Investment Office ANRS

Project Profile on the Establishment of

Plastic Syringes and Disposable
Needles producing plant

Development Studies
Associates (DSA)

October 2008
Addis Ababa
 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....................................................................3
4.1 Availability and Source of Raw materials...........................................................3
4.1 Annual Requirement and Cost of Raw Materials and Utilities...........................4
5 Location and Site.....................................................................................4
6 Technology and Engineering..................................................................4
6.1 Production Process...............................................................................................4
6.2 Machinery and Equipment...................................................................................5
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 establishment of plastic syringes and disposable needles in
Amhara National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for plastic syringe and disposable needles
is substantial and is increasing with time. Accordingly, the planned plant is set to produce 6
million plastic syringes and disposable needles annually. The total investment cost of the project
including working capital is estimated at Birr 5.82 million and creates 46 jobs.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project breaks even at 36.34% of capacity utilization and payback fully
the initial investment less working capital in third year of operation. The results further show that
the calculated IRR of the project is 22.3%.

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

Medical facilities are expanding in the Amhara Region although health coverage is still very low.
With 19 million people living in the Region, millions of syringes and needles are used every year
in the Region. The use of disposable syringes and needles has become necessary for people to
protect themselves against diseases like HIV/AIDS. Like conventional syringes, plastic syringes
are used for injections muscular as well as intravenous but the difference is that disposable
syringes and needles are disposed of immediately after using them once. So every injection
requires a new syringe and a needle. Disposable syringes are made of plastics with nozzle and
sold with needles. Disposable needles have plastic holders and they are presterilized and do not
require any sterilization while using them. However, they cannot resist high temperature.

1
 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Disposable syringes and needles are medical products, and as such their production requires the
utmost care and the final products must be of the highest quality. If these conditions are met,
there will be sufficient demand for disposable syringes and needles in the Amhara Region and its
neighbors. The current demand is projected by assuming that one patient consumes 5 plastic
syringes and disposable needle. According to Central Statistical Authority report the region will
have a total patient of 2 million currently. Thus, it is assumed that the regional demand stands at
10 million syringes and needles.

3.1.2 Projected Demand

The projected demand for plastic syringes and needles is shown in Table 1 below. The demand is
assumed to increase at 2% per annum, an assumption below the rate of population growth.

Table 1: Projected Demand for Plastic Syringe& Disposable Needle

3.1.3 Pricing and

Year Projected Distribution
Demand for
Syringes and
The market survey result indicates that the average
Needles (pcs)
retail price for plastic 2008/09 10,200,000 syringe and disposable
needles in major public 2009/10 10,404,000 and private pharmacy on
2010/11 10,612,080
average is Birr 0.90. Deducting 20% margin
2011/12 10,824,322
for retailer and 10% for 2012/13 wholesaler and by taking
11,040,808
the capacity of the 2013/14 11,261,624 envisaged plant in to
account, the selling price 2014/15 11,486,857 of Birr 0.63 per plastic
2015/16 11,716,594
syringe has been estimated for the
2016/17 11,950,926
projection of the revenue 2017/18 of the plant.
12,189,944

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The available retail and wholesale network shall be used by the envisaged plant to reach its
customer.

3.2 Plant Capacity

Thus, given the expected demand for syringes and disposable needles presented earlier, and the
planned technology, the envisaged plant is set to produce 6 million deposable syringe and needle
annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
where the remaining days will be holidays and for maintenance. During the first year of
operation the plant will operate at 85 percent capacity, and then the capacity will grow to 100
percent starting from the 2rd year. This consideration is developed based on the assumption that
market and logistics barriers would take place within the first year of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials
Production of plastic syringe and disposable needle require the following major raw materials.
PVC plastic, Brass road, Ethyl Oxide, Nickel Chromium and other; and most of them should be
imported.

4.1 Annual Requirement and Cost of Raw Materials

and Utilities
The annual raw material and utility requirement and the associated cost for the envisaged plant
are listed in Table 2 hereunder.

Table 2: Material and Utility Requirement

Total Cost
(Birr)
Material and Input Qy L.C. F.C.

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 PVC Plastic 36 tons 396,900
Brass Rod 24 tons 476,280
Ethyl Oxide 10 tos 90,720
Nickel Chromium 30 tons 102,060
Packing Material Lumpsum 68,040
Total Material Cost 260,820 873,180
Utility
Electricity 700 kwh 88,000
Water 200 m2 2,650
Total Utility Cost 90,650

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 Combolcha and Bahir Dar.

6 Technology and Engineering

6.1 Production Process

Production of plastic syringe and needle has the following major steps.
 Preparation of compounding mixture;
 Manufacture of plastic parts;
 Manufacture of needles;
 Assembling of the syringes;
 sterilization of the syringes and needless; and
 Packing.
Plastic parts are prepared with suitable dies and moulds on an automatic injections molding
machine. Needles are manufactured by feeding a bright drawn brass rod into the capstan lathe to
turn out the hubs which has operations of turning drilling, cut off, and taper turning. The
miniature drilling is carried out on high precision drilling machine. Then the hubs are sent for
nickel chromium plating. After some additional processes are performed on the needle, both the

4
needle and hubs are fitted to each other on the press machine. Once the manufacturing of parts is
completed, sterilization, autoclaving, exposure to ethylene oxide, exposure to ionizing radiation
and packing are performed.

Alternative technology
The needles are made by other specialized manufacturers. In this case the needles become
component or input to the syringes manufacturing plant. This option requires two independent
plants.

6.2 Machinery and Equipment

Many types of machines are involved in the production of disposable syringes and needles. The
most important include horizontal injection molding machine, printing and embossing machine,
assembling machine, precision drilling machine, precision cylindrical grinding machine, grinder,
needle cutting and finishing unit, moulds, power press, capstan lathe, electroplating, air
compressor.

The machineries and equipment required for producing plastic syringe and disposable needle is
detailed in Table 3 below.

Table 3: Machinery and Equipment Requirement

Machinery and Equipment Quantity

Molding machine 2
Printing and embossing machine 1
Assembling machine 2
Precision drilling machine 3
Precision cylindrical grinding machine 2
Grinder 1
Needle cutting and finishing unit 3
Electroplating 1
Air compressor 1
Power press 2
Capstan lathe 3
Total 20

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The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 4.5 million.

Suppliers Addresses:
Zhangjiagang Feiyun Machinery Co., Ltd.
Leyu Economic Industrial Park,
Zhangjiagang, Suzhou, Jiangsu,
Suzhou/Jiangsu
China
Zip/Postal Code: 215621
Telephone Number: 86-512-58119129
Fax Number: 86-512-58119130

Shandong Tongya Plastic Technology Co., Ltd

Erhuan East Road, Jinan, China.
TEL：0086-531-83532811
FAX：0086-531-83532377 POST：250100
E-mail：sdtongya@yahoo.com.cn

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 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 700m2 where 200m2 is allocated to
the building place. The cost of which is estimated at Birr 42,000 and Birr 400,000 respectively.

7 Human Resource and Training Requirement

7.1 Human Resource

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

Table 4: Human Resource Requirement

Total
Monthly Annual
Required Salary Salary
Position No. (Birr) (Birr)
1 Manager 1 3500 42,000
2 Administration and Finance 1 2000 24,000
3 Accountant 2 1200 28,800
4 Mechanical Engineer 1 2500 30,000
5 Secretary 1 850 10,200
6 Sales Clerks 3 700 25,200
7 Casher 1 700 8,400
8 Store Keeper 4 700 33,600
9 Mechanic and Electrician 3 750 27,000
10 Supervisor 4 1500 72,000
11 Operators 10 1000 120,000
12 Daily Laborers 8 400 38,400
13 Cleaners 3 350 12,600
14 Messengers 2 250 6,000
15 Guards 2 400 9,600
Total 487,800
Benefit (20%) 97,560
585,36
Grand Total 46 0

The envisaged plant therefore, creates 46 jobs opportunity and about Birr 585,360 of annual
household income from employment.

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 7.2 Training Requirement

Training of key personnel shall be conducted in the early 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 60,000 included in
the working capital for training expense.

8 Financial Analysis
8.1 Underlying Assumption
The financial analysis of plastic syringes and disposable needles 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 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

Building 5%
Machinery and equipment 10%
Office furniture 10%
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 5.82
million as shown in Table 5 below. The Owner shall contribute 40% of the finance in the form of
equity while the remaining 60% is to be financed by bank loan.

Table 5: Total Initial Investment

Total Initial Investment

Item Cost
Land 2,100.00
Building and civil works 400,000.00
Office equipment 75,000.00

Plant machinery & equipment 4,500,000.00

Total Fixed Investment 4,977,100.00
Pre production capital expenditure 149,313.00
Total Initial Investment 5,126,413.00
Working capital at full capacity 699,896.52
Total 5,826,309.52
*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 2.83 million as detailed in
Table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1. Raw materials 1,134,000.00
2. Utilities 90,650.00
3. Wages and Salaries 585,360.00
4. Spares and Maintenance 99,542.00
Factory costs 1,909,552.00
5. Depreciation 507,362.60
6. Financial costs
419,494.29
Total Production Cost 2,836,408.89

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 23.66 %, 17.75% and 38.38% 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 36.34% 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 third year.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 17.8%.

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
22.3% and the net present value at 18 % discount is Birr 870,493.26.

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 22.82% with payback period of the first
quarter of the fourth 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 on average a profit of Birr 827,391 per
year and Birr 8.3 million 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 3.06 million 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
3.7 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 46 professionals as well as support
stuffs. Consequently the project creates income of Birr 585,360 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 InterSectoral 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.

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ANNEXES

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

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

1. Total Inventory 0 0 880,283 1,035,627 1,035,627 1,035,627

Raw Materials in Stock- Total 0 0 348,056 409,477 409,477 409,477

Raw Material-Local 0 0 24,185 28,453 28,453 28,453

Raw Material-Foreign 0 0 323,870 381,024 381,024 381,024

Factory Supplies in Stock 0 0 2,241 2,637 2,637 2,637

Spare Parts in Stock and Maintenance 0 0 13,845 16,289 16,289 16,289

Work in Progress 0 0 56,028 65,916 65,916 65,916

Finished Products 0 0 112,057 131,832 131,832 131,832

2. Accounts Receivable 0 0 350,509 412,364 412,364 412,364

3. Cash in Hand 0 0 62,685 73,747 73,747 73,747

CURRENT ASSETS 0 0 945,421 1,112,260 1,112,260 1,112,260

4. Current Liabilities 0 0 350,509 412,364 412,364 412,364

Accounts Payable 0 0 350,509 412,364 412,364 412,364

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 594,912 699,897 699,897 699,897

INCREASE IN NET WORKING CAPITAL 0 0 594,912 104,984 0 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 1,035,627 1,035,627 1,035,627 1,035,627 1,035,627 1,035,627

Raw Materials in Stock-Total 409,477 409,477 409,477 409,477 409,477 409,477

Raw Material-Local 28,453 28,453 28,453 28,453 28,453 28,453

Raw Material-Foreign 381,024 381,024 381,024 381,024 381,024 381,024

Factory Supplies in Stock 2,637 2,637 2,637 2,637 2,637 2,637

Spare Parts in Stock and Maintenance 16,289 16,289 16,289 16,289 16,289 16,289

Work in Progress 65,916 65,916 65,916 65,916 65,916 65,916

Finished Products 131,832 131,832 131,832 131,832 131,832 131,832

2. Accounts Receivable 412,364 412,364 412,364 412,364 412,364 412,364

3. Cash in Hand 73,747 73,747 73,747 73,747 73,747 73,747

CURRENT ASSETS 1,112,260 1,112,260 1,112,260 1,112,260 1,112,260 1,112,260

4. Current Liabilities 412,364 412,364 412,364 412,364 412,364 412,364

Accounts Payable 412,364 412,364 412,364 412,364 412,364 412,364

TOTAL NET WORKING CAPITAL REQUIREMENTS 699,897 699,897 699,897 699,897 699,897 699,897

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

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 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 2,563,207 3,263,103 3,563,509 3,841,855 3,780,000 3,780,000
1. Inflow Funds 2,563,207 3,263,103 350,509 61,855 0 0
Total Equity 1,025,283 1,305,241 0 0 0 0
Total Long Term Loan 1,537,924 1,957,862 0 0 0 0
Total Short Term Finances 0 0 350,509 61,855 0 0
2. Inflow Operation 0 0 3,213,000 3,780,000 3,780,000 3,780,000
Sales Revenue 0 0 3,213,000 3,780,000 3,780,000 3,780,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 2,563,207 2,563,207 3,486,807 3,053,912 3,128,591 3,079,650
4. Increase In Fixed Assets 2,563,207 2,563,207 0 0 0 0
Fixed Investments 2,488,550 2,488,550 0 0 0 0
Pre-production Expenditures 74,657 74,657 0 0 0 0
5. Increase in Current Assets 0 0 945,421 166,839 0 0
6. Operating Costs 0 0 1,609,821 1,884,948 1,884,948 1,884,948
7. Corporate Tax Paid 0 0 0 0 311,433 332,408
8. Interest Paid 0 0 931,565 419,494 349,579 279,663
9.Loan Repayments 0 0 0 582,631 582,631 582,631
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 699,897 76,702 787,943 651,409 700,350
Cumulative Cash Balance 0 699,897 776,598 1,564,541 2,215,950 2,916,301

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 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000
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 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000
Sales Revenue 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 3,030,709 2,990,726 2,941,785 2,310,213 2,310,213 2,310,213
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 1,884,948 1,884,948 1,884,948 1,884,948 1,884,948 1,884,948
7. Corporate Tax Paid 353,383 383,316 404,291 425,266 425,266 425,266
8. Interest Paid 209,747 139,831 69,916 0 0 0
9. Loan Repayments 582,631 582,631 582,631 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 749,291 789,274 838,215 1,469,787 1,469,787 1,469,787
Cumulative Cash Balance 3,665,592 4,454,866 5,293,081 6,762,867 8,232,654 9,702,441

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 3,213,000 3,780,000 3,780,000 3,780,000

1. Inflow Operation 0 0 3,213,000 3,780,000 3,780,000 3,780,000

Sales Revenue 0 0 3,213,000 3,780,000 3,780,000 3,780,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,563,207 2,563,207 2,204,733 1,989,932 2,196,381 2,217,356

3. Increase in Fixed Assets 2,563,207 2,563,207 0 0 0 0

Fixed Investments 2,488,550 2,488,550 0 0 0 0

Pre-production Expenditures 74,657 74,657 0 0 0 0

4. Increase in Net Working Capital 0 0 594,912 104,984 0 0

5. Operating Costs 0 0 1,609,821 1,884,948 1,884,948 1,884,948

6. Corporate Tax Paid 0 0 0 0 311,433 332,408

NET CASH FLOW -2,563,207 -2,563,207 1,008,267 1,790,068 1,583,619 1,562,644

CUMULATIVE NET CASH FLOW -2,563,207 -5,126,413 -4,118,146 -2,328,078 -744,459 818,185

Net Present Value (at 18%) -2,563,207 -2,172,209 724,122 1,089,491 816,813 683,046

Cumulative Net present Value -2,563,207 -4,735,415 -4,011,294 -2,921,803 -2,104,990 -1,421,944

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

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 PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000

1. Inflow Operation 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000

Sales Revenue 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,238,330 2,268,264 2,289,239 2,310,213 2,310,213 2,310,213

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 1,884,948 1,884,948 1,884,948 1,884,948 1,884,948 1,884,948

6. Corporate Tax Paid 353,383 383,316 404,291 425,266 425,266 425,266

NET CASH FLOW 1,541,670 1,511,736 1,490,761 1,469,787 1,469,787 1,469,787

CUMULATIVE NET CASH FLOW 2,359,855 3,871,591 5,362,352 6,832,139 8,301,926 9,771,712

Net Present Value (at 18%) 571,083 474,572 396,599 331,372 280,824 237,986

Cumulative Net present Value -850,861 -376,289 20,310 351,683 632,507 870,493

Net Present Value (at 18%) 870,493.26

Internal Rate of Return 22.3%

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

1. Total Income 3,213,000 3,780,000 3,780,000 3,780,000 3,780,000

Sales Revenue 3,213,000 3,780,000 3,780,000 3,780,000 3,780,000
Other Income 0 0 0 0 0
2. Less Variable Cost 1,360,030 1,600,035 1,600,035 1,600,035 1,600,035
VARIABLE MARGIN 1,852,970 2,179,965 2,179,965 2,179,965 2,179,965
(In % of Total Income) 57.67 57.67 57.67 57.67 57.67
3. Less Fixed Costs 757,154 792,275 792,275 792,275 792,275
OPERATIONAL MARGIN 1,095,817 1,387,690 1,387,690 1,387,690 1,387,690
(In % of Total Income) 34.11 36.71 36.71 36.71 36.71
4. Less Cost of Finance 931,565.45 419,494.29 349,578.57 279,662.86 209,747.14
5. GROSS PROFIT 164,251.18 968,195.47 1,038,111.18 1,108,026.90 1,177,942.61
6. Income (Corporate) Tax 0.00 0.00 311,433.35 332,408.07 353,382.78
7. NET PROFIT 164,251.18 968,195.47 726,677.83 775,618.83 824,559.83
RATIOS (%)
Gross Profit/Sales 5.11% 25.61% 27.46% 29.31% 31.16%
Net Profit After Tax/Sales 5.11% 25.61% 19.22% 20.52% 21.81%
Return on Investment 19.15% 23.82% 18.47% 18.11% 17.75%
Return on Equity 7.05% 41.54% 31.18% 33.28% 35.38%

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

1. Total Income 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000

Sales Revenue 3,780,000 3,780,000 3,780,000 3,780,000 3,780,000
Other Income 0 0 0 0 0
2. Less Variable Cost 1,600,035 1,600,035 1,600,035 1,600,035 1,600,035
VARIABLE MARGIN 2,179,965 2,179,965 2,179,965 2,179,965 2,179,965
(In % of Total Income) 57.67 57.67 57.67 57.67 57.67
3. Less Fixed Costs 762,413 762,413 762,413 762,413 762,413
OPERATIONAL MARGIN 1,417,552 1,417,552 1,417,552 1,417,552 1,417,552
(In % of Total Income) 37.50 37.50 37.50 37.50 37.50
4. Less Cost of Finance 139,831 69,916 0 0 0
5. GROSS PROFIT 1,277,721 1,347,637 1,417,552 1,417,552 1,417,552
6. Income (Corporate) Tax 383,316 404,291 425,266 425,266 425,266
7. NET PROFIT 894,405 943,346 992,287 992,287 992,287
RATIOS (%)
Gross Profit/Sales 33.80% 35.65% 37.50% 37.50% 37.50%
Net Profit After Tax/Sales 23.66% 24.96% 26.25% 26.25% 26.25%
Return on Investment 17.75% 17.39% 17.03% 17.03% 17.03%
Return on Equity 38.38% 40.48% 42.58% 42.58% 42.58%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 2,563,207 5,826,310 6,341,070 6,788,489 6,932,536 7,125,524
1. Total Current Assets 0 699,897 1,722,019 2,676,801 3,328,211 4,028,561
Inventory on Materials and Supplies 0 0 364,142 428,402 428,402 428,402
Work in Progress 0 0 56,028 65,916 65,916 65,916
Finished Products in Stock 0 0 112,057 131,832 131,832 131,832
Accounts Receivable 0 0 350,509 412,364 412,364 412,364
Cash in Hand 0 0 62,685 73,747 73,747 73,747
Cash Surplus, Finance Available 0 699,897 776,598 1,564,541 2,215,950 2,916,301
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 2,563,207 5,126,413 4,619,050 4,111,688 3,604,325 3,096,963
Fixed Investment 0 2,488,550 4,977,100 4,977,100 4,977,100 4,977,100
Construction in Progress 2,488,550 2,488,550 0 0 0 0
Pre-Production Expenditure 74,657 149,313 149,313 149,313 149,313 149,313
Less Accumulated Depreciation 0 0 507,363 1,014,725 1,522,088 2,029,450
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 2,563,207 5,826,310 6,341,070 6,788,489 6,932,536 7,125,524
5. Total Current Liabilities 0 0 350,509 412,364 412,364 412,364
Accounts Payable 0 0 350,509 412,364 412,364 412,364
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1,537,924 3,495,786 3,495,786 2,913,155 2,330,524 1,747,893
Loan A 1,537,924 3,495,786 3,495,786 2,913,155 2,330,524 1,747,893
Loan B 0 0 0 0 0 0
7. Total Equity Capital 1,025,283 2,330,524 2,330,524 2,330,524 2,330,524 2,330,524
Ordinary Capital 1,025,283 2,330,524 2,330,524 2,330,524 2,330,524 2,330,524
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 164,251 1,132,447 1,859,124
9.Net Profit After Tax 0 0 164,251 968,195 726,678 775,619
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 164,251 968,195 726,678 775,619

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 7,367,452 7,679,226 8,039,941 9,032,228 10,024,514 11,016,801
1. Total Current Assets 4,777,852 5,567,126 6,405,341 7,875,128 9,344,914 10,814,701
Inventory on Materials and Supplies 428,402 428,402 428,402 428,402 428,402 428,402
Work in Progress 65,916 65,916 65,916 65,916 65,916 65,916
Finished Products in Stock 131,832 131,832 131,832 131,832 131,832 131,832
Accounts Receivable 412,364 412,364 412,364 412,364 412,364 412,364
Cash in Hand 73,747 73,747 73,747 73,747 73,747 73,747
Cash Surplus, Finance Available 3,665,592 4,454,866 5,293,081 6,762,867 8,232,654 9,702,441
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 2,589,600 2,112,100 1,634,600 1,157,100 679,600 202,100
Fixed Investment 4,977,100 4,977,100 4,977,100 4,977,100 4,977,100 4,977,100
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 149,313 149,313 149,313 149,313 149,313 149,313
Less Accumulated Depreciation 2,536,813 3,014,313 3,491,813 3,969,313 4,446,813 4,924,313
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 7,367,452 7,679,226 8,039,941 9,032,228 10,024,514 11,016,801
5. Total Current Liabilities 412,364 412,364 412,364 412,364 412,364 412,364
Accounts Payable 412,364 412,364 412,364 412,364 412,364 412,364
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1,165,262 582,631 0 0 0 0
Loan A 1,165,262 582,631 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2,330,524 2,330,524 2,330,524 2,330,524 2,330,524 2,330,524
Ordinary Capital 2,330,524 2,330,524 2,330,524 2,330,524 2,330,524 2,330,524
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 2,634,743 3,459,303 4,353,708 5,297,053 6,289,340 7,281,627
9. Net Profit After Tax 824,560 894,405 943,346 992,287 992,287 992,287
Dividends Payable 0 0 0 0 0 0
Retained Profits 824,560 894,405 943,346 992,287 992,287 992,287

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