ANRS INVESTMENT COMMISSIN

[Link]

Project Profile on the Establishment of

VETERINARY MEDICINE producing plant

Development Studies Associates

(DSA)

Revised July 2016

Bahir Dar
 Table of Contents

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

This profile envisage the establishment of a plant for the production of 2,700,000 tablets of
Albendazole (1.5 gm/tab), 270,000 bottles of Albendazole syrup (60ml), 540,000 pieces of
besenil injections (5 mg/injection), 540,000 pieces of flukazol tablets, (200 mg/tablets),
3,600,000 torpidol tablets (1 gm/tablets) and 540,000 pieces of strepto pencilline injection 2.5
gm/injection) – totally 8,190,000 different item per year.

The present demand for different types of veterinary medicine is estimated at 63 tons per annum
in Ethiopia and 21 tons in ANRS.

The demand is expected to grow to 318 tons and 105 tons in Ethiopia and ANRS, respectively, in
the year 2025.

The total investment requirement 44.78 million including working capital at full capacity is
estimated at Birr 44.88 millions, out of which Birr 26.69 million is for machinery and equipment.

The plant will create employment opportunities for 76 persons.

The project is financially viable with internal rate of return (IRR) of 36.51 % and net present
value (NPV) of Birr 125.48 million at 18 % annual discount rate.

2. Product Description and Application

The ANRS hosts approximately one third of Ethiopia’s cattle, sheep and goats population;
currently, it is estimated at 300 million.

Despite over half a century of veterinary services in the region, diseases remains a major
constraint to livestock production. Apart from their contribution to deaths and illness leading to
condemnation of organs, poor weight gain, poor milk yield, poor feed conversion, poor
reproductive capacity and poor work capacity, they severely restrict access to some potential
export markets. Prevailing diseases of economic importance in the region are:

1
 a. Diseases causing high mortality: These are diseases caused by bacteria and responsible
for high mortality in cattle, sheep and goats are anthrax, blackleg and pasteurellosis.
b. Disease of special concern: Mange, lice and keds: These are ectoparasites specialized for
life on or within the skin. They are found widely distributed and are constraints to sheep
and goat production in the ANRS.
c. Trypanosomosis: The disease trypanomosomosis and its cyclic vector the “tse tse fly”
occur in three zones of the ANRS they are: East Gojam, West Gojam, and Awi Zones1.

The envisage plant addresses this problem by producing vital veterinary medicines in the region.
The most frequently used veterinary medicines in region are:

1. Berenil
Berenil is often chemically referred by the name diminazene aceturate, which is an aromatic
dizmidine derivative related to pertamidine and is an antiprotozoal agent which is used in the
treatment of trypanomosomosi (“tse tse fly”) and babesisis. The solution usually contains
odytertacyline. It is produced in 5mg/injection.

2. Albendazole
Albendazole is a benzimidazole anthelmintic produced in syrup, 5ml, and tablets, 1.5m. It is
used to control gastrointestinal roundworms, hung worms, tapeworms and tematodes in
cattle, sheep and goats.

3. Flukazol
Flukazol is a trizole antiungal drug which inhibits tungol cytochrome dependent enzymes
resulting in blocked ergosterol synthesis. It is active against aspergillus, blastomyces
dermatitidies, etc. In Ethiopia, it is used as anthelminthic, and can be produced in 200mg
tablets.

4. Strepto Penicillin
It is antibiotic injection used, for example, against “Gorerssa”. In the envisaged plant
strepto pencillin is produced in 2.5gm/injection.

1
. potential Assessment Survey – Livestock Potentials Report December 2006 Bahr Dar

2
 5. Torpidol
Torpido is authemitic tablet, 1gm/tablet. It is used to treat horses and donkeys. Torpidol
usually contains fenbendazole.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

In all the zones, mortality rates recorded by the region in cattle and sheep are over 10 and 25
percent respectively, which is higher than the 7% and 20% national average2. In most less than
half of he livestock owing population have any access to veterinary clinics; and the existing
clinics suffer from lack of veterinary medicines.

The total import and domestic production of veterinary medicines are shown in Table 1.
Accordingly, the present regional demand is set at 41 tons.

Table 1: Total Consumption of Veterinary Medicines

Ethiopia
Year (ton) ANRS (ton)
2007 60 20
2008 63 21
2009 69 23
2010 76 25
2011 84 28
2012 92 31
2013 101 34
2014 112 37
2015 123 41

3.1.2 Projected Demand

A consultancy study undertaken in ANRS recommends the privatization of the state run
public veterinary services. It indicates that farmers would prefer to have ready access to
modern medicines through trained local service providers rather than have to trek their
animals to the nearest clinic or substation. Almost all said they would be prepared to pay

2
. Ibid

3
more than current prices charged at wereda clinics especially if the drugs were readily
available in their immediate vicinity. The sustainability of supervision and drug supplies to
community animal health workers (CAHWS) is more likely to be achieved through linkages
with a private sector delivery chain than through the public sector3.

Three interrelated factors are taken into consideration for forecasting the future demand
veterinary medicine: (a) the visible current shortage of veterinary services as exemplified by the
above paragraph,(b) the rapid growth on Agriculture in general and that of the livestock sub-
sector in particular, and (c) the region’s robust agricultural extension development program.
Taking a rather modest assumption of 10% growth per annum, the regional demand for the
selected veterinary products is forecasted to increase from the current 41 tons to 105 tons in the
year 2025.
Table 2: Projected Demand for Veterinary Medicines

Year Ethiopia (ton) ANRS (ton)

2015 123 41
2016 135 45
2017 149 50
2018 163 54
2019 179 59
2020 197 65
2021 217 72
2022 239 79
2023 263 87
2024 289 96
2025 318 105

3.1.3 Pricing and Distribution

Taking into account the import and domestic prices the ex-factory selling price is determined to
be an average Birr 5.90 /piece.

The products could be distributed through the existing trading channels and agricultural
extension system

3
. Ibid

4
 3.2 Plant Capacity

Considering the time needed for developing production skill and setting a significant market
share of the product, the capacity of the envisaged plant is summarized in Table. This capacity is
selected on the basis of three shifts per day and 275 working days per annum. The working days
are set by deducting holidays and stoppages.

Qty (pcs.)
No. Product
1 Albendazole Tablet (1.5gm/tab) 2,700,000
2 Albendazole syrup bottle(60ml) 270,000
3 Berenil injections (5m/injection) 540,000
4 Flukazole Tablets(200mg/tablet) 540,000
5 Torpidol Tablets(1gm/tablets) 3,600,000
6 Strepto penciline injections(2.5gm/injection) 540,000
8,190,000

3.3 Production Program

Full capacity production may not be achieved just at the beginning of the production phase,
because the local products require enough time to compete with the imported ounces and secure
reasonable market share. Therefore, in the first, second, and third year of production, the
capacity utilization rate is assumed to be 70%, 80% and 90% respectively. In the four year and
thereafter, full capacity production will be achieved.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

All raw materials should be imported preferably from Asian countries such as India, China and
Indonesia.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual raw materials requirements and their costs are shown in Table 3.

5
 Table 3: Raw material Requirements at Full Capacity
No. Material Qty Price
(ton) Unit Local Foreign Total
1 Albendazole 449
11,249 1,515,205 3,535,476 5,050,681
2 Berenil 2.7
1,883,511 1,525,644 3,559,832 5,085,476
3 Flucanozle 0.108
44,994,936 1,457,837 3,401,618 4,859,452
4 Torpidol 3.6
470,876 508,548 1,186,611 1,695,159
5 Strepto pencilline 1.35
2,223,588 900,553 2,101,290 3,001,843
6 Packaging 1
materials 843,968 253,190 590,778 843,968

- 6,160,974 14,375,607 20,536,581

A. UTILITIES

The annual electricity and water requirement of the plant is 576,000 kwh (Birr 316,800) and
16000 m3 (Birr 42, 400) respectively. Fuel oil will also be significantly consumed, 12000
lit/annum and its estimated cost is Birr 108, 000. The total cost of utilities is thus about Birr
467,200.

5. Location and Site

Bahir Dar is selected as preferred site for this plant for better endowment of infrastructure.

6. Technology and Engineering

6.1 Production Process

The major operation of the plant are tablet making, syrup making and filling of capsules. The
manufacturing of tablets consists of the following basis step: formulation, mixing and milling,
granulation, drying, lubrication, compression and coating.

The syrup making essentially consists of mixing the various ingredients in a jacketed kettle. The
bottles to be used must be separated, washed, sterilized, dried and labeled.

6
The modern rotary die capsule machine is self contained unit capable of continuously and
automatically producing finished capsules from a supply of gelatine mass and filling material.
Accurate filling under pressure and sealing of the capsule wall occur as dual and coincident
operations, each delicately timed against the other.

The technical data and information are compiled from a document provided by the National
Research Development Corporation of India.

Alternative technology
Microbial fermentation process is an alternative technology which might take time tp practice it
in Ethiopia. In this Antibiotics are produced by a number of micro organisms and inhibit the
growth of other micro organisms even at very low concentrations. As such, the antibiotics have
found wide application in chemotherapy, plant pathology, food preservation, veterinary medicine
and as research tools in biochemistry and molecular biology. At present about 7000 antibiotics
are known and about 100 of these are produced commercially by microbial fermentation process.

6.2 Machinery and Equipment

The list of machinery and equipment is indicated in Table 4. the total cost of these items is
estimated to be Birr 26,712,060.

Table 4: Required Machineries and Equipments

No. Description Qty.

Tablet Making Section

1 Powder and mass mixer (cap. 50kg/batch) 2
2 Mill(for granulation, shredding and pulverizing 1
3 Horizontal Granulators 2
4 Drying over 1
5 Fluid bed drier(cap 100kg/batch) 1
6 Mechanical lifter 1
7 Drum mixer(ss) 1
8 Rotary Tableting machines 2
9 Coating pans(ss) 2

7
 10 Canvas polishing pan 2
11 Full automatic tablet/syrup packing manines 2
12 Blister packing machine
Capsule Section
1 Double cone blender 1
2 Blender 1
3 Drum Mixer(ss) 1
4 Capsules filling machine 1
5 Capsules conter 1
Injection Liquid Section
1 Mixer 2
2 Cylindrical tank (ss) 2
3 Filler presses 2
4 Industrial Stirrer 2
5 Emulsifier 1
6 Bottle washing and brushing machine 1
7 Drying oven 1
8 Batch printing machine 1
9 Label gumming machine 1
10 Volumetric liquid filling machine 1
11 Capsule sealing machine 1
Miscellaneous
1 Mini boiler 1
2 Steam and water piping 1
3 Pumps, value and other fillings 1
4 Material handling equipments, trolleys, containers, etc. 1
5 Weighing platform and balance 1
6 Other misc. Items 1
Supplier Address:

Paragon Medical
Tel: 954-340-2457
P.O. Box 770187 Coral Springs, Florida 33077
USA

6.3 Civil Engineering Cost

The total area of the plant including provision for open space 2000 m2 out of which 1000m2 is a
built-up area. The lease cost of land and building is estimated to be Birr 120,000 and Birr
5,132,000, respectively.

8
 7. Human Resource and Training Requirement

7.1 Human Resource

The human resource requirement is shown in Table 5 below.

Table 5: Human Resource Requirements
Salary/Wage (Birr)

  Job Title No. Monthly Annual

1 Plant Manger 1 10000 120000
2 Sales Officer 1 5000 60000
3 Production and technical head 1 8000 96000
4 Accountant 1 3000 36000
5 Secretary 1 2300 27600
6 Supervisor 3 4000 48000
7 Operators 27 2500 30000
8 Ass. Operators 14 2000 24000
9 Production Labourer 17 900 10800
10 General Service workers 8 800 9600
11 Drivers 2 1500 18000
Total 76 40,000 480,000
  Employment Benefits 20% of Annual Salary 381,512.88
      861,512.88

7.2 Training Requirement

Induction and periodic trainings are important. Birr 228,374 is budgeted and it is included in the
working capital.

8. Financial Analysis
8.1 Underlying Assumption

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

9
 A. Construction and Finance

Box 1: Construction and Finance

Construction period 2 year

Source of finance 40% equity and 60% 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

Box 2: Depreciation

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

C. Working Capital (Minimum Days of Coverage)

Box 3: Working Capital

Raw Material-Local 30 days

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

10
 8.2 Investment

The total initial investment inducing working capital at full capacity is estimated at Birr 44.87
million of which Birr 26.71 million is for plant machinery and equipments. The detail is shown
in Table 6.

Table 6: Initial Investment & Working Capital

Total Initial Investment

Item Cost
Land 6,000
Building and civil works 5,132,000
Office equipment 256,600
Vehicles 1,283,000
Plant machinery & equipment 26,712,060
Total Fixed Investment 33,399,056
Pre production capital expenditure 1,669,953
Total Initial Investment 35,069,009
Working capital at full capacity 9,803,659
Total 44,872,668
*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.

8.3 Production Costs

The total production cost at full capacity is estimated at Birr 31.80 million. The details are shown
at Table 7.

Table 7: Production Cost at Full Capacity

Total Production Cost at Full Capacity

Items Cost

11
 1.      Raw materials
20,536,580
2.      Utilities
467,200
3.      Wages and Salaries
2,289,077
4.      Spares and Maintenance
1,001,972
Factory costs
24,294,829
5.      Depreciation
3,544,057
6.      Financial costs
3,230,832
  Total Production Cost 31,801,353

8.4 Financial Evaluation

I. Profitability
The income statement (Annex 4) shows that the proposed project generates profit starting from
the first year of operation. Profits starts at Birr 2.29 million in first year and reach at about 6.5
million in the eight year of the project life. Gross Profit to Sales starts at 17.38% and reach at
42.89% at eight year. Return on Equity start at 32.76% and reaches 80.85%. The total profit to be
earned during the whole ten years of operation amounts Birr 123.65 million. These indicators
prove that the project is profitable.

II. Breakeven Analysis

The breakeven analysis shows that the Total Revenue equals the Total Cost at 19.25% of
capacity which is achieved at the first year of operation.

III. Payback Period

The project pays back its initial investment at during the first half of the second year.

IV. Simple Rate of Return

The simple interest rate is 32.5%.

V. Internal Rate of Return and Net Present Value

12
The Internal Rate of Return is 36.5%; and the Net Present Value at 18% discount rate per annum
is about Birr 30.53 million.

VI. Sensitivity Analysis

The project can absorb shocks. If prices increase by 10%, for example, the project remains viable
with a total profit of Birr 109 millions. Likewise, sales declines by 10%, the project will remain
viable with a total profit of Birr 91.53 million.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project 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 a total profit of Birr 125 million within the
project life.

B. Tax Revenue

In the project life under consideration, the government will collect about Birr 46.08 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT).

C. Import Substitution and Foreign Exchange Saving

The project has strong import substitution effect. Furthermore, there is a possibility to engage in
international market since the product has sustainable international demand.

D. Employment and Income Generation

13
The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 76 professionals as well as support
staffs.

E. Diversification and InterSectoral linkage.

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

F. Public Health

The project compliments to the current consorted efforts for better public health.

14
ANNEXES

15
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 70% 80% 90% 100%

1. Total Inventory 0 0 11457780 13094606 14731432 16368257

Raw Materials in Stock- Total 0 0 4861569 5556078 6250589 6945097

Raw Material-Local 0 0 470474 537685 604896 672107

Raw Material-Foreign 0 0 4391093 5018393 5645693 6272992

Factory Supplies in Stock 0 0 21819 24934 28052 31167

Spare Parts in Stock and Maintenance 0 0 76513 87444 98375 109306

Work in Progress 0 0 545437 623356 701278 779197

Finished Products 0 0 1090873 1246714 1402553 1558391

2. Accounts Receivable 0 0 3691093 4218391 4745691 5272989

3. Cash in Hand 0 0 266351 304399 342451 380499

CURRENT ASSETS 0 0 10553655 12061319 13568985 15076648

4. Current Liabilities 0 0 3691093 4218391 4745691 5272989

Accounts Payable 0 0 3691093 4218391 4745691 5272989

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 6862562 7842928 8823294 9803660

INCREASE IN NET WORKING CAPITAL 0 0 6862562 980366 980366 980366

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 16368257 16368257 16368257 16368257 16368257 16368257

Raw Materials in Stock-Total 6945097 6945097 6945097 6945097 6945097 6945097

Raw Material-Local 672107 672107 672107 672107 672107 672107

Raw Material-Foreign 6272992 6272992 6272992 6272992 6272992 6272992

Factory Supplies in Stock 31167 31167 31167 31167 31167 31167

Spare Parts in Stock and Maintenance 109306 109306 109306 109306 109306 109306

Work in Progress 779197 779197 779197 779197 779197 779197

Finished Products 1558391 1558391 1558391 1558391 1558391 1558391

2. Accounts Receivable 5272989 5272989 5272989 5272989 5272989 5272989

3. Cash in Hand 380499 380499 380499 380499 380499 380499

CURRENT ASSETS 15076648 15076648 15076648 15076648 15076648 15076648

4. Current Liabilities 5272989 5272989 5272989 5272989 5272989 5272989

Accounts Payable 5272989 5272989 5272989 5272989 5272989 5272989

TOTAL NET WORKING CAPITAL REQUIREMENTS 9803660 9803660 9803660 9803660 9803660 9803660

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 17534504 27338164 37526113 39195894 44029468 48863042
1. Inflow Funds 17534504 27338164 3691093 527300 527300 527300
Total Equity 7013802 10935266 0 0 0 0
Total Long Term Loan 10520703 16402898 0 0 0 0
Total Short Term Finances 0 0 3691093 527300 527300 527300
2. Inflow Operation 0 0 33835019 38668594 43502168 48335742
Sales Revenue 0 0 33835019 38668594 43502168 48335742
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 17534504 17534504 34963728 29015225 35421354 38196211
4. Increase In Fixed Assets 17534504 17534504 0 0 0 0
Fixed Investments 16699528 16699528 0 0 0 0
Pre-production Expenditures 834976 834976 0 0 0 0
5. Increase in Current Assets 0 0 10553655 1507666 1507666 1507666
6. Operating Costs 0 0 17358441 19789462 22220482 24651500
7. Corporate Tax Paid 0 0 0 0 4513581 5395890
8. Interest Paid 0 0 7051632 3230833 2692360 2153888
[Link] Repayments 0 0 0 4487267 4487267 4487267
[Link] Paid 0 0 0 0 0 0
Surplus (Deficit) 0 9803660 2562385 10180667 8608111 10666831
Cumulative Cash Balance 0 9803660 12366044 22546711 31154822 41821653

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 48335742 48335742 48335742 48335742 48335742 48335742
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 48335742 48335742 48335742 48335742 48335742 48335742
Sales Revenue 48335742 48335742 48335742 48335742 48335742 48335742
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 36311615 36111862 35734932 30870733 30870733 30870733
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 24651500 24651500 24651500 24651500 24651500 24651500
7. Corporate Tax Paid 5557430 5896150 6057690 6219232 6219232 6219232
8. Interest Paid 1615415 1076945 538473 0 0 0
9. Loan Repayments 4487267 4487267 4487267 0 0 0
[Link] Paid 0 0 0 0 0 0
Surplus (Deficit) 12024127 12223880 12600810 17465009 17465009 17465009
Cumulative Cash Balance 53845781 66069661 78670473 96135480 113600489 131065499

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 33835019 38668594 43502168 48335742

1. Inflow Operation 0 0 33835019 38668594 43502168 48335742

Sales Revenue 0 0 33835019 38668594 43502168 48335742

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 17534504 17534504 24221003 20769828 23200848 31027756

3. Increase in Fixed Assets 17534504 17534504 0 0 0 0

Fixed Investments 16699528 16699528 0 0 0 0

Pre-production Expenditures 834976 834976 0 0 0 0

4. Increase in Net Working Capital 0 0 6862562 980366 980366 980366

5. Operating Costs 0 0 17358441 19789462 22220482 24651500

6. Corporate Tax Paid 0 0 0 0 0 5395890

NET CASH FLOW -17534504 -17534504 9614017 17898766 20301320 17307986

CUMULATIVE NET CASH FLOW -17534504 -35069009 -25454992 -7556226 12745094 30053079

Net Present Value (at 18%) -17534504 -14859750 6904636 10893743 10471194 7565479

Cumulative Net present Value -17534504 -32394254 -25489618 -14595875 -4124681 3440801

5
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

6
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 48335742 48335742 48335742 48335742 48335742 48335742

1. Inflow Operation 48335742 48335742 48335742 48335742 48335742 48335742

Sales Revenue 48335742 48335742 48335742 48335742 48335742 48335742

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 30208933 30547650 30709193 30870733 30870733 30870733

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 24651500 24651500 24651500 24651500 24651500 24651500

6. Corporate Tax Paid 5557430 5896150 6057690 6219232 6219232 6219232

NET CASH FLOW 18126809 17788092 17626549 17465009 17465009 17465009

CUMULATIVE NET CASH FLOW 48179888 65967980 83594532 101059539 118524548 135989555

Net Present Value (at 18%) 6714742 5584127 4689334 3937591 3336942 2827917

Cumulative Net present Value 10155543 15739670 20429004 24366595 27703539 30531456

Net Present Value (at 18%) 30,531,455.90

Internal Rate of Return 36.50%

Annex 4: NET INCOME STATEMENT ( in Birr)
  PRODUCTION

7
 1 2 3 4 5
Capacity Utilization (%) 70% 80% 90% 100% 100%

1. Total Income 33835019 38668594 43502168 48335742 48335742

Sales Revenue 33835019 38668594 43502168 48335742 48335742
Other Income 0 0 0 0 0
2. Less Variable Cost 16376197 18715652 21055110 23394566 23394566
VARIABLE MARGIN 17458823 19952941 22447058 24941176 24941176
(In % of Total Income) 52 52 52 52 52
3. Less Fixed Costs 4526301 4617866 4709429 4800991 4800991
OPERATIONAL MARGIN 12932522 15335075 17737629 20140185 20140185
(In % of Total Income) 38 40 41 42 42
4. Less Cost of Finance 7051632 3230833 2692360 2153888 1615415
5. GROSS PROFIT 5880890 12104243 15045269 17986295 18524767
6. Income (Corporate) Tax 0 0 4513581 5395890 5557430
7. NET PROFIT 5880890 12104243 10531688 12590407 12967337
RATIOS (%)  
Gross Profit/Sales 17.38% 31.30% 34.59% 37.21% 38.33%
Net Profit After Tax/Sales 17.38% 31.30% 24.21% 26.05% 26.83%
Return on Investment 30.84% 35.74% 30.13% 32.86% 32.50%
Return on Equity 32.76% 67.44% 58.68% 70.15% 72.25%
Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
  6 7 8 9 10

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

1. Total Income 48335742 48335742 48335742 48335742 48335742

Sales Revenue 48335742 48335742 48335742 48335742 48335742
Other Income 0 0 0 0 0
2. Less Variable Cost 23394566 23394566 23394566 23394566 23394566
VARIABLE MARGIN 24941176 24941176 24941176 24941176 24941176
(In % of Total Income) 52 52 52 52 52
3. Less Fixed Costs 4210401 4210401 4210401 4210401 4210401
OPERATIONAL MARGIN 20730776 20730776 20730776 20730776 20730776
(In % of Total Income) 43 43 43 43 43
4. Less Cost of Finance 1076945 538473 0 0 0
5. GROSS PROFIT 19653831 20192303 20730776 20730776 20730776
6. Income (Corporate) Tax 5896150 6057690 6219232 6219232 6219232
7. NET PROFIT 13757681 14134611 14511543 14511543 14511543
RATIOS (%)  
Gross Profit/Sales 40.66% 41.78% 42.89% 42.89% 42.89%
Net Profit After Tax/Sales 28.46% 29.24% 30.02% 30.02% 30.02%
Return on Investment 33.06% 32.70% 32.34% 32.34% 32.34%
Return on Equity 76.65% 78.75% 80.85% 80.85% 80.85%
Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 17534504 44872668 54444649 62588925 69160646 77791084

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1. Total Current Assets 0 9803660 22919697 34608029 44723807 56898302
Inventory on Materials and Supplies 0 0 4959901 5668458 6377016 7085573
Work in Progress 0 0 545437 623356 701278 779197
Finished Products in Stock 0 0 1090873 1246714 1402553 1558391
Accounts Receivable 0 0 3691093 4218391 4745691 5272989
Cash in Hand 0 0 266351 304399 342451 380499
Cash Surplus, Finance Available 0 9803660 12366044 22546711 31154822 41821653
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 17534504 35069009 31524952 27980896 24436839 20892783
Fixed Investment 0 16699528 33399056 33399056 33399056 33399056
Construction in Progress 16699528 16699528 0 0 0 0
Pre-Production Expenditure 834976 1669953 1669953 1669953 1669953 1669953
Less Accumulated Depreciation 0 0 3544057 7088113 10632170 14176226
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 17534504 44872668 54444649 62588925 69160646 77791084
5. Total Current Liabilities 0 0 3691093 4218391 4745691 5272989
Accounts Payable 0 0 3691093 4218391 4745691 5272989
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 10520703 26923601 26923601 22436334 17949067 13461801
Loan A 10520703 26923601 26923601 22436334 17949067 13461801
Loan B 0 0 0 0 0 0
7. Total Equity Capital 7013802 17949067 17949067 17949067 17949067 17949067
Ordinary Capital 7013802 17949067 17949067 17949067 17949067 17949067
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 5880890 17985132 28516820
[Link] Profit After Tax 0 0 5880890 12104243 10531688 12590407
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 5880890 12104243 10531688 12590407
Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 86271158 95541572 105188916 119700459 134212000 148723543

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1. Total Current Assets 68922432 81146312 93747122 111212131 128677138 146142147
Inventory on Materials and Supplies 7085573 7085573 7085573 7085573 7085573 7085573
Work in Progress 779197 779197 779197 779197 779197 779197
Finished Products in Stock 1558391 1558391 1558391 1558391 1558391 1558391
Accounts Receivable 5272989 5272989 5272989 5272989 5272989 5272989
Cash in Hand 380499 380499 380499 380499 380499 380499
Cash Surplus, Finance Available 53845781 66069661 78670473 96135480 113600489 131065499
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 17348726 14395260 11441794 8488328 5534862 2581396
Fixed Investment 33399056 33399056 33399056 33399056 33399056 33399056
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 1669953 1669953 1669953 1669953 1669953 1669953
Less Accumulated Depreciation 17720283 20673749 23627215 26580681 29534147 32487613
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 86271158 95541572 105188916 119700459 134212000 148723543
5. Total Current Liabilities 5272989 5272989 5272989 5272989 5272989 5272989
Accounts Payable 5272989 5272989 5272989 5272989 5272989 5272989
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 8974534 4487267 0 0 0 0
Loan A 8974534 4487267 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 17949067 17949067 17949067 17949067 17949067 17949067
Ordinary Capital 17949067 17949067 17949067 17949067 17949067 17949067
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 41107228 54074565 67832246 81966859 96478400 110989944
9. Net Profit After Tax 12967337 13757681 14134611 14511543 14511543 14511543
Dividends Payable 0 0 0 0 0 0
Retained Profits 12967337 13757681 14134611 14511543 14511543 14511543

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