67.

PROFILE ON PRODUCTION OF SHEET

GLASS
 67-2

TABLE OF CONTENTS

PAGE

I. SUMMARY 67-3

II. PRODUCT DESCRIPTION & APPLICATION 67-3

III. MARKET STUDY AND PLANT CAPACITY 67-4

A. MARKET STUDY 67-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 67-6

IV. RAW MATERIALS AND INPUTS 67-7

A. RAW & AUXILIARY MATERIALS 67-7
B. UTILITIES 67-8

V. TECHNOLOGY & ENGINEERING 67-9

A. TECHNOLOGY 67-9
B. ENGINEERING 67-10

VI. MANPOWER & TRAINING REQUIREMENT 67-11

A. MANPOWER REQUIREMENT 67-11
B. TRAINING REQUIREMENT 67-11

VII. FINANCIAL ANALYSIS 67-13

A. TOTAL INITIAL INVESTMENT COST 67-13
B. PRODUCTION COST 67-14
C. FINANCIAL EVALUATION 67-15
D. ECONOMIC BENEFITS 67-16
 67-3

I. SUMMARY

This profile envisages the establishment of a plant for the production of sheet glass
with a capacity of 15,000 tonnes per annum.

The present demand for the proposed product is estimated at 14,148 tonnes per annum. The
demand is expected to reach at 36,696 tonnes by the year 2017.

The plant will create employment opportunities for 107 persons.

The total investment requirement is estimated at Birr 175.55 million, out of which Birr 155.92
million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 30 % and a net present
value (NPV) of Birr 157.68 million discounted at 8.5%.

II. PRODUCT DESCRIPTION AND APPLICATION

A sheet glass is a rigid, brittle, transparent material which is produced by fusing it mainly with
silica, lime and soda ash. It can be produced in a wide range of sizes with a thickness of 2 to l2
mm.

The profile envisages production of sheet glass of thickness 3mm - 6mm in different proportion.
The product is widely applicable in construction, particularly in building construction for doors and
windows as well as for furniture, show cases, green houses mirrors and the like.
 67-4
III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

The country's requirement of sheet glass is entirely met through import. Ethiopia imports a
variety of sheet glass for use in the construction sector and furniture manufacture. The types of
sheet glasses imported include cloured throughout the mass (body tinted), non-wired and wired
un worked sheets of cast/rolled glass and plain clear sheet glass. The quantity and value of
sheet glass imported in the past ten years is given in Table 3.1.

Table 3.1
IMPORT OF SHEET GLASS

Year Qty(TON) Value ( Birr)

1997 2162.3 10,072,350
1998 3063.3 9,526,367
1999 3431.9 10,786,046
2000 5149.2 24,577,993
2001 6792.8 25,426,036
2002 5361.7 18,348,741
2003 8257.0 22,219,519
2004 10250.5 30,682,606
2005 6704.6 27,415,360
2006 11,789.7 41,213,056

Source:- Compiled from Customs Authority

As could be observed from Table 3.1 import of sheet glass in the past 10 years has shown an
increasing trend. During the past 10 years the annual average growth of import was about
20%. The import level, which was 2,162.3 tones in the year 1997, has increased to a level of
 67-5
5,149.2 tons and 10,250.5 tons by the year 2000 and 2004 respectively. Although the import
figure declined to 6,704.6 tons by the year 2005 it did not stay long to increase to about to
11,790 tons by the year 2006. The high growth rate registered during the past eight years is
mainly due to the growth of the construction sector and urbanization.

To determine the present effective demand 20 annual average growth rates, which was
observed in the past ten years, is applied by taking year 2006 as a base. Accordingly, current
effective demand for sheet glass is estimated at 14,148 tons.

2. Demand and Projection

The demand for sheet glass is mainly influenced by the development of the building
construction sector and urbanization. The construction sector of developing economies is
found to grow at faster rate than their economy in general. With a population of more than 70
million and existing conducive conditions the economy is expected to grow at an accelerated
rate. The accompanying growth in-turn will accentuate the demand for sheet glass and other
building materials.

In order to forecast the demand for sheet glass the observed values in the past trend and the
growth of the construction sector has been considered. Accordingly, import has been growing
by about 20 annually in the past 10 years. Since this is found to be very high due to backlog
effect it is adjusted to 10 and is considered to be a pessimistic growth rate. The forecast
executed on the basis of this assumption is presented in Table 3.2
 67-6
Table 3.2
PROJECTED DEMAND FOR SHEET GLASS

Year Qty (TON)

2008 15,562
2009 17,119
2010 18,831
2011 20,714
2012 22,785
2013 25,064
2014 27,570
2015 30,327
2016 33,360
2017 36,696

2. Pricing and Distribution

The average CIF price of sheet glass imported in the past four years in Birr 3,792 per ton.
Assuming 40% for duty, clearance, and other expenses Birr 5,000 per ton is recommended for
sales revenue projection.

The product will find its market outlet through the existing building materials distributing
enterprises throughout the country.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

The recommended plant capacity is l5, 000 tons operating twenty-four hours per day, working for
300 working days.

The working days have been estimated by subtracting routine maintenance from calendar days of
 67-7
the year. The process can not be interrupted once started at least for four to five years as stopping
and restarting the operation will be extremely expensive.

2. Production Programme

70% of plant capacity during the 1st year

85% of plant capacity during the 2nd year
90 % of plant capacity during the 3rd year
l00% of the plant capacity during the 4th year

The gradual increase in production is planned because of the complexity of technology which will
require considerable amount of time for the operators to grasp the skill.

IV. MATERIALS AND INPUTS

A. RAW MATERIALS

Even though there are so many different glass compositions, the average composition for sheet
glasses is as follows:-

- Sand 64%
- Lime stone 7%
- Soda Ash l4%
- Dolomite l4%
- Other refining, colouring and decolorizing chemicals l%.

During processing of this product, cullet (broken glass) of similar composition is added in the
range of 30 to 50% to facilitate the melting process. The annual consumption of raw materials is
summarized in Table 4.l. The major auxiliary materials are packing materials. As the products are
rigid and brittle, appropriate packing materials which are usually wooden pallets are required.
 67-8
Table 4.l
ANNUAL CONSUMPTION OF RAW MATERIALS AND AUXILIARY MATERIALS

No Description Annual Cost in '000 Birr

Consumption

F.C L.C T.C

1 Sand L0800 t - 3,240 3,240
2 Soda Ash 2400 t - 2,808 2,808
3 Limestone l200 t - 48l 48l
4 Dolomite 2400 t 1200 240 1440
5 Cullet 3300 t - 990 990
6 Additives l50 t 373.25 74.65 447.9
Total 1573.25 7,353 8,926

B. UTILITIES

Utilities required by the project are:-

- Furnace oil (Heavy fuel oil)

- Electricity
- Compressed air
- Potable and industrial water

The annual requirement of utilities and the corresponding cost are given in Table 4.2
 67-9
Table 4.2
ANNUAL UTILITIES CONSUMPTION AND COST

No Description Annual Cost in '000 Birr

Consumption

F.C L.C T.C

1 Furnace oil 825 t - 883.9 883.9
2 Electric 5250 mwh - l345.6 l,345.6
Energy
3 Water 7000 m3 - ll.7 ll.7
Total - 883.9 883.9

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Production Process

The ordinary sheet glass is produced by the vertical drawing method. The procedure is as follows.

The major ingredients, from their storage bins, are proportioned by the adjustable automatic
weigher and fed to the batch mixer. The small ingredients are dosed on the belt conveyor which
feed the ingredients to the batch mixer. The mixed batch from the storage bin is fed to the furnace
via a belt conveyor with the batch distributor so that it can be distributed uniformly in the furnace.
There it melts and the molten glass is homogenized as it slowly flows through the regaining vessel,
and then its viscosity gradually drops. This molten glass is drawn vertically from the furnace
through a so called "debiteuse" by means of a drawing machine.

The glass is continuously drawn upward in ribbon form and its' surface is chilled by adjacent water
coils. Then it passes through the annealing chamber. After cooling down completely it is cut to
required size and packed in appropriate way.
 67-10
2. Source of Technology

Information regarding machinery and equipment for processing of the product can be obtained
from: www.glassglobal.com.

B. ENGINEERING

1. Machinery and Equipment

The required machinery and corresponding costs are provided in Table 5.1 below.

Table 5.1
LIST OF MACHINERY AND EQUIPMENT

Cost in 'OOO Birr

No. Description F.C L.C T.C
1 Sand preparation and refining unit 3,620 725 4,345
2 Storage and mix preparation 10,861 2,172 13,033
2.l Storage bins
2.2 Automatic batch dozer
2.3 Batch mixer
2.4 Batch feeder
2.5 Batch distributor 50,684
3 Melting furnace and utilities 42,236 8,448 14,481
4 Cooling system 12,067 2,414 15,928
5 Finishing line 13,274 2,654
5.l Dibiteuse and draw bar
5.2 Drawing machine
5.3 Automatic Cutler
5.4 Lay down machine 2,896
5.5 Annealing chamber 21,721
6 Compressor station 2,413 483 20,980
7 Central control panel 18,101 3,620 4,427
8 Handling facilities 17,483 3,497 7,425
9 Transformer station 3,689 738
10 Erection 5,197 2,228
128,941 26,979 155,920
 67-11
2. Building and Civil Works

For construction of this plant an estimated land area of 20,000 square meters is required of which
the building covers a total floor area of 3,000 square meters. Enough open space has been assumed
for bulky raw material storage and easy of movement during operation and possible future
expansion.

It is estimated that the annual land lease cost will be Birr 2,000 and the total cost of building
construction is estimated to be Birr 7,500,000.

3. Proposed Location

The project shall be located in Bachima town, Meanit Goldia Woreda of Bench Maji Zone.

VI. MANPOWER AND TRAINING REQUIREMENTS

A. MANPOWER REQUIREMENT

Manpower requirement for sheet glass processing plant is summarized in Table 7.l.

B. TRAINING REQUIREMENT

Process engineers shall be intensively trained for glass technology.

All other production personnel shall be trained for processing technique and operation of
machinery and equipment of their respective work areas during the commissioning period of the
plant.
 67-12
Table 7.1
MANPOWER REQUIREMENT FOR SHEET GLASS PROCESSING PLANT

Salary Per Salary Per

Position No Month Year
A. Plant Management
1. Plant Manger 1 4,000 48,000
2. Secretary 1 1,000 12,000
B. Production Staff
1. Production manager 1 3,000 36,000
2. Production clerk 1 650 7,800
3. Process engineer 3 2,000 72,000
4. Shift leader 3 l,300 46,800
5. Control room attendant 6 800 57,600
6. Operators 9 650 70,200
7. Production inspectors 6 800 57,600
8. Packers 6 500 36,000
9. Labourers 24 300 86,400
C. Maintenance & Laboratory
l. Maintenance & Utility Manager 1 2,500 304,000
2. Quality Manger 1 2,500 30,000
3. Quality Controller 9 l,000 l08,000
4. Mechanic 6 1,000 72,000
5. Electrician 6 1,000 72,000
6. Instrument technician 3 800 28,800
D. Others
l. Head for finance & admin 1 2,500 30,000
2. Marketing Manager 1 30,000
2. Personnel Officer 1 2,500 12,000
3. Accountant 1 1,000 12,000
4. Cashier 1 1,000 9,600
5. Purchaser & transistor 1 800 9,600
6. Sales man 1 800 9,600
7. Stores' clerk 1 800 4,800
8. Time Keeper 3 400 10,800
9. Security guard 6 300 14,400
l0. Messenger/cleaner 3 200 7,200
200
Benefits ( 25% of Basic Salary) 296,800
 67-13
Total 107 1,484,000

VII. FINANCIAL ANALYSIS

The financial analysis of the sheet glass project is based on the data presented in the previous
chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity
70 % loan
Tax holidays 3 years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30 days
Raw material, import 90 days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 175.55
million, of which 19 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
 67-14

Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (‘000 Birr)
1 Land lease value 2.0
2 Building and Civil Work 7,500.0
3 Plant Machinery and Equipment 155,920.0
4 Office Furniture and Equipment 125.0
5 Vehicle 200.0
6 Pre-production Expenditure* 10,096.9
7 Working Capital 1,713.4
Total Investment cost 175,557.3
Foreign Share 19

* N.B Pre-production expenditure includes interest during construction ( Birr 9.94 million thousand ) and
Birr 150 thousand costs of registration, licensing and formation of the company including legal fees,
commissioning expenses, etc.

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 35.85 million (see
Table 7.2). The material and utility cost accounts for 27.36 per cent, while repair and
maintenance take 0.78 per cent of the production cost.
 67-15

Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %
Raw Material and Inputs 8,926.00 24.89
Utilities 883.9 2.47
Maintenance and repair 280 0.78
Labour direct 890.4 2.48
Factory overheads 296.8 0.83
Administration Costs 593.6 1.66
Total Operating Costs 11,870.70 33.11
Depreciation 16049.5 44.76
Cost of Finance 7935.59 22.13
Total Production Cost 35,855.79 100

C. FINANCIAL EVALUATION

1. Profitability

According to the projected income statement, the project will start generating profit in the
first 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 life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.
 67-16

2. Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.

BE = Fixed Cost = 35 %
Sales – Variable Cost

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project’s initial investment will be fully recovered within 3 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 30% and the net present
value at 8.5% discount rate is Birr 157.68 million.

D. ECONOMIC BENEFITS

The project can create employment for 107 persons. In addition to supply of the domestic
needs, the project will generate Birr 90.64 million in terms of tax revenue. The establishment
of such factory will have a foreign exchange saving effect to the country by substituting the
current imports.