PROJECT PROPOSAL FOR ESTABLISHMENT OF

ALUMINUM BAR MELTING, STRUCTURAL

CONSTRUCTION MATERIALS, FRAMES, PROFILES
& SHEET MANUFACTURING FACTORY

PROJECT TO BE IMPLEMENTED IN OROMIA

FINFINNEE SURROUNDING SPECIAL ZONE
GALAN TOWN

PROMOTER: AT TEXTILE PLC

FEBRUARY, 2016

GELAN, ETHIOPIA
TABLE OF CONTENTS

EXECUTIVE SUMMARY................................................................................................................................2
1. INTRODUCTION.......................................................................................................................................3
1.1. General Background........................................................................................................................3
1.2. Profile of the Promoter....................................................................................................................3
1.3. Why aluminum?...............................................................................................................................4
1.4. Aluminum – Building material of the modern age..........................................................................4
1.5. Applications.....................................................................................................................................4
1.6. Project Description..........................................................................................................................5
1.7. Objective of the Project...................................................................................................................6
1.8. Project Location...............................................................................................................................6
1.9. Premises Required...........................................................................................................................7
2. MARKET STUDY AND PLANT CAPACITY..................................................................................................9
2.1. Market Study...................................................................................................................................9
2.2. Plant Capacity and Production Program........................................................................................10
3. TECHNOLOGY AND ENGINEERING........................................................................................................11
3.1. Process Description........................................................................................................................11
3.2. Production Process........................................................................................................................11
3.3. Environmental Impact...................................................................................................................13
3.4. Resources Requirement.................................................................................................................14
3.5. Project Implementation and Schedule.............................................................................................15
4. ORGANIZATIONAL STRUCTURE AND MANPOWER..............................................................................16
4.1. Organizational Structure................................................................................................................16
4.2. Manpower and Training Requirement..........................................................................................17
5. FINANCIAL ANALYSIS OF THE PROJECT.................................................................................................18
5.1. Total Initial Investment Cost..........................................................................................................18
5.2. Financial Evaluation.......................................................................................................................23
5.3. Economic and Social Benefits........................................................................................................25

1
EXECUTIVE SUMMARY

1 Project Name Aluminum Structures construction materials, Profiles, Frames &

sheet Manufacturing Factory

2 Project Owner AT TEXTILE PLC

3 Nationality Ethiopian

4 Project Location Oromia – Finfinnee Surrounding Special Zone – Galan Town

5 Project Manufacturing of Aluminum Structure Construction Materials, ,

Composition frames, profiles and Sheet manufacturing

6 Premises 10,000m2
Required
7
Market strategy 87% for local market and 13% for foreign
8
Total Initial 62,000,000.00 of which 30% (18,600,000) from Promoter and 70%
Investment Cost (43,400,000) from Bank Loan
9
Employment It will create job opportunities for more than 549 employees;
Opportunity
354 permanent (240 skilled, 114 unskilled)and

195 temporary employees (165 unskilled, 30 skilled)

As it will be needed increase the hire.

10 Benefits of the Value add, supply of quality product, employment, income

Project for the generation, save foreign currency, and technology transfer
Region/Nation

2
1. INTRODUCTION
1.1. General Background

Ethiopia-Building on progress, a plan for accelerated and sustained development to end poverty
(PASDEP), volume 1: Main Text. As shown in the table, all sectors of the economy have
economy have contributed to the overall GDP growth achieved during the period. This persistent
improvement in the Import is accounted for the macroeconomic stabilization policy measures
taken by the country that have resulted in, increase volume of the traditional import commodities
and diversification efforts of new commodities. Macroeconomic stabilization measures
implemented by the government in the past years have generally yielded improved performance
in the economy.
Table: 1.1
Trends in Macroeconomic performance Growth Rate (2001/02-2004/05)
Description 2001/02 2002/03 2003/04 2004/05
GDP in 1990/01 prices 1.0 -3.3 11.9 10.6
- Agriculture -2.1 -11,4 17.3 13.4
- Industry 8.3 3.0 10.0 8.1
- Distribution services 3.3 2.9 8.2 7.6
- Other services 0.3 6.1 6.4 9.1
- Private consumption pedicure -0.2 8.6 12.5 23.1
- Gross Domestic Expenditure 10.9 4.5 17.3 15.5
- Inflation -8.5 15.1 8.6 6.8
- Exports 0.6 21.8 18.8 34.2
- Imports 9.4 13.7 25.7 33.3

The Oromia Investment commission has been exerting its maximum effort to expand investment
opportunities in the region so as to faster the economic development of the region and subduing
the city’s big enemy that is the trap of poverty. Therefore, aside with the government duties and
responsibilities vested on it Galan town Administration investment office has been preparing a
viable business environment to attract many domestic and foreign investors so that the dream of
making poverty history turns to be true. Hence it is this viable investment policy which invited
AT TEXTILE PLC develop the interest and motivation to build Aluminum structures and frames
project in Oromia – Finfinnee Surrounding Special Zone – Galan Town with a capital of
62,000,000.00.00 birr.

1.2. Profile of the Promoter

The initial capital of the company for the proposed project is 18,600,000.00birr cash. The
General Manager of the business is AT TEXTILE PLC the owner of the business. They have
been engaged in different business activities as owners and managers of various import and
export business organization. The marketing manager, who started his professional career as a

3
business person in diverse areas after completing his study, is now the right of the business. In
general, the General Managers are assisted by qualified personnel to carry out the day to-day
activities of the business operations.
As could be deduced from the above information the factory management as well as the finance
and marketing operations is in the hands of technically capable and dependable professionals
with the necessary experience for the business.
Initially, the Company has been engaged in the business world since 1995as owners and
activities of various import and export business.
The company has an initial vision, readiness and deep assessment of the situation to implement
the project. As the business has not yet secured land, one of the purposes of this feasibility study
is to use it as a requirement to acquire the required land and to obtain the investment certificate
for the realization of the project objective.

1.3. Why aluminum? Aluminum is the second most widely specified metal in buildings after
steel, and is used in all construction sectors, from commercial buildings to domestic dwellings.
40% of the Ethiopia annual supply of aluminum is utilized within the construction industry,
which equates to roughly 2165 tons of aluminum per annum, of which approximately 750 tons
are extruded products, and 400 tons sheet materials.

The main market sectors are windows, roofing, cladding, curtain walling and structural glazing,
prefabricated buildings, architectural hardware, shop fitting and partitions. Aluminum is also
used extensively in plant, ladders, supporting structure and scaffolding.

1.4. Aluminum – Building material of the modern age

Modern building and construction is more than merely erecting buildings as functionally as
possible. In addition to functional and economic criteria, aesthetic and design considerations
together with ecological demands placed on building projects play an equally important role.
This means the materials used are of major significance. Aluminum, the building material for the
modern age, established itself as an important factor in the building and construction industry
during the course of the 20th century. Aluminum enables every possible architectural concept to
be realized – regardless of whether it is a new build or a modernization. Possible applications
range from façades and roof and wall manufacturers of Aluminum building products systems to
interior decoration and the design of living are world leaders technologically – not least space,
and include windows and doors, balconies because the companies have furthered the
conservatories development of modern windows and façades in the fields of surface treatment,
thermal insulation and soundproofing, air conditioning and solar heating.
These are the best prerequisites for aluminum putting its qualities as a modern, contemporary
building material to full use in the 21st century as well.

1.5. Applications

The best application can be obtained in some typical cases, which are characterized in getting
profit at least of one of the main basic properties: lightness, corrosion resistance and
functionality. The structural applications which best fit these properties in the field of civil
engineering are the following:

4
1. Long-span roof systems in which live loads are small compared with dead loads, as in the case
of reticular space structures and geodetic domes covering large span areas, like halls and
auditoriums.

2. Structures located in inaccessible places far from the fabrication shop, for which transport
economy and ease of erection are of extreme importance, like for instance electrical transmission
towers, which can be carried by helicopter.

3. Structures situated in corrosive or humid environments such as swimming pool roofs, river
bridges, hydraulic structures and offshore super-structures.

4. Structures having moving parts, such as sewage plant crane bridges and moving bridges,
where lightness means economy of power under service.

5. Structures for special purposes, for which maintenance operations are particularly difficult and
must be limited, as in case of masts, lighting towers, antennas towers, sign motorway portals, and
so on.

1.6. Project Description

Aluminum structures, frames and profiles are building material products made from aluminum.
The products are used for doors, windows for making water tanks, for show cases etc. aluminum

5
products are popular because they are light, strong and they do not rust. They are commonly used
for modern commercial buildings.

1.7. Objective of the Project

The main objective of the project is to generate profit to the promoter over the invested capital to
make the hires and legatees beneficiaries in the mere future. The objective is generation income
from export market, improving our export quality to the international market and creation of job
opportunities.
The specific Objective are:-
 Create employment opportunity to a number of man power during construction and in
operation period , so that it will benefit the surrounding population in double phase,
 Generate revenue for the government which will be collected in different form of tax and
land rental payment which contributes much for the national economy.
 Provide quality services at fair and equitable price, as well as contribute to the
development of export market.

1.8. Project Location

Location of an industrial plant is determined on the basis of the proximity to sources of raw
materials and access to the market for final products. In terms of basic location mode, the
optimal location is one where the aggregate costs of raw materials transportation, production and
distribution of the products is minimized. The majority of the raw materials for the envisaged
products have to be imported although few auxiliary materials can be procured from local
markets. End user of the products is available in big town and cities. Therefore, it would be
advisable to locate the plant at Galan town. This is advantageous since infrastructures like
electricity, water; transportation and communication are well developed.
Galan town is found under development and located in the Oromia regional state, surrounding
Finfinnee – special zone. It is located at about 25km southeast of Addis Ababa on the high way
to Adam city.

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1.9. Premises Required

For the proposed set up of aluminum products manufacturing plant, a total of 10,000 square
meters is required. This land requirement includes space for the installation of plant and
machinery, management office, stores for raw materials and finished products, and parking.

Table: 1.2
Premises required
# Description Land requirement (m2)
1 Production Hall
1.1 Workshop 1,000
1.2 Quality control 400
1.3 Production area 3,000
Total production hall area 4,400
2 Warehouse
2.1 Raw material and input 1,000
2.2 Finished products 1,000
Total warehouse area 2,000
3 Office building and cafeteria 1,600
4 Loading and unloading space 1,000
5 Waste accumulation area 300
6 Toilet and shower room 200
7 Green and parking area 500
Total 10,000

7
 Quality control
Feedback (400m2)
Inputs Processing Outputs

Workshop
Production Area (3000m2)
(1000m2)

ToolsForman
Parking Area
(250m2)
Raw Materials
Store
(1000m2)
Offices
Loading and unloading area (1500m2)
(1000m2)
Finished Products
Store
(1000m2)
Waste acc area (300m2) (250m2) Training center (50m2)
Green area Flags

Toilet & Shower R.

(200m2) Guard R
G. R.

Fig 1.2: Plant location and layout

100m

150m

The location and layout of the land, buildings, and loading and unloading spaces of the factory
will look like the following diagram.

8
2. MARKET STUDY AND PLANT CAPACITY
2.1. Market Study

1. Present Demand and Supply

Aluminum frame and profile is a structure that is used for fabrication of window frames. The
product is commonly used for modern commercial buildings. Accordingly, the building
construction sector constitutes the major end user of the product. Although various types of
profiles and frames are manufactured locally the country's requirement for aluminum frames and
profiles is essentially met through imports. The target market is 87% for domestic- import
substitution and the remaining 13% will be export market. The quantity of imports of the product
during the period 2000 - 2015 is shown in Table 2.1.
Table 2.1
Imports of aluminum frames and profiles
Year Import (tons)
2000 801.3
2001 3175.1
2002 550.7
2003 663.1
2004 762.6
2005 814.5
2006 1661.2
2007 1110.9
2008 1222.0
2009 1344.2
2010 1478.6
2011 1626.5
2012 1789.1
2013 1968.0
2014 2164.8
2015 2381.3

Given, the substantially considerable fluctuations in the supply of the product, which comprises
of only imports, the average annual supply for the period under reference is considered as the
effective demand for the product for the year 2014. The demand for the product is directly
related to the growth of the construction sector. Hence, given the substantial growth in the
construction sector, the demand for aluminum frame and profile is estimated to grow at the rate
of 10%. Thus the projected demand for the product (i.e., for 2015) is estimated at 2381.3 tones.

2. Demand Projection

As stated above, a rate of growth of 10% is used in projecting the demand for aluminum frame
and profile. Table 2.2 depicts the projected demand for the product.

9
 Table 2.2
Projected demand for aluminum frames and profiles (in tons)
Year Projected demand
2015 2381.3
2016 2619.4
2017 2881.4
2018 3169.5
2019 3486.5
2020 3835.1
2021 4218.6
2022 4640.5

3. Pricing and Distribution

According to the external trade statistics for 2006 the unit CIF price of aluminum frame and
profile was Birr 36.75 per kg. Allowing 40% for import duty and other clearing expenses, the
factory-gate price for the envisaged plant is estimated at Birr 51.45 per kg.
The products of the envisaged plant can be marketed through the existing wholesale and retail
network. The plant can also appoint agents at selected locations.

2.2. Plant Capacity and Production Program

1. Plant Capacity

Demand projection for aluminum frames and profile indicate that in the first year and second
year, the demand is 392 tons and 504 tons, respectively. The envisaged plant will have a capacity
of 280 tons of aluminum frames and profiles. The plant will operate single shift of eight hours a
day and 300 days per annum. There is a possibility to double or triple the production by
introducing additional shifts if an increase is observed in the market demand.

2. Production Program and Sales projection

With an assumption that the initial production years will be required for market penetration and
technical capacity building by the envisaged plant, it is planned to start production at 70% of its
installed capacity which will grow to 90% in the second year. Full capacity (100%) production
will be attained in the third year and onwards. Accordingly, the production of all types of
aluminum structures, frames and profiles are undertaken.

10
 Table 2.3
Annual production program
# Description Unit of Production Year
Measure
1st 2nd 3rd& Onwards
1 Aluminum frame Ton 196,00 252,000 280,000
Profiles Ton 0
190,00 240,000 270,000
Structure Ton 196,00 252,000 280,000
Sheets Ton 190,00 240,000 270,000
Capacity utilization rate % 70 90 100
Sales projection of sale plan
Table 2.4
# Description Quantity Sell projection
in tons 1st 2nd 3rd&
Onwards
1 Frames 12,450,000.00 16007142.86 17785714.29
2 Profiles 12,950,000.00 16650000 18500000
3 Structure 22,386,000.00 28782000 31980000
4 Sheets 23,645,000.00 30400714.29 33778571.43
Total sell 71,431,000.00 91,839,857.14 102,044,285.7

3. TECHNOLOGY AND ENGINEERING

3.1. Process Description

The manufacturing of aluminum frame and profile comprises aluminum ingots are melted in the
melting furnace, the mother ingot is cast into billets, a feeding and oven preheating system for
the initial billets, a means of loading the pre-heated billets into an extrusion press and, at the exit
of this press, a line for the reception of the extruded profiles followed by a bench for cooling,
straightening (stretching) and cutting the profile to size.

Then, once cut, the profiles are grouped together side by side on support tables or in baskets and
conveyed to an ageing chamber or tunnel where they stay at a present temperature and for a
preset time for a heat treatment so their molecular structure can stabilize and the extruded metal
can reach mechanical characteristics.

After this treatment, the profiles are recovered and conveyed to other process such as anodizing
and other mechanical conditions. Then finally the finished products passed to the assembly
section and the other products can be arranged for transport.

3.2. Production Process

Aluminum is one of the most heavily utilized metals in the world today. Once it has been
extracted, it can be used for numerous functions. Aluminum is easily recycled and selling
aluminum scrap has become quite profitable. To melt aluminum you will need to have a furnace
capable of high temperatures and the proper equipment and safety procedures in place.

11
1. Find objects that have high aluminum content if you are interested in melting aluminum
scrap.
 Aluminum is the most readily available metal found in the earth's crust; however, it is
always combined with other elements. These elements must be removed to separate
aluminum. It is, therefore, necessary to melt aluminum objects rather than a mined metal.
 The 3 largest markets for aluminum are transportation, packaging, and construction.
 The transportation industry uses aluminum for automobile bodies, front and rear axles,
transmission housings, pistons, and numerous other cast parts.
 The packaging industry uses aluminum in beverage and food containers and industrial or
household foil.
 The building industry uses aluminum in wire, cable, forgings, pigments, plate and sheet
aluminum, foil backing, windows, screens, doors, skylights, roofs, canopies, door
handles, shower units, staircases, window catches, power lines and solar power collection
components.

2. Research the price of aluminum to determine if the process of collecting and melting
aluminum is worth the time and effort required for the potential monetary reward.
 Aluminum is a commodity much like oil, corn, or gold. As with all commodities, the
market price for aluminum rises and falls daily. Therefore, the price of aluminum will
change each day as the market fluctuates.

3. Heat small pieces to the melting point of aluminum, which is 1220 degrees Fahrenheit
(660 degrees Celsius).
 Heat the furnace to a temperature greater than the melting point of aluminum.
 Cut larger pieces of aluminum into smaller pieces and work only with small batches in
order to more evenly distribute the heat and allow all of the pieces to melt.
 Place the pieces of aluminum into the crucible and maintain the furnace heat until all
units of aluminum have melted.
 Use tongs to lift the crucible and pour the aluminum into prepared metal molds while still
in liquid form. This must be completed quickly to prevent the aluminum from solidifying
while in the crucible.

Manufacturing of Aluminum Sheet:

Ingot + Master Alloy → Melting → Holding Fu mace → Continuous Casting → Cold Rolling
(Mediate Annealing) → Horizontal shear → Annealing → Aluminum Sheet

12
Fig 3.1: production process of aluminum sheet

3.3. Environmental Impact

Currently the issue of Environment and development has got a due emphasis and the government
has enshrined environmental policy within the constitution. In line with this environmental
policy the envisaged project deemed to mitigate the different impacts that may be caused by
actions of the project.
The Aluminum metal products manufacturing plant will employ a wide range of
environmentally sound practices, ranging from basic pollutant gases to high-tech systems that
control solid, liquid and gaseous wastes.
Water Conservation
• The project will use water responsibly during production process. For example, waste water
is recycled to use and treated before discharged.
Waste Management
 Solid, liquid and gaseous wastes management plans. These plans take into account the types
of wastes, and recommended mitigation measures.

Air Quality

13
 The project protects air quality by following proper waste gases management practices and
maintaining clean facilities. During production and row material and product handling
N.B. The project will accommodate the entire possible impact assessment document and
implementation as well as management program. And also, the factory pays maximum effort
for fighting against any negative impacts on the environment so as to result in a win-win solution.

3.4. Resources Requirement

1. Machinery and Equipment

Plant machinery and equipment required for aluminum frame and profile plant is presented in
table 3.1 and including Generator.
Table 3.1
Plant machinery and equipment required
# Description Unit Qty
1 Extrusion plant
Extrusion press Pc 2
Melting furnace, preheating furnace and ageing furnace Pc 3
Billet casting machine Pc 1
Power hack saw Pc 3
Materials handling equipment LS 2
2 Anodizing plant
Coloring equipment Set 2
Cooling equipment Set 1
Tank lining and accessories Set 1
DC power supply system, steam generation equipment, gas Set 3
exhausting and scrubber equipment
3 Door and window fabrication shop
Assembly equipment Set 1
Power hack saw Pc 1
Tools Set 1
4 Extrusion die manufacturing and maintenance equipment
Vertical milling machine Pc 1
Lathe machine Pc 1
Surface grinding machine Pc 1
Measuring and hand tools Set 2

2. Raw Materials and Auxiliary Materials

Raw and auxiliary material required by the plant is aluminum ingot. Anodizing chemicals are
used as auxiliary inputs. Annual requirement of raw and auxiliary materials is shown in Table
3.2.
Table 3.2
Raw materials requirement at full capacity operations
# Description Qty (tons)
1 LM pressure die casting Aluminum Ingot 308
2 Anodizing Chemicals LS

14
3. Utilities

Inputs required by the plant consist of electricity, fuel oil and water. Electricity is required for
supplying power to all production equipment, and also to power sockets, lighting system and
other auxiliary equipment of the plant.

For the plant operating single shift of eight hours a day, and 300 days a year, the total annual
electrical energy requirement will be 125,000 Kwhs. And, water is required for cleaning, drinking
and general purpose. The annual water requirement is estimated at 1,500m3. Fuel oil is required for

the extrusion press and the anodizing unit is estimated to be 25m3

4. Land, Buildings and Civil Works

Land is required to accommodate plant building, management offices, social building for
workers, stores, internal roads, adequate space for expansions and other industry related
activities. The total land area for the envisaged plant is estimated to be 10,000m 2. Of this size of
land, about 6,250m2 will be covered by different types of buildings indicated above.

3.5. Project Implementation and Schedule

Table 3.3
Project implementation schedule
# Activities Time duration
1 Land request processing February, 2015
2 Bank loan processing March – December, 2015
3 Purchasing of construction equipments January – February, 2016
4 Site development March, 2016
5 Building and construction of the factory April, 2016
6 Factory set up and installation May, 2016
7 Sales execution Jun, 2016
8 Commencing operation July, 2016

15
4. ORGANIZATIONAL STRUCTURE AND MANPOWER
4.1. 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 a general
manager with the responsibility of supervising the overall activity of the plant. Depending up on
the nature of the center and the amount of work to be performs; there will be auxiliary units
under the general manager. Employees under each unit will be supervised by the unit head that is
accountable for the general manager.

Owner

General Manager

Internal Auditing
Executive Secretary
& Inspection

Manufacturing Admin & Finance Commercial

Department Department Department

Fig 4.1: Organizational structure

Hence the following section deals with the duties and responsibilities of each division.

1. The General Manager’s

Duties and responsibilities
 He will plan, organize, direct and control the overall activities of the project
 He will devise policies and strategies that will enable the project to be profitable.
 He will incorporate modern technological innovation that will facilitate the service
delivery of the project center and increase customer’s satisfaction.
 He will plan, organize, direct and control the human and non-human resources of the
plant so as to achieve the short and long run objectives of the organization.

16
2. General Administration and Finance Department
Duties and responsibilities:-
 Will plan, organize direct and control the financial transaction of the project by using the
entire necessary document.
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for both the
General Manager and other concerned government body.
 Will control the human and non-human resources of the honey processing project, which
include: effective handling of the different inventories of the machineries, equipment’s,
raw materials, finished products, and devise strategies of controlling against fraud and
damage.

3. The Marketing Department

Duties and responsibilities:-
 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of the
company
 Will develop effective customer handling strategies

4. The production Department

Duties and responsibilities:-
It is the core department of the project center and has the following responsibilities.
 Use modern production and processing technologies that will boost production and
productivities in honey processing
 Produce quality product that will enable the center competent both in the domestic and
international market.
 Control on the quality of raw materials, quality of the product and also the overall
production process.
 Produce products in least cost so that the profitability of the center is guaranteed.
 Moreover control over the quality of the processed honey.

4.2. Manpower and Training Requirement

The plant requires both direct and indirect manpower. The direct manpower consists of
designers, operators of workshop equipment, mechanics, welders, painters, and laborers are
engaged in manufacturing of the products executed by production & technical departments and
the administrative activities are executed by indirect works that include plant manager, executive
secretary, heads of finance and administrations, and personnel officer, accountant and other
support giving personnel. A total human resource of 549 persons is required for the envisaged
project.
And, the Designer, machine operator and skilled workers need at least three weeks training on
the technology, maintenance and operation of the machines. For the rest, on-the-job training will
be sufficient on the startup period by the specialists.

17
5. FINANCIAL ANALYSIS OF THE PROJECT
The financial analysis of the baby food project is based on the data presented in the previous
chapters and the following assumptions:-
Construction period: 2 years
Source of finance: 30 % equity
70 % loan
Bank interest: 10%

5.1. Total Initial Investment Cost

The total investment cost of the project including working capital is estimated at 62,000,000.00
birr (see Table 5.1).
Table 5.1
Total initial investment cost (in birr)

No Description Cost (in Birr)

Land, buildings and
1 9,026,666.67
construction
2 Machines and equipment’s 26,026,666.67
3 Vehicles 6,326,666.67
4 Office equipment’s 2,526,666.67
Total fixed investment cost 43,906,666.68
5 Pre-service expenses 1,026,666.67
6 Salary expenses 2,413,333.31
7 Raw and auxiliary materials 10,526,666.67
8 Utilities 1,026,666.67
9 Other operating expenses 690,952,.37
Total operating expenses 14,993,333.32
Total
Contingency (5%) 3,100,000.00
Grand total 62,000,000.00

1. Total Cost of Land, Buildings and Civil Works

The construction cost of buildings and civil works, assuming a hollow concrete block wall,
cement tiles floor and EGA sheet roof is estimated at Birr 9,026,666.67 including fences, site
development, design and supervision, and land lease.

18
 Table 5.2
Total Cost of Land, Buildings and Civil Works
No Description Land /m2 Cost /m2 Total Cost
1 Land lease - - 100,000.00
2 Design and supervision - - 200,000.00
3 Office and Cafeteria Construction 1,600 3000 4,400,000.00
4 Production hall construction 4,400 2000 5,400,000.00
5 Warehouse Construction 2,000 2000 4,000,000.00
6 Loading and unloading space 1,000 500 500,000.00
7 Green and parking area 500 800 200,000.00
8 Toilet and waste accumulation room 500 800 200,000.00
9 Other - - 5,326,666.67
Total land required 10,000 9,026,666.67

2. Total Cost of Machinery and Equipments

The total cost of plant machinery and equipment required for the envisaged project is estimated
at Birr 26,026,666.67 million. The list of machinery and equipment along with the estimated
costs is given in Table 5.3.
Table 5.3
Machinery and equipment and estimated cost
# Description Unit Qty Cost (Birr)
1 Extrusion plant
Extrusion press Pc 2 3,000,000.00
Melting furnace, preheating furnace and Pc 3 6,000,000.00
ageing furnace
Billet casting machine Pc 1 2,000,000.00
Power hack saw Pc 3 100,000.00
Materials handling equipment LS 2 3,000,000.00
2 Anodizing plant
Coloring equipment Set 2 500,000.00
Cooling equipment Set 1 250,000.00
Tank lining and accessories Set 1 500,000.00
DC power supply system, steam Set 3 900,000.00
generation equipment, gas exhausting
and scrubber equipment
3 Door and window fabrication shop
Assembly equipment Set 1 150,000.00
Power hack saw Pc 1 50,000.00
Tools Set 1 150,000.00
4 Extrusion die manufacturing and
maintenance equipment

19
 Vertical milling machine Pc 1 2,026,666.67
Lathe machine Pc 1 2,000,000.00
Surface grinding machine Pc 1 2,000,000.00
Measuring and hand tools Set 2 500,000.00
5 Generator Set 2 1,900,000.00
6 Others 1,000,000.00
Total 26,026,666.67

3. Total Cost of Vehicles

The cost of vehicles that include Isuzu NPR, mini bus, bus and pickup is 9,526,666.67 birr.
Table 5.4
The cost of vehicles
# Description Required Qty Total Cost
1 Mini bus 2 3,000,000.00
2 Bus 1 2,026,666.67
3 Pick up 2 3,000,000.00
4 Isuzu NPR 1 2,000,000.00
Total 3 6,326,666.67

4. Total Cost of Office Equipments

The cost of office equipments include tables with chairs, computer with printer, shelf and filing
cabinets, and decoration (carpet and curtain) is 2,526,666.67 birr.
Table 5.5
The cost of office equipments
# Description Required Qty Cost (Birr)
1 Table with chair 30 1,526,666.67
2 Chair 50 100,000.00
3 Computer 15 1,000,000.00
4 Printer 2 50,000.00
5 Shelf 5 50,000.00
6 Others office equipments - 700,000.00
Total 2,526,666.67

5. Pre-service Expenses
The pre-service expenses include project proposal, environmental impact assessment, and
licensing and other fee that are 1,026,666.67 birr.
Table 5.6
The pre-service expenses
# Description Total Cost
1 For project Proposal 20,000.00
2 For Registration & licenses 30,000.00
3 Others fee 950,000
Total pre operating cost 1,026,666.67

6. Total Annual Cost of Labor

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The total annual labor cost including overhead is estimated at Birr 2,413,333.31. The list of
human resource required and estimated annual labor cost is given in Table 5.7.
Table 5.7
Human resource requirement and labor cost
# Job Title Required Qualifications Salary, Birr
Persons Monthly Annually
1 General manager 1 MA in Management 6,500.00 78,000.00
2 Secretary 1 BA in Secretarial Science 2,000.00 24,000.00
3 Clerk 5 Diploma in S/Science 5,000.00 60,000.00
4 Marketing officer 2 BA in Marketing 7,000.00 84,000.00
5 Sales person 4 BA in Marketing 10,000.00 120,000.00
6 Purchaser 2 BA in Marketing 5,000.00 60,000.00
7 Accountant 3 BA in Accounting 7,500.00 90,000.00
8 Cashier 3 BA in Finance 6,000.00 72,000.00
9 Personnel 1 BA in Management 3,500.00 42,000.00
10 Store keeper 4 BA in Marketing 6,000.00 72,000.00
11 Stock keeper 4 BA in Marketing 6,000.00 72,000.00
12 General service 5 10 + Certificate 4,500.00 54,000.00
13 Production manager 1 BSc in Engineering 5,500.00 66,000.00
14 Designer 5 BSc in Engineering 17,500.00 210,000.00
15 Mechanic 8 Diploma in Mechanics 24,000.00 288,000.00
16 Electrician 5 Diploma in Electric 15,000.00 180,000.00
17 Welder 5 10 + skilled 12,500.00 150,000.00
18 Quality controller 3 BSc in Engineering 10,500.00 126,000.00
19 Driver 8 10 + skilled 12,000.00 144,000.00
20 Operator 15 10 + skilled 22,500.00 270,000.00
21 Assistant operator 15 Semi-skilled 15,000.00 180,000.00
22 Painter 5 10 + skilled 12,500.00 150,000.00
23 Laborer 320 Unskilled 180,166.67 853,333.31
24 Guard 10 Unskilled 8,500.00 102,000.00
25 Cleaner 15 Unskilled 12,000.00 144,000.00
Total 450 416,666.67 2,413,333.31

*From 549 employers, 354 permanent (240 skilled, 114 unskilled) and 195 temporary employees (165
unskilled, 30 skilled)

7. Total Annual Cost of Raw Materials

Raw and auxiliary material required by the plant is aluminum ingot. Anodizing chemicals are used as
auxiliary inputs. Annual requirement of raw and auxiliary materials is shown in Table 5.8.
Table 5.8
Raw and auxiliary materials requirement at full capacity operations
# Description Qty (tons) Unit Price, Cost (Birr)
Birr/Unit
1 LM pressure die casting 200 35,000 6,000,000.00
Aluminum Ingot and scrap
2 Anodizing Chemicals LS 4,526,667
Total 10,526,666.67

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8. Total Annual Cost of Utilities
The total annual cost of power and utilities at full capacity production and the estimated costs are
shown in Table 5.9.

Table 5.9
Annual utilities requirement at full capacity and cost
# Description Unit of Required Unit Price, Total
Measure Qty Birr/Unit
1 Electric power kWh 250,000 0.58 145,000.00
2 Water m3 25,000 10.00 250,000.00
3 Others 7,631,666.67
Total 8,026,666.67

9. Other Operating Expenses

Other operating expenses include property insurance, audit and legal fee, telephone, fax and
postal, repair and maintenance, adverting, stationery, fuel, oil and lubricant, and miscellaneous
expenses like training that are 690, 952.37 birr.
Table 5.10
Other operating expenses
# Description Cost (Birr)
1 Property insurance 100,000.00
2 Audit and legal fee 100,000.00
3 Telephone 50,000.00
4 Fax and postal 50,000.00
5 Repair and maintenance 200,000.00
6 Advertising 500,000.00
7 Stationery 50,000.00
8 Fuel, oil and lubricant 26,667.00
9 Miscellaneous expense 14,285.70
Total 690, 952.37

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5.2. Financial Evaluation
5.2.1. Balance Sheet
Table 5.11

Asset
Current Asset
Cash 5,000,000.00
Inventory of raw materials 10,526,666.67
Total Current Asset 15, 526,666.67
Fixed Asset
Building and Construction 9,026,666.67
Processing Machineries 26,026,666.67
Office Equipment 6,326,666.67
Vehicles 2,526,666.67
Total fixed Asset 43,906,666.68
Total Asset
Liability
Account payable 43,400,000.00
Owners’ Equity 18,600,000.00
Capital
Total Liability & Owners’ Equity 62,000,000.00

Sources of Fund: source of fund to finance the project is planned to be from two sources. These
are promoter’s equity and bank loan. 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. Accordingly, the total
financial requirement from the two sources the sources of the finance include:
Table 5.12
# Description % share Amount in Birr
1 Owner share 30 18,600,000.00
2 Bank loan 70 43,400,000.00
Total 100 62,000,000.00
Annual depreciation schedule of the fixed asset
Table 5.13
# Description Annual depreciation Initial value
% Value
1 Building & construction 5 451,333.3335 9,026,666.67
2 Machines &equipments 10 2,602,666.667 26,026,666.67
3 Vehicles 20 1,265,333.334 6,326,666.67
4 Office equipments 10 252,666.667 2,526,666.67

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5.2.2. Income lose statement

Table 5.14
Revenue 2008 2009 2010-2019

Sales Revenue 71,431,000 91,839,857 102,044,286

Sales cost (2%) 1,428,620 1,836,797 2,040,886
Purchase of Raw Material and 10,526,666.67 12,100,000 13,310,000
Utilities
Gross Profit 59,002,380 77,903,060 86,693,400
Expenses
Salary Expense 2,413,333.31 3,500,000.00 4,050,000.00
Operating Expenses 690,952,.37 325,382 357,920
Pre-operating Expense 1,026,666.67
Deprecation Building 451,333.3335 627,500 708,875
Deprecation Vehicles 1,265,333.334 1,560,000 1,872,000
Deprecation office Equipment 252,666.667 300,000 600,000
Deprecation Machineries 2,602,666.667 2,625,000 2,650,250
Interest Expense 6,300,000.00 5,670,000.00 5,040,000
Lease payment 6,936,530.07 6,806,530.07 6,806,530.07
Total Expense 29,450,815.77 24,314,412.07 24,985,575.07
Profit Before Tax 29,551,564.23 53,588,647.93 61,707,824.93
Tax(30% ) 8865469.269 16076594.38 18512347.48
Net Profit 20,686,094.96 37,512,053.55 43,195,477.45

5.2.3. Cash Flow Analysis.

The liquidity position of the project can be seen from the project cash flow statement. According
to this projection the project will be healthy financial position to repay all its debts. This is
because the analysis shows that the project will have positive cash flow throughout the
anticipated life.

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 Table 5.15
Cash flow projection
Year Year 0 Year 1 Year 2 Year 3-10
Equity Capital 18,600,000.00 15,000,000 14,945,189 43,320,687
Loan principal 43,400,000.00 0 0 0
sales 0 71,431,000 91,839,857 102,044,286
Total cash in flow 62,000,000.00 76,431,000 106,785,046 145,364,973
cash payment
Raw materials purchase 0 10,526,666.67 12,100,000 13,310,000
Sales expense (2% sales) 0 1,428,620 1,836,797 2,040,886
Salary expense 0 2,413,333.31 2,500,000 3,050,000
Pre operating expense 0 50,000
Operating cost 0 690,952,.37 325,382 357,920
loan repayment 0 12,600,000.00 11,970,000.00 11,340,000.00
Tax payment 35,742,906 31,732,179 33,098,806
Total payment 71,485,811.40 63,464,358.29 66,197,611.43
Cash surplus / Deficit 15,000,000.00 14,945,188.60 43,320,687.46 79,167,361.74
Cumulative Balance 15,000,000.00 14,945,188.60 43,320,687.46 79,167,361.74

5.2.4. Profitability

Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax ranges from more than Birr 20 million to Birr 30
million during the life of the project.
5.2.5. Pay-back Period

The pay-back period, also called pay – off period is defined as the period required for recovering
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 4 –year’s operation period.

5.3. Economic and Social Benefits

The project can create an employment for 450 numbers of skilled and unskilled persons. The
project will generate tax revenue for the government. The establishment of such factory will
have a foreign exchange saving effect to the country by substituting the current imports. The
project will also create backward linkage with the agricultural sector and also generates income
for the Government in terms of payroll tax.

25