March 1, 2024 [ Project on PP Bag Manufacturing Factory ]

PROJECT PROPOSAL FOR PP BAG

MANUFACTURING FACTORY

PROJECT TO BE IMPLEMENTED IN BISHOFTU

TOWN OF OROMIA REGION

PROMOTER: - ROMAN DIFABACHO

TYPE: NEW PROJECT

March, 2024

Bishoftu, Oromia
 Project on PP Bag Manufacturing Factory

Table of Contents
Executive Summary.............................................................................................................3
1. Introduction..................................................................................................................4
1.1 General Background..................................................................................................4
1.2 objective of the project...............................................................................................5
1.3 Project Rationale...................................................................................................6
1.4 The significance of the project...................................................................................7
1.4 Project Location and Land use..............................................................................8
2. The market Study.........................................................................................................9
2.1 Market Analysis.........................................................................................................9
2.3 Current supply..........................................................................................................10
2.4 Future market or Demand........................................................................................11
2.5 Target customers......................................................................................................11
2.6 Marketing promotion and strategy...........................................................................11
2.7 competition...............................................................................................................12
2.8 Farm Capacity and Production Progress.............................................................12
2.8.1 Farm Capacity..............................................................................................12
2.8.2 Production Program.....................................................................................12
3. Technical Study..........................................................................................................13
3.1 Product Process and Technology.............................................................................13
3.2 Raw Materials and Input..........................................................................................13
3.3 Production Process..............................................................................................14
4. Organizational Structure.............................................................................................17
4.1 Organization and management.................................................................................17
4.1.1 Man Power........................................................................................................17
4.1.2 Organizational Structure....................................................................................17
5. Financial Requirement and Analysis..........................................................................18
5.1 Fixed Investment......................................................................................................18
5.2 Working Capital..................................................................................................19
5.2.1 Operating Expense at full Capacity...................................................................19
5.2.2. Pre-service Expenses........................................................................................20
5.3. Summary of Total initial investment cost...............................................................20
a. Financial analysis and Statements..........................................................................21
5.3.1 Underlying Assumption....................................................................................21

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5.3.2 Sources of Fund....................................................................................................21

5.3.3 Bank loan Repayment Schedule........................................................................22
5.3.4 Depreciation Schedule.......................................................................................22
b. Revenue..................................................................................................................22
5.4.1 Production Program and Capacity.....................................................................22
i. Annual Revenue from products..........................................................................23
5.5. Financial Statement.............................................................................................24
5.5.1 Income loss/statement.......................................................................................24
5.6. Financial analysis................................................................................................25
6. Environmental impact of the project..........................................................................26

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Executive Summary
S.No
1 Project Name Roman Difabacho PP Bag Manufacturing
Factory
2 Project Promoter Roman Difabacho
Address-Bishoftu city
Phone-+251 911687111
3 Project Sector Manufacturing
4 Project Location Bishoftu City, Oromia Regional State
5 Proposed Own Land Area 5830 m2
6 Total Initial Capital Birr. 6,000,000.00 Source of fund
20%= 1,200,000.00 financed by owner
80%=4,800,000.00 financed by bank loan
7 Employment opportunity The total man power required for the plant will
be 46 employees at full capacity.
Permanent workers 46
 Skilled 30 (20 Male & 10 Female)
 Unskilled 16 (6 Male & 10 Female)
Temporary workers 60
 Skilled 40 ( 25 Male & 15 Female)
 Unskilled 20 (5 Male & 15
Female)
8 Project Composition PP Sheets,
Tiles
Bags,
Mats and other packing materials
products

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1. Introduction

1.1 General Background

Ethiopia is one of the East African countries with the diversified climatic
conditions, natural scenery and resource bases. Currently the country
has a total population of about 130 million of which more than 60
million are found in Oromia regional state. Oromia is one of the regional
states of Ethiopia with very fertile land, very conducive weather condition
for both crop production and animal husbandry.
The government of the country has been excreting its maximum effort to
expand investment opportunities in the country by designing different
policies and strategies that will facilitate investment through attracting
both domestic and foreign investors. Likewise, the Oromia regional state
government has been working day and night to make poverty history by
making its door open to investors both (domestic and foreign) to come
and invest in the region.
Fallowing the nation’s economic growth the manufacturing sector is
booming result in bridging the market demand gap of such products in
the country, The Government is highly inviting the private sector to work
on import substitution is highly motivating the private sector to respond
to the government invitation, there by contributing their share to the
development process.
It is with this back ground that, the promoter Roman Difabacho came
up with this project study that aims to establish PP Bag Manufacturing
Factory in Bishoftu town on 5830 m2 of land to be provided by the
government.

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1.2 objective of the project

The main objective of the project is to produce PP bag products for local
markets and to maximize profit so as to sustain the project.
In line with this the following are specific objects of the project.
 To undertake the production of the pp bag products though
scientific methods and modern technology.
 To create job opportunity for skilled and unskilled local citizens.
 To create market linkages with small holder factory in the town and
its surroundings etc.
Project description
The long-term goal of the project is become the best choice in Bishoftu
town and its surrounding areas by to produce pp bag products for
domestic and foreign market. The proposed project will have a total area
of 5830 m2, to establish pp bag manufacturing in Bishoftu town, which
will in turn plays significant role towards solving shortage of pp bag
products in Bishoftu town.
The historical nature of the town is business unique location in one of
the main road occurrence of Ethiopian Djibouti main road for future
promising growth of the town.
The owner plans the project to produce quality and affordable pp bag
productions to satisfy the interest of customers in the town. Based on
environmental and other considerations, the entrepreneur has
determined the product types and quality of the product which is already
determined by; conceptual planning and preliminary analysis have been
carried out by analysts.
In order to attract its clients to the product, the project will develop high
quality and quantity productions for domestic and foreign market.

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1.3 Project Rationale

Manufacturing sector is relatively labor intensive with which Ethiopia
has comparative advantage. In this regard many developing countries
have a comparative advantage in the production of pp bag production,
which often relies on relatively simple technology and a comparatively
large input of low-skilled labor.
The country is more preferable due to various opportunities to make the
manufacturing sector grow at expected level. Currently, the government
is placing more emphasis on manufacturing development, which will
naturally lead to greater demand for the productions. Thus, this project
provides an exciting opportunity for the owner.
The greater demand increase in urban and rural areas for the products,
low inputs costs, strategic location, better market opportunity and
favorable policy are indicators of the potential and opportunities for pp
bag production in the country. Considering the huge potential of the
country, investing in development interventions to the manufacturing
sector will contribute to poverty alleviation by increasing the income of
the society by creating employment and transforming the existing small
production of manufacturing to export level.
The country is more preferable due to various opportunities to make the
manufacturing sector grow at expected level. Among such factors, the
political and social stability, rapidly growing economy and the strategic
location at the crossroads between Addis Ababa and Bishoftu are worth
to mention here.

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1.4 The significance of the project

The envisaged project deemed to add to the economic development of the
nation in general and zone and town in specific with following ways:
A. Source of Revenue
As public policy of any nation, the government collects different forms of
taxes from different business organizations and individuals. Among the
different forms of taxes, business income taxes, payroll income tax and
VAT are collected from undertaking business activities. Therefore, the
factory will serve as sources of revenue for the town as well as for the
region.
B. Employment opportunity
One of the problems that our country faced is unemployment. Therefore,
the current objective of the government is working on tackling the
problem of unemployment and fostering the development process either
through creating self-employment or employment in other organization.
Hence, this project will hire 46 individuals and more than thirty
individual during construction.
C. Sources of social service
In addition to serving as a source of employment and income for the
region, the project renders social services for different group of people.
Hence, the manufacturing factory deemed to provide the following
services: Regular subscriptions with local and foreign market with quality
productions.
Furthermore, it serves as the pilot experience and ground for other
investor to enter in to such kinds of manufacturing development.

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1.4 Project Location and Land use

A. Location
As aforementioned on the introductory part the envisioned project is
intended to be located in Bishoftu town on the way to Bishoftu City
Market at about 47 km from Addis Ababa to the North. It is located in
the Rift Valley Region. Bishoftu town is one of the east Shoa zone
political administrations.
The town is selected because of the location in one of the main road
occurrence of Ethiopian Djibouti main road for future promising growth
of the town, and easy for transport in any direction.

B. Land use
The envisioned project requires a total of 5,830 m2. The premises
required and the land use plan is indicated in the table below;

Land
SN Description requirements (M²)
1 Plant building 2,200.00
2 Product finishing room 400
3 Raw materials room 300
4 Office Space 200
Living accommodations for
5 on duty 300
6 Green Area 1,180
7 Security Guard Room 50
Inner Roads, Parking and
8 Unloading Area 1,200
Total 5,830.00

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2. The market Study

2.1 Market Analysis
Plastic products are influenced by general economic conditions as well as
demographic factors, The main demand factor for plastic packing
products are population and overall economic growth of the nation that
reflects from booming in the agriculture sector, industry sector,
construction sector and infrastructure development of the government
increasing the market demand and supply of plastic products.
Table: Annual domestic Production of plastic products

Products Uni 200/03 2003/04 2004/05 2005/ 2006/

t 06 07
Plastic PCs 301,00 185,000 200,00 1,297, 652,00
crates 000 0
Plastic Pair 5,989,671 8,352,492 6,893,52 8,469, 15,901
footwear s 5 260 ,540
Plastic Pair 3,443,200 3,486,978 2,140,77 4,837, 2,696,
soles s 1 168 625
Source: CSA annual statistical abstract

The table shows the demand for PP BAG has increased rapidly in recent
years. The same is true for the domestic production as well as the
import.
2.2 Demands-Supply Gap
Currently in Ethiopia the major end users of PP bag are the agricultural
and manufacturing sectors. According the Growth and Transformation
Plan (GTP) of the 83-8 government the agriculture and industrial sectors
of the country are expected to register a growth rate of 8.6% and 20%,
respectively. However, in order to be conservative growth rate of 11% is
considered for PP bags which are equivalent to the expected growth rate
of the country’s GDP. Moreover, it is assumed that the highest local

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production during the period 2002 – 2011 which is 170 million indicates
the local production capacity of PP bag. Accordingly, the projected
demand and demand supply gap for PP woven bag estimated on the
basis of the above assumption and using the estimated present demand
as a base is presented in Table.
Table Projected Demand-Supply Gap For PP bag production
Projected
Demand
year (m2)
2013 3,296
2014 5,323
2015 7,574
2016 10,073

2017 12,846
2018 15,925
2019 19,342

2020 23,135
2021 27,345
2022 32,019
2023 37,206
2024 42,964
2025 49,356

2.3 Current supply

As clearly indicated in the introductory part of this proposal, Bishoftu
town is the growing town of Oromia special zone. Above all it found on
the road to Addis – Adama where moderate traffic flow is recorded due to
different commodities flow to capital cities.
Thus, it has a big market opportunity for the pp bag Products. Moreover,
since this project encompasses different supplementary and
complementary projects, it deemed to help the customers have a stop
services.

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Therefore, the target customers of this envisaged project include:

 The residents of the city of Bishoftu town and the surroundings
 Individuals all over the country and
 For export trades
Hence to reach customers different marketing vehicles will be used.
Among the different marketing strategies and tools for promoting and
controlling the market of the project will use:
Sponsorship of key government activities and public support mechanism
Using different marketing segmentation strategies and tactics: Utilizing
effective and customer centric marketing strategies is the marketing
strategies that focuses on different groups of customers based on
different segmentation tools.

2.4 Future market or Demand

Urbanization, population growth and consumer awareness will increase
the demand for quality, volume, graded and standardized products and
traceability of sources.

2.5 Target customers

The project target is upper and lower level of the people because our
strategy is to provide quality product at cheaper prices and to capture
the market.
The project will distribute 50% of its product for domestic market and
50%for Export.

2.6 Marketing promotion and strategy

The company will follow promotional methods:
 Electronic Medias
 Advertising (Media, Flayer and newspaper)
 Public relations
 Branding,
The marketing strategy mainly focus on the satisfying the needs and the
requirement of the customers.

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2.7 competition
There are different forms of competition that may face the factory. These
are price and non-price based competition. Moreover, there are different
competitors that will compete with the project either directly or
indirectly. But the factory is under discussion has diversified marketing
strategies that could enable it cope-up with the different competitors in
the market. Moreover it will frequently conduct competitors research
which focuses on, the strength and the weaknesses, the different
competitor’s strategies, the techniques they use in rendering the product,
their customer handling methods, and others.

2.8Farm Capacity and Production Progress

2.8.1 Farm Capacity
Based on plant capacity and progress this plant assumed to produce PP
Bags (pcs) 15,000 (psc), PP Sheets (M2) 11,000 (psc) and PP Mats (M²)
12,000 (M²) full capacity and processing 310 days per year and 8 hours
per day.

2.8.2 Production Program

Considering the gradual growth of demand and the time required to
develop the required skill the rate of capacity utilization during the 1st,
2nd and 3rd year of production will be 70%, 90% and 100% respectively.
Full capacity utilization will be reach during the third year of processing.

Years 3-
Description Years 1 Years 2 10
Capacity Utilization
(%) 70 90 100
PP Bags (pcs) 10,500 13,500 15,000
PP Sheets (M²) 7,700 9,900 11,000
PP Mats (M²) 8,400 10,800 12,000

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3. Technical Study
3.1 Product Process and Technology
Plastic is a common name for Polymers: materials made of long strings
of carbon and other elements. Each unit in a string is called a
monomer, and is a chemical usually derived from oil. There are many
different types of plastic, depending on the starting monomer selected,
the length of polymer chains, and the type of modifying compounds
added. Each plastic is developed for a special purpose. However the
varied use of plastic in our everyday life has made it an integral
component in almost everything. Plastic is used in everyday items like
ballpoint pen, buckets, cups, glasses water pipes, plastic bags to items
of engineering excellence like cars and airplanes. According to some
experts, around 350 kilograms plastic is used in every car
manufactured in Germany. With such a high ratio of usage in
developed countries, plastic has become a cheap but an important
commodity.
Most of the plastic products are manufactured using two types of
technologies. Blow molding and injection molding. The proposed
project envisages the setup of a blow molding products manufacturing
business. The setup will produce plastic products i.e. tumbler, bottles,
canes, drums, water coolers etc. The manufactured products will then
be sold in the local market to generate revenue. The proposed project is
assumed to manufacture PP Sheets, Bags & Mats:
It is desirable to have a vast array of products where most of the plastic
manufacturers have at least 20 to 25 different product categories
running in their production line, but initially the entrepreneur, needs to
be careful in choosing the product mix of the right able to cover the
mold costs required for each separate item.

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3.2 Raw Materials and Input

The main and direct major raw material required for production of poly
propylene bag are polypropylene resin, also ink and solvent are auxiliary
materials for printing purpose. All the raw materials have to be imported.

3.3 Production Process

PP bag are generally manufactured and printed as per the Customers’
demands/needs. The end users adopt different kinds of Color
Combinations and Designs in the Printing of these Sacks to convey the
massage(s), characteristic(s), quantity & quality related details and
handling instructions etc. For some kind of specific applications like
filling of Hydroscopic Materials e.g. Chemicals, Fertilizers, Food Products
etc. these Woven Sacks are laminated also.

The Process of manufacturing PP Bags involves following three steps:

 Extrusion
 Weaving
 Finishing & Stitching

Extrusion
The process of manufacturing PP woven bags involves mixing raw
materials starting with PP or HDPE pellets and other additives, extruding
the raw materials into a yarn PP resin is heated with feeler of CaCo3 and
pigment, melted and extruded as a flat film. It is then slit into tape yarn
by the slitting unit and stretched and annealed. Next, a take-up winder
winds the heat oriented tape yarn onto a bobbin.

The Raw Material (PP & Filler) in the Granules form is fed to a Raffia
Tape Manufacturing Plant to obtain the Raffia Tapes of PP. The Raw
Material Mix is prepared in a Tray adjacent to the Feed Hopper. The
prepared Mix is sucked in to the Hopper by Vacuum. The Raw Material
Mix is fetched to the Extruder of the Plant; where the same is melt by

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applying controlled External Heat on the Barrel. The Molten Mass is

forced out through a Die Head into a Cooling Tank, in the form of
Sheet/Film. The cooled & solidified Sheet/Film is passed through the
Knifes to obtain Raffia Tapes of higher Denier (a Unit by which the
fineness of a Yarn is measured). High Density Polyethylene (HDPE) or
Polypropylene (PP) granules are first converted in to 2.5 mm wide tapes
by Extrusion process. The Raffia Tapes received from the Plant are
stretched and annealed. These are then wound on Cheese Pipes with the
help of the Sets of Winders.
Weaving
Weaving the yarn into a fabric in a process similar to the weaving of
textiles:
These flat tapes are then woven into circular fabric by Circular weaving
machine. Thus woven circular fabric is then cut in to required
dimension. Thread from the bobbin in the circular loom’s creel stand is
woven into tubular cloth The Weaving of Raffia Tapes into Cloths is
carried out in Circular Looms, which produce Circular Cloth of desired
Width. The process of Weaving is Automatic and Continuous in nature.
Numbers of Circular Looms are installed so as to match the Effective
Output of the Raffia Tape manufacturing Plant. The Cloth produced by
each Loom is continuously wound on Rotating Pipes.
Finishing & Stitching

The Rolls of Woven Cloth are carried out to the Finishing & Stitching
Section of the Unit. The Cloth is cut into desired size and the printed.
After printing the cut pieces are sent for stitching. Prior to the stitching
of the Cloth, a valve is made in one corner of the cut piece, as per the
Customers specification. The Woven Sacks passed through the Quality
Control Test are bundled in 500 or 1000 Nos. and pressed on a Bailing
Press. The pressed Woven Sacks are wrapped, bundled, packed and
dispatched.

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The Quality Control checks are carried out at each and every step to
avoid rejections. The parameters pertaining to the Weight, Denier,
Bursting Strength etc. are strictly adhered to.
3.4. Project implementation
The project’s implementation is expected to take 8 months. The major
activities include Bank loan processing construction of the building,
cleaning the area around the building, Procurement of equipment’s and
start Manufacturing and Supplying product for market. The time
schedule for the above matured major activities is presented below:
Table: project Implementation schedule
SN Activities Date
1 Project request processing March, 2024
2 Project approval April, 2024
3 Bank loan processing May, 2024
4 Site Development May, 2024
5 Building and construction work June, 2024-Aug, 2024
6 Preparation for Product Sep, 2024
7 Processing and Supplying Oct, 2024
product for market

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4. Organizational Structure
4.1 Organization and management
The organizational structure should be in a way that the company able to
achieve its objectives as well as the satisfaction and quality product.

4.1.1 Man Power

The total manpower required for the manufacturing will be 46 persons.
The manpower list and the corresponding labor cost are shown in part
five of this document.

4.1.2 Organizational Structure

The organizational structure of the project is designed by including all
the necessary personnel under the right division. At the top of the
organizational structure, there will be manager with the responsibility of
supervising the overall activity of the building. Depending up on the
nature of the center and the amount of work to be performs; there exist
auxiliary units under the general manager.
Employees under each unit will be supervised by the department head
that is accountable for the general manager. General Manager is
appointed by owner.
Owner

General
Manager

Building Marketing Technical and

Admin maintenance
manager

HRM and IT, Electricity

finance and plumper
Fig:
Cashier Purchas
er
Fig: Organization structure of the factory

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5. Financial Requirement and Analysis

The financial resource is a prime resource for undertaking any activities.
Hence for implementing this project a total of 6,000,000.00 ETB is
required. From this 20% 1,200,000.00 birr will be covered by the
promoter of the project while the rest 80% 4,800,000.00 birr will be
covered through loan from bank at the prevailing interest rate.
Therefore the said amount of finance is needed for undertaking the
following.

5.1 Fixed Investment

A. Land, Building & Construction
S. Description of works Total Cost in birr
N
1 Building construction 3,600,000.00
2 Site Development 431,400.00
3 Design and supervision 45,400.00
4 1st Year land lease & (10%) down payment 0.00
Total 4,076,800.00
B. Building Machineries and Equipment’s
S Item Measurement Qty Unit Price in Total Price in
N Br. Br.

1 Double screw
extruder with power
loader Unit 1 300,000.00 300,000.00
2 Injection Molding Unit 1 25,000.00 25,000.00
3 Blow Molding
Machine Unit 1 25,000.00 25,000.00
4 Crusher 14” Unit 1 10,000.00 10,000.00
5 Molds Unit 3 35,000.00 105,000.00
6 Lathe Machine 8 F1 Unit 1 32,000.00 32,000.00
7 Support structure
(cutter, batteries, etc.) Set 1 40,000.00 40,000.00
8 Mold Unit 1 30,000.00 30,000.00
9 Vacuum Thank Unit 1 98,000.00 98,000.00
10 Hauling Off Unit 1 60,000.00 60,000.00
11 Automatic cutting
machine Unit 1 75,000.00 75,000.00

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12 Stacker Set 1 46,000.00 46,000.00

13 Scrap line (Recycling
machine) Set 1 50,000.00 50,000.00
14 Oil-Ink Printer Unit 1 19,000.00 19,000.00
15 Compressor Set 1 18,000.00 18,000.00
16 Chiller unit Unit 1 25,000.00 25,000.00
Total 958,000.00
Office Equipment’s
S Description Measurement Qty Unit cost Total cost
N in birr in Birr

1 Managerial tables Unit 5 4,000.00 20,000.00

2 Guest chairs Unit 2 600.00 1,200.00
3 Computer with chairs Unit 1 12,000.00 12,000.00
4 Shelf Unit 1 3,000.00 3,000.00
Total 36,200.00

5.2 Working Capital

5.2.1 Operating Expense at full Capacity
a. salary Expense

Monthly salary Annual salary in

SN Position No in Birr Birr
1 Factory Manager 1 3,000 36,000
Production and Tech
2 Manager 1 1,200.00 14,400
3 Machine Operators 1 1,500.00 18,000
4 Process testers 1 1,800.00 21,600
Sales & Marketing
5 Manager 1 1,800.00 21,600
Administration and
6 Finance manager 1 2,000.00 24,000
7 Accountants 1 1,500.00 18,000
8 Cashier 1 1,500.00 18,000
9 Production workers 30 1,200.00 432,000
10 Store Keepers 1 1,200.00 14,400
11 Guard 2 1,700.00 40,800
12 Driver 1 2,200.00 26,400
13 Cleaner 4 1,600.00 76,800
Grand Total 46 762,000

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b. Operating Expenses
S List of Items Annual cost in birr Assumptions Used
N
1 Audit and legal fee 2,400.00 200 birr/per ,month
2 Stationery supplies 2,400.00 200 birr/month
3 Promotional Cost 2,000.00 Lump sum annual cost
4 Property Insurance 36,000.00 1% of the building
5 Cleaning Supplies 12,000.00 1000 br. Per month
6 Uniforms 3,600.00 200 per person for 18 people
7 Water consumption 5,000.00 2500 m3 by 3.15 birr
8 Electric consumption 6,000.00 20000KWH By Br.0.4736
9 Fuel 0.00 2032 lit per year by Br. 21
10 Oil & lubricants 0.00 10% of fuel cost
11 Telephone & fax 6,000.00 500 per month
12 Repair expense 72,000.00 2% of building cost
13 Miscellaneous costs 9,600.00 800 per month
Total 157,000.00

5.2.2. Pre-service Expenses

SN Description Cost in birr
1 Project proposal 10,000.00
2 Licensing fee and others
Total 10,000.00

5.3. Summary of Total initial investment cost

SN Description Cost in Birr
1 Land, building & construction 4,076,800
2 Building machines & Equipments 958,000.00
3 Vehicle 0.00
4 Office Equipment 36,200.00
Total fixed investment cost 5,071,000
5 Salary expense 762,000
6 Operation Expense 157,000.00
7 Pre service Expense 10,000.00
Total Working capital 929,000
Total initial investment capital 6,000,000.00

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a. Financial analysis and Statements

5.3.1 Underlying Assumption
The financial analysis of the factory is based on the data provided in the
preceding sections and the following assumptions.

A. construction and finance

Construction period 2 months
Source of finance 20% equity and 80% loans
Bank interest rate 10%
B. depreciation
Building 10%
Building machinery and equipment 10%
Office Equipment’s 10%

5.3.2 Sources of Fund

The source of fund to finance the project is planned to be from two
sources. These are promoter’s equity and bank loan. The loan is expected
to be obtained from one of the local lending institutions. Since the project
is expected to take some times to repay all its debts, the bank loan is
assumed to obtain on long term credit basis. Taking the financial
position of the promoters into account, equity contribution and bank
loan to finance the total investment outlays of the project are assumed to
be 20% and 80% respectively.
Accordingly, the total financial requirement from the two sources will be;
SN Description Percentage share Amount
Owners Share 20% 1,200,000.00
Bank Loan 80% 4,800,000.00
Total 100% 6,000,000.00

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5.3.3 Bank loan Repayment Schedule

Year Principal Interest (10%) Total annual Remaining
Payment Payment in ETB Balance

0 4,800,000
1 781,178 301,178 480,000 4,498,822
2 781,178 331,296 449,882 4,167,526
3 781,178 364,425 416,753 3,803,101
4 781,178 400,868 380,310 3,402,233
5 781,178 440,955 340,223 2,961,279
6 781,178 485,050 296,128 2,476,229
7 781,178 533,555 247,623 1,942,674
8 781,178 586,911 194,267 1,355,763
9 781,178 645,602 135,576 710,162
10 781,178 710,162 71,016 0

5.3.4 Depreciation Schedule

SN Description Original Depreciatio Depreciation
Value in Birr n rate in % per year in Birr
1
Construction and Building 4,076,800 10 407,680.00
2
Bldg. machines & Equipment’s 958,000.00 10 95,800.00
3
Vehicle 0.00 10 -
4
Office Equipment 36,200.00 10 3,620.00
Total 5,071,000 507,100.00

b. Revenue
5.4.1 Production Program and Capacity
Based on plant capacity and progress this plant assumed to produce PP
Bags (pcs) 15,000 (psc), PP Sheets (M2) 11,000 (psc) and PP Mats (M²)
12,000 (M²) full capacity and processing 310 days per year and 8 hours
per day.
Considering the gradual growth of demand and the time required to
develop the required skill the rate of capacity utilization during the 1st,

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2nd and 3rd year of production will be 70%, 90% and 100% respectively.
Full capacity utilization will be reach during the third year of processing.

Description Years 1 Years 2 Years 3-10

Capacity Utilization (%) 70 90 100

PP Bags (pcs) 10,500 13,500 15,000
PP Sheets (M²) 7,700 9,900 11,000
PP Mats (M²) 8,400 10,800 12,000

i. Annual Revenue from products

It would be important to examine the possible level of pricing based on
the competitor action.
In this regard the existing average pricing of similar company were
assessed for the benefit of comparison. Based on the existing retail price
in the market the firm stetted the price as follows.
Product Price of company

PP Bags (pcs) 70

PP Sheets (M²) 110

PP Mats (M²) 120

Total Price and Sales products

Years 3-
Description Years 1 Years 2 10
PP Bags (pcs) 735,000 945,000 1,050,000
PP Sheets (M²) 847,000 1,089,000 1,210,000
PP Mats (M²) 1,008,000 1,296,000 1,440,000
Total 2,590,000 3,330,000 3,700,000
Increase by 5 % per
annum after 2nd year 185,000
Grand Total 3,885,000

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5.5. Financial Statement

5.5.1 Income loss/statement
Project revenue and production costs are listed and compared to see
whether the project generate profits or not.
Starting from first year of the project operation, the project will generate
a reasonable amount of net profit for the owners throughout its life
period. Profit and loss statement shows that the project will generate net
profit of
ETB 603,905 in the first year and increase to ETB 1,331,039 starting
from the third year of the project life and hence it is found to be
profitable.

Pp bag manufacturing factory profit/Loss Statement

Revenue Year 1 Year 2 Year 3 and after
Product revenue
2,590,000.00 3,330,000.00 3,885,000.00
Gross Revenue
2,590,000.00 3,330,000.00 3,885,000.00
Expenses
Salary Expense
762,000.00 838,200.00 922,020.00
Operating Expenses
157,000.00 172,700.00 189,970.00
Deprecation Building
407,680.00 407,680.00 407,680.00
Deprecation Bld.
Machineries and Equip.
95,800.00 95,800.00 95,800.00
Deprecation of Vehicle
0.00 0.00 0.00
Deprecation office Equip
3,620.00 3,620.00 3,620.00
Interest Expense
301,177.90 331,295.68 364,425.25
Lease payment
0.00 0.00 0.00
Total Expense
1,727,277.90 1,849,295.68 1,983,515.25
Profit before Tax
862,722.10 1,480,704.32 1,901,484.75
Tax (30%)
258,816.63 444,211.29 570,445.42
Net profit
603,905 1,036,493 1,331,039

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5.6. Financial analysis

i. Profitability
According to the projected income statement, the pp bag manufacturing
factory will start generating profit in the 1 st year of operation. Important
ration such as profit to total sales, net profit to equity (Return on equity)
and net profit plus interest on total investment (return on total
investment) show as increasing trend during the lifetime of the project.
The income statement and the other indicators of profitability show that
the project is viable.
ii. Pay-Back period
The investment cost and income statement projection are used to
project the pay-back period. The project total investment will be fully
recovered at the 5.2 year of operation.

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6. Environmental impact of the project

The project activities were determined by identifying the environmental aspects
and then undertaking an environmental risk assessment to determine the
significant environmental aspects. The environmental impact assessment has
included all phases of the project namely construction phase and production
phase.
The positive impact of the project is:-
 Generation of employment opportunity
 Source income for the government through business income tax
 Income generation for the promoter
 Being exemplary for other investors who want to engage in the same
business line.
 Negative impact of the project
The project has the following negative impacts:
 The manufacturing process of pp bag products has impacts on global
warming potential, fossil resource depletion, human toxicity,
acidification, and petrochemical oxidant formation.
 The impact mitigation measures:
 Consumption of new materials by buying used, salvaged or recycled
materials. And they can reduce the waste they generate by sending their
construction and demolition debris to be recycled and used again in new
projects.
 Proper disposal of waste materials is essential for reducing the
environmental impacts of building construction.
 In order to ensure that the proposed mitigation measures will be
implemented, an environmental management plan has been developed
to guide all activities of the project during all its phases concerning the
protection of the environment. Provide comfortable environmental
conditions such as adequate ventilation, needed temperature, sufficient
light, water, air, and well-drained housing accommodation.

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