ANRS Investment and Industry Bureau

Revised Project Profile on the

Establishment Of Oral Re-hydration
Salt Producing Plant

Revised 2023
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........................................................................................2
3.1.3 Pricing and Distribution...............................................................................3
3.2 Plant Capacity......................................................................................................3
3.3 Production Program.............................................................................................3
4. Raw Materials and Utilities....................................................................4
4.1 Availability and Source of Raw materials...........................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................4
5 Location and Site.....................................................................................5
6 Technology and Engineering.................................................................5
6.1 Production Process...............................................................................................5
6.2 Machinery and Equipment...................................................................................6
6.3 Civil Engineering Cost........................................................................................7
7 Human Resource and Training Requirement......................................7
7.1 Human Resource..................................................................................................7
7.2 Training Requirement..........................................................................................8
8 Financial Analysis...................................................................................8
8.1 Underlying Assumption.......................................................................................8
8.2 Investment............................................................................................................9
8.3 Production Costs................................................................................................10
8.4 Financial Evaluation..........................................................................................10
9 Economic and Social Benefit and Justification..................................11
ANNEXES....................................................................................................13
 1. Executive Summary
This project profile deals with the establishment of Oral Re-hydration Salt (ORS)
producing plant in Amhara National Regional State. The following presents the main
findings of the study

Demand projection divulges that the domestic demand for ORS is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 6 million cases of
ORS annually. The total investment cost of the project including working capital is
estimated at Birr 97.25 million and creates 77 jobs Birr 10,092171.57 annual household
income from employment.

The financial result indicates that the project will generate profit beginning from the first
year of operation. Moreover, the project breaks even at 24.52% of capacity utilization and
payback fully the initial investment less working capital in second year. The result further
show that the calculated IRR of the project is 29.3%

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

Oral Re-hydration salt (ORS) is an orally taken medicine and it is made of glucose,
sodium, chloride, sodium bicarbonate and potassium chloride.

1
ORS is used for the treatment of dehydration due to diarrhea of any etiology in all age
groups. ORS is widely used in Ethiopia because of the prevalence of diarrhea/episode;
especially during periods of wide spread food shortages.

With a population of about 75 million, Ethiopia produces only 3 million packets of ORS
annually, but it also imports a large quantity of the same products through UNICEF, the
Red Cross and some NGOs. For example import of ORS between 2001/01 and 2006/07
was 5,328,105 packets on yearly average basis. This indicates that, in the past, the
demand for the product was greater than the domestic production showing an opportunity
for investment to exploit the domestic supply deficit of ORS. As the population of the
country grows by about 2.9 percent year, the demand for ORS will, at the minimum,
grow by the same percentage. Since practically all the raw materials of ORS can be
obtained from domestic sources, there is no reason why the total demand of ORS can not
be produced at home provided that the demand gap justifies the establishment of a viable
ORS producing plant.

3. Market Study, Plant Capacity and Production

Program

3.1 Market Study

3.1.1 Present Demand and Supply

In the year 2005 the demand for ORS was 29 million packets. With 3 million packets of
existing capacity, demand gap for 2006/7 was estimated to be about 26 million packets.
The current year (2008) demand gap is estimated to be 30.71 million packets.

This demand gap can absorb the production of at least four ORS making plants.

3.1.2 Projected Demand

The projected demand for ORS in the coming ten years is depicted in Table 1 below.

2
 Table 1: Projected Demand for ORS

Projected
Year Demand for ORS
(in packets)
2019/20 47,074,224.47
2020/21 52,694,886.87
2021/22 58,986,656.36
2022/23 66,029,663.13
2023/24 73,913,604.91
2024/25 82,738,889.34
2025/26 92,617,912.72
2026/27 103,676,491.50
2027/28 116,055,464.59
2028/29 129,912,487.06
2029/30 145,424,038.01

3.1.3 Pricing and Distribution

Market survey indicates that the average retail price for ORS in major public and private
pharmacy on average is Birr 30per package. Deducting 20% margin for retailer and 10%
for wholesaler and by taking the capacity of the envisaged plant in to account, the selling
price of Birr 21 per case of ORS has been estimated for the projection of the revenue of
the plant. The available retail and wholesale network shall be used by the envisaged plant
to reach its customers.

3.2 Plant Capacity

Given the expected demand for ORS presented earlier, the market price and the planned
technology, the envisaged plant is set to produce 6 million packets of ORS annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work
275 days in a year 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 it
grows to 85 percent in the 2 nd year. The capacity will grow to 100 percent starting from

3
the 3rd 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 material for ORS is glucose (anhydrous). Sodium chloride, sodium
bicarbonate and potassium chloride are also necessary raw materials. Currently most of
these raw materials are produced locally in good quality. Although the sodium chloride
(edible salt) being produced in Ethiopia does not meet the necessary quality to be used as
an input for ORS preparation, the plan to introduce high tech in salt manufacturer is
assumed to materialize soon. Hence, it is assumed that the raw materials will mainly be
procured from the local market.

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 listed in Table 2 hereunder.

Table 2: Material and Utility requirement of ORS

Total Cost
Quantity (in Birr)
Material and Input (gm/case) L.C. F.C.
Anhydrous Glucose 13.5 - 50,352,944.73
Sodium Chloride 2.6 9,697,598.38 -
Trisodium Chloride 2.9 10,816,560.87 -
Potassium Chloride 1.5 5,594,766.53 -
Lemon Extract 0.2 745,975.00 -
Total Material Cost 20.7 26,854,900.78 50,352,960.01
Utility
Electricity 60000KWh 197,010.00
Water 1000m3 15,820.50
Total Utility Cost 212,830.50

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5 Location and Site

The appropriate locations for the envisaged project in view of the availability of input,
infrastructures as well as market for the output are Bahir Dar, Combolcha, or another
location preferred by the investor.

6 Technology and Engineering

6.1 Production Process

The production process starts with the formulation of the ingredients. Thus the first
operation is preparation of ingredients that is drying of glucose and sifting of the other
three inputs. The materials are then weighed and are mixed according to proportions. The
mixture is then transferred to the filling machine. Packets are also formed in the some
machine from foil coils or rolls. At this stage the machine forms packets, fills them with
the product and seals them. Finally, packets are packed in boxes (first) and in cartons
(later) and become ready for dispatch.

Alternative technology
ORS can be prepared at home as well. There are` many recipes. One is the following.
To making a 1 (one) litre solution using Salt, Sugar and Water
Ingredients:
 one level teaspoon of salt
 eight level teaspoons of sugar
 one litre of clean drinking or boiled water and then cooled cupfuls (each cup
about 200 ml.)

Preparation Method:
Stir the mixture till the salt and sugar dissolve.
However, this technology is not appropriate for large scale commercial production.

5
 6.2 Machinery and Equipment

The main machinery needed to produce ORS include; tray dryer, sifter, weighing
balances, mixers, containers, packet forming, filling and sealing machine. The detail
machineries and equipment required for producing ORS is detailed in Table 3 below

Table 3: Machinery and Equipment

Machinery and Equipment Quantity

Tray dryer 2
Sifter, weighing
balances 1
Mixers 2
Containers 3
Packet forming 2
Filling and sealing
machine 3
Total 13

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 2.3 million.

Suppliers Addresses
Savino Barbera SNC
Via Torino 12
Brandizzo (TO), 10032
Italy
hone: 39 011 913.90.63
Fax: 39 011 913.73.13

Buss-SMS-Canzler GmbH
Kaiserstrasse 13-15
Butzbach, 35510
Germany
Phone: 49 6033-85(0)

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 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 1,000m 2 where 600m2 is
allocated to the building place. The costs are estimated at Birr 358,200 and Birr
7,164,000 respectively.

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required human resource for the foreseeable plant is stated in Table 4 below.

Table 4: Human resource Requirement

Total
Monthly Annual
Position Required Salary Salary
No. (Birr) (Birr)
1
General Manager 1 53,616.57 643,398.84
2
Marketing head 1 38,297.55 459,570.60
3
Administration 1 30,638.04 367,656.48
4
Accountant 2 18,381.63 441,188.97
5
Mechanical Engineer 1 38,297.55 459,570.60
6
Secretary 1 13,020.57 156,252.81
7
Sales Clerk 3 10,722.12 386,038.11
8
Casher 2 10,722.12 257,360.73
9
Store Keeper 4 10,722.12 514,721.46
10
Electrician 3 11,492.25 413,613.54
11
Supervisor 4 22,978.53 1,102,969.44
12
Operators 10 15,319.02 1,838,282.40

7
 13
Daily Laborers 10 6,125.22 735,312.96
14
Cleaners 3 5,361.06 193,022.04
15
Messengers 2 3,832.74 91,914.12
16
Driver 1 10,722.12 128,677.38
17
Guards 3 6,125.22 220,591.50

Total - 8,410,141.98

Benefit (20%) - 1,682,029.59

Grand Total 77 - 10,092,171.57

7.2 Training Requirement

Training of key personnel shall be conducted during the

first year of operation. This can be arranged with the
suppliers of the plant machineries. The training should
primarily focuses on the production technology and
machinery maintenance and trouble shooting. Birr
995,736 is allocated as training expense.

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of ORS Producing plant is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

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

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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%

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 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

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr
97.28 million as shown in Table 5 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 5: Total Initial Investment

Total Initial Investment

Item Cost
Land 358,200.00
Building and civil works 18,382,824.00
Office equipment 1,531,902.00
Vehicles 4,595,706.00
Plant machinery & equipment 35,233,746.00
Total Fixed Investment 60,102,378.00
Pre production capital expenditure 2,989,506.75
Total Initial Investment 63,091,884.75
Working capital at full capacity 34,196,803.39
Total 97,288,688.14
*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.

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 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 17.33 million as
detailed in Table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1. Raw materials
77,207,860.80
2. Utilities
212,830.50
3. Wages and Salaries
10,092,170.38
4. Spares and Maintenance
2,909,293.30
Factory costs
90,422,154.97
5. Depreciation
6,112,748.55
6. Financial costs
6,982,304.06
Total Production Cost 103,517,207.59

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part 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 8.6%,
26.21% and 21.39% 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 24.52% of capacity utilization.

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 III. Payback Period

Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment less working
capital in second year.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 25%.

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 29.3% and the net present value at 18 % discount is Birr 34,566,300.00

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes
place in the sector. This result is accompanied by IRR value of 30.92% with payback
period of third year.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it promotes the socio-
economic goals and objectives stated in the strategic plan of the Amhara National
Regional State. These benefits are listed as follows

A. Profit Generation

The project is found to be financially viable and earns Birr 80, 714,400.00 within the
project life. Such result induces the project promoters to reinvest the profit which,
therefore, increases the investment magnitude in the region.

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 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 21,909,900.00
from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such
result create 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 8 million will be saved as a result of the proposed project. This will create room
for the saved hard currency to be allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of

the region. That is, it will provide permanent employment to 77 professionals as well as
support staffs. Consequently, the project creates household income of Birr 10,092,171 per
year. This would be one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

F. Diversification and Inter Sectoral Linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the ANRS as well as the country as a whole. It also has a potential to
strengthen the linkage between the manufacturing and the trade sub-sectors.

13
ANNEXES

14
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 75% 85% 100% 100%

1. Total Inventory 0 0 43,453,564.48 49,247,371.03 57,938,080.86 57,938,080.86

Raw Materials in Stock- Total 0 0 18,676,367.06 21,166,550.36 24,901,817.64 24,901,817.64

Raw Material-Local 0 0 2,197,222.36 2,490,183.30 2,929,624.70 2,929,624.70

Raw Material-Foreign 0 0 16,479,144.70 18,676,367.06 21,972,192.94 21,972,192.94

Factory Supplies in Stock 0 0 78,341.47 88,789.04 104,460.40 104,460.40

Spare Parts in Stock and Maintenance 0 0 146,756.21 166,318.60 195,669.84 195,669.84

Work in Progress 0 0 1,958,582.66 2,219,726.00 2,611,433.34 2,611,433.34

Finished Products 0 0 3,917,150.01 4,439,436.68 5,222,866.68 5,222,866.68

2. Accounts Receivable 0 0 10,528,348.83 11,932,122.55 14,037,798.44 14,037,798.44

3. Cash in Hand 0 0 870,411.40 986,452.97 1,160,538.32 1,160,538.32

CURRENT ASSETS 0 0 36,175,942.33 40,999,411.51 48,234,599.98 48,234,599.98

4. Current Liabilities 0 0 10,528,348.83 11,932,122.55 14,037,798.44 14,037,798.44

Accounts Payable 0 0 10,528,348.83 11,932,122.55 14,037,798.44 14,037,798.44

1
TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 25,647,608.81 29,067,288.97 34,196,801.54 34,196,801.54

INCREASE IN NET WORKING CAPITAL 0 0 25,647,608.81 3,419,680.15 5,129,527.89 0

2
 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 57,938,080.86 57,938,080.86 57,938,080.86 57,938,080.86 57,938,080.86 57,938,080.86

Raw Materials in Stock-Total 24,901,817.64 24,901,817.64 24,901,817.64 24,901,817.64 24,901,817.64 24,901,817.64

Raw Material-Local 2,929,624.70 2,929,624.70 2,929,624.70 2,929,624.70 2,929,624.70 2,929,624.70

Raw Material-Foreign 21,972,192.94 21,972,192.94 21,972,192.94 21,972,192.94 21,972,192.94 21,972,192.94

Factory Supplies in Stock 104,460.40 104,460.40 104,460.40 104,460.40 104,460.40 104,460.40

Spare Parts in Stock and Maintenance 195,669.84 195,669.84 195,669.84 195,669.84 195,669.84 195,669.84

Work in Progress 2,611,433.34 2,611,433.34 2,611,433.34 2,611,433.34 2,611,433.34 2,611,433.34

Finished Products 5,222,866.68 5,222,866.68 5,222,866.68 5,222,866.68 5,222,866.68 5,222,866.68

2. Accounts Receivable 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44

3. Cash in Hand 1,160,538.32 1,160,538.32 1,160,538.32 1,160,538.32 1,160,538.32 1,160,538.32

CURRENT ASSETS 48,234,599.98 48,234,599.98 48,234,599.98 48,234,599.98 48,234,599.98 48,234,599.98

4. Current Liabilities 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44

Accounts Payable 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44

3
TOTAL NET WORKING CAPITAL REQUIREMENTS 34,196,801.54 34,196,801.54 34,196,801.54 34,196,801.54 34,196,801.54 34,196,801.54

INCREASE IN NET WORKING CAPITAL - - - - - -

4
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

TOTAL CASH INFLOW 31,389,820.91 65,586,622.44 107,038,174.84 110,781,576.54 130,785,443.89 128,679,768.00

1. Inflow Funds 31,389,820.91 65,586,622.44 10,528,348.83 1,403,773.72 2,105,675.89 -

Total Equity 12,555,928.36 26,234,648.98 - - - -

Total Long Term Loan 18,833,892.54 39,351,973.47 - - - -

Total Short Term Finances - - 10,528,348.83 1,403,773.72 2,105,675.89 -

2. Inflow Operation - - 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00

Sales Revenue - - 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00

Interest on Securities - - - - - -

3. Other Income - - - - - -

TOTAL CASH OUTFLOW 31,389,820.91 31,389,820.91 118,275,365.37 97,606,269.51 120,372,340.05 112,322,547.39

4. Increase In Fixed Assets 31,389,820.91 31,389,820.91 - - - -

Fixed Investments 29,895,067.53 29,895,067.53 - - - -

Pre-production Expenditures 1,494,753.38 1,494,753.38 - - - -

5. Increase in Current Assets - - 36,175,942.33 4,823,453.87 7,235,188.47 -

6. Operating Costs - - 67,222,494.62 76,102,853.92 89,423,415.88 89,423,415.88

5
7. Corporate Tax Paid - - - - 8,197,513.98 8,546,619.13

8. Interest Paid - - 14,876,928.40 6,982,302.08 5,818,592.73 4,654,868.06

9.Loan Repayments - - - 9,697,644.33 9,697,644.33 9,697,644.33

10.Dividends Paid - - - - - -

Surplus (Deficit) - 34,196,801.54 (11,237,190.53) 13,175,322.30 10,413,103.85 16,357,220.62

Cumulative Cash Balance - 34,196,801.54 22,959,611.01 36,134,917.99 46,548,021.83 62,905,242.43

6
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10

TOTAL CASH INFLOW 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00

1. Inflow Funds - - - - - -

Total Equity - - - - - -

Total Long Term Loan - - - - - -

Total Short Term Finances - - - - - -

2. Inflow Operation 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00

Sales Revenue 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00 50,148,000.00

Interest on Securities - - - - - -

3. Other Income - - - - - -

TOTAL CASH OUTFLOW 43,455,940.44 43,315,842.45 42,998,381.73 38,901,636.39 38,901,636.39 38,901,636.39

4. Increase In Fixed Assets - - - - - -

Fixed Investments - - - - - -

Pre-production Expenditures - - - - - -

5. Increase in Current Assets - - - - - -

6. Operating Costs

7
 34,849,343.67 34,849,343.67 34,849,343.67 34,849,343.67 34,849,343.67 34,849,343.67

7. Corporate Tax Paid 3,466,773.03 3,780,186.09 3,916,242.39 4,052,298.69 4,052,298.69 4,052,298.69

8. Interest Paid 1,360,545.09 907,028.07 453,517.02 - - -

9. Loan Repayments 3,779,284.62 3,779,284.62 3,779,284.62 - - -

10.Dividends Paid - - - - - -

Surplus (Deficit) 6,692,059.56 6,832,157.55 7,149,618.27 11,246,363.61 11,246,363.61 11,246,363.61

Cumulative Cash Balance 31,206,963.09 38,039,120.64 45,188,732.94 56,435,096.55 67,681,454.19 78,927,817.80

8
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

TOTAL CASH INFLOW - - 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00

1. Inflow Operation - - 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00

Sales Revenue - - 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00

Interest on Securities - - - - - -
2. Other Income - - - - - -

TOTAL CASH OUTFLOW 31,389,820.91 31,389,820.91 92,870,088.10 79,522,534.10 102,750,442.40 97,970,034.99

3. Increase in Fixed Assets 31,389,820.91 31,389,820.91 - - - -

Fixed Investments 29,895,067.53 29,895,067.53 - - - -

Pre-production Expenditures 1,494,753.38 1,494,753.38 - - - -

4. Increase in Net Working Capital - - 25,647,608.81 3,419,680.15 5,129,527.89 -

5. Operating Costs - - 67,222,494.62 76,102,853.92 89,423,415.88 89,423,415.88

6. Corporate Tax Paid - - - - 8,197,513.98 8,546,619.13

NET CASH FLOW (31,389,820.91) (31,389,820.91) 3,639,737.88 29,855,268.72 25,929,325.59 30,709,733.01

CUMULATIVE NET CASH FLOW (31,389,820.91) (62,779,641.81) (59,139,903.94) (29,284,650.54) (3,355,309.63) 27,354,423.38

Net Present Value (at 18%) (31,389,820.91) (26,601,539.51) 2,613,991.62 18,170,839.40 13,374,055.94 13,423,505.74

9
Cumulative Net present Value (31,389,820.91) (57,991,360.41) (55,377,368.80) (37,206,529.40) (23,832,473.43) (10,408,967.71)

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

TOTAL CASH INFLOW 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00

1. Inflow Operation 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00

Sales Revenue 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00

Interest on Securities - - - - - -

2. Other Income - - - - - -

TOTAL CASH OUTFLOW 98,319,155.45 99,123,373.38 99,472,493.84 99,821,598.96 99,821,598.96 98,319,155.45

3. Increase in Fixed Assets - - - - - -

Fixed Investments - - - - - -

Pre-production Expenditures - - - - - -

4. Increase in Net Working Capital - - - - - -

5. Operating Costs 89,423,415.88 89,423,415.88 89,423,415.88 89,423,415.88 89,423,415.88 89,423,415.88

6. Corporate Tax Paid 8,895,739.59 9,699,957.51 10,049,077.97 10,398,198.44 10,398,198.44 8,895,739.59

NET CASH FLOW 30,360,612.55 29,556,394.64 29,207,274.17 28,858,169.02 28,858,169.02 30,360,612.55

CUMULATIVE NET CASH FLOW 57,715,035.93 87,271,430.58 116,478,704.74 145,336,873.77 174,195,027.46 57,715,035.93
Net Present Value (at 18%)

11
 11,246,535.13 9,278,485.31 7,770,251.20 6,506,248.22 5,513,774.87 11,246,535.13

Cumulative Net present Value 837,567.42 10,116,068.05 17,886,303.92 24,392,552.14 29,906,327.01 837,567.42

34,579,013.54
Net Present Value (at 18%)

Internal Rate of Return 29.3%

12
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00 128,679,768.00

Sales Revenue 96,509,826.00 109,377,802.80 128,679,768.00 128,679,768.00 128,679,768.00

Other Income - - - - -

2. Less Variable Cost 63,575,112.55 72,051,785.05 84,766,816.78 84,766,816.78 84,766,816.78

VARIABLE MARGIN 32,934,713.44 37,326,017.75 43,912,951.25 43,912,951.25 43,912,951.25

(In % of Total Income) 522.84 522.84 522.84 522.84 522.84

3. Less Fixed Costs 9,760,130.62 10,163,817.43 10,769,347.66 10,769,347.66 10,769,347.66

OPERATIONAL MARGIN 23,174,582.82 27,162,200.32 33,143,603.59 33,143,603.59 33,143,603.59

(In % of Total Income) 367.81 380.37 394.62 394.62 394.62

4. Less Cost of Finance 14,876,927.64 6,982,304.08 5,818,586.75 4,654,869.43 3,491,151.96

5. GROSS PROFIT 8,297,658.70 20,179,891.04 27,325,021.44 28,488,738.75 29,652,456.23

6. Income (Corporate) Tax - - 8,197,506.48 8,546,621.58 8,895,736.84

7. NET PROFIT 8,297,658.70 20,179,891.04 19,127,514.96 19,942,117.17 20,756,719.24

RATIOS (%)
Gross Profit/Sales 8.60% 18.45% 21.23% 22.14% 23.04%

13
Net Profit After Tax/Sales 8.60% 18.45% 14.86% 15.50% 16.13%
Return on Investment 26.21% 29.57% 25.72% 25.36% 25.00%
Return on Equity 21.39% 52.02% 49.31% 51.41% 53.51%

14
 Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00

Sales Revenue 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00 128,679,768.00

Other Income - - - - -

2. Less Variable Cost 84,766,816.78 84,766,816.78 84,766,816.78 84,766,816.78 84,766,816.78

VARIABLE MARGIN 43,912,951.25 43,912,951.25 43,912,951.25 43,912,951.25 43,912,951.25

(In % of Total Income) 522.84 522.84 522.84 522.84 522.84

3. Less Fixed Costs 9,252,305.10 9,252,305.10 9,252,305.10 9,252,305.10 9,252,305.10

OPERATIONAL MARGIN 34,660,646.14 34,660,646.14 34,660,646.14 34,660,646.14 34,660,646.14

(In % of Total Income) 412.69 412.69 412.69 412.69 412.69

4. Less Cost of Finance 2,327,434.03 1,163,724.67 - - -

5. GROSS PROFIT 32,333,212.12 33,496,936.79 34,660,646.14 34,660,646.14 34,660,646.14

6. Income (Corporate) Tax 9,699,957.51 10,049,077.97 10,398,198.44 10,398,198.44 10,398,198.44

7. NET PROFIT 22,633,254.61 23,447,858.82 24,262,463.02 24,262,463.02 24,262,463.02

RATIOS (%)

15
Gross Profit/Sales 25.13% 26.03% 26.94% 26.94% 26.94%
Net Profit After Tax/Sales 17.59% 18.22% 18.85% 18.85% 18.85%
Return on Investment 25.74% 25.38% 25.02% 25.02% 25.02%
Return on Equity 58.35% 60.45% 62.55% 62.55% 62.55%

16
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

TOTAL ASSETS 31,389,820.91 96,976,443.35 115,802,446.60 127,688,474.22 139,224,018.00 149,468,490.06

1. Total Current Assets - 34,196,801.54 59,135,553.34 77,134,329.50 94,782,621.84 111,139,842.45

Inventory on Materials and Supplies - - 18,901,464.74 21,421,658.00 25,201,963.20 25,201,963.20

Work in Progress - - 1,958,582.66 2,219,726.00 2,611,433.34 2,611,433.34

Finished Products in Stock - - 3,917,150.01 4,439,436.68 5,222,866.68 5,222,866.68

Accounts Receivable - - 10,528,348.83 11,932,122.55 14,037,798.44 14,037,798.44

Cash in Hand - - 870,411.40 986,452.97 1,160,538.32 1,160,538.32

Cash Surplus, Finance Available - 34,196,801.54 22,959,611.01 36,134,917.99 46,548,021.83 62,905,242.43

Securities - - - - - -

2. Total Fixed Assets, Net of Depreciation 31,389,820.91 62,779,641.81 56,666,893.26 50,554,144.71 44,441,396.16 38,328,647.61

Fixed Investment - 29,895,067.53 59,790,135.06 59,790,135.06 59,790,135.06 59,790,135.06

Construction in Progress 29,895,067.53 29,895,067.53 - - - -

Pre-Production Expenditure 1,494,753.38 2,989,506.75 2,989,506.75 2,989,506.75 2,989,506.75 2,989,506.75

Less Accumulated Depreciation - - 6,112,748.55 12,225,497.10 18,338,245.65 24,450,994.20

3. Accumulated Losses Brought Forward - - - - - -

17
4. Loss in Current Year - - - - - -

TOTAL LIABILITIES 31,389,820.91 96,976,443.35 115,802,446.60 127,688,474.22 139,224,018.00 149,468,490.06

5. Total Current Liabilities - - 10,528,348.83 11,932,122.55 14,037,798.44 14,037,798.44

Accounts Payable - - 10,528,348.83 11,932,122.55 14,037,798.44 14,037,798.44

Bank Overdraft - - - - - -

6. Total Long-term Debt 18,833,892.54 58,185,866.01 58,185,866.01 48,488,221.67 38,790,577.34 29,092,933.00

Loan A 18,833,892.54 58,185,866.01 58,185,866.01 48,488,221.67 38,790,577.34 29,092,933.00

Loan B - - - - - -

7. Total Equity Capital 12,555,928.36 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34

Ordinary Capital 12,555,928.36 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34

Preference Capital - - - - - -

Subsidies - - - - - -

8. Reserves, Retained Profits Brought Forward - - - 8,297,654.42 28,477,552.65 47,605,064.85

9.Net Profit After Tax - - 8,297,654.42 20,179,898.24 19,127,512.20 19,942,116.41

Dividends Payable - - - - - -

Retained Profits - - 8,297,654.42 20,179,898.24 19,127,512.20 19,942,116.41

18
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10

TOTAL ASSETS 160,527,566.35 173,463,161.28 187,213,375.79 211,475,838.76 235,738,286.51 260,000,749.49

1. Total Current Assets 128,311,667.29 145,842,968.22 164,188,888.73 193,047,057.70 221,905,211.45 250,763,380.43

Inventory on Materials and Supplies 25,201,963.20 25,201,963.20 25,201,963.20 25,201,963.20 25,201,963.20 25,201,963.20

Work in Progress 2,611,433.34 2,611,433.34 2,611,433.34 2,611,433.34 2,611,433.34 2,611,433.34

Finished Products in Stock 5,222,866.68 5,222,866.68 5,222,866.68 5,222,866.68 5,222,866.68 5,222,866.68

Accounts Receivable 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44

Cash in Hand 1,160,538.32 1,160,538.32 1,160,538.32 1,160,538.32 1,160,538.32 1,160,538.32

Cash Surplus, Finance Available 80,077,067.28 97,608,383.55 115,954,288.71 144,812,457.75 173,670,611.44 202,528,780.47

Securities - - - - - -

2. Total Fixed Assets, Net of Depreciation 32,215,899.06 27,620,193.06 23,024,487.06 18,428,781.06 13,833,075.06 9,237,369.06

Fixed Investment 59,790,135.06 59,790,135.06 59,790,135.06 59,790,135.06 59,790,135.06 59,790,135.06

Construction in Progress - - - - - -

Pre-Production Expenditure 2,989,506.75 2,989,506.75 2,989,506.75 2,989,506.75 2,989,506.75 2,989,506.75

Less Accumulated Depreciation 30,563,742.75 35,159,448.75 39,755,154.75 44,350,860.75 48,946,566.75 53,542,272.75

3. Accumulated Losses Brought Forward - -

19
 - - - -

4. Loss in Current Year - - - - - -

TOTAL LIABILITIES 160,527,566.35 173,463,161.28 187,213,375.79 211,475,838.76 235,738,286.51 260,000,749.49

5. Total Current Liabilities 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44

Accounts Payable 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44 14,037,798.44

Bank Overdraft - - - - - -

6. Total Long-term Debt 19,395,288.67 9,697,644.33 - - - -

Loan A 19,395,288.67 9,697,644.33 - - - -

Loan B - - - - - -

7. Total Equity Capital 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34

Ordinary Capital 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34 38,790,577.34

Preference Capital - - - - - -

Subsidies - - - - - -

8. Reserves, Retained Profits Brought Forward 67,547,181.25 88,303,901.90 110,937,156.47 134,384,999.99 158,647,463.03 182,909,910.72

9. Net Profit After Tax 20,756,720.62 22,633,254.61 23,447,858.82 24,262,463.02 24,262,463.02 24,262,463.02

Dividends Payable - - - - - -

Retained Profits 20,756,720.62 22,633,254.61 23,447,858.82 24,262,463.02 24,262,463.02 24,262,463.02

20