,769.80 768,845.20
Pre-Operating Cost 22,000.00 0 0
Utility 362,000.00 362,000.00 380,100.00 399,105.00 419,060.25
Deprecation Vehicles 850,000.00 765,000.00 765,000.00 765,000.00 765,000.00
Deprecation
4,419,450.00 441,945.00 441,945.00 441,945.00 441,945.00
Machineries
Interest Expense 1,050,000.00 787,500.00 525,000.00 262500
training 20,000.00
Repayment 2,625,000.00 2,625,000.00 2,625,000.00 2625000
Total Expense 6,397,950.00 5,968,445.00 5,738,535.00 5,509,819.80 5,282,350.45
Profit Before Tax 1,210,473.54 2,689,978.54 5,084,494.41 7,477,871.10 9,148,426.02
Tax(30% ) 363,142.06 806,993.56 1,525,348.32 2,243,361.33 2,744,527.81
Net Profit 847,331.48 1,882,984.98 3,559,146.09 5,234,509.77 6,403,898.21
From this table income statement shows the project has a positive income.
4.4 PROJECTED CASH FLOW STATEMENT

The annual Cash Flow Statements projected for five years is depicted in table 4.10 below. The
projections give positive cash balances throughout the 5-year period. The project shows a cash balance
of 12,293,031.48; 12,728,435.92; 14,698,485.53; 17,241,452.00; 21,045,040.93 Birr in the first,

second, third, fourth and fifth years, respectively. This means that the factory will be able to operate
fairly smoothly without any further recourse to additional external financial assistance other than those
27
already indicated. The loan repayment schedule presented in the preceding sections shows that the
proposed loan can be repaid using internally generated funds. The total interest servicing obligation of
the project for the four year analysis period will be 2,625,000 birr which could be paid from funds
generated by the project.
Table 4.10 Cash Flow Statement
Year Year 0 Year 1 Year 2 Year 3 year 4
Cash on hand 12,293,031.48 12,728,435.92 14,698,485.53 17,241,452.00

Equity Capital 4,500,000.00
Loan principal 10,500,000.00
Net sale 57,722,823.54 72,153,529.41 86,584,350.90 96,205,176.47 96,205,176.47
110,903,662.0
Total cash in flow 72,722,823.54 84,446,560.89 99,312,786.82 0 113,446,628.47
cash payment
Purchase of raw 49,064,400.0 61,330,500.0 73,596,660.0 81,774,400.0
mater 0 0 0 0 81,774,400.00
724,500. 738,990. 753,769. 768,845.
Salary expense 00 00 80 20 807,287.46
5,294,450.
Investment 00
490,791. 515,330. 541,097.
Operating cost 00 55 08 541,097.08
42,000.
Pre-Operating Cost 00 -
1,050,000. 787,500. 525,000.
Interest Expense 00 00 00 262,500.00
36,000. 37,800. 39,690. 41,674.
Rent payment 00 00 00 00
2,625,000. 2,625,000. 2,625,000.
Principal payment 00 00 00 2,62,5000
55,161,350.0 66,273,081.0 78,317,950.3 86,276,016.2
total cash payment 0 0 5 8 83,385,284.54
5,268,442. 5,445,043. 6,296,350. 7,386,193.
Tax payment 06 97 94 72 9,016,303.00
60,429,792.0 71,718,124.9 84,614,301.2 93,662,210.0
Total payment 6 7 9 0 92,401,587.54
Cash surplus / 12,293,031.4 12,728,435.9 14,698,485.5 17,241,452.0
Deficit 8 2 3 0 21,045,040.93
28
5 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 performs; 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.
General manager
Adivisor
Production Market and Sale Administration

Division Division and finance
As clearly shown in the organizational structure, the integrated project center 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
29
Department. Under each Department there are different sections which are undertaking different
activities. Hence the following section deals with the duties and responsibilities of each division.
6 ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROJECT

Currently the issue of Environment and development has got a due emphasis and the government has
enshrined environmental policy within the constitution. In line with this environmental policy the
envisaged project deemed to mitigate the different impacts that may be caused by actions of the
project. For this, a detailed analysis of environmental impact of the project together with their
mitigation will be included within the EIA reports.
30
7 PROJECT IMPLEMENTATION PLAN

Project implementation action plan
The envisaged project has the following implementation schedules.
Activities Time plan
Store renting January, 2017
Loan processing February 2017
Import of Machineries May, 2017
Machine installation June and July 2017
Office structuring & hiring employees August 2017
Production September-October 2017
31

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BNY TRADING SOAP AND LIQUID DETERGENT MANFUCTURING PLANT

BNY TRADING PLC SOAP AND DETERGENT

PROJECT TO BE ASSELA CITY ADMINISTRATION,

PROMOTER: BNY TRADING PLC.

2 Back ground of project........................................................................................................................6

3.5 production process....................................................................................................................17

The total investment cost of the project including working capital d u r i n g i n i ti a l y e a r is

2 BACK GROUND OF PROJECT

The members of organization is 2

Organized since 2009. E.C

2.1 LOCATION, INFRASTRUCTURE AND PREMISES REQUIRED

The following Figure: shows the location of Request place.

2.2 PHYSICAL CHARACTERISTICS

2.3 SOCIO-ECONOMIC CONDITION

2.3.2 Social Livelihood

2.4 LAND REQUIRED AND USE PLAN

2.5 THE ECONOMIC SIGNIFICANCE OF THE PROJECT

2.5.1 Source of Employment

2.5.2 Source of Government Revenue

2.5.3 Source of Supply for sanitary and hygienic of the community

3 MARKET STUDY AND PLANT CAPACITY

3.1 MARKET DEMAND POTENTIAL

Table 3.1 Supply of soap and Detergent in Tons

Year(E.C) Local Imported Total

Source: CSA Annual Survey Manufacturing Industries Customs Authority

3.1.2 Demand Projection

Table 3.2 Projected Demand forecast of Soap and Detergent (Tons)

Projecte Market Share

3.1.3 Pricing and Distribution

3.2 PRODUCTION CAPACITY

3.3 PRODUCTION PROGRAM

Table 3.3 Production Program of the Envisaged Plant

3.4 RAW MATERIALS AND ITS INPUTS

No Description Quantity (tons) Cost in Birr (000)

3.4.2 Materials for Liquid Detergent

3.5 PRODUCTION PROCESS

3.5.1 Laundry and Toilet Soap

3.5.2 Liquid Detergent

3.6 MACHINERY AND EQUIPMENT

Table 4.1: List of Machinery Equipment for Liquid Detergent

Sr.N0 Description Quantity

Sr. No Description Quantity

3.6.1 Source of technology

3.7 MANPOWER AND TRAINING REQUIREMENT

Table 4.3: Annual Manpower Requirements and annual Cost

2 Executive secretary Casher 1 1200 14,400

3.7.2 Training Requirement

3.8 LAND BUILDING AND CIVIL WORK

3.9.1 Pre project Cost

Table 4.4 Pre Project cost

No Description Total Cost

3.10 PROPOSED LOCATION ENVISAGE PROJECT

4 FINANCIAL STSTEMENT SUMMERY

A. Construction and Finance

Construction period 1 year

Source of finance 30% equity and 70% loan

Accounts receivable 30 days

Raw material local 30days

Work in progress 5 days