January 1, 2016

Contents
I. EXECUTIVE SUMMARY…………………………………………………………………………1
II. PROJECT BACKGROUND
……………………………………………………………………...6
2.1. The Applicant............................................................................................................ 6

2.2. The Project/Business................................................................................................. 6

2.3. Project legal documents............................................................................................6

2.4. Land Holding............................................................................................................. 7

2.5. Brief History of the Company....................................................................................7

2.6. Credit Information..................................................................................................... 9

2.7. Past performance of the Project /Business..............................................................10

2.7.1. Summary of Operational Performance (Physical Performance).........................................10

2.7.2. Summary of Financial Performance (as indicated in financial statements provided).........10

2.8. Reason for Expansion & Future Plan of the Project..................................................12

2.9. The Loan Request to DBE........................................................................................13

III. KEY DRIVERS, SUCCESS FACTOR, MAJOR RISK AND PROBLEMS..........14

3.1. Key Drivers.............................................................................................................. 14

3.2. Success Factors....................................................................................................... 14

3.3. Firm Level Success Factors......................................................................................14

3.4. Risk Factors............................................................................................................. 16

3.5. Risk Mitigating Measures.........................................................................................16

3.6. SWOT ANALYSIS...................................................................................................... 17

IV. MARKET STUDY FOR TERRAZZO TILE PRODUCTS..................................................18

4.1. World Market........................................................................................................... 18

4.1.1. Production..........................................................................................................................18

4.1.2. Consumption......................................................................................................................18

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4.1.3. Trade..................................................................................................................................19

4.1.4. Market Segmentation.............................................................................................. 19

4.2. Domestic Market..................................................................................................... 20

4.2.1. Demand..............................................................................................................................20

4.2.1.1. Determinants of Demand for the Terrazzo Tiles............................................................20

355,194............................................................................................................................................22

4.2.2. Supply.................................................................................................................................23

4.2.3. Demand Supply Gap...........................................................................................................26

V. TECHNICAL STUDY................................................................................................... 29

5.1. Plant Location.......................................................................................................... 29

5.2. Land and Building.................................................................................................... 29

5.3. Machinery and Equipment.......................................................................................30

5.4. Vehicles................................................................................................................... 32

5.5. Generator................................................................................................................ 32

5.6. Office furniture and equipment...............................................................................32

5.7. Utilities.................................................................................................................... 33

5.8. Material Inputs and availability................................................................................33

5.9. Production Process and Production Capacity...........................................................33

5.9.1. Production Process.............................................................................................................33

B. Mixing...................................................................................................................... 34

C. Tile Pressing............................................................................................................ 34

D. Polishing.................................................................................................................. 35

5.9.2. Production Capacity...........................................................................................................35

5.10. Environmental Impact Assessment..........................................................................35

5.11. Implementation Plan............................................................................................... 36

VI. Organization and Management................................................................................................37

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6.1. Organizational Structure.........................................................................................37

6.2. Project Management............................................................................................... 38

6.3. Training Requirement and Employee Remuneration and Benefits...........................40

VII. FINANCIAL ANALYSIS.........................................................................................................41

7.1. Fund Allocation........................................................................................................ 41

7.2. Source of Fund........................................................................................................ 41

7.3. Expected Financial Results......................................................................................44

7.3.1. Profit/loss forecast.............................................................................................................44

7.3.2. Cash flow forecast..............................................................................................................44

7.3.3. Balance Sheet Projection....................................................................................................44

7.3.4. Sensitivity Analysis..............................................................................................................45

VIII. SOCIO ECONOMIC BENEFIT.........................................................................................46

IX. CONCLUSION AND RECOMMENDATION.......................................................................47
9.1. Conclusion............................................................................................................... 47

9.2. Recommendation.................................................................................................... 48

9.3. Terms and Conditions.............................................................................................. 48

X. ANNEXES..................................................................................................................................51

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I. EXECUTIVE SUMMARY

Xxx Terrazzo Factory PLC was established on 08/08/1994 E.C by 6 (six) shareholders, namely
Ato Alemayehu Kidane, W/ro Aster Mekuria, Ato Keruk Alemayehu, Ato Dagim Alemayehu,
W/rt Wubet Alemayehu and W/rt Tizita Alemayehu with registered paid up capital of Birr
2,000,000 as per the commercial code of the country. However, through time the capital of the
PLC has shown a remarkable increment and as per the minute of the company, dated May 8,
2007 E.C the total registered paid up capital of the company has increased to Birr 10,213,000.
As per the memorandum of association of the Company, it was established with general
objectives of establishing terrazzo production and marketing, cement and cement products
manufacturing and market, mineral and plastic products manufacturing and other construction
materials production and consulting of the production of such materials.

Based on the establishment objective of the Company has already established terrazzo and
marble manufacturing plant in Addis Ababa City in two Sub cities, in Akaki Kality Sub City,
Woreda 07 which produces double layer terrazzo and marble on two separated sites and the
other site is in Nifaslik Lafto Sub City Woreda 3 which produces only double layer terrazzo. All
the project sites are accessible throughout the year since it is located in the center of the city and
also utilities like electric power, water and telephone are available in their respective place.

Currently, the company has planned to produce single layer terrazzo tile in addition to the
existing products of double layer terrazzo and marble products produced in the two sub cities of
three sites. For this objective the company has selected Kality site two and approached DBE
South Addis Ababa branch for achieving the objective of manufacturing single layer terrazzo
tile with a modern technology that can deliver high quality product to the local market on Akaki
Kality site two via this expansion project.

As per Addis Ababa district technical team asset evaluation report, the existing investment of
the company on Kality terrazzo manufacturing site only is birr 17,193,234.05 (Birr
5,718,980.21 on civil works and birr 11,474,253.85 on machineries and vehicles). With this
amount of investment, the company has working by its 80% capacity of the theoretical capacity
(inspection report of South Addis Ababa branch, Nov 14, 2006).
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When we see the past performance and its future outlook of the project, as per our site visit and
assessment on track record submitted by the company we have observed that the project has
performed well and since its establishment the Company has been registering a very good
progress. The project’s production and productivity, sales revenue and profitability have been
improving through time. The income statement of the company for the last four consecutive
Ethiopian fiscal years (2005, 2006, 2007 and 2008) indicates that the company generates a net
profit of birr 3,608,092, 3,241,803, 3,162,729 and 6,681,625 respectively. The assets of the
project are also show increment from year to year and the balance sheet on the year ended June
30, 2005, 2006, 2007 and 2008 E.C indicates that the total asset of the PLC is Birr 20,731,578,
birr 21,849,147, birr 17,076,770 and birr 18,555,727 respectively. In general, the status of the
project is very pleasant and attractive.

In view of the fact that the market condition for the proposed products has vital role for the
realization of the objectives of establishment of the proposed project, the team has also tried to
review the past, contemporary as well as forecasted demand and supply condition and price of
the planned products based on the past and current performance of the Company and
commodity study of the bank 2012. As we have discussed with the General Manager and
inspection report of the sourcing branch, the Company has no market problem. Rather, the
project has excess order on hand and they have missed more than 30 million bid sales per
annum after winning a bid competition from Addis Ababa city government housing
development project office for about 54 million birr annual sales because they cannot produce
that much of product continuously. Moreover, there is also high demand from walk in clients
but they cannot meet merely the pre ordered products. In addition to this, based on commodity
study of the Bank, we have tried to assess future demand of the planned product and we have
confirmed that there is excess demand for the product even at a relatively higher price. The
boosting construction sector of the country can be seen as the best example. Beside, the
company has planned to produce new product, single layer terrazzo tile which is high quality
than the current double layer terrazzo products. This will improve the market for the product of
the company. Therefore, instead of threat to the project the prospective market situation of the
product can be seen as an opportunity.

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Technical viability of the project has also been assessed. All the required buildings and
constructions have already been constructed and their value and appropriateness are verified by
the district technical team expect those are planned to be constructed with this expansion phase
and also the team confirmed that the existing space is enough for the additional buildings of
expansion. The existing machineries and vehicles are also examined and their values are
evaluated by the technical team. In addition to this, new machineries used for single layer
terrazzo manufacturing for the expansion project is planned to be purchased from different
suppliers originated in China and Italy as per the submitted pro forma invoices by the company.
Accordingly, the district technical team has evaluated and recommended all the necessary
machineries and equipments that are technically viable and their costs are included in the total
investment cost of the project.

For smooth and optimal operation of the project, proper organizational structure and human
resource have significant roles. As a result, we have also tried to evaluate the existing
organizational structure and required human resource of the project. The Company has already
implemented proper organizational structure and hired required human resources for the
existing business. So as to smoothly implement the expansion part of the project we proposed
additional human resources without changing the existing organizational structure.

Concerning the financial aspects of the project, we found that the project is viable in all aspects
of analysis. The total investment of the project is worked-out to be Birr 51,502,822. From this
amount of investment birr 24,988,838 or 49% is an existing investment executed by the
company while the remaining amount birr 26,513,984 or 51% will be planned investment. Out
of the total planned cost of the project, the Bank will finances 94% or Birr 25,000,000 to cover
partial cost of additional building for the expansion, full costs of new machineries and
additional working capital requirement which accounts 49% of the total investment cost.
However, the remaining 51% or Birr 26,502,821 including the existing investment amounting
birr 24,988,838 is the company’s equity. Thus, the additional cash contribution of the company
will be only birr 1,513,984 for partial cost of the expansion building (birr 125,445) and pre
operating interest and (birr 1,388,539).

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With above investment amount, financial viability of the project is checked which is
unquestionable to determine acceptance or rejection of the project. In the past, the project has
been registering very good financial progress. The financial projections of the company when
the expansion plan starts operation also reveal the same thing with the previous good financial
performance achieved by the company onwards. As we have tried to gone through each
financial components, the project is financially viable & capable to achieve its objective
covering all its costs even in adverse conditions that can possibly affect either project cost or
revenue. Before and after tax IRR of the project is calculated to be 40% and 29%, respectively.
The project’s sensitivity to adverse situations has also been tested by reducing revenue and
increasing operating cost and investment cost all by 10%. In all scenarios, IRR is above the cost
of capital confirming that the project is financially viable. The net present value of the project,
NPV, before and after tax is calculated to be birr 67,171,422 and birr 38,167,836 respectively.
The net profit of the project is forecasted to be Birr 8,700,388 and Birr 11,208,339 for the first
and the last projected year, respectively. The projected cash flow at the end of the first year and
the last project year is computed to be Birr 8,863,271 and Birr 75,034,519 respectively
indicating that the project is liquid throughout the envisaged project years.

Establishment of the project has also various socio-economic significant for the country. Some
of them are: creation of employment opportunity, source of government revenue in the form of
tax, and its GDP contribution are among the benefits of the project. In addition to these, the
subsector has strong linkage with construction subsector which is highly demanding different
inputs such as terrazzo products for modern growing construction of the country. It will also
substitute imported for similar products, which in turn save foreign currency.

However, unhidden fact, it does not mean that the project is totally free from obvious business
risks. The project has also some environmental impact on the surrounding societies and the
atmospheres through its dust, liquid, sound pollution and working vibration. However, with
appropriate mitigating mechanisms such as using recycling instruments, installing grinding and
crushing on the separate site owned for it and through proper follow-up, all associated risks as
well as environmental impact can successfully be reduced.

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By considering all the above facts and findings, Appraisal Team I found that financing the
proposed expansion project for its implementation is commendable and appropriate. Therefore,
the team in charge has approved at its level and propose a total loan amount of Birr 25,000,000
for final consideration subject to the terms & conditions stated at term and conditions part of
this study.

Summary of Financial Analysis

I. Project Investment
Investment items Amount Percentage
Fixed Investment 39,582,832 77%
Pre-operating Expense 1,694,523 3%
Working Capital 10,225,467 20%
Total 51,502,822 100%
II. Source of fund
Description Amount D/E Ratio
Debt -DBE Loan 25,000,000 48.54%
Equity 26,502,821 51.46%
Total 51,502,822 100.00%

III. Expected Financial results

Description Year 1 Year 10
Sales Revenue 72,825,300 87,390,360
Profit (Loss) 8,700,388 11,208,339
Cumulative Cash Balance 8,863,271 75,034,519
FIRR before Tax = 40%
FIRR after Tax = 29%
NPV Before Tax = 67,171,422
NPV After Tax = 38,167,836

IV. Sensitivity Analysis

Description FIRR after Tax

When Revenue decreased By 10% 17%

When Operating Costs increased By 10% 26%
When Investment Costs increased By 10% 26%

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II. PROJECT BACKGROUND

II.1. The Applicant

A. Name : Xxx Terrazzo Factory PLC

Address: -
Region/City – Addis Ababa City Administration
Sub-City – Kirkos
Woreda –06
House Number – 260
Telephone- 0114163307
B. General Manager : - Ato Alemayehu Kidane Abbu
Address,
Region: - Addis Ababa city Administration
Sub-city: - Nifasilk Lafto
Woreda: - 12
Kebele- 03/04/05
Mobile: - 0911-20-65-64

II.2. The Project/Business

 Name: Xxx Terrazzo Manufacturing

o Address: -
Region – Addis Ababa City Administration
Sub City: Akaki Kality
Woreda: - 07
Mobile: - +251-911-20-65-64/+251-911-20-31-83
Fax: - +251114674236/674234/668577

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II.3. Project legal documents

Business license:

 Licensing Organ: Addis Ababa City Administration Trade Bureau

 License number:- 14/666/4206/2004
 Date of Issued/Renewal: 24/04/2008

Principal/Commercial Registration:

 Licensing organ: FDRE Trade Ministry

 License number:- MT/AA/2/00083347/2004
 Date of Issued/Amendment: 18/11/2008

Expansions Investment License

 Licensing Organ: Addis Ababa Government Investment Agency
 License number:- አኢፈ 56421/08
 Date of Issued/Renewal: 20/07/2008

TIN: 0000012087
VAT No.: - 10141

II.4. Land Holding

The company has an area of 4,664 M 2 where the terrazzo Factory is established, located in
Akaki Kality Sub City, Woreda 7. The area where this project is established, Akaki kality site
two, is entitled through legal land use right transfer from MAJKON CONSTRUCTION PLC
who was owned the land through the former ownership policy or “NEBAR YIZOTA”. The
company has purchased the land with a full entitlement to uses for terrazzo factory and now the
ownership system is transferred to the land lease policies and the land lease period of the land is
for 60 years. The area under consideration is accessible for all types of infrastructures and
utilities like electric power, water, telephone, internet etc.

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II.5. Brief History of the Company

Xxx Terrazzo Manufacturing PLC, as stipulated on the memorandum of association, was

established in April 08, 1994 E.C by six family member shareholders namely Ato Alemayehu
Kidane, W/Ro Aster Mekuria, Ato Keruk Alemayehu, Ato Dagim Alemayehu, W/rt Wubet
Alemayehu and W/rt Tizita Alemayehu with a paid up capital of birr 2,000,000 (Two Million
birr) where Ato Alemayehu Kidane and W/ro Aster Mekuria owned the higher share with 720
shares for each while the remaining shares are owned by other shareholders with equal 140
number of shares. The par share value of each share was birr 1,000. As per the company article
of association Ato Alemayehu KidanE Abbu, who is one of the major shareholders of the
company, is assigned as the General Manager of the company.

As per the memorandum of association, the company is established with the objective of
production, processing and trading of different local and imported construction materials, some
of the company’s objectives are the under listed:

Floor terrazzo tile production, trading and tiling

Different cement products production and trading
Importing and supplying of different terrazzo tile products and inputs
Production of different mineral and plastic products
Consultancy services on the production and marketing of construction materials
and
Other similar business which has relation with the general objective of the
company

However through time the financial capacity of the project has grown and the total paid up
capital of the company has gone through increment at different time and currently the paid up
capital of the company has reached birr 10,213,000 by selling additional shares to the existing
shareholders mainly from the members profit divided. The current capital structure of the
company is shown in the table below.

Table 2.1 Capital structure of the company

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Sr Number Share Paid up Share

Name of shareholder
.No of Share Value Capital (%)

1 Ato Alemayehu Kidane 4,118 1,000 4,118,000 40%

2 W/Ro Aster Mekuria Ayele 2,535 1,000 2,535,000 25%
3 Ato Keruk Alemayehu Kidane 945 1,000 945,000 9%
4 Ato Dagim Alemayehu Kidane 945 1,000 945,000 9%
5 W/rt Wubet Alemayehu Kidane 835 1,000 835,000 8%
6 W/rt Tizita Alemayehu Kidane 835 1,000 835,000 8%
Total 10,213 10,213,000 100%

II.6. Credit Information

A. Credit Relation with DBE

The due diligence of the sourcing Branch states that the Company as well as the shareholders
has no credit relation with DBE.

B. Credit Relation with Local Financial Institutions

As per the credit information from NBE with report Generation date 2016-11-15 with enquiry
ID No 454399 stated that the company Xxx Terrazzo Factory PLC has credit relation with
different local commercial banks. The detail of credit history of the company has presented in
the table below.

Table 2.2 Credit history of Xxx Terrazzo Factory PLC

Loan
Current
S/ Name of Type of Amount Date of
Loan Status Purpose
N Institution Loan Approve Approval
Balance
d
Term 30/09/201
1 NIB Sc 1,500,000 586,104.31 pass Industry
loan 6
Term 30/09/201 1,281,494.6
2 NIB Sc 1,800,000 Pass Industry
loan 5 0
Term 30/09/201 Settled Mining &
3 NIB Sc 1,200,000 -
loan 5 Normally Quarry
Term 22/10/201 Settled
4 NIB Sc 1,500,000 - Industry
loan 4 Normally
Term
5 NIB Sc 1,200,000 2/7/2014 358,536.92 Pass Industry
loan

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Term Settled
6 NIB Sc 800,000 2/7/2014 - Industry
loan Normally
Term 16/01/201 Settled
7 BIB Sc 1,621,516 - Industry
loan 3 Normally
Term 1,858,021.4
9 NIB Sc 7,000,000 12/9/2012 Pass Industry
Loan 4
Wegagen Term 14/12/201 Settled
8 894,747 - Industry
Bank Sc Loan 2 Normally
Term 27/08/201 Settled
10 NIB Sc 1,000,000 - Industry
Loan 0 Normally
Overdraf 28/10/200
11 NIB Sc 1,000,000 260,380.09 Pass Industry
t 9
Term 28/10/200 Settled
12 NIB Sc 3,000,000 - Industry
loan 9 Normally
Term 16/08/200 Settled
13 CBE 754,600 - Industry
loan 8 Normally

From the Table above we can easily understand that the company has strong relation with local
creditors and also it is credit worthy in all the past credit histories.

Moreover, as per the credit history presented by NBE CIC report the major shareholders of the
company’s has no credit relation with any local financial institutions.

II.7. Past performance of the Project /Business

II.7.1. Summary of Operational Performance (Physical Performance)

As per the inspection report made by South Addis Ababa branch, the company has production
different types of double layer terrazzo product with different sizes used for different purpose
mostly through order based production. The products produced by the company are different
size floor terrazzo tiles, window sills, tread and riser. The production capacity of the company is
600 square meter per day for 20X20 floor terrazzo tile, 250 square meter per day for 25X25,
30X30 and 40X40 floor terrazzo tile and 234 square meter per day for other terrazzo products
like window sill and risers. The inspection report of the branch shows that the current capacity
utilization rate of the company has reached to 80% of its theoretical capacity of the installed
machineries.

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II.7.2. Summary of Financial Performance (as indicated in financial statements

provided)

As the past financial performance of any business is very crucial for future prediction, we have
tried to inspect trend financial performance of the project. The past three years audited financial
statement reports of the project are illustrated and discussed as follows.

i. Balance sheet Statement

In order to assess the assets and capital structure of the project, we have tried to go through
audited Balance Sheet Statement of the Company. Accordingly, the Company’s total assets
have been shown through up and downs because of depreciation and capital increment. The
balance sheet of the company has shown an increment from birr 33,400,436 for the year ended
on June 30, 2005 E.C to birr 34,721,980 on the year ended 2007 E.C. However, the total assets
of the company has gone down to birr 33,776,609 on the year ended June 2007 E.C because of
depreciation, the profit was withdrawal and liability repayment from birr 34,721,980 on the year
ended June 30, 2006 E.C. again in the later year ended on June 30, 2008 E.C the assets of the
company has increased to birr 34,116,095since the shareholders increase their capital via buying
additional shares which can offset the depreciation of assets. The detail of the balance sheet of
the company is shown in then table below.

Table 2.3: Balance Sheet Statement Report of the Company

Year (E.C)
Description
2005 2006 2007 2008
Current Assets 9,845,090 7,359,118 10,792,062 11,558,101
23,555,34
Fixed Assets 6 27,362,862 22,984,547 22,557,994
33,400,43
Total Assets 6 34,721,980 33,776,609 34,116,095
12,668,85
Total Current Liability 8 12,872,833 16,699,839 15,560,368
Total Long Term
Liability 9,208,826 10,421,779 6,589,677 4,463,247
Total Capital 4,058,000 7,665,000 10,213,000 10,213,000
Legal Reserve 405,800 567890 726,026 1,058,294

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Retained Earning 7,058,952 3194478 -451,933 2,821,186

Total (Liability + 33,400,43
Capital) 6 34,721,980 33,776,609 34,116,095

As shown on the above table, the Company’s total assets up and downs because of different
reasons mainly fixed assets depreciation, withdrawal of company’s profit by shareholders and
long term loan repayment.

ii. Profit/Loss Statement

Based on the submitted audited financial report, we have also tried to assess financial
profitability of the Company. As depicted on the below table, the profitability of the Company
is also inspiring even though there were some up and downs. For the first years of audit report
the profit amount was decrease slightly while in the last reporting year the profit of the company
has increased more than double. The registered profit of the company for year 2005, 2006, 2007
and 2008 E.C is birr 3,608,092, birr 3,241,803, birr 3,162,729 and birr 6,681,625 respectively.

Table 2.4: Profit/Loss Statement of the project from June 30, 2005 E.C – June 30, 2008
E.C

Description 2005 2006 2007 2008

Sales 40,476,269 45,059,649 46,358,881 58,577,135
Operating Expense and Depreciation 35,321,852 40,428,502 41,840,697 49,031,956
Profit before tax 5,154,417 4,631,147 4,518,184 9,545,179
Profit Tax 1,546,325 1,389,344 1,355,455 2,863,554
Net Loss/Profit 3,608,092 3,241,803 3,162,729 6,681,625

iii. Cash Flow Statement

For the periods covered by the audit report, the cash flow status of the Company was also very
nice. The Company has been faced neither shortage that can cause liquidity problem nor excess
that reflects idleness of resources in the past years of performance.
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II.8. Reason for Expansion & Future Plan of the Project

During the past operational periods, the Company has been producing only double layer
terrazzo product and also at limited capacity in related to the demand for the product. The
company has terrazzo factories in two sites at Nifas Silk Lafto and Akaki Kality but still unable
to meet the higher requirements of its potential clients. Hence the company has planned to
install new technology which can produce single layer terrazzo tiles which has good quality in
all aspects. It has better quality, less weight and also better attractiveness than the double layer
which can increase the demand as well as the purpose of the product. The single layer terrazzo
machine can be used in high floor buildings since its weight is suitable for the structure.
Including this single layer terrazzo tile in the company’s product will have many advantages for
the country and the construction sector in general by adding quality as well as for the producers
in particular since it can attract more markets. Therefore, the expansion request is reasonable
and recommendable since it can increase the company’s production both in quantity and quality.

II.9. The Loan Request to DBE

A) Loan requested:

Amount: Birr 24,738, 757

Purpose: To cover the partial cost of expansion project (Cost of Building, machinery
and Equipment and Working Capital Requirement of the Project).

B) New Loan Proposed:

 Amount: Birr 25,000,000

 Purpose: To cover the partial cost of expansion project (Cost of Building, machinery
and Equipment and Working Capital Requirement of the Project).
 Variation: Birr 261,243 above the request
 Reason for Variation: The detail of request, proposed and reason for variation is
indicated on the following table.
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Table 2.5 comparison of loan request and proposed, vacation and reason for variation
Requeste
Proposed Variatio
d
S/N Description Amount n (In Reason for Variation
Amount
(In Birr) Birr)
(In Birr)
The district technical Team
revision report is above the
promoters request because of
Building
quantification difference but the
and 5,990, 6,102,3
1 proposed amount becomes
Constructio 580 61 111,781
lesser since some part of the
n
cost is planned to be cover by
the company's cash equity
contribution.
The exchange rate used by the
promoter is higher than the used
16,935, 16,037,6
2 Machinery (898,157 at appraisal report or birr is
840 83
) appreciated in relative to euro
in recent few months
The proposed loan is based on
Working Capital determination
Working 1,812, 2,859,9 & requirement. The difference is
8 1,047,62
Capital 337 57 due to promoter’s
0
underestimation of operating
costs
24,738,75
Grand Total 25,000,000 261,243
7

III. KEY DRIVERS, SUCCESS FACTOR, MAJOR RISK AND PROBLEMS

III.1. Key Drivers

 Low land lease cost: - Ethiopia has low land lease cost compared to other Countries.
 Availabilities of Potential Quarry areas and Raw materials: - the major raw materials
like marble, aggregate, etc which are extracted from quarry sites are available.
 Availability of trainable man power: - the education policy of Ethiopia can create many
graduates yearly both in the natural and social sciences since fields that could better work in
any organization.

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 Peace and Stability of the country: - As compared to the neighborhood countries as well
as most African countries Ethiopia is peaceful and politically stable.
 Favorable Investment Policy and Strategies and Strong government commitment to
private sector investors: - the government gives special focus for investors and adopts
good investment Policy and Strategies.

III.2. Success Factors

 Professional Management
 Good financial capacity
 Own quarry
 Experience on the construction sector

III.3. Firm Level Success Factors

 Character

According to the due diligence report prepared by south Addis Ababa Branch, the company as
well as general manager of the company has excellent working experience, well known the
society and met tax obligations and has no any history of delinquency in the last 5 years.
Moreover over, the course in which the promoter has been registering progress shows his
commitment towards achieving superior results.

 Capacity/Competence

The General Manager of the company Ato Alemayehu Kidane has specialized from university
of Cagliari (Italy) in the field of Mining exploitation and mineral processing, advanced level in
the field of mineral economics from the University of McGill (Canada) and certificate of
appreciation from Ministry of miming and energy. He also has ample work experience directly
related to his education. Under the ministry of mine and energy, he has worked at Adola gold
development since 1/2/1973 E.C as engineering and technical service supervisor, engineering
and technical service manger, since 1/1/1978 E.C head of engineering and technical service
department construction sector, head of Ministry of mines and energy construction sector
engineering and technical service department, project implementation unit manager since
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1/12/1981 E.C, head of engineering and technical services department and acting deputy
manager of the mine at Ministry of mines energy and water resources since 19/4/82 E.C,
engineering and technical service consultant at Ethiopian mineral resources development
corporation since 1/1983 E.C and operations department head at National mining corporation
plc during March 13/3/96 – March 20/3/98. And he has ample work experience in different
government companies and project at different position. This experience obtained from
diversified managing and professional positions enable him to manage the project under
consideration efficiently. Moreover, his son Ato Dawit Alemayehu will be a project manager,
who has BSc degree in Civil Engineering from Jimma University and worked as Kalti Site
terrazzo factory project manager which makes him competent manager. Hence both the general
and project manager can run the project without any difficulty.

 Capital

As per the company’s memorandum of association and consecutive capital increment minute of
the members, the company has registered capital of Birr 10,213,000. In addition to this, based
on information obtained from the due diligence assessment report and the district technical team
existing asset evaluation report the company’s existing investment is birr 23,771,813. Moreover,
the proposed debt equity ratio is 50:50 which is above the bank’s equity contribution
requirement. All this clearly shows the company’s financial capacity and ability to raise equity
contribution expected from it for implementation of the project sufficiently.

 Collateral

This project is favored with the government and the bank’s policy of incentive in holding the
fixed asset on the project as collateral since the project is a priority area project. The total
project investment cost is birr 50,454,612 while the fixed asset investment, total investment
excluding the pre-operating expense & working capital, summed to be birr 39,982,832. This
amount can be held as first-degree collateral by DBE, which accounts to 160% of the loan
amount, (39,582,832/ 25,000,000 x 100% = 160%). Therefore there will be no problem in
related to the collateral coverage of the loan granted.

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 Compliance

All permits and licenses required for the project have been submitted. The kind of business
itself is in line with the Government’s laws and regulations and even with the case of the bank’s
financing policy and procedures in particular or the project is one of the priority areas. Thus, it
is possible to say that the project complies with all national laws and regulations and with all the
bank’s policies and procedures.

III.4. Risk Factors

These risks are outside the control of organization and have significant impact on the
performance of the businesses these risks are:

 Raw material cost fluctuation with the dynamic change in the global market
situation.

III.5. Risk Mitigating Measures

For every identified risk, appropriate risk mitigation measure has to be taken from the inception
to minimize the severity of the consequence. As a result we forwarded the following mitigating
mechanism that will help to alleviate the above mentioned risks:

 holding enough stock of raw material,

III.6. SWOT ANALYSIS

Strengths Opportunities
Well educated and The various investment incentive extended by
experienced or qualified government such as land at low lease cost,
management members. improved infrastructural for industry areas.
The company has its own Sufficient demand for products in the local market.
marble processing project
whose byproduct can used for The availability of abundant raw material.
raw material
Availability of finance/loan with favorable interest
Strong market linkage with rate.
contractors and potential
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buyers Growth and expansion of construction and building.

The project has two quarry Consumer choice of terrazzo as a surface treatment
sites for raw material in
Oromia region, East Harari
Zone, Babile area and also for
raw material processing in
Addis Ababa, Akaki Kality.

Weaknesses Threats
There is no identified Currently Manufacturing of construction materials
weakness. are mostly demand driven
Possibility of output price reduction and rise in
price of raw materials due to world economy and
markets.
Site is in front of the newly build 40/60
condominium residential site which may result.

IV. MARKET STUDY FOR TERRAZZO TILE PRODUCTS

This is the market study for terrazzo tiles. Terrazzo flooring has a long and rich history that
dates back over 1500 years. Today terrazzo flooring continues to provide the ultimate in
durability and low maintenance, typically lasting the life of the building. The combination of
beauty, durability, and low maintenance has led to a renaissance in the use of terrazzo over the
past decade.

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Overall the demand for terrazzo is increasing in many markets, from performance driven
institutions such as schools, airports, and hospitals; to the designer driven markets of retail and
commercial buildings. Terrazzo is the ultimate choice when evaluating finishes on a life cycle
basis. In the subsequent sections the world market, domestic market, the pricing of the product
at the domestic market and the market channel and arrangement with possible constraints will
be presented.

IV.1. World Market

Terrazzo tile is not, internationally, as such well traded product. Of course, the trend in
production and consumption, of the product skewed towards the western developed nations.
Here under some facts about the international marketing of the product is presented.

IV.1.1. Production

The data concerning the production of terrazzo tiles is found to be hard to come. In the let years
of the last decade, the world economy was hit by severe recession which immediacy caused by
the housing market crush. Studies show that the housing market is not well recovered yet. But it
is rational to conclude that as the construction industry, particularly the house construction
activity, grows so does the production of terrazzo tiles.

IV.1.2. Consumption

The data concerning the consumption of the terrazzo tiles, too, are not managed to be found. As
the terrazzo tiles are widely used in the houses construction industry, the consumption of the
product is certain to increase with such a magnificent rate in the last decade though the world
economic crises crushed the housing market in the West severely. The good performance of the
emerging markets economy has of course, escalated the housing demand and hence the demand
for the flooring tiles.

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IV.1.3. Trade

Though important they are in the flooring industry, by their very nature terrazzo tiles are very
cheap and bulky. Probably, that is the reason behind the fact that terrazzo tiles are not exported
or imported internationally. Given the information collected from International Trade Centre,
ITC, there is no data showing the import and export of the terrazzo tiles’ (DBE Commodity
Study for Terrazzo Tile production, first update 2015).

IV.1.4. Market Segmentation

Market segmenting is dividing the market into groups of individual markets with similar wants
or needs that a company divides into distinct groups which have distinct needs, wants, behavior
or which might want different products & services. Broadly, markets can be divided according
to a number of general criteria, such as by industry, or public versus private. Although industrial
market segmentation is quite different from consumer market segmentation, both have similar
objectives. All of these methods of segmentation are merely proxies for true segments, which
don't always fit into convenient demographic boundaries. Theoretically, markets can be
segmented in to geographic, demographic, psychographic, and behavioral segmentation and the
detail of them are presented here under with their special application for terrazzo tiles.

IV.1.5. Geographic Segmentation

The market is segmented according to geographic criteria: nations, states, regions, counties,
cities, neighborhoods, or zip codes. Geo-cluster approach combines demographic data with
geographic data to create a more accurate profile of specific. The market segment for terrazzo
tiles is majorly totally the domestic market. The product is neither exported from nor imported
to the country.

IV.1.6. Psychographic Segmentation

Psychographics is the science of using psychology and demographics to better understand

consumers. In psychographic segmentation consumers are divided according to their lifestyle,
personality, values. People within the same demographic group can exhibit very different

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psychographic profiles. For the segmenting of the product under consideration, there is no such
persuasive habit of consumers, here in Ethiopia, in consuming terrazzo tiles. Terrazzo tiles are
majorly used in government buildings, real estate developers, house builders and commercial
mortgages.

IV.1.7. Behavioral Segmentation

In behavioral segmentation, consumers are divided into groups according to their knowledge of
attitude towards use of or response to a product. In this way of segmenting, we segment the
market according to occasions, which simply mean segmenting the market according to the
occasions. There is also mechanism of segmenting the market according to benefits sought by
the consumer. Finally, markets can be segmented as nonusers, ex-users, first time users, etc. As
far as segmenting the market for terrazzo in these ways is considered, it was found to be
difficult to segment the market for the product in such ways.

IV.2. Domestic Market

In domestic market analysis of the product, terrazzo tiles, the determinants of demand, the
present and future demand of the product are presented.

IV.2.1. Demand

IV.2.1.1. Determinants of Demand for the Terrazzo Tiles

Theoretically there are factors and circumstances that could affect a buyer's willingness or
ability to buy a good. Some of the common factors are: good's own price, price of related goods,
personal disposable income, tastes or preferences, consumer expectations about future prices
etc.

Among the factors that affects the demand for terrazzo tiles, the first three such as good's own
price, price of related goods and personal disposable income are found to be more important
than the others. Terrazzo tile, by house builders here in Ethiopia, is considered to be a luxury
product. As the income of the consumers increases so does the demand for luxury houses which
in turn increases the demand for terrazzo tiles.
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A terrazzo tile is substitute by couple of tiles such as cement, plastic, ceramic and marble tiles.
Even if consumer’s preference is one of the factors that determine to use any one of the product,
the price of substitute products will definitely affect the consumer’s choice.

IV.2.1.2. Estimation of Present Demand

End use and apparent consumption methods can be used to estimate the demand for products.
End use method can be used if the product is intermediate and used for the production of other
goods and services. The employment of this method entails the knowledge of the coefficient at
which the product under consideration is consumed by the final product. End use method could
not be used since the data concerning the end user itself are not available.

The apparent consumption method is then found to be the only option available at hand. By
definition apparent consumption is the sum of domestic production plus import minus export.
Accordingly, the estimation of demand through this method is presented here under.

IV.2.1.3. Demand for Terrazzo Tiles

The demand for terrazzo tiles is the driven demand of housing unit: institutional, commercial
and residential. Urbanization is another most important factor that induces the demand.
Migration from rural area to urban area increases the demand for housing in the urban. Again,
the demand for terrazzo tile has higher correlation with the income that in turn induces the
demand for quality housing.

IV.2.1.4. Local Demand for Terrazzo Tiles

According to central statistical agency population and housing census report, both the total
housing unit and the housing unit that are constructed using concrete, hallow block, bricks,
stone wall of the country has shown increasing trend in the last thirteen years with the
compound annual growth of 2.64 and 10 percent respectively.

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Table 4.1: Housing Unit

Housing Unit 1994 2007 AAGR

10,766,72
Total Housing Unit 15,103,135 2.64 %
9

Construction and Building of houses

115,873 355,194 10 %
( with bricks , block & stone wall)

Percentage of Construction & Building of houses

1% 2%
( with bricks , block & stone wall)

Source: DBE Commodity Study for Terrazzo Tile production, first update 2015The

Amount of quality constructed housing unit using bricks, hallow blocks and stones was
estimated to be 2 % of the total housing unit population (Population and Housing census report,
2007). The future demand for terrazzo tiles is forecasted by using 10 % annual average growth
rate which was estimated by CSA Population and Housing census (1994 and 2007).

Table 4.2: Projected Housing Units

Tiles Tile per-capita

Year Housing Units* production (m2) usage(m2)
2010 472,763 199,092 0.4
2011 520,040 413,431 0.8
2012 572,043 437,876 0.8
2013 629,248 463,766 0.7
2014 692,173 491,187 0.7
Per capital Average usage 0.69

Source: DBE Commodity Study for Terrazzo Tile production, first update 2015

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The apparent consumption of terrazzo tile in the country that are used in house construction and
in house hold equipment is divided for the housing units to get the per capita usage of each
housing unit. The last five years (2010-2014) average per capita usage of terrazzo tiles was
0.69m2.

IV.2.1.5. Terrazzo Tiles Demand Forecast

The future demand for terrazzo tiles is forecasted using the average per- capita usage of these
products in the past five years which is 0.69m2.

Table 4.3: Terrazzo Tiles Demand Forecast

Terrazzo Tiles
Year Housing Units per-capita Tiles demand (m2)
usage(m2)
2017 921,281 0.69 635,684
2018 1,013,409 0.69 699,252
2019 1,114,750 0.69 769,178
2020 1,226,225 0.69 846,095
2021 1,348,848 0.69 930,705
2022 1,483,733 0.69 1,023,776
2023 1,632,106 0.69 1,126,153
2024 1,795,317 0.69 1,238,769
2025 1,974,849 0.69 1,362,646

Source: Calculation Based on the past data

IV.2.2. Supply

The production of terrazzo tiles is not new business venture in Ethiopia though the information
concerning the commencement of production and consumption of the product in the country is
patchy. The production of tiles started 50 years ago by an Italian manufacturer. Though the
industry has such a long history it has been served by only two firms up to the recent years.
Recently, according to the information collected from the firms in the industry, a sizable
number of firms produce terrazzo tiles in the country jointly with marble tiles, one of the
exportable products.

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IV.2.2.1. Firms in the Industry

The information concerning the supply of the terrazzo tiles that encompass the installed and
attainable capacity were supposed to be available at the Ethiopian Investment Agency and
Ministry of Industry but unfortunately such information was not available. Whereas the
information that was collected from the Ethiopian Investment Agency was also found to be
inconclusive and presented in table 5.2.

According to the information collected from Ethiopian Investment Agency, six firms are
operational in the country. Two firms are on the way to enter in the industry while 17 of them
are at pre-implementation stage where their prospect of entrance is bleak.

Table 4.4: Licensed firms and their status

Particulars Number
Operational Firms 2
Firms at implementation Stage 2
Firms at Pre Implementation Stage 17
Total 21

Source: DBE Commodity Study for Terrazzo Tile production, first update 2015

The following list of firms are terrazzo tiles producer companies in the country, Ethiopian
Marble Industry, Saba Marble, National Mining Corporation, Berta terrazzo factory, Cement
Factory, Zenebe Firew Cement Products Factory, Ayat PLC (former CMC Plat), Paolo Nardelli
Cement Products Manufacturers, Xxx Terrazzo Factory and Sof Oumer Factory. These firms
are mainly engaged in producing marble and granite tiles of different shapes and sizes. Most of
the firms produce terrazzo tiles using the byproduct of marble tiles production. There are also
other in Mekele area, that are producing the terrazzo tiles. Some of the firms that are producing
terrazzo tiles are among the major real estate developers. These firms produce terrazzo tiles for
their own consumption.

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IV.2.2.2. Estimation of current Supply and Projection

Customarily the estimation of supply is made by adding domestic production and imports. As
presented in the earlier sections terrazzo tiles are neither import to nor export from the country.
In the estimation of supply, hence, it is only the domestic production was considered.

IV.2.2.3. Domestic Production and Supply Projection

The domestic production data of terrazzo tiles is expected to be compiled by the Central
Statistical Agency. CSA has no production data by the name of terrazzo tiles, rather it is
presented as cement and marble tiles. The case team has confirmed that the data on cement tiles
includes also terrazzo tiles. According to the interviewed firms cement tile interchangeably used
with terrazzo tile as their difference only lies as the latter uses marble chips as a raw material.

Table 4.5: Domestic Production

Particulars Years
2008 2009 2010 2011 2012 2013 2014
Cement floor 287,257 112,616 199,092 413,43 437,87 463,76 491,18
tiles (Sqm)
CAGR 1
0.059 6 6 7

Source: DBE Commodity Study for Terrazzo Tile production, first update 2015

IV.2.2.4. Projected supply

Due to lack of data from CSA, the case team use as a base year 2011 for the projection of
supply.

Table 4.6: Projected supply of tiles

Particula Year
rs 2017 2018 2019 2020 20222021
2023 2024 2025
Cement
floor tiles 583,56 618,07 654,61 693,31 734,31 777,72 823,71 872,41 923,99
(Sqm) 6 0 4 9 2 9 3 6 8

Source: Calculation Based on the past data

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IV.2.3. Demand Supply Gap

The demand supply gap analysis (table 4.7) shows the existence of an increasing trend in market
for the next five year.

Table 4.7: Demand Supply Gap

Terrazzo floor tiles(m2)

Year Demand supply
Demand Supply
gap
2015 525,358 520,229 5,129
2016 577,894 550,988 26,906
2017 635,684 583,566 52,118
2018 699,252 618,070 81,182
2019 769,178 654,614 114,564
2020 846,095 693,319 152,777
2021 930,705 734,312 196,393
2022 1,023,776 777,729 246,047
2023 1,126,153 823,713 302,441
2024 1,238,769 872,416 366,353
2025 1,362,646 923,998 438,648

Source: Calculation Based on the past data

IV.3. Price and price trend of the product

The price of the terrazzo tiles goes hand in hand with the price of the major raw materials like
marble chips and cement. Particularly, marble chips and cement have a heavy hand in
determination of the price of the product. As cement price goes upward or down so does the
price of the terrazzo tiles.

As the information collected from the incumbent terrazzo tiles manufacturers and the company
under consideration show the price of the product is going upward as the demand for the

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product is increase. The price of the product in Addis Ababa depends on majorly three things:
the raw materials it uses, the type of order made by the customer and the size of the product
itself.

In door terrazzo tiles have different quality grade. The lower grade with crushed stone, cement
and coloring material is the cheapest and the average cost for such terrazzo is Birr 120-150 per
Sqm. The best quality that is made from imported port land white cement and different
ingredient of marble and limestone shall be sold at Birr 180-220 per Sqm. The company has
also different products that sold with different prices but in the financial projection we take the
average price of the company and the current price of the major products of the company are
listed in the Table below.

Table 4. 8 Current Average price of the company

Selling price (Birr per

Product type
piece)
Terrazzo (20X20) 169
Terrazzo(25X25,30X30, 40X40) 169
Other Terrazzo Product Production 364
Single layer terrazzo 210
Source: Actual selling price on site visit for the existing products and feasibility study for single
layer

IV.4. Marketing Arrangement of the Product

There are few producers of the product in the country though the demand for it is rebounding.
The bargaining power in the sales of the product is in the hands of the producer. Hence, sales
are always and everywhere made on cash basis. Buyers have to wait for more than three months
for the delivery of the product. A customer usually orders a specific type of terrazzo, with
specific grade and quality tile for his own specific use. Sales are usually made right at the
factory gate. The transportation cost of the product is totally covered by the buyer.

Xxx Terrazzo factory PLC has also a lot of pre orders which cannot meet with the existing
production capacity. It has win a bid from Addis Ababa city housing development project office
but the company cannot address their order on time so that some amount of the bid has been
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canceled but still the company production is far below the order and most sales are made in
advances as pre order production.

IV.5. Marketing Channel

Concerning the market channel of the product, there is no such complicated root to path. The
buyer is, most of the time, the consumer itself. As the data collected from the incumbent firms
show, there are no whole sellers/ brokers between the buyers and the sellers (see figure 5.1).

Figure 4.1 Marketing channels of terrazzo tiles

Raw material suppliers

Producers

Consumers (real estate developers, households, institution

of different kind and commercial mortgages builders)

IV.6. Market Constraint

There is no well articulated market constraint, as far as the market and marketing of terrazzo
tiles are considered. The product has well established and growing market. But in recent years
some of the major consumers of the product, like real estate developers, are managing to have
their own small scale terrazzo tiles making machines. This might share the market of large and
middle scale terrazzo tiles makers. But it is difficult to estimate the number of firms engaged in
the market, currently, and those that might enter the industry in the future and their installed
capacity.

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V. TECHNICAL STUDY

V.1. Plant Location

The project is located in Addis Ababa City, Akaki Kality sub city Woreda 7 on 4,664 M2 of
land owned through the former land ownership policy, “NEBAR YIZOTA”. The due diligence
stated that the area is accessible to infrastructure facilities such as road, tap water, electric
power, telephone, and postage easily to distribute its output to the market as well as to get
sufficient facilities for its operation.

V.2. Land and Building

Land Holding

The company has its own 4,664 m2 land entitled through legal land use right transfer from
MAJKON CONSTRUCTION PLC who was owned the land through the former ownership
policy or “NEBAR YIZOTA”. The company has purchased the land with a full entitlement to
uses for terrazzo factory and now the ownership system is transferred to the land lease policies
and the land lease period of the land is for 60 years.

Building and Construction

As per the district technical team report, the Company has already constructed factory hall for
existing project, office building and other necessary civil works with an estimated value of birr
5,718,980. But the expansion project for single layer terrazzo production requires an additional
building and the cost is revised to be birr 6,227,806. Therefore, the total cost building of the
project is valued to be birr 11,946,786. The detail of building and construction is shown in the
table below.

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Table 5.1 Building and construction

Unit
S/ Descriptio Existing Value Planned Value Total Value
meas Area
N n (Birr) (Birr) (Birr)
.
Production 1,59
1 Hall M2 0 4,272,048 - 4,272,048
8
2 Office M2 0 878,770 - 878,770
13
3 Fence M 2 440,680 - 440,680
Consultanc
4 y Fee M2 127,483 - 127,483
Production
hall for the
5 Expansion M2 - 6227806.02 6,227,806
5,718,98 6,227,80 11,946,78
Total 0 6 6

V.3. Machinery and Equipment

As it is obviously known, selection of machineries and equipments has critical importance since
it has the capacity to determine the quantity and quality standard of the product intended to
produce. Therefore, it is mandatory to thoroughly identify whether the appropriate type of plant
that meets the consumer requirements are selected & all the necessary machineries &
equipments are included. The company has an existing double layer terrazzo manufacturing
line which can with different size and all the existing machineries are evaluated to be birr
7,855,754 by the district technical team. However, the company has planned to install a new
single layer terrazzo plant with its full accessories which can help to deliver higher quality
products and high amount of quantities to meet the current high demand for the product. The

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total value of the new machineries and equipments is estimated to be birr 16,037,683 and are
planned to procured from china (WEIFANG JINGHUA POWER ENGINEERING
EQUIPMENT CO.LTD) for Air Classifier machine with accessories and Italy (OFFICINA
MECCANICA PIGNOTTI SRL For Planetary Mixer with accessories and LONGINOTTI
GROUP SRL for Polishing Machine and Automatic Rotating Press. The details of machinery
and equipment are shown in the following table.

Table 5.2 Lists of machineries and equipments.

Unit
S/ Existing Planned Value Total Value
Description mea Qty
N Value (Birr) (Birr) (Birr)
s.
Semi Automatic
Rotating Press 438,3 438,3
1 Machine Set 1 61 61
Automatic Rotating 2,106, 2,106,3
2 Press Machine Set 1 379 79
1,030, 1,030,0
3 Polishing Machine Set 1 005 05
230,2 230,2
4 Calibrating Machine Set 1 65 65
Bridge Cutting 381,3 381,3
5 Machine Set 1 00 00
37,1 37,1
6 Cutting Machine Set 2 40 40
113,8 113,8
7 Cutting Machine Set 2 95 95
Steeples Speed
Adjusting Molding 105,6
8 Machine Set 1 105675 75
406,7 406,7
9 Ball Mill Set 1 33 33
Jaw Crusher and 632,7 632,7
10 vibrating screen Set 1 06 06
Effluent water 660,8 660,8
11 softening and mud Set 1 25 25
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disposal plant
41,1 41,1
12 Air Compressor Set 1 90 90
Complete sand making 1,671, 1,671,2
13 line Set 1 282 82
Planetary Mixer with
14 accessories Set 1
15 Polishing Machine Set 1
Automatic Rotating 14,681,7 14,681,7
16 Press Set 1 89 89
Air Classifier with 1,355,8 1,355,8
17 accessories Set 1 94 94
Total 7,855,7 16,037,68 23,893,43
54 3 7

V.4. Vehicles

The Company has already procured vehicles which is useful for smooth operation of the project.
The total value of the vehicles is Birr 2,510,000. The company’s existing vehicles are depicted
on below table.

Table: 5.3: Vehicles

Unit of Existing Planned Value Total Value

S/N Description Qty
meas. Value (Birr) (Birr) (Birr)
1,350, 1,350,0
1 Dump Truck Pcs 2 000 00
Toyota Hilux 960, 960,0
2 Pick up Pcs 2 000 00
200, 200,0
3 Automobile Pcs 1 000 00
2,510,0 2,510,00
Total 00 - 0

V.5. Generator

Stand by generator is mandatory to supply electric power for the project since there is electric
power is down/ interruption. As a result the company has an existing power generator with an
estimated value of birr 908,500 and its capacity is 160 KW. This can be used for major
operation when electric power is down and we believed it is enough for major operations only.
The details of power generator are shown in the table under.
XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION 3
PROJECT 3
 January 1, 2016

Table 5.4: Generator and Water Pump

Unit Planned
S/ Qt Existing Value Total Value
Description meas Value
N y (Birr) (Birr)
. (Birr)

1 Generator Set 1 908,500 908,500

V.6. Office furniture and equipment

As existing company, the project has all the necessary office furniture and equipment as existing
investment. However, we do not include the cost on this appraisal report because there no legal
document attached that reveal either the original value or the current book values of these
investment items.

V.7. Utilities

It is obvious that utilities like electric power, water and communication devices like telephone,
internet and fax are among important facilities that are supposed to be very crucial for smooth
operation of every project. As we have observed during our field visit, the factory site is
accessible with all infrastructures like power, water and communication devices. The company
has an existing electric power of 234.38 KW installed twice while the power requirement of the
project is less that 200 KW. Thus, the installed electric power is sufficient for both the existing
and expansion new machineries. The total cost for only 114.5 KW electric powers is birr
463,013 which installed on 07/06/2008 E.C such that the current balance will be birr 324,109
after three years of depreciation. Hence, there will be no problem in regarding electric power
and other utilities

V.8. Material Inputs and availability

As the name indicates, the factory is terrazzo product manufacturing where the major raw
materials are marble powder, marble chips, crushed stone sand (“fino”) or River sand, Lime
stone, white Portland cement, Coloring material, Portal cement, Grinding and polishing stones
and Filter for single layer terrazzo. The Company has its own quarry site in Oromia region, East
Harari Zone, Babile area for its marble pressing project operating in Kality site one. In addition
the company has basalt quarry site in Addis Ababa for its basalt requirement but does not yet
XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION 3
PROJECT 4
 January 1, 2016

started operation such that we assumed the company will used the site for crushing marble
byproducts while on this appraisal study the basalt aggregate is assumed to be purchased until
the quarry site starts full operation. Therefore, there will be no problem in regarding raw
material and input availability of the project.

V.9. Production Process and Production Capacity

V.9.1. Production Process

Terrazzo Tiles Production process begins with the preparation of required size marble and lime
stone grains by crushing. Then the ingredients are mixed to a predetermined composition which
is followed by moulding and pressing. After tiles are formed, then they are finished by polishing
the upper part before delivery.

A. Crushing

The required grain size of marble and lime stone is prepared by crushing their chips (or heavy
rocks) with the help of crusher Machine. Then the crushed mineral stone shall be stored
separately in accordance with their size and color types. Forklift or wheel loader can
alternatively be used for feeding the raw materials to the jaw crusher machine.

B. Mixing

Top Layer: This refers to the part which is in direct contact to our foot and comprises the main
terrazzo raw materials such as Marble chips (coarse or Medium or fine sized), Marble powder,
Coarse sized calcium carbonate (lime stone), White Cement and Colorant (if necessary).

Bottom Layer: This refers to the part beneath the first layer and in direct contact with the
ground. The second layer of a terrazzo tile comprises Ordinary Portland cement (OPC) and
Coarse sand.

Therefore, mixing in terrazzo tile production indicates dry type (mixing raw materials of the
lower part in dry form) and wet massing where in the case of mixing raw materials for upper.
XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION 3
PROJECT 5
 January 1, 2016

The types of mixer machines commonly utilized for terrazzo tile producing projects are
Planetary and Screw types.

C. Tile Pressing

The wet matrix aggregate for upper is first introduced to the Moulds of the tile pressing
machine. Course sharp sand and Portland cement is then taken via conveyer belt (or can also be
performed manually) and dropped into a mould on the Tile Press machine. Leveling materials in
the mould is controlled by the vibratory action of the machine.

Once the raw material mix is placed in the mould, the press then pushes down on the mould
exerting high pressure, which removes moisture and air from within the mix and base and
consolidates both layers together, essentially making the tile. Tile Press machines mainly
consist of PLC system with the human and machine interview screen, hydraulic
system, pneumatic system, etc. Besides, the machines can be operated by manual or automatic
way.

Tiles are manufactured in square sizes varying typically from 10 cm x 10 cm up to 40 cm x 40

cm simply by changing the moulds. Once compressed the tile can be removed onto the
protruding platform, stacked neatly and left to harden.

D. Polishing

The tiles pass through on the conveyer belt, are ground down using diamond tipped polishing
stones, being simultaneously washed and cleaned with water and later come out the other end
where they can be stacked neatly and left to dry.

V.9.2. Production Capacity

As per the branch inspection report the current capacity utilization of the company has reached
80% of its theoretical capacity which appropriate and reasonable.

Based on our assumption, during the first operational year after expansion, the production
capacity utilization of the project will start at 75% of its total theoretical production capacity

XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION 3

PROJECT 6
 January 1, 2016

and will increase by 5% per annum until it reaches the maximum production capacity utilization
of 90% during its fourth operational period and it will remain the same thereafter. The rationale
behind selecting lower capacity utilization than the existing is that the proposed machine is new
for the company and it may take some time to be efficient in utilization and thus the average
capacity utilization of the factory may be lower as compared to the existing capacity utilization.
The increment rate 5% is selected since adding capacity on factories used their capacity in
relatively better way is more challenging than those uses less capacity at the base year.

V.10. Environmental Impact Assessment

Theoretical Terrazzo tile manufacturing has different impacts on environment like dust
emission, noise pollution, ground vibration, and air pollution.

Moreover Akaki Kality Sub City administration Environmental protection office with its Ref
No አቃ/ቃ/ክ/ከ/አካ/ጥ/7279/06 dated 01/03/2009 E.C has confirmed this theoretical
environmental impact but approved the implementations of the project with due consideration
of implementing the mitigations measurements forwarded by the office. At the time of the site
visit we have also seen that most of the mitigation measures are accomplished and take in place:
hence we believed that the company can manage the environmental effects of the project
without significant impacts on the surrounding society and the environment.

V.11. Implementation Plan

The project implementation schedule is an important time management document that defines
and schedules the major phases of project work being carried out to fulfill the desired project
objective(s) and achieve the expected deliverables. It clarifies and describes what the project
should deliver and within what time-frames. Based on this concept, all the key operations are
included and appropriate time is allotted. The detail of implementation schedule for expansion
part of the project is depicted as follows.

Table 5.5: Implementation Schedule

Description 201 2017

6

XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION 3

PROJECT 7
 January 1, 2016

Ja Fe Ma Ap Ma Ju Ju Au Se Oc No De
Dec n b r r y n l g p t v c
Loan
Processing
Building and
construction
for the
expansion
Procurement
machinery
Procurement
of Imported
Raw Materials
Procurement
of Local Raw
Materials
Recruitment
and training of
manpower
new staffs
Installation of
Machinery
Commenceme
nt of
commercial
production

Note: the delivery time of machinery is six months after first payment hence we made the
procurement schedule seven months.

XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION 3

PROJECT 8
 January 1, 2016

VI. Organization and Management

VI.1. Organizational Structure

The Company has already been implemented proper organizational structure and hired the
required human resources for the existing operations. The existing organization structure is
sufficient to smoothly implement the expansion part of the project therefore the existing
organizational structure is not changed. The project will be continuing headed by the General
Manager, who is responsible to control the activities of all staffs and the overall operations of
the project. Under the General Manager, major operations will be performed by the middle
level of management that consists of the heads of Production Department, Administration and
Finance Department and Marketing Department. Under each department there will be further
division and sub divisions as appropriate. The organizational structure of the project is
depicted on the following chart as follows:-

Figure 6.1 Organizational Structure of the Project

GENERAL
MANAGER

Project
Secretary
Manager

Production Marketing Administration , Finance

Department Department and HRM Department

Slab Production Sales

Administration
Division Division
Division

Quarry Site Purchase

Finance
Operation Division Division
Division

Human Resource
Division

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 January 1, 2016

VI.2. Project Management

Ato Alemayehu Kidane is the major shareholders and General Manager of the company.
Since the establishment of this project, he has been managing the project efficiently and
effectively in collaboration with other key management members of the company and others
staffs. The progress that the Company has been registered is the best evidence of his and
coworkers hard work.

The general manager, Ato Alemayehu Kidane has specialized from university of Cagliari
(Italy) in the field of Mining exploitation and mineral processing, advanced level in the field
of mineral economics from the University of McGill (Canada) and certificate of appreciation
from Ministry of miming and energy. He also has ample work experience directly related to
his education. Under the ministry of mine and energy, he has worked at Adola gold
development since 1/2/1973 E.C as engineering and technical service supervisor, engineering
and technical service manger, since 1/1/1978 E.C head of engineering and technical service
department construction sector, head of Ministry of mines and energy construction sector
engineering and technical service department, project implementation unit manager since
1/12/1981 E.C, head of engineering and technical services department and acting deputy
manager of the mine at Ministry of mines energy and water resources since 19/4/82 E.C,
engineering and technical service consultant at Ethiopian mineral resources development
corporation since 1/1983 E.C and operations department head at National mining corporation
plc during March 13/3/96 – March 20/3/98.

Besides, the Company has already hired 95 employees for slab production and quarry site
operation and we have also proposed additional 28 employees for the new machineries
operator and laborers for expansion part of the project. The detail of planned additional human
resources with their respective remuneration scale is depicted on the table 6.1 below.

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 January 1, 2016

Table 6.1 Manpower and salary of the project

Existing Staffs
Average Number of staffs (taking two
47 per month
Months)
Birr per
Average Monthly Salary (taking two Months) 196,240.50
month
Average Number of labor force(taking two Birr per
48
Months) month
Birr per
Average Monthly wage (taking two Months) 115,325.01
month
Average total number of employees (taking
95 per month
two Months)
Average total Monthly Salary and wage (taking two Birr per
311,565.51
Months) month
Average total Salary and wage (taking two Birr per
3,738,786.06
Months) Annum

Additional Staffs for the

expansion
Salary/
Salary/ Salary/
Position Man Power Month/
Month annum
person
Accountant 1 4,000 4,000 48,000
Cashier 1 2,500 2,500 30,000
Sales personnel 2 4,000 8,000 96,000
Purchasing Personnel 1 4,000 4,000 48,000
Daily laborer 15 1,500 22,500 270,000
Terrazzo machine operators 3 4,500 13,500 162,000
Assist. machine operators 3 3,000 9,000 108,000
Maintenance mechanic 1 3,500 3,500 42,000
Janitor 1 800 800 9,600
Total 28 67,800 813,600
Grand Total 123 379,366 4,552,386
Salary and Wage is assumed to increase by 5% per annum

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 January 1, 2016

VI.3. Training Requirement and Employee Remuneration and Benefits

Training is a process of enhancing the skills, capabilities, and knowledge of employees for
doing a particular job. It is crucial for organizational development and success. It is fruit full
to both employers and employees of an organization. An employee will become more efficient
and productive if he/she trained well. As a result, continuous and related training is
recommended as deemed necessary.

Employee remuneration and benefit are also an important factor for employee’s productivity.
Employee remuneration refers to the reward or compensation given to the employees for their
work performances. Similarly, benefits are any perks offered to employees in addition to
salary. The most common benefits are medical, disability and life insurance, retirement
benefits and fringe benefits. Both remuneration and benefits provide basic attraction and
motivation to an employee to perform job efficiently and effectively. These all are considered
and included in project cost. Therefore, the Company is expected to work hard on their
implementation for success of the project.

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 January 1, 2016

VII. FINANCIAL ANALYSIS

VII.1. Fund Allocation

The total project cost is estimated to Birr 51,502,822. Out of this, Birr 39,582,832 (77%) is
fixed assets, Birr 10,225,467 (20%) working capital and the remaining Birr 1,694,523 (3%) is
pre-production expenditure of the project. As depicted on the table 7.1 below, from the total
project cost the sum of Birr 24,988,838 (49%) has already been executed on fixed assets,
working capital and pre-production expenditures. The remaining cost of Birr 26,513,984
(51%) is the planned expansion cost of the project for procurement of machineries, additional
building and working capital for the expansion project and pre operating interest.

Table 7.1 investment of the project

Planned Total
Existing
Sr. Investment Investment Share
Description Investment Cost
Cost Cost (%)
No. (Birr)
(Birr) (Birr)
5,718,98 6,227,80 11,946,78
1 Building
0 6 6
7,855,75 16,037,68 23,893,43
2 Machineries
4 3 7
2,510,00 2,510,00
3 Vehicles -
0 0
908,50 908,50
4 Generator -
0 0 77%
324,10 324,10
5 Electric Power -
9 9
17,317,34 22,265,48 39,582,83
Sub-total
3 9 2
305,98 305,98
6 Pre-production Cost -
4 4
1,388,53 1,388,53
7 Pre-production Interest -
9 9 3%
305,98 1,388,53 1,694,52
Sub-total
4 9 3

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 January 1, 2016

7,365,51 2,859,95 10,225,46

8 Working Capital
1 7 7
7,365,51 2,859,95 10,225,46 20%
Sub-total
1 7 7
24,988,83 26,513,98 51,502,82
Total
8 4 2
Proportion of Existing Vs 100%
49% 51% 100%
Plan

VII.2. Source of Fund

According to credit policy of the Bank, even if there are other conditions that will be
considered, the borrowers who wish to obtain financing for the expansion of an existing
priority area project are expected to contribute 40% of the total project cost. Based on this
concept, the Company that we are dealing with is expected to contribute at least 40% of the
total project cost. However, since the total existing investment that has been invested by the
Company is greater than the minimum requirement, the Company shall only be expected to
contribute for pre production interest part of the expansion cost.

As we have tried to depict on the table below, from the total cost of the project including
expansion part, the sum of Birr 24,988,838 (49%) has already been invested by the company.
The total expansion cost has planned to be Birr 26,513,984 (51% of the total project cost)
which will be financed by the company’s cash contribution birr 1,513,984 for some portion
of building and pre operating interest and birr 25,000,000 DBE loan for building and
contribution, the purchase of planned machineries and additional working capital requirement
of the expansion project. Therefore, from the total investment cost of the project birr
51,502,822, the share of the Company will be Birr 26,502,821 (51%) and the remaining Birr
25,000,000 (49%) will be covered by DBE loan. The detail of fund allocation and source of
fund is depicted on the following table.

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 January 1, 2016

Table 7.2: Fund allocation and Source of Fund

Source of Investment Cost

Owner's Equity
S/N Description DBE Loan
Contribution In Total Equity Total
Existing Investment (Birr)
Cash Contribution
(Birr)
( Birr) (Birr)
1 Building 5,718,980 125,445 5,844,425 6,102,361 11,946,786
2 Machineries 7,855,754 - 7,855,754 16,037,683 23,893,437
3 Vehicles 2,510,000 - 2,510,000 - 2,510,000
4 Generator 908,500 - 908,500 - 908,500
5 Electric Power 324,109 - 324,109 - 324,109
Sub-total 17,317,343 125,445 17,442,788 22,140,044 39,582,832
6 Pre-production Cost 305,984 - 305,984 - 305,984
7 Pre-production Interest - 1,388,539 1,388,539 - 1,388,539
Sub-total 305,984 1,388,539 1,694,523 - 1,694,523
8 Working Capital 7,365,511 - 7,365,511 2,859,957 10,225,467
Sub-total 7,365,511 - 7,365,511 2,859,957 10,225,467
Total 24,988,838 1,513,984 26,502,821 25,000,000 51,502,822
Percentage D/E Ratio 51% 49% 100%

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 January 1, 2016

VII.3. Expected Financial Results

Here, our objective is to provide information about the financial position, performance and
changes in financial position of the project to make rational economic decision. Hereunder,
we will try to look Profit/loss or income statement forecast, cash flow and balance sheet
projection, financial rate of return and sensitivity of the project for potential variables.

VII.3.1. Profit/loss forecast

Profit/loss forecast presents the results of project’s operations during a period of time. It
shows income earning from the project and expenses incurred in attaining the income. The
projected profit/loss statement of the project reveals that the project will earn profit of Birr
8,700,388 during the first year of operation and earn profit of Birr 11,208,339 at the 10th
end year of projection. This indicates that the project could run profitable business venture
and can maintain objective of its establishment at competitive quality and price.

VII.3.2. Cash flow forecast

Cash flow projection provides a look at the movement of cash in and out of the project. It is
important in determining whether or not a project has enough cash to pay its bills, handle
expenses and acquire assets. Thus, it is important to give due attention to identify whether
the total inflows of the project have the capacity to cover all cash outflows during its
operational period. Unless, the project will faces liquidity crisis and fail before achieving its
objective of establishment.

Based on this fact, the forecasted cumulative cash balance shows a balance of Birr
8,863,271 during the first year and will grow up to Birr 75,034,519 at the end of the tenth
operational year, demonstrating that the project will not face liquidity constraint to finance
its operational costs as well as debt obligation.

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 January 1, 2016

VII.3.3. Balance Sheet Projection

Balance Sheet Projection is used to provide insight into assets and debts of the project at a
particular point in time. Total assets of the project expected to rise from Birr 56,082,176 at
the end of the first year to Birr 114,267,998 at the end project year.

VII.3.4. Financial Rate of Return

Net Present Value
Internal Rate of Return (IRR)
(NPV)
Before Tax 67,171,422 40%

After Tax 38,167,836 29%

VII.3.5. Sensitivity Analysis

Under sensitivity analysis we tried to made assessments that compares the expected results
with possible results. The profitability of the project will vary under various circumstances
that could possibly happen. Thus, the project's sensitivity to adverse circumstance is
analyzed from three different scenarios: decrease in sales revenue by 10%; increase in
operating costs by 10% and increase in investment costs by 10%.

i. Decrease on Revenue

Based on financial our findings, when revenue decreases by 10% after tax IRR of the project
reduced from 29% to 17%. From this, we can say that the project is viable and can achieve
its objective of its establishment even in an adverse circumstance that may happen and
trigger to reduce its revenue by 10%.

ii. Increase on operating Cost

Also, if the operating costs of the project may increase by 10% due to unforeseen
circumstances; other things remain constant, after tax IRR of the project anticipated to
reduce to 26%. This means, still the project has the capacity to cover its costs and make
profit for stakeholders.

iii. Increase on Investment

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 January 1, 2016

When investment costs increase by 10%, after tax IRR of the project anticipated to be 26%.

To sum up, the project is more sensitive to the sales performance. As a result, the company
should give more focus on pricing strategy and try to maximize its sales performance as
much as possible. Whatsoever will happen, the project has the capacity to absorb external
shock and attain its objectives of its establishment.

VIII. SOCIO ECONOMIC BENEFIT

As our country is among the world fastest growing countries, development and
establishment of such manufacturing and mining sub-sectors are very important. It is
possible to state enormous reasons. Among, the followings are some of it:

 Employment opportunity: unemployment is one of the major problems of developing

countries. In order to alleviate this, government has designed a policy and made
economic decisions which enhance the creation of job opportunity for unemployed
citizens. Towards this end, marble quarrying and slab processing subsector is becoming
significant for employment opportunities creation to the local communities since it is
both capital and labor intensive. The project is expected to create total permanent
employment opportunity for about 123 professionals, skilled, semi-skilled and unskilled
workers.

 Linkage effects: The project will integrate backward with the marble processing project
as it can uses the byproducts as input which adds value on the marble byproducts. In
addition to this the subsector has strong forward linkage with construction subsector
which is highly demanding tiles for modern housing construction.

 Source of Government Income: The government will get income in the form of
income tax from permanent and temporary employees, profit tax and royalty fee from
the business.

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 January 1, 2016

IX. CONCLUSION AND RECOMMENDATION

IX.1. Conclusion

In view of the fact that market condition for the proposed product has vital role for
realization of objectives of establishment of the proposed project, we have also tried to
review the contemporary and forecasted demand and supply condition and price of the
product. Based on commodity study of the bank and past performance of the Company, we
have observed that there is excess demand for the product even at a relatively higher price.

As we gone through all the issues that determine the success and failure of project, we have
tried to touch all important aspects. The credit history of the Company shows its
creditworthiness when working with any commercial banks.

Technical viability of the project has also been assessed. All the required buildings and
constructions have already been constructed and their value and appropriateness are verified
by the district technical team. Machineries and equipments required for its smooth operation
included and confirmed their appropriateness.

The Company has already implemented proper organizational structure and hired required
human resources for the existing project. So as to include the expansion part of the project,
we have not modified the existing organizational structure and rather we proposed
additional human resources.

In addition, financial viability of the project is unquestionable to determine acceptance or

rejection of the project. As we tried to gone through each financial components, the

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 January 1, 2016

project’s past performance and future projection has also revealed that the project is
financially viable & capable to achieve its objective covering all its costs even in adverse
conditions that can possibly affect either its cost items or revenue.

At the same time, establishment of the project has also various socio-economic importances
for the country. But, the unhidden fact, it does not mean that the project is totally free from
obvious business risks and some environmental impact. But, with appropriate mitigating
mechanisms, its national significances considerably surpass those anticipated risks.
Therefore, we can conclude that the project is feasible in all aspects.

IX.2. Recommendation

By considering all the above facts and findings, Appraisal Team I found that financing the
proposed expansion project is commendable and appropriate. Therefore, the team has
proposed & approved on its level a total loan amount of Birr 25,000,000 subjects to terms
and conditions stated below.

IX.3. Terms and Conditions

IX.3.1. Terms

a) Disbursement Condition

 Equity Release Schedule

Balance in
Condition Expected
Commitmen Remaini To be
Equity Amount to be Months
t for
Release Released
(In Birr) ng Disbursed to be
Plan (in Birr) Disburseme Released
1,5 Amount to
nt (2017)
13,984
First Round
cost 1-Feb-
Contractor
Building 125,445 17
With Loan After signing
1st
loan Phase
Equity
contractual by
Release Pre
agreement Phase
operating DBE
1,388,539 - when
Interest
interest
due
XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION PROJECT 5
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 January 1, 2016

Equity to be Blocked
In Cash 1,513,984

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 January 1, 2016

 Loan Disbursement Schedule

Balance in
Loan Amount to be Commitment Months to be
To be Condition for
Disbursement Purpose of Disbursement Disbursed (Birr) Disbursed
Disbursed to Disbursement
Plan (in Birr) (2017)
25,000,000
Building and Construction for
sub structure and Concrete 3,911,582 Contractor
work After effective
1st
30% LC opening cost of Steel 20,489,018 utilization of equity 1-Feb-17
Disbursement 599,400 Supplier
Structure released.
Sub-total 4,510,982
Building and Construction
supper structure and finishing 192,779 Contractor
Work After verifying the
2nd 70% LC Settlement cost of effective utilization of
1,398,600 14,086,335 Supplier 1-Apr-17
Disbursement Steel Structure previous
Procurement of Machinery disbursements
4,811,305 Supplier
(30% L/C Opening)
Sub-total 6,402,684 Supplier
Procurement of Machinery
11,226,378 Supplier After verifying the
(70% L/C settlement)
effective utilization of
Procurement of Imported Raw 1-Jul-17
641,759 2,218,198 Supplier previous
Materials (30% L/C Opening)
3rd disbursements
Sub-total 11,868,137
Disbursement
Procurement of Imported Raw
1,497,437
Materials (70% L/C settlement)
Working Capital 720,761 Promoter After verifying the
effective utilization of
1-Oct-17
Sub-total 2,218,198 - previous
disbursements
Total 25,000,000 -

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 January 1, 2016

b) Interest Rates and Other Charges

12% interest rate p.a. on the outstanding loan balance to be paid every four months and
repayment for pre operating interest from the block account held for it or deduction of pre
operating interest accrued on implementation period from the block account will start on June
30, 2017.

c) Commitment Charge Payment

0.5 % per annum commitment charge shall be paid on balance in commitment.

d) Repayment Schedule

The principal loan is planned to be repaid every four months within 7 (seven) years beginning
from June 30, 2018 and the last repayment shall be made on February 28, 2025. Whereby, the
repayment shall be made every-four-months and the first installments will be birr 1,190,480 and
the remaining 20 installment shall be equal amount of Birr 1,190,476.

IX.3.2. Conditions

 Collateral: First degree mortgage on the entire assets of the project.

 Insurance: Insurance policy for the entire assets of the project should timely be renewed and
confirmed that the DBE is co-beneficiary.
 Current Account: The Company should open current account with DBE.
 Record Keeping: The Company should keep maintaining proper record keeping system.
 L/C Opening: The Company should open letter of credit in DBE for The Company should
open letter of credit (L/C) in DBE both for import and export.
 The company should block birr 1,513,984 in cash at DBE for partial building construction
cost and full cost of preproduction interest.
 Other conditions

 The Company should raise its registered paid up capital at least to the level of the required
equity contribution of the company.

XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION PROJECT 5

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 January 1, 2016

X. ANNEXES

- Pro forma Invoices

- Detail of Investment Costs

- Basic Assumptions

- Operating Cost Determination

- Working Capital Determination

- Fund Allocation

- Loan Repayment Schedule

- Depreciation Schedule

- Profit/Loss Forecast

- Cash Flow Forecast

- Balance Sheet Forecast

- FIRR Projection

- Others

XXX TERRAZZO FACTORY PLC TERRAZZO MANUFACTURING EXPANSION PROJECT 5

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