ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the Establishment

of Straw pulp and yellow board
making plant

Development Studies
Associates (DSA)

July 2016 Revised

Bahir Dar
 Table of Contents

1. Executive Summary................................................................................1
2. Product Description and Application....................................................1
3. Market Study, Plant Capacity and Production Program...................2
3.1 Market Study.......................................................................................................2
3.1.1 Present Demand and Supply........................................................................2
3.1.2 Projected Demand........................................................................................3
3.1.3 Pricing and Distribution...............................................................................4
3.2 Plant Capacity......................................................................................................4
3.3 Production Program.............................................................................................5
4. Raw Materials and Utilities....................................................................5
4.1 Availability and Source of Raw Materials...........................................................5
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................5
5 Location and Site.....................................................................................6
6 Technology and Engineering.................................................................6
6.1 Production Process...............................................................................................6
6.2 Machinery and Equipment...................................................................................9
6.3 Civil Engineering Cost......................................................................................10
7 Human Resource and Training Requirement....................................10
7.1 Human Resource................................................................................................10
7.2 Training Requirement........................................................................................11
8 Financial Analysis.................................................................................12
8.1 Underlying Assumption.....................................................................................12
8.2 Investment..........................................................................................................13
8.3 Production Costs................................................................................................13
8.4 Financial Evaluation..........................................................................................14
9 Economic and Social Benefit and Justification..................................15
ANNEXES....................................................................................................17
 1. Executive Summary

This project profile deals with the establishment of straw pulp and yellow board making plant in
Amhara National Regional State. The following presents the main findings of the study.

Demand projection divulges that the demand for the product is substantial and is increasing with
time. Accordingly, the planned plant is set to produce 600 tons annually. The total investment
cost of the project including working capital is estimated at Birr 33.81 million and creates 38
jobs and Birr 1,175,022 of income.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 29.9% of capacity utilization and it will
payback fully the initial investment less working capital in 3 years and 3 months. The result
further shows that the calculated IRR of the project is 22.7% and the NPV at 18% discount rate
is Birr 5,922,682.69. The envisaged plant, however, is sensitive slightly to an increase in cost of
production.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution

Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Yellow board, which is the most basic among paper boards, is used for a wide range of purposes,
including folding boxes, back board for writing pads, etc. Yellow board is made from rice straw
or wheat straw and treated with small amounts of pulping chemicals such as lime milk (calcium
carbonate), etc. Yellow board is a kind of paper board, which can be turned into white board if
bleached pulp is added as a surface layer in the process of manufacture. It has a good

1
appearance, and can be used for the packaging of foodstuffs and cosmetics. The variety of
yellow board merely means a variety in thickness where it is classified into several grades by
weight.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

The demand for paper board and box is met through domestic production and import from
abroad. The total effective demand for the latest 10 years is presented in table 1 below.

Table 1: Domestic Production and Import of Paper Board and Box (in tons)

Domestic Effective
Year Production Import Demand
1997/98 2,749 956 3,705 Source:
CSA 1998/99 (various
years); 2,278 494 2,772 Customs
authority, 1999/00 3,090 394 3,484 (various
yeas)
2000/01 2,187 510 2,697
The above 2001/02 1,727 567 2,294 table
shows the 2002/03 1,373 604 1,977 presence
of 2003/04 4,274 682 4,956 substantial
2004/05 4,453 681 5,134
demand for paper
2005/06 5,950 636 6,586
box and boards for
2006/07 5,202 675 5,877
various purposes.
That is, for the ten years indicated in table 1 total demand has grown on average by 13.4%.
Judged by any standard this growth rate is huge and suggests the relevance of investing in the
sector. The breakdown of the effective demand shows that on average import constitutes 18%
while domestic production holds 82% of the total demand. Available data further show that the
price that importers pay to cover the cost of their import is on average more than double when

2
compared with domestic producers cost. This is likely to have contributed to the lower share of
import from the total effective demand.

The major factors affecting the demand for the products includes: the demographic trend and age
group, the education sector developments, the economic growth trends and trends in
industrialization. This is briefly explained as follows.

Demographic Trends: Increase in population brings a tremendous demand for the product.
According to the age-group classification presented in CSA, Statistical Abstracts (2006), about
46.5 percent of the total population belongs to the age group of 5-24 years. This is the population
segment which is directly related to the education sector and hence has the greatest effect on the
demand for paper and paper board.

Education: Educational facilities in Ethiopia have been expanding overtime and the significant
development of the sector in the coming years would lead to considerable increase in demand for
writing pads and the like.

Economic Growth Trend: The demand for paper board and other packaging materials is
directly influenced by the level of economic activity. The increase of economic activity is
expected to lead to greater demand for the products.

3.1.2 Projected Demand

The future demand for the product heavily depends on the trend in school age population,
education coverage, urbanization and industrialization, among other things. All these major
factors are expected to increase in the future in view of the current performance as well as the
plan and program of the government. Thus, it is projected that demand at least increases by 5%
in the future in light of the various factors mentioned. Accordingly, the future demand is
forecasted as shown in table 2 below.

Table 2: Projected Demand for Straw Pulp and Yellow Board (in ton)

3
 Year Projected Demand

2015/16 9,117
2016/17 9,573
2017/18 10,052
2018/19 10,554
2019/20 11,082
2020/21 11,636
2021/22 12,218
2022/23 12,829
2023/24 13,470
2024/25 14,143
2025/26 14,850
2026/27 15,592

The above table divulges that the total demand is projected to reach 10,052 tons in 2017/18 and it
is expected to increase by 55% to reach 15,592 tons within 10 years (2026/27). This indicates the
presence of a higher and growing demand for the product in the future.

3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the selling price of
straw pulp and yellow board is set to be Birr 33 per kilogram. The available retail and wholesale
network shall be used by the envisaged plant.

3.2 Plant Capacity

In view of the expected demand for the product as presented earlier, and the planned technology,
the envisaged plant is set to produce 600 tons annually. For a plant that starts operation in
2009/10, the capacity represents about 8.8% of the total demand. The percentage, however,
decreases to a great extent in the future due to a number of factors discussed earlier.

3.3 Production Program

4
The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 2 shifts, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 75 percent capacity and then at 90 percent in the
2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This consideration is
developed based on the assumption that market and logistics barriers would take place for the
first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The major raw materials required in the production process are rice and wheat straw and lime.
Straws are by-products of cereal crops, mainly wheat and rice. Rice straw’s use in paper making
is limited as it contains silica and gives some process problems. Thus wheat straw is preferred
and it is available in cereal growing areas in times of harvest. To come up with quality product,
the envisaged plant shall use imported high grade lime which can be replaced through time if
domestic firms start the production of same.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
presented in table 3 here under.

5
 Table 3: Material and Utility Requirement

Total Cost
Material and Input Quantity L.C. F.C.
Wheat straw 900 ton 180000
Lime (Calcium Carbonate) 90 ton 0 692820
Total Material Cost 180000 692820
Utility
Electricity 748,000 kwh 411,400
Furnace Oil 201,600 lit 3621139.2
Water 90,000 lit 238,500
Total Utility Cost 4,271,039

According to the above table, the annual cost of material and utility at full capacity of operation
is estimated to be Birr 5,143,859

5 Location and Site

The appropriate location for the envisaged project, in view of the availability of input,
infrastructure as well as market for the output, is Gonder town. Other zonal capitals adjacent to
major wheat growing areas can also be selected so that the plant can easily collect wheat straw
from the surrounding farms.

6 Technology and Engineering

6.1 Production Process

The manufacture of yellow board has two major stages. The first stage is pulp making and the
second is paper or board making. The detail of the production process is presented below.

6
Stage I: Pulp Making

1. Pretreatment of Straw and Cooking

A. Pretreatment of Straw: The wheat straw, which has been collected and stored, is cut to a
suitable uniform length by a cutter, and it is sent to the duster via a belt conveyor. The
dusted straw is carried to the next process on another conveyor.

B. Cooking: The straw stored in a chip bin is put in a digester at the rate of about 2.5 tons of
dry straw at a time. When the above operation is over, a fixed amount of lime solution is
added, after which digestion continues for several hours (6-8 h/cycle) with steam under a
pressure of 4-6 kg/cm2. The cooked material is blown into a blow pit, and waste liquid is
washed away by a beater placed in the lower part of the pit.

2. Stock Preparation

The raw material made available from the above operation is fed into a dilution box with a pump.
Fresh water is added to the box to provide consistency to suit the following beating process.
Nodes and sheaves are eliminated by the inclined screen to drop the stock into the next beater, in
which it is treated for an appropriate number of hours so as to make it suitable for paper
machining, as well as to provide a good quality for the finished paper. Stock which has been
subjected to the beater process is stored in the beater chest, out of which it is sent into the head
box by the pump. The stock goes out of the above equipment into the selective screen, where is
dusted, for transfer to the distributing box and head box.

3. Chemical Preparation

This is an independent section, in which the lime for digestion is dissolved to the stipulated
concentration and stored. The process so far described constitutes the first half of the paper
making process, namely the section for the manufacturing of raw materials.

7
Stage II: Paper Making

1. Paper machine- Wire, Press and Dryer Part

A. Wire Part: One or several cylinder moulds rotate in each vat. The stock which has been
fed is scooped up by the rotating cylinder mould machine for formation of sheet. When
cylinders go out of the stock liquid, the surfaces of the cylinders are covered with wet
paper which constitutes fabrique. The number of cylinders is decided according to the
thickness of paper to be made.

B. Press part: The bottom felts, which rotate endlessly, pass the crests of the cylinders one
by one to pick up the paper layer formed there. After passage of the second press roll, felt
and paper are separated, with felt resuming its advance to the cylinder after water has
been squeezed out of the felt by the squeeze roll, and paper proceeding towards the next
dryer part.

C. Dryer part: The paper which comes out of the final press roll has both smoothed by the
smoother. It is dried when it comes into contact with the surfaces of the fourteen paper
dryers (cylindrical, with steam inside), one after another. Canvass or dry felt is employed
to insure good contact with cylinders.

2. Calendar

The calendar comprises for chilled rolls, the surfaces of which are hardened. Paper gains glaze as
it passes between the rolls through the slip action of heat and pressure.

3. Cutter

Paper is finally cut into the required size by the cutter, thereby ending the continuous paper
making process. When paper is specially required in a smaller size, it is cut by a guillotine cutter
which is provided separately.

8
The alternative technological option refers to the use of manual labor in the drying process. In
this method a blotter sheet is used to collect the water instead of canvass or dry felt. Then, the
paper is hanged in open space and is left for a while until the moisture level is reduced to a level
less than 6 percent. Although this option has the advantage of lower cost when compared to
steam-heated dryer discussed earlier, it is not recommended for a scale and quality of production
envisaged by the proposed plant.

6.2 Machinery and Equipment

The machineries and equipment required for producing straw pulp and yellow board making
plant is detailed in table 4 below.
Table 4: Machinery and Equipment

Machinery and Equipment Quantity

Stock Preparation System 1
Cylinder Mould Section 1
Wire Part 1
Press Part 1
Pre-Dryer 1
Yankee 1
After Dryer 1
Calendar 1
Pope Real 1
Boiler 1

The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 20.52 million.

The following are some of the suppliers’ address for the machineries of the envisaged project.
1. RIVER MACHINERY CORPOPATION
NO, 101, DUNG SHUEN ST., SHU LIN CITY, TAIPEI HSIEN, TAIWAN
TEL: 886-2-86867648, 86867649, 86869268,86869269
FAX: 886-2-86868968
HTTP://WWW.H-F.COM.TW

9
 2 SHANGHAI LIGHT GOOD PAPERMAKING MACHINERY EQUIPMENT PLANT
ADDRESS: SHANGHAI, CHING CHUNG HIGHWAY 3201, CHAINA
TEL: 021-59745501 021-59741988
FAX: 021-59741437
E-MAIL: SHQLZZ@SH163.NET

3 RAMESH INDUSTRIES
MR. RAMESH CHANDRA
D-122, INDUSTRIAL AREA, BS ROAD
GHAZIABAD - 201 001, UTTAR PRADESH, INDIA
TEL : +(91)-(120)-2700791/2796264
EMAIL : INFO@RAMESHINDUSTRIES.COM

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 1,600m 2 of which 1,250m2 is
allocated for the production space and the remaining space is left for stores (250m 2), office
buildings and facilities (100m2).

7 Human Resource and Training Requirement

7.1 Human Resource
The required manpower for the envisaged plant is stated in table 5 below.

10
 Table 5: Human Resource Requirement

Monthly
Position No. Required Salary Total Annual Salary
Manager 1 12830 153960
Mechanical Engineer 1 10264 123168
Administration/Finance Head 1 7698 92376
Accountant 1 3079.2 36950.4
Secretary 1 2566 30792
Sales Clerk 1 1539.6 18475.2
Store Keeper 1 1539.6 18475.2
Technician 2 2566 61584
Supervisor 2 3079.2 73900.8
Operators 10 1539.6 184752
Daily Laborers 6 769.8 55425.6
Cleaners 2 769.8 18475.2
Messengers 1 769.8 9237.6
Driver 3 1539.6 55425.6
Guards 5 769.8 46188
Benefit (20%) 0 195837.12
Total 38 0 1175022.72

The envisaged plant therefore, creates 38 jobs and about Birr 1,175,022 of income. The
professionals and support staff for the envisaged plant can be recruited from Amhara region

7.2 Training Requirement

Training of key personnel will be conducted in collaboration with the suppliers of the plant
machineries. The training should primarily focus on the production technology and machinery
maintenance and trouble shooting. Birr 192,450 will be allocated as training expense.

11
8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of straw pulp and yellow board making plant is based on the data provided
in the preceding sections and the following assumptions.

A. Construction and Finance

Construction period 2 years

Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

12
 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 33.81
million as shown in table 6 below. The Owner shall contribute 30% of the finance in the form of
equity while the remaining 70% is to be financed by bank loan.

Table 6: Total initial investment

Items L.C F.C Total

Land 96,00
0.00 96000
Building and civil works 8,211,200.
8211200 00
Office equipment
128300 128300
Vehicles
1283000 1283000
Plant machinery & equipment 19,245,000.
1283000 00 20528000
Total fixed investment cost 11,001,500 19,245,000. 30,246,500.
.00 00 00
Pre production capital
expenditure* 1508140.84 1508140.84
Total initial investment 12,509,640 19,245,000. 31,754,640.
.84 00 84
Working capital at full capacity
1762475.062 302320.988 2064798.616
Total 14,272,115 19,547,320. 33,819,439.
.90 99 46

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project accounts for 57.79% of the total investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 10.15 million as detailed
in table 7 below.

13
 Table 7: Production Cost

Items Cost
1. Raw materials 1154700
2. Utilities 2,061,100
3. Wages and Salaries 1175022.72
4. Spares and Maintenance 301628.168
Factory costs 4692450.888
5. Depreciation 3034418.168
6. Financial costs 2428975.6
Total Production Cost 10,155,844.66

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 3%, 3% and 18%
respectively in the first year and are gradually rising. Furthermore, the income statement and
other profitability indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 29.9% of capacity utilization.

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in 3 years and 3
months.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 19.6%.

14
 V. Internal Rate of Return and Net Present Value
Based on cash flow statement described in the annex part, the calculated IRR of the project is
22.7% and the net present value at 18 % discount is Birr 5,922,682

VI. Sensitivity Analysis

The envisaged plant is sensitive to some extent with an increase in cost of production. That is,
the plant incurs loss of birr 120,595.51 only for the first year of operation when 10 % cost
increment takes place in the sector. The plant enjoys profit starting from the second year of
operation. This result is accompanied with a payback period of 3 years and 5 months.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It also
boosts inter sectorial linkage between the agricultural and industrial sector. At the same time,
therefore, it helps diversify the economic activity of the region. The other major benefits are
presented below.

A. Profit Generation

The project is found to be financially viable and earns on average a profit of birr 5.34 million per
year and Birr 53.50 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 20.48 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
additional fund for the regional government that will be used in expanding social and other basic
services in the region.

C. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of US Dollar
7.5 million will be saved as a result of the proposed project. This will create room for the saved
hard currency to be allocated to other vital and strategic sectors.

15
 D. Employment and Income Generation

The proposed project is expected to create employment opportunity for several citizens of the
region. That is, it will provide permanent employment to 38 professionals as well as support
staff. Consequently the project creates income of Birr 1,175,022 per year. This would be one of
the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

16
ANNEXES

17
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 75% 90% 100% 100%

1. Total Inventory 0.00 0.00 1284272.479 1541126.975 1712363.314 1712363.314

Raw Materials in Stock- Total 0.00 0.00 264531.2751 317437.5249 352708.3753 352708.3753

Raw Material-Local 0.00 0.00 37790.17482 45348.22518 50386.89976 50386.89976

Raw Material-Foreign 0.00 0.00 226741.1002 272089.2998 302321.4499 302321.4499

Factory Supplies in Stock 0.00 0.00 8962.80706 10755.389 11950.42652 11950.42652

Spare Parts in Stock and Maintenance 0.00 0.00 74036.00254 88843.20818 98714.6615 98714.6615

Work in Progress 0.00 0.00 224070.3818 268884.4427 298760.509 298760.509

Finished Products 0.00 0.00 448140.7379 537768.9111 597520.9924 597520.9924

2. Accounts Receivable 0.00 0.00 1637574.55 1965089.45 2183432.725 2183432.725

3. Cash in Hand 0.00 0.00 528856.8082 634628.1494 705142.3939 705142.3939

CURRENT ASSETS 0.00 0.00 3186172.563 3823407.075 4248230.084 4248230.084

4. Current Liabilities 0.00 0.00 1637574.55 1965089.45 2183432.725 2183432.725

Accounts Payable 0.00 0.00 1637574.55 1965089.45 2183432.725 2183432.725

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 1548598.013 1858317.625 2064797.359 2064797.359

INCREASE IN NET WORKING CAPITAL 0.00 0.00 1548598.013 309719.6128 206479.7333 0

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 1712363.314 1712363.314 1712363.314 1712363.314 1712363.314 1712363.314

Raw Materials in Stock-Total 352708.3753 352708.3753 352708.3753 352708.3753 352708.3753 352708.3753

Raw Material-Local 50386.89976 50386.89976 50386.89976 50386.89976 50386.89976 50386.89976

Raw Material-Foreign 302321.4499 302321.4499 302321.4499 302321.4499 302321.4499 302321.4499

Factory Supplies in Stock 11950.42652 11950.42652 11950.42652 11950.42652 11950.42652 11950.42652

Spare Parts in Stock and Maintenance 98714.6615 98714.6615 98714.6615 98714.6615 98714.6615 98714.6615

Work in Progress 298760.509 298760.509 298760.509 298760.509 298760.509 298760.509

Finished Products 597520.9924 597520.9924 597520.9924 597520.9924 597520.9924 597520.9924

2. Accounts Receivable 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725

3. Cash in Hand 705142.3939 705142.3939 705142.3939 705142.3939 705142.3939 705142.3939

CURRENT ASSETS 4248230.084 4248230.084 4248230.084 4248230.084 4248230.084 4248230.084

4. Current Liabilities 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725

Accounts Payable 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725

TOTAL NET WORKING CAPITAL REQUIRMENTS 2064797.359 2064797.359 2064797.359 2064797.359 2064797.359 2064797.359

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 15835478.82 17900276.18 16648674.55 18340834.9 20233143.28 20014800
1. Inflow Funds 15835478.82 17900276.18 1637574.55 327514.8998 218343.2751 0
Total Equity 6334191.528 7160110.461 0 0 0 0
Total Long Term Loan 9501287.292 10740165.72 0 0 0 0
Total Short Term Finances 0 0 1637574.55 327514.8998 218343.2751 0
2. Inflow Operation 0 0 15011100 18013320 20014800 20014800
Sales Revenue 0 0 15011100 18013320 20014800 20014800
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 15835478.82 15835478.82 14739096.76 13702508.77 15934285.4 15226082.05
4. Increase In Fixed Assets 15835478.82 15835478.82 0 0 0 0
Fixed Investments 15081408.4 15081408.4 0 0 0 0
Pre-production Expenditures 754070.42 754070.42 0 0 0 0
5. Increase in Current Assets 0 0 3186172.563 637234.5125 424823.0084 0
6. Operating Costs 0 0 6103516.775 7262724.391 8035529.485 8035529.485
7. Corporate Tax Paid 0 0 0 0 2076212.107 2197660.836
8. Interest Paid 0 0 5449407.426 2428974.368 2024145.298 1619316.228
9.Loan Repayments 0 0 0 3373575.497 3373575.497 3373575.497
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 0 2064797.359 1909577.786 4638326.131 4298857.854 4788717.954
Cumulative Cash Balance 0 2064797.359 3974375.145 8612701.276 12911559.16 17700277.08

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 20014800 20014800 20014800 20014800 20014800 20014800
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 20014800 20014800 20014800 20014800 20014800 20014800
Sales Revenue 20014800 20014800 20014800 20014800 20014800 20014800
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 14942701.7 14826789.81 14543409.47 10886453.63 10886453.63 10886453.63
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production
Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 8035529.485 8035529.485 8035529.485 8035529.485 8035529.485 8035529.485
7. Corporate Tax Paid 2319109.539 2608026.718 2729475.446 2850924.15 2850924.15 2850924.15
8. Interest Paid 1214487.184 809658.1142 404829.0699 0 0 0
9. Loan Repayments 3373575.497 3373575.497 3373575.497 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 5072098.295 5188010.186 5471390.527 9128346.366 9128346.366 9128346.366
Cumulative Cash Balance 22772375.38 27960385.57 33431776.07 42560122.43 51688468.8 60816815.16

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 15011100 18013320 20014800 20014800

1. Inflow Operation 0 0 15011100 18013320 20014800 20014800

Sales Revenue 0 0 15011100 18013320 20014800 20014800

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 15835478.82 15835478.82 7652114.788 7572444.003 10318221.32 10233190.32

3. Increase in Fixed Assets 15835478.82 15835478.82 0 0 0 0

Fixed Investments 15081408.4 15081408.4 0 0 0 0

Pre-production Expenditures 754070.42 754070.42 0 0 0 0

4. Increase in Net Working Capital 0 0 1548598.013 309719.6128 206479.7333 0

5. Operating Costs 0 0 6103516.775 7262724.391 8035529.485 8035529.485

6. Corporate Tax Paid 0 0 0 0 2076212.107 2197660.836

NET CASH FLOW -15835478.82 -15835478.82 7358985.212 10440876 9696578.675 9781609.68

CUMMULATIVE NET CASH FLOW -15835478.82 -31670957.64 -24311972.43 -13871096.43 -4174517.78 5607091.923

Net Present Value (at 18%) -15835478.82 -13419897.3 5285108.601 6354639.469 5001387.393 4275631.73

Cumulative Net present Value -15835478.82 -29255376.12 -23970267.52 -17615628.05 -12614240.7 -8338608.905

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 20014800 20014800 20014800 20014800 20014800 20014800

1. Inflow Operation 20014800 20014800 20014800 20014800 20014800 20014800

Sales Revenue 20014800 20014800 20014800 20014800 20014800 20014800

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 10354639.02 10643556.2 10765004.93 10886453.63 10886453.63 10886453.63

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 8035529.485 8035529.485 8035529.485 8035529.485 8035529.485 8035529.485

6. Corporate Tax Paid 2319109.539 2608026.718 2729475.446 2850924.15 2850924.15 2850924.15

NET CASH FLOW 9660160.977 9371243.798 9249795.069 9128346.366 9128346.366 9128346.366

CUMMULATIVE NET CASH FLOW 15267252.87 24638496.67 33888291.77 43016638.11 52144984.47 61273330.84

Net Present Value (at 18%) 3578428.284 2941868.014 2460798.491 2058041.106 1744102.63 1478053.079

Cumulative Net present Value -4760180.621 -1818312.608 642485.9085 2700527.015 4444629.645 5922682.698

Net Present Value (at 18%) 5922682.698

Internal Rate of Return 22.7%

Annex 4: NET INCOME STATEMENT ( in Birr)

6
 PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 90% 100% 100% 100%

1. Total Income 15011100 18013320 20014800 20014800 20014800

Sales Revenue 15011100 18013320 20014800 20014800 20014800
Other Income 0 0 0 0 0
2. Less Variable Cost 5443531.311 6532237.563 7258041.749 7258041.749 7258041.749
VARIABLE MARGIN 9567568.689 11481082.44 12756758.25 12756758.25 12756758.25
(In % of Total Income) 163.55684 163.55684 163.55684 163.55684 163.55684
3. Less Fixed Costs 3694403.632 3764904.995 3811905.904 3811905.904 3811905.904
OPERATIONAL MARGIN 5873165.057 7716177.441 8944852.347 8944852.347 8944852.347
(In % of Total Income) 100.40758 109.92744 114.67454 114.67454 114.67454
4. Less Cost of Finance 5449407.426 2428974.368 2024145.298 1619316.228 1214487.184
5. GROSS PROFIT 423757.6308 5287203.073 6920707.049 7325536.119 7730365.163
6. Income (Corporate) Tax 0 0 2076212.107 2197660.836 2319109.539
7. NET PROFIT 423757.6308 5287203.073 4844494.942 5127875.283 5411255.625
RATIOS (%)
Gross Profit/Sales 3% 29% 35% 37% 39%
Net Profit After Tax/Sales 3% 29% 24% 26% 27%
Return on Investment 18% 23% 20% 20% 20%
Return on Equity 3% 39% 36% 38% 40%

Annex 4: NET INCOME STATEMENT (in Birr):Continued

PRODUCTION
7
 6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 20014800 20014800 20014800 20014800 20014800

Sales Revenue 20014800 20014800 20014800 20014800 20014800
Other Income 0 0 0 0 0
2. Less Variable Cost 7258041.749 7258041.749 7258041.749 7258041.749 7258041.749
VARIABLE MARGIN 12756758.25 12756758.25 12756758.25 12756758.25 12756758.25
(In % of Total Income) 163.55684 163.55684 163.55684 163.55684 163.55684
3. Less Fixed Costs 3253677.736 3253677.736 3253677.736 3253677.736 3253677.736
OPERATIONAL MARGIN 9503080.515 9503080.515 9503080.515 9503080.515 9503080.515
(In % of Total Income) 121.83368 121.83368 121.83368 121.83368 121.83368
4. Less Cost of Finance 809658.1142 404829.0699 0 0 0
5. GROSS PROFIT 8693422.401 9098251.446 9503080.515 9503080.515 9503080.515
6. Income (Corporate) Tax 2608026.718 2729475.446 2850924.15 2850924.15 2850924.15
7. NET PROFIT 6085395.683 6368776.025 6652156.366 6652156.366 6652156.366
RATIOS (%)
Gross Profit/Sales 43% 45% 47% 47% 47%
Net Profit After Tax/Sales 30% 32% 33% 33% 33%
Return on Investment 20% 20% 20% 20% 20%
Return on Equity 45% 47% 49% 49% 49%

Annex 5: Projected Balance Sheet (in Birr)

8
 CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 15835478.82 33735755 35797087.18 38038229.66 39727492.37 41481792.14
1. Total Current Assets 0 2064797.359 7160547.708 12436108.35 17159789.24 21948507.17
Inventory on Materials and Supplies 0 0 347530.0847 417036.1221 463373.4633 463373.4633
Work in Progress 0 0 224070.3818 268884.4427 298760.509 298760.509
Finished Products in Stock 0 0 448140.7379 537768.9111 597520.9924 597520.9924
Accounts Receivable 0 0 1637574.55 1965089.45 2183432.725 2183432.725
Cash in Hand 0 0 528856.8082 634628.1494 705142.3939 705142.3939
Cash Surplus, Finance Available 0 2064797.359 3974375.145 8612701.276 12911559.16 17700277.08
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 15835478.82 31670957.64 28636539.47 25602121.3 22567703.14 19533284.97
Fixed Investment 0 15081408.4 30162816.8 30162816.8 30162816.8 30162816.8
Construction in Progress 15081408.4 15081408.4 0 0 0 0
Pre-Production Expenditure 754070.42 1508140.84 1508140.84 1508140.84 1508140.84 1508140.84
Less Accumulated Depreciation 0 0 3034418.168 6068836.336 9103254.504 12137672.67
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 15835478.82 33735755 35797087.18 38038229.66 39727492.37 41481792.14
5. Total Current Liabilities 0 0 1637574.55 1965089.45 2183432.725 2183432.725
Accounts Payable 0 0 1637574.55 1965089.45 2183432.725 2183432.725
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 9501287.292 20241453.01 20241453.01 16867877.49 13494301.99 10120726.49
Loan A 9501287.292 20241453.01 20241453.01 16867877.49 13494301.99 10120726.49
Loan B 0 0 0 0 0 0
7. Total Equity Capital 6334191.528 13494301.99 13494301.99 13494301.99 13494301.99 13494301.99
Ordinary Capital 6334191.528 13494301.99 13494301.99 13494301.99 13494301.99 13494301.99
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 423757.6308 5710960.704 10555455.65
9.Net Profit After Tax 0 0 423757.6308 5287203.073 4844494.942 5127875.283
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 423757.6308 5287203.073 4844494.942 5127875.283

Annex 5: Projected Balance Sheet (in Birr): Continued

9
 PRODUCTION
5 6 7 8 9 10
43,519 46,231, 49,226 69,182,9
TOTAL ASSETS ,472 292 ,493 55,878,649 62,530,806 62
1. Total Current Assets 27020605.46 32208615.62 37680006.15 46808352.52 55936698.88 65065045.25
Inventory on Materials and Supplies 463373.4633 463373.4633 463373.4633 463373.4633 463373.4633 463373.4633
Work in Progress 298760.509 298760.509 298760.509 298760.509 298760.509 298760.509
Finished Products in Stock 597520.9924 597520.9924 597520.9924 597520.9924 597520.9924 597520.9924
Accounts Receivable 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725
Cash in Hand 705142.3939 705142.3939 705142.3939 705142.3939 705142.3939 705142.3939
Cash Surplus, Finance Available 22772375.38 27960385.57 33431776.07 42560122.43 51688468.8 60816815.16
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 16498866.8 14022676.8 11546486.8 9070296.8 6594106.8 4117916.8
Fixed Investment 30162816.8 30162816.8 30162816.8 30162816.8 30162816.8 30162816.8
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 1508140.84 1508140.84 1508140.84 1508140.84 1508140.84 1508140.84
Less Accumulated Depreciation 15172090.84 17648280.84 20124470.84 22600660.84 25076850.84 27553040.84
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 43519472.26 46231292.42 49226492.95 55878649.32 62530805.68 69182962.05
5. Total Current Liabilities 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725
Accounts Payable 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725 2183432.725
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 6747150.995 3373575.497 0 0 0 0
Loan A 6747150.995 3373575.497 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 13494301.99 13494301.99 13494301.99 13494301.99 13494301.99 13494301.99
Ordinary Capital 13494301.99 13494301.99 13494301.99 13494301.99 13494301.99 13494301.99
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 15683330.9 21094586.53 27179982.21 33548758.24 40200914.58 46853070.94
9. Net Profit After Tax 5411255.625 6085395.683 6368776.025 6652156.366 6652156.366 6652156.366
Dividends Payable 0 0 0 0 0 0
Retained Profits 5411255.625 6085395.683 6368776.025 6652156.366 6652156.366 6652156.366

10