MILK PROCESSING PLANT ]

PROJECT PROPOSAL
ON

DAIRY FARM AND MILK PROCESSING PLANT

PROJECT LOCATION: - OROMIA SPECIAL ZONE

SURROUNGING FINFINE, AKAKI WOREDA.

PROMOTER: - ABERA GUTA JIMA

May, 2022
ADDIS ABABA, ETHIOPIA

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I. EXCUTIVE SUMMARY
1. Project type Dairy farm and Milk Processing Plant

2. Project Owner Abera Guta Jima

3. Nationality Ethiopian

4. Project Location Oromia national regional state OSZSF, Akaki woreda.

5. Premises Required 1.8 hectare equivalent to /18,000 m2/

6. Total Initial Investment Br. 96,000,000 of which 30% equivalent to Br. 28,800,000
Capital
financed by the owner equity and the rest 70% equivalent to
birr 67,200,000 financed through bank loan
7. Employment Opportunity 350 persons

8. Benefits for the region/ Add value to the economy, Source of Revenue to the
country
government , Employment opportunity, Save Foreign
currency, Benefit for the local community, Stimulate the
local economy and technology transfer

1. Introduction
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Ethiopia has the largest livestock population in Africa and the contribution of livestock
and livestock products to the agricultural economy is significant. Recent figures indicate
that the livestock sector contributes about 12-16% of national GDP, 30-35% of
agricultural GDP, 15% of export earnings and 30% of agricultural employment.
Livestock contribute to the livelihoods of 60-70% of the population Smallholder farmers
represent about 85% of the population and are responsible for 98% of the milk
production. Productivity however is relatively low, quality feeds are difficult to obtain
and support services are inadequate.
There is an immediate and growing shortage of milk products in all major cities of
Ethiopia and the trends of economic prospects for milk industry performance and
development are rather good both at small holder level and on more commercial level.
Rapidly increasing population size with a growing urban population is resulting in a
growing demand for milk products. Milk development can lead to income generating
activities, increasing incomes, transfer technology and create employment opportunities.
The analysis of the support market and milk business services revel that the milk industry
is immature and young, competition barely exist, basic services are either not existing or
inadequate. In general, it offers wide opportunity for investment in milk and related
businesses. The investment opportunities are immense. The potential is within the grasp
of investors. It only needs adapting the technology, capital and human resources to
specific market niche and opportunity excising or to be developed a new Conducive
government policies, laws and regulations as part of the economic liberalization program
besides investment incentives are necessary to smooth the progress of easy entry in to and
expand the investment opportunities in the Ethiopian milk industry. To this effect, with
the objective of promoting smallholder and commercial milk production and the inflow
of foreign capital and technology into the country, the Ethiopian government provides
various packages of fiscal incentives to both foreign and domestic investors engaged in
establishing new enterprises and expansions. In this regard, the owner of the envisioned
plant planned to invest and carried out this pre-project study to check the market,
technical and financial feasibility of this project. The result of the study is very sound and
promising for the owner to start the project in this area. That is this opportunity that
initiates the promoter to develop the project.

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1.1 The project

1.1.1 Project Justification

Ethiopia is one of the countries whose potential for sustainable economic growth lies on
the agriculture sector. The sector takes lion’s share of the GDP and foreign exchange
earnings of the country It also provides a major part of the population food feed and
employment opportunity.
The country has a significant agricultural potential and endowed with vast agricultural
land, fertile soil and moderate climatic condition suitable for agricultural production
specially that supports milk processing sector. Rapidly increasing population size mainly
with a growing urban population is resulting in a growing demand for milk products.
Milk development can lead to income generating activities, transfer technology, generate
foreign currency and create employment opportunities.

Though, The Government aims at stimulating milk industry (milk marketing) in potential
areas milk product processing and marketing are not developed well with demand on the
market. .

Though, the formal market appears to be expanding with the private sector entering the
milk processing. It is believed that though there is immense potential on this sector our
country did not use efficiently.
The project is believed to have a significant social and economic benefit that accrue to
the society beyond financial returns to the owner of the project

In addition to the above facts, the following points further explain the rationales for
establishment for the envisioned plant by the owners.
 High market demand and few plant in this sector
 High population.
 Favorable and attractive investment incentives packages by the governments
 Availability of skilled labor force at reasonable price.
 Availability of infrastructure

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1.1.2 Objectives
1.1.2.1 General Objectives
 To supply quality and enough quantity milk products to the market at fair price to
meet the market demand.

1.1.2.2 Specific Objectives

 Support development of small and medium business and farmers in rural areas by
distributing modern technologies
 Increase employment opportunity
 Increase workers’ income
 Decrease milk products import and begin export by using up-to-date technologies
in milk products industry and generate foreign currency
 Generate revenue to the government in the form of tax and land lease payment
and others
 To drive fair profit to the owner of the project
 The existing conducive social and investment saturations and increase number of
private investment in the area for the value chain

1.1.3 The Economic significance of the Project

The envisaged project deemed to contribute to the economic development of the nation in
general and the region in specific with following ways:

A. Supply of quality milk products

The project under discussion will provide quality and fair priced milk products for the
country market.

B. Value add

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The establishment of this plant will add a value to the milk industry sector in specific and
in the economy in general.

C. 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, VAT and payroll taxes are collected from undertaking business
activities. Therefore, the plant will serve as sources of revenue for both the region and
nation in general.

D. 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 plant will hire around 350 persons.

E. Save the country’s foreign exchange

By minimizing the market gab for milk products demand and supply, the plant will help
to reduce the nation’s foreign exchange cost to import these products. This will save the
foreign exchange resource of the nation.

F. Benefit for the local community

As a corporate responsibility the company will engage in different development activities

on the surrounding areas. This will better worse the community and contribute for the
development of the region.

G. Stimulate the local and national economy

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This factory has positive externality in the zone that will encourage the economic
movement of local economy. Hence, there will be economic relationship and transactions
among different actors.

H. Technology transfer

By milk industry, the project will train and develops the capacity of the staffs. By doing
this, the plant will add value in technology transfer for the nation.

1.1.4 Location and premises required

1.1.4.1 Location
The envisaged project is planned to be established in OSZSF zone, Akaki woreda,
Oromia National Regional State. Akaki woreda is center of Special zone is situated at
about 28 kms away from Addis Ababa. it is accessible all year round with all types of
motor vehicles. The area is conducive social and investment situations, ease of future
development and increase number of private investment in the area are some of the
reasons behind selecting the area for the proposed project.

Table 1: Map of Oromia National Regional State O/S/Z/S/Finfine Akaki woreda

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1.1.4.2 Infrastructure
Supplies such as road, potable water and electric power are available in the town. The
available electric power, water supply, telephone service & transportation facilities are
also in the town.

1.1.4.3 Economic activity of Area

Even though there are few/sparsely people living around the project the major economic
base of them is farming supplemented with animal rearing.

1.1.5 Premises Required

The total land holding of the project is 1.8 hectare , that means 1 hek to farm and 0.8 hek
for processing the premises required planned as follows in table below;

Table:- Premises Required and Land Use Plan

No Description Plot in m2
1 Housing
- milk herd
- Replacement herd
- cattle feed processing
16,000
- cattle wash shade
- sanitary installation
- electrical installation
- hitters and aged pen cows box
- cattle, pen, milk house shade
- office and guard house
2 Hey storage 1,000
3 Milking parlor 1,000
4 Manure pit with roof 500
5 Power and wiring 500
6 Machine shed and shop 500
7 Bunker silo 500

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8 Green area 500

9 Parking and others 500
Total 18,000 m2

2. milk Industry Development in Ethiopia in market demand and supply aspect

2.1 Overview of Livestock Sector
The Ethiopian economy is highly dependent on agriculture. Despite being more
subsistence, agricultural production plays an important role in the economy. In the late
1980s, agriculture contributed about 45% of national GDP while the livestock sector,
despite large population size1, contributed about 12-16% of national GDP, 30-35% of
agricultural GDP, 15% of export earnings and 30% of agricultural employment.

Livestock contributes to the livelihoods of 60-70% of the Ethiopian population2 (Aklilu

2002; Ayele et al.2003; Ejigu 2003) in one way or the other. It is raised in all of the
farming systems by pastoralists, agro-pastoralists, and crop-livestock farmers. The rural
milk system is part of the subsistence farming systems that are mainly concentrated in the
highlands, but also in the lowlands. Pastoralist is the major system of milk production in
the lowlands. It is estimated that about 30% of the livestock population are
found in the pastoral areas3. Nevertheless, because of the erratic nature of rainfall that
results in shortage of feed availability, milk production is low and highly seasonal.

Over the last 30 years, national and per capita production and consumption of livestock
products have declined (Ayele et al. 2003). During 1993-2001, per capita income
remained at about USD100. Livestock production increased by much less than the
production increase for the agriculture sector as a whole, so relative share of livestock to
agricultural GDP declined. Hence, per capita livestock output fell by 5% while crop and
agriculture grew by 14 and 6% respectively (Halderman 2004).

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2.2 milk Production Systems in Ethiopia

Ethiopia holds large potential for Milk development. In addition, the country enjoys
diverse topographic and climatic conditions favorable for dairying. These consist of a
high central plateau ranging from 1,800 to 3,000 letres above sea level, a rift valley that
divides the country from north to south with altitudes ranging from 1,000 to 1,800 letre
above sea level and lowland plain areas of less than 1,000 letre above sea level in
altitude. Depending on the altitude difference, temperature ranges from less than 100 C in
alpine areas to 350 C and more in lowland areas. Moreover, rainfall in most of the
country is adequate for crop and pasture production.

The favorable climate throughout the country supports use of improved, high-yielding
animal breeds and offers a relatively disease-free environment for livestock development.
Given the high potential for Milk development and the ongoing policy reforms and
technological interventions, success similar to that realized in the neigh bouring Kenya
under a very similar production environment is expected in Ethiopia

The Ethiopian highlands possess a high potential for Milk development. They occupy the
central part of the Ethiopia, cover over 40% (approx. 490.000 km2) of the country area
and are the largest of their kind in Sub- Saharan Africa. In the highland areas, the
agricultural production system is predominantly subsistence smallholder mixed farming,
with crop and livestock husbandry typically practiced with in the same management unit.
The Milksector in Ethiopia can also be categorized based on market-orientation, scale,
and production 1 Ethiopia currently manages the largest livestock population in Africa,
estimated at 29 million cattle, 24 million sheep and 18 million goats, 7 million equines, 1
million camels and 53 million poultry. The country holds 2.4% of the world, 3.4% of
developing countries and 15.9% of Africa cattle population (ILRI, 2000).

When considering the economic dependency of the rural population it was estimated that
7.8% are purely livestock dependent, 14.6% predominantly livestock dependent and
74.5% dependent on crop production (Winrock, 1992). The pastoralist livestock

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production system which supports an estimated 10% of the human population covers 50-
60% of the total land area mostly lying at altitudes ranging from below 1500 masl.

The traditional smallholder system corresponds to the rural milk production system.
Both the pastoralists and smallholder farmers produce 98% of the national milk
production (MOA, 1993) and 75% of the commercial milk production. The majority of
milking cows are indigenous Zebu breeds with low production performance (average age
at first calving of 53 months and average calving intervals of 25 months). Cows had three
to four calves before leaving the herd at 11-13 years of age and the average lactation
yield is 524 litres/ cow for 239 days (of which 45% is off take for human use while 55%
is suckled by the calf).

The milk processing used to be known as the milk Development Enterprises. The farms
mostly use grade animals (those with more than 87.5% exotic blood) and are
concentrated within 38 km distance around Addis Ababa.

The first attempt to introduce modern milk production in the country was made by the
Imperial regime in 1947, when 300 Friesian and Brown Swiss Milkcattle were received
as a donation from the United Nations Relief and Rehabilitation Administration. A small
milk processing plant was established in Addis Ababa to support commercial
Milkproduction (Yigezu 2000). With the introduction of these cattle in the country,
commercial liquid milk production started on large farms in Addis Ababa (and Asmera).
Most interventions during this period was focused on urban-based production and
marketing.

During the second half of the 1960s, Milk production in the Addis Ababa area began to
develop rapidly as a result of the expansion in large milk process and the participation of
smallholder producers. With the advent of modern dairying, the government established
the Addis Ababa Milk Industry in 1966 and, later on, the Milk Development Agency
(DDA) in 1971 to control and organize the collection, processing and distribution of
locally produced milk. By 1972, the DDA was receiving about 21,000 litres milk/ day for

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processing, of which 57% come from 65 large farms. In addition to collecting milk, the
DDA sold milk and Milk products through its kiosks and shops as well as to institutions.
It also facilitated the creation of Milk cooperatives to ease the provision of credit and
technical and extension service to Milk producers. In 1979 it was merged with numerous
other nationalized milk process to establish the milk Development Enterprise (DDE). The
DDE includes large milk process, milk collection networks, and a processing plant.

The DDE, which is privatized in 2007and changed its name to Lame Dairy, has a
capacity to process 60,000 litres of milk at its inception (Yigezu, 2000). DDE is
privatized and re-named as LAME. With the downfall of the Derg regime in 1991, as a
result of the country’s policy reforms that aim to bring about a market-oriented economic
system, the private sector has begun to enter the Milk sector and market as an important
actor. Many private investors have established small and large milk process.

This commercial farms use grade and crossbred animals that have the potential to
produce 1120-2500 litres over 279 day lactation. This production system is now
expanding in the highlands among mixed crop-livestock farmers, such as those found in
Selale, Ada’a and Holetta, and serves as the major milk supplier to the urban market.
Additionally, some ten private investors and one cooperative union have established
milk-processing plants to supply fresh processed milk and Milkproducts to Addis Ababa,
Dire Dawa and Dessie towns.
 The Sebeta Agro Industry, the biggest dairy-processing in Ethiopia, has a capacity to
process around 30,000 litres of milk per day. Around 6000-10000 litres of this milk
come from the owner’s milk rocess with 600 cows. Currently, the market share of this
company has exceeded that of the DDE’s (now LAME).
 The other private milk-processing plants established in and around Addis Ababa are
FAMILY, LEMA, Genesis, Ada’a Milk cooperative and Dinsho Milk industries that
have already started marketing their products. Although their market share are still
small compared to DDE and Sebeta Agro- Industry.
 Selale Milk Producers Cooperative Union is established by thirty-two milk marketing
cooperatives that have been established by the Small Milk Development Project

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(SDDP) of MoA financed and The development of modern dairying is comparatively

recent and its start-up only dates back to the post world war II time.

2.3 Trend and Performance of Milk Industry

Between 1961 and 1974, milk production increased by 16.6% from 637,400 to 743,100
metric tons with an average annual growth rate of 1.6%. This growth was largely due to
the economies of scale in production as well as marketing, subsidies in transport to the
formal market, secured land tenure and an active free market for feed and other inputs
(Staal et al., 1996). On a per capita basis, however, milk production declined during this
period at an average rate of 0.87% per annum.

Processed milk production has stagnated in the early 1960s but expanded significantly in
the second half of 1960s and early 1970s. To bridge the gap between supply and demand,
Milk imports increased significantly beginning from 1978. This was partly due to
increased food aid milk powder imports by WFP, and a level of Milk production
development that lagged far behind the demand. Imports reached a peak of 314,700
metric tons in 1986 during the drought period (Reda, 2001). During the period between
1977 and 1989, Milk imports as a percent of total consumption increased from 4.1% to
12.8%. Commercial imports grew rapidly at 24.2% per year (Felleke and Geda, 2001).
Further, it is estimated that imported milk powder accounted for 23% of Addis Ababa
market.
Post 1991 producer groups such as the Addis Ababa Milk Producers Association
(AADPA) emerged encompassing 90% of all urban Milk producers and a large
proportion of peri-urban producers within a radius of 38km of Addis Ababa (Staal 1995).
Milk production grew faster in the post reform period, at an annual growth rate of 3%.
Per capita milk production stagnated though grew at a positive but insignificant rate. This
represents a reversal or termination of the negative trend in the growth of per capita
production during the previous two phases.

Using rough estimates from the FAO database and available information from DDE and
Felleke and Geda (2001), the contribution of imported milk to total milk consumption

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declined from 24% in 1985 to less than 1% in 2000. At the same time, the share of
government-owned enterprises in total milk production decreased markedly. In contrast,
the share of smallholder production in total consumption increased by 30% from 71% to
97%. To sum up, total milk production in Ethiopia increased during the 1961-2000 period
at an average annual rate of 1.55% though per capita production declined as a result of
the high population growth rate.

However, during the last decade production grew at a higher rate of 3%. The increased
coverage of extension services (such as better management skills) and increased use of
improved inputs (improved breeds and feed) and policy changes promoting Milk
production have contributed to faster growth of the sub-sector. Milk product imports
during this period were relatively smaller than the previous three decades. Most of the
growth during the 90’s is concentrated in the peri-urban and rural production systems.
The emergence of private processing industries and marketing units have stimulated
producers in the peri-urban areas and rural production systems as it offered them a new
market for their milk production.

On the whole, Milk processing and marketing function was being performed at various
levels; parastatal sector (DDE) had dominated the Milk industry scene until late 90’s
where private sector and cooperative sector appeared to play significant roles in
collecting and processing milk. Under the current market-oriented economic system,
private sector involvement in milk marketing was emerging alongside co-operative
marketing organizations. The privatization of DDE in 2007 marked the end of the
parastatal Milk production system in Ethiopia.
2.4 Milk Marketing System
As is common in other African countries (e.g., Kenya and Uganda), Milk products in
Ethiopia are channeled to consumers through both formal and informal Milk marketing
systems. Until 1991, the formal market of cold chain, pasteurized milk was exclusively
dominated by the DDE which supplied 12% of the total fresh milk in Addis Ababa
(Holloway et al., 2000). Even though the proportion of milk Two are established by
FAO/TCP (Technical Cooperation Programme) and World Food Programme.

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The informal market involves direct delivery of fresh milk by producers to consumer in
the immediate neighborhood or sale to itinerant traders or individuals in nearby towns. In
the informal market, milk may pass from producers to consumers directly or through two
or more market agents. The informal system is characterized by no licensing requirement
to operate, low cost of operations, high producer price compared to formal market and no
regulation of operations.

In Ethiopia, 95% of the national milk is marketed through informal channels and is
unprocessed. The traditional processing and marketing of Milk products, especially
traditional soured butter, dominate the Ethiopian Milk sector. Only 5% of the milk
produced is marketed as liquid milk due to underdevelopment of infrastructures in rural
areas. Hence, the informal (traditional) market has remained dominant in Ethiopia.
Production is non-market oriented and most of the milk produced is retained for home
consumption.
Formal milk markets are particularly limited to peri-urban areas and Addis Ababa. The
formal market appears to be expanding during the last decade with the private sector
entering the Milk processing industry in Addis Ababa, Dire Dawa and Dessie towns.

The Lame Milk(formerly DDE), collects milk for processing from different sources,
including large commercial farms and milk collection centers that receive milk from
smallholder producers. The enterprise operates 25 milk collection centers located around
Addis Ababa, of which 13 located around Selale, 5 around Holetta and 7 around Debre
Brehane. Ten private milk processing plants have entered the milk marketing and
processing, increasing the amount of milk channeled via the formal markets.

Recent study by Teferra Abreha (2006) indicates that in Addis Ababa milk shed there are
about 66,770 cattle of which 46.5% were estimated to be crossbred Milk cows. The peri-
urban milk system includes smallholder and commercial milk process found in the
proximity of Addis Ababa, secondary and other regional towns. In some case intensive
production units based on stall feeding of crossbred and high grade cows is practiced.

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This sector controls most of the country’s improved Milk stock. The urban and peri-urban
milk produce 2% of the total milk production of the country. The total estimated milk
supplied to Addis Ababa annually is65 million liters

Sebeta Agro Industry established the first UHT6 Milk processing facility in the country.
The new production lines will produce 500ml carton pouches (Tetra Fino Aseptic) and
250ml portion packages (Tetra Brik Aseptic). The DDE, now LAME, produces
pasteurized milk in 500ml plastic pouches. The introduction of UHT Milk products on
the market is a great step forward to offset the seasonality in milk production and
consumption. Share of milk sold in the formal market is insignificant in Ethiopia, less
than 2%, compared to 15% share in Kenya and 5% in Uganda (Muriuki and Thorpe,
2001).
Ethiopia there is no market for dairy, exception in few major urban areas. Absent markets
affect the overall Milk production and consumption in the country. UHT products are
aseptically processed and packaged, which gives them a shelf life of 6-12 months without
the need for cooling during storage and transportation.

2.5 Milk Consumption in Ethiopia

Milk Consumption in Ethiopia shows that most consumers prefer purchasing of raw milk
because of its natural flavour (high fat content), availability and lower price. Specific
upper income market segments prefer and can afford packaged processed milk.
Packaging costs alone may add up to 25% of the cost of processed milk depending on the
type of packaging used. Polythene sachets of processed milk are cheaper alternatives.
Ethiopians consume less Milk products than other African countries and far less than the
world consumption. The present national average capita consumption of milk is
19kg/year as compared to 27 kg for other African countries and 100kg to the world per
capita consumption (FAO, 2003). The recommended per capita milk consumption is 200
litre/year. On the other hand, they regularly consume other Milk products such as butter,
ayib (cottage cheese) and fermented milk. According to the Central Statistics Authority
(2005) only 15.4% of the milk produced is sold in the market where as 54.7% milk
produced is consumed at home.

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The remaining, 29.5% of the milk produced, is converted into butter and cottage cheese
or ayib using traditional processing technologies. It is to be expected that these
proportions would start to change as collection infrastructures improve around the
country. There are differences in the demand for milk between rural and urban
population. The demand for milk in rural areas is mainly for fresh whole milk and this
demand is partially satisfied by home production and or purchased from neighboring
producers. The demand for processed milk in the rural areas, is currently nil and expected
not to change significantly in the near future.

The potential market for surplus milk which will have to be processed is found in the 7%
urban population, i.e. 4 million people. Sixty five percent of this market is formed by
Addis Ababa and the surrounding districts. The principal demand will continue to be
fluid milk, much of which will be supplied through informal channels. In rural areas,
consumption of milk and milk products is heavily influenced by livestock ownership, but
in the urban areas, in particular, the principal determinant of consumption levels is
income. The growth in demand resulted from rapidly growing population, urbanization,
change in life style and consumption behaviors, and some increase in per capita incomes.

3. Production and Technology to be used

3.1 Technology

A) Milk Analyzers

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We now take extreme pleasure in introducing our New Model of High Speed Milk
Analyzers developed by our European Principals who are the patent holders for ultrasonic
Milk Analyzers and the largest and most reputed manufacturers of Milk Analyzers-
worldwide. These Analyzers have been specially built to meet the requirement of Indian
Market. Having a vast experience of work with Indian Milk Companies, and in keeping
with our strategy of offering the best solutions for the Milk Industry. We now offer model
of high speed milk analyzer which fully meets the requirements of the Indian Market and
is suitable for milk collection centers, cooperative societies, and Milk Laboratories where
there is a big work load and fast and cost effective analysis is needed.

B) Automatic Milk Collection

We are offering AMCS to enable milk collectors to automate the testing and payment
system at the milk collection point. This system enables immediate analysis of milk for
Fat, SNF, added water and calculation of rate, amount of the supplier based on the
formula used by buyer. You can issue acknowledgment slip to the supplier and also
generate shift summary, milk bill summary.

The DPU offered is one of a kind and unmatched in features or hardware used. We can
assure you that no other DPU available in the country can match our product in features
or Hardware used, at this price.

Various reports like acknowledgment slip (with amount payable), Shift Summary
(Purchase register), Milk bills (optional) Online Printer Low Operation & Maintenance
Cost Systems

C) Electronic Milk Tester

Backed by our robust infrastructure, we are engaged in fabricating a range of superior

quality electronic milk testers. Designed with precision, these milk testers are used to
calculate fat percentage in milk. These electronic milk testers require to operate handle
for three times during testing of one sample. Easy and simple to operate, these testers are
appreciated for their accurate testing and durable performance.

Features :

 Milk tester performs simple and easy and accurate milk fat testing

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 Easy to read digital read-out

 Operates on mains or battery

 Measures up to 13% fat. Small sample volume used

 120 to 150 tests per hour

 Automatic switch over to battery in case of power failure

D) Domestic Cream Separators

We offer our clients a range of electric cream separators that are fabricated from high
grade stainless steel and other materials. Designed using advanced techniques; these
separate the milk cream from milk carefully and speedily. Our cream separators are
resistant to corrosion and rust, thus ensuring that milk is not contaminated.

Features:

 Separator Capacity: 60 Litre/hour

 All milk connecting parts are made of stainless steel

 Dynamically balanced bowl

E) Cream Separators

We offer cream separators that have dynamically balanced bowl and available in different
capacities. Constructed using graded material, these are acknowledged for their corrosion
resistance, high performance and long functioning life. Further, we also make sure that
these are in strict compliance with the prevalents industrial standards.

Features for SONU AS-108

 Separation capacity 550 - 750 LPH

 Centrifugal bowl made of Stainless Steel AISI 304 /

 Mild Steel

 Collection pans and float made of AISI 304 / Tin Plated

 CRCA Sheet

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 Bowl is dynamically balanced

 Lubrication is not required

 Special clutch drive system consists of high torque

 motor of 0.5 HP and flat belt drive, eliminates the

 necessity of drive gears

 Absence of drive gears/lubrication makes it very easy

to maintain

F) Milk Cans

We have with us a range of S.S milk cans that are appreciated for their robust designs,
corrosion resistance and superior finishing. Our ranges of cans are available in various
storage capacities and are compliant with the set industrial norms. Further, these cans are
provided by us with durable handles for easy portability.

Features:

 S.S. Milk Cans available in 5, 10, 20, 40 & 50 litre capacity

 Material used AISI 304 & 202 Stainless Steel

 Tig welding process used to give fine welding quality

 All dimensions very close to aluminum milk cans

 Best quality finishing & polishing

G) Milk Testing Equipment

We bring forth a range of hand and electric centrifuges that are widely acclaimed for their
smooth and trouble free working. Fabricated from premium quality material, these are
sturdy in construction and compliant with the set industrial standards. Our range is
available in various models and specifications to suit the diverse requirements of clients.

Hand & Electric Centrifuges for Gerber fat test available in various models. Hand Driven

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Centrifuge also available with ISI Mark Smooth & Trouble Free Working Solid
Construction Electric motor AC 50 cycles, 220/230V,Single phase, 1440 RPM, Send Enq

H) Butter Churners

We bring forth a gamut of butter churners that are hand operated and available in various
capacities ranging from 5 Ltrs to 500 Ltrs. Made from graded stainless steel and

other materials, these are known for their sturdy construction and are easy to operate and
maintain. Moreover, our range is quality tested in order to ensure a flawless range to our
clients.

Features:

 Various Capacities available from 5 Ltrs to 500 Ltrs

 Cream Holding tank made of stainless steel

 Sight Glass on other side for observation

 Sand Blast Internal Finish

 Double Ball Bearings Hand operated

I) Milking Machines

Optimizing the advanced technology, we are engaged in manufacturing and supply of

wide range of milking machines. The design and function of milking machine is critical
for rapid and efficient removal of milk without damage. Designed as per relevant
industrial standards, our range is available in various models to suit all needs of clients.

Various models available to suit all needs Machines available in mobile and fixed models
Ranging from single cluster to Herringbone type installation for big farms. All major
components from largest European manufacturers.

Milking Machine with Single cluster We hold expertise in manufacturing a range of

milking machine with single cluster, that can milk the herd of 10-12 animals in one hour.
Our range is provided with all major parts like pulsator, liners and complete set of teat
cup milk claw. Precision engineered, our range offer high performance, reliable
operations and long service life. Milking Machine with one can and one cluster

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 MILK PROCESSING PLANT

Assembly Complete with all major parts like pulsator, liners, complete set of teat cup
Milk Claw Specially designed vacuum pump (capable of expanding the machine in
future) Can Milk herd of 10-12 animals in one hour
3.2 . Production
 The project will start with 200 Milk Friesian cows (100 milking and 100 pregnant ),
50 open 30 female calves , and 20 bulls with the total 300 Milk purchased from the
markets with assistance of animal breeding and health professionals in the initial
year of the project.
 The project aims at keeping and producing milking cows in stock with female
calves and selling non milking ones and male calves. In the future the proportion of
calves born is 50:50 of female and male calves.
 When the project starts is operation the number of Milk cows(milking and
pregnant), open, female and male calves, bulls reaches up to 1,495
 Holstein-Friesian breeds are valuable animals and proper health care will done to
attain the targeted daily milk production of 20lit/ per cow.

Project year
Sir. no Description 1 2 3-10
1 Milkcows 200 200 670
2 Open 50 50 450
3 Female calves 30 30 270
4 Male calves - 10 270
5 Bull 10 10 25
  Total 290 300 1,495

A) Powdered Milk production

Ethiopia imports powdered milk that is used in the food industry and for domestic
consumption. Beginning from 1978 Milk imports increased significantly to bridge the

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 MILK PROCESSING PLANT

gap between supply and demand. Powder milk imports (WFP) has reached its peak of
315 thousand metric tons in 1986 during the drought period (Reda 2001). Commercial
imports grew rapidly at 24.2% per year (Felleke and Geda, 2001). Further, it is estimated
that imported milk powder accounts for 23% of Addis Ababa market.

Processing surplus milk into powdered milk would reduce post-harvest losses and add
value to a product for both the domestic and regional market. The ideal location for the
powdered milk plant is the in and around Addis Ababa, including the peri-urban areas
within the radius of 100km. This location would take advantage of the milk surplus in
this production area, largely reduce transport costs for the raw milk and has proximity to
the regional market of COMESA, ESA and Middle East.
 Powdered milk production and sales of the project:-

Description Project year

1 2 3 4 5 6-10
Powdered
milk(lit) 4,000.00 7,000.00 9,000.00 10,000.00 12,400.00 13,400.00

B) Production of Butter and Ghee

Traditional, fermented butter (kibe), which is used mainly for cooking, is mostly made in
Ethiopia. Although insignificant amount butter produced in the Milkprocessing, Ethiopia
imports considerable amounts of butter mainly from Kenya and Europe. Farmers produce
butter and ghee mainly on a small scale which is used for domestic consumption and sale.
A lot of small scale Milkprocessers have started production of butter and ghee and its
production has increased. This could be an entry point and good investment opportunities
in the Milkindustry.
 In year 1, 4,00,000.00 kg butter is produced and sales will be birr 60/kg that
generates birr 240,000.00/year.
 In year 2, 5,000,000.00 kg butter is produced and sales will be birr 60/kg that
generates birr 300,000.00/year.

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 MILK PROCESSING PLANT

 In year 3, 5,250,000.00 kg butter is produced and sales will be birr 65/kg that
generates birr 341,250.00/year.
 In year 4, 5,512.50 kg butter is produced and sales will be birr 65/kg that generates
birr 358,312.50/year.
 In year 5, 5,788.00 kg butter is produced and sales will be birr 70/kg that generates
birr 405,168.75/year.
 In year 6-10, 6,077.00 kg butter is produced and sales will be birr 70/kg that
generates birr 425,427.00/year.
C)Cheese production
Few private firms produce cheeses as their principle products. The DDE and Sebeta Agro
industry produce pasteurized (table/bread) butter; yogurt and various type of cheese
(apart from cottage cheese or ‘ayib’) apart from being imported. The country still imports
cheese. Cheese production provides yet another investment opportunity.
 In year 1, 3,000 cheese will be produced and sales will be birr 12/unit that generates
birr 36,000.00/year.
 In year 2, 3,200 cheese will be produced and sales will be birr 12/unit that generates
birr 38,400.00/year.
 In year 3, 3,360 cheese will be produced and sales will be birr 15/unit that generates
birr 50,400.00/year.
 In year 4, 3,528 cheese will be produced and sales will be birr 15/unit that generates
birr 52,920.00/year.
 In year 5, 3,704 cheese will be produced and sales will be birr 15/unit that generates
birr 55,566.00/year.
 In year 6-10 , 3,889 cheese will be produced and sales will be birr 15/unit that
generates birr 58,344.00/year.
D)Yoghurt and Cultured milk production
Among the Milk products consumed by Ethiopians, raw milk, yoghurt, sours (ergo) and
pasteurized milk is mostly made in Ethiopia. The Lame Dairy, Sebeta Agro-industry,
Genesis Farm are the leading yoghurt producing firms. However, other private firms
produce and sell yoghurt. Cultured yoghurt or ergo is very popular countrywide and its
demand are expected to grow. However, its production is by small-scale processors and

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 MILK PROCESSING PLANT

the informal sector. Investment by the formal sector is required in order to exploit this
market and develop it further.
 In year 1, 260,000.00 lit flavored yogurt is produced and sales will be birr 10/lit that
generate birr 2, 600,00.00/year.
 In year 2, 290,000.00 lit flavored yogurt is produced and sales will be birr 10/lit that
generate birr 3,349,500.00/year.
 In year 3, 304,500.00 lit flavored yogurt is produced and sales will be birr 11/lit that
generate birr 3,349,500.00/year.
 In year 4, 319,725 lit flavored yogurt is produced and sales will be birr 11/lit that
generate birr 3,516,975.00/year.
 In year 5, 3, 35,711.25 lit flavored yogurt is produced and sales will be birr 12/lit that
generate birr 4,028,535.00/year.
 In year 6, 352,496 lit flavored yogurt is produced and sales will be birr 14/lit that
generate birr 4,934,955.00/year.
Cream and ice cream
Some cooperatives and private Milk companies produce cream for the open market.
Production of cream can be profitable because most of the ice-cream (a product made
from cream) is imported to meet the demand for the local market. The number of firms
producing ice cream has increased in the last few years. Although most of the ice-cream
producing firms are concentrated around Addis Ababa, there is an untapped market in the
main urban centres of the country.
 In year 1, 2,000 cream will be produced and sales will be birr 15/unit that generates
birr 30,000.00/year.
 . In year 2, 2,300 cream will be produced and sales will be birr 15/unit that
generates birr 34,500.00/year.
 In year 3, 2,415 cream will be produced and sales will be birr 17/unit that generates
birr 41,055.00/year.
 In year 4, 2,553 cream will be produced and sales will be birr 17/unit that generates
birr 43,107.75/year.
 In year 5, 2,666 cream will be produced and sales will be birr 18/unit that generates
birr 47,925.00/year.

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 MILK PROCESSING PLANT

 In year 6-10, 2,795 cream will be produced and sales will be birr 18/unit that
generates birr 50,321.00/year.

 In year 4, 30 aged cows will be sold and sales will be birr 8,000/heard that
generates birr 240,000.00/year
 In year5, 40 aged cows will be sold and sales will be birr 8,500/heard that
generates birr 340,000.00/year
 In year 6-10 , 50 aged cows will be sold and sales will be birr 8,500/heard that
generates birr 425,000.00/year
 In year 1, 100 male calves will be born and sales will be birr 5,000/heard that
generates birr 300,000.00/year
 In year 2, 125 male calves will be born and sales will be birr 6,000/heard that
generates birr 750,000.00/year
 In year 3, 150 male calves will be born and sales will be birr 6,500/heard that
generates birr 975,000.00/year
 In year 4, 150 male calves will be born and sales will be birr 7,000/heard that
generates birr 1,050,000.00/year
 In year 5, 160 male calves will be born and sales will be birr 8,000/heard that
generates birr 1,280,000.00/year
 In year 6-10, 165 male calves will be born and sales will be birr 8,000/heard
that generates birr 1,320,000.00/year

4. ORGANIZATION, MANAGEMENT AND MANPOWER

4.1 Organization and Management

The organizational structure should be in a way that the project able to achieve its
objectives as well as the satisfaction of standard requirement.

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 MILK PROCESSING PLANT

4.2 Man Power

 Generally the project will create job opportunities for 200 qualified and 150 daily
laborers totally for 150 employees

 The man power list and the Corresponding labor cost are shown on the financial part.

4.3 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 plant.
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 the owners.

Owner

Hence the following section deals with General

the dutiesManager
and responsibilities of some
departments.
Executive
Secretary
1. General Manager
Duties and responsibilities
Production
 She/he
Department will plan, organize, directAdmin
and control the overall activities of
& Finance the plant
Marketing
Department Department
 She/he will devise policies and strategies that will enable the factory to be
profitable.
 She/he will incorporate modern technological innovation that will facilitate the
service delivery of the project center and increase customer’s satisfaction.
 He/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.
2. The Manufacturing Department

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 MILK PROCESSING PLANT

Duties and responsibilities:-

It is the core department of the project center and has the following responsibilities.
 Design and prepared prototype for irrigation pipe, conduit, fittings and
accessories based on the plant standard and customer preferences
 Use modern manufacture, processing and technologies that will enhance the
quality of the those products.
 Produce quality product that will enable the center competent both in the
domestic and international market.
 Use appropriate technology to manage its products.
 Control on the quality of raw materials, inputs, 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 final products
3. Administration and Finance Department
Duties and responsibilities:-
 Will plan, organize direct and control the financial transaction of the plant 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 the
general manager, owner and other concerned government body.
 Will control the human and non human resources of the plant, which include:
effective handling of the different inventories of the machineries, equipments, raw
materials, finished products, and devise strategies of controlling against fraud and
damage.
 Manage and execute the company national and international procurement
procedure
 Administer and control the company logistic resource

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 MILK PROCESSING PLANT

 Effectively administer the company Procurement process domestically as well as

internationally.
 Manage the public relation of the company/factory with external
parties/stakeholders
 Provide and manage general supportive service to the plant.
4. Commercial Department
Duties and responsibilities:-
 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Provide cost estimates in preparation for securing ...
 Gather information on new product design, profile
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will design and implement effective advertisement and promotion schemes
 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

5. FINANCIAL REQUIREMENTS AND ANALYSIS

5.1 Total initial investment cost

The total amount of money that is required to establish the envisaged project is estimated
to be birr 96,000,000.00

Table:- Total Initial Investment Capital

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 MILK PROCESSING PLANT

No Description Cost
1 Fixed Investment  
1.1 Land, Building and Construction 26,880,000
1.2 Machines and Equipments 21,120,000
1.3 Vehicles and Motors 2,880,000
1.4 Office Furniture and Equipment 1,920,000
Total Fixed Investment Cost 52,800,000
2 Operating Expense  
2.1 Raw Materials Purchase and Products 19,200,000
2.2 Salary Expense 9,600,000
2.3 Other Operating Expense 2,880,000
2.4 Pre-operating Expense 1,920,000
Total Operating Expense 33,600,000
  Contingency (Lump sum) 10% 9,600,000
Total Investment Cost 96,000,000

4.1.1 Fixed Investment

A) Building and Construction

No Description Plot in m2 unit cost Total cost
in birr
1 Housing      
- milk herd      

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 MILK PROCESSING PLANT

- Replacement herd      
- cattle feed processing      
- cattle wash shade      
- sanitary installation      
- electrical installation 10,000.00 348.84 18,488,400.00
- hitters and aged pen cows     0.00
box
- cattle, pen, Milk house     0.00
shade
- office and guard house     0.00
2 Hey storage 500 2500 1,250,000.00
3 Milking parlor 500 1500 750,000.00
4 Manure pit with roof 1,000 1500 1,500,000.00
5 Power and wiring 1,000 1000 1,000,000.00
6 Site preparation and paving 1,000 1400 1,400,000.00
7 Machine shed and shop 1,000 1500 1,500,000.00
8 Bunker silo 1,000 1000 1,000,000.00
9 Green area 500 1000 500,000.00
10 Parking 500 600 300,000.00
  Total 7,000.00   26,000,000.00

B) Farm tools and equipment

N0 Description Qty Unit cost Total cost
1 Manure blade 1 1,500.00 1,500.00
2 Liqiud manure sprader 3 1,000.00 3,000.00
3 Feeding computer 2 500.00 1,000.00
4 Water pump 10 3,000.00 30,000.00
5 Feed mill with mixer 3 10,000.00 30,000.00
6 Deep freezer 10 6,000.00 60,000.00
7 Container 16 3,000.00 48,000.00
8 Wheel barrow 10 15,000.00 150,000.00
9 Milk tank 10 10,000.00 100,000.00
10 Milk Analyzers,      
Automatic Milk Collection
Systems, AMCU Accessories,
Electronic Milko Tester,
Domestic Cream Separators ,
Cream Separators,
Milk Cans , 20,000,000.00

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 MILK PROCESSING PLANT

Milk Testing Equipment  

,Butter Churners,
Milking Machines and others

 TOTAL 21,000,000

C) Vehicles

SN Description Qty Unit Price in Total Price in

br. br.
1 Medium Truck 1 375,000 375,000
2 Pick up 1 300 ,000.00 300 ,000.00
3 Mini-bus van 1 337,900.00 337,900.00
4 Animal feeder mixier 1 337,500.00 337,500.00

Total 4 1,350,000 1,350,000.00

D) Office Equipment

SN Description Qty Unit cost in Br. Total cost in Br.

1 Managerial Tables with chair 6 4200 25,200

2 Secretarial chairs 2 1200 2,400

3 Office tables 10 1500 15,000

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 MILK PROCESSING PLANT

4 Office Chairs 25 800 20,000

5 Computer with its printer 5 15,000 75,000

6 Shelf 1 3500 3,500

7 Telephone and fax machine 2 1700 3,400

8 Filing Cabinets 2 1900 3,800

9 Decoration(Curtain, Sofa & Carpet) LS 89,000

11 Others 1,600,000.00

Total 1,900,000.00

4.2. OPERATING EXPENSE

A) Purchase of animals
No Description Quantity Unit cost Total cost
1 Cows, 100 200,000.00 1,600,000.00
- Young cows
-Older cows
2 Milkbull 15 20,000.00 300,000.00
  Total 45 40,000.00 1,900,000.00

B) Salary expense
As indicated in part three of this study, the total cost of salary and wage is estimated
to be 9,500,000 birr.
N Description Req . No Qualificatio Monthly Annual
o n salary in salary in
birr birr
1 Milk process manager 1 B.A in
Animal
science 35,000.00 35,000.00
2 Secretary 1 Dip. in
Sec.Science 1,500.00 1,500.00

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 MILK PROCESSING PLANT

3 Adminstator 1 Dip.in Pub.

adminstartio
n 1,500.00 1,500.00
4 Accountant 1 Dip. in
Accoounting 1,500.00 1,500.00
5 Purchaser & sales man 1 Dip. In
marketing 1,500.00 1,500.00
6 Cashier 1 Dip. in
Accounting 1,000.00 1,000.00
7 Store keeper 3 Grade 7 1,000.00 3,000.00
8 Machine operator 5 Grade12 1,000.00 5,000.00
  Time keeper 2 10th complete 1,000.00 2,000.00
7 Milk processing plant 10 Diploma
workers TVET 1,000.00 10,000.00
8 Barn workers 10 10th complete 1,000.00 10,000.00
9 Veterinarian 5 Dip. In
Vet.Science 1,250.00 6,250.00
10 Pasture area worker 7 8 grade 1,000.00 7,000.00
11 Driver 5 10th
Complete 1,500.00 7,500.00
12 Assistant driver 3 6th complete 1,000.00 3,000.00
13 Guards 2 Grade 10 1,000.00 2,000.00
14 Cleaners 2 Cleaners 1,000.00 2,000.00
15 Daily labors(30birr*60 35 Un skilled 5,200,500.0
days*56 person) 1,500.00 0
  Sub total 90   50,000.00 9,500,000.0
0
  Employee benefit     35,985.00
(30%) 0.00
  Grand total  250   155,935.0 9,500,000.0
0 0

C) Other Operating Cost

   Health care expense
 
No Description Number Price/heard Total cost in birr
1 Health care 300 cows 500 150,000.00
   Fuel, oil and lubricant costs
    Total Fuel Fuel price per Total cost
No Consumer lit

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 MILK PROCESSING PLANT

1 Generator (1) 2880 10 57,600.00

2 Pick up (2) 7,980 10 159,600.00
3 Medium Truck(1) 15,000 10 300,000.00
4 Mini bus (2) 7,980 10 159,600
5 Oil &lubricant - - 67,680.00
(10%) of the
fuel cost
  Sub Total - - 2,350,000

3.  Feed cost

No Description Number of quintal Price/Quintal Total cost in birr
1 Wheat bran 2,000 500 1,600,000.00
2 Corn 3,000 1000 1,200,000.00
3 Oil cake 2,000 1500 1,100,000.00
4 Salt 150 100 30,000.00
5 Straw / hay 3,000 100 600,000.00
    10,150    500,000
Ground Total 5,000,000
D) Pre- service expenses
SN Description Total Cost in br

1 Project proposal 10,000.00

2 EIA 35,000.00

4 Licensing fee 5,000.00

5 Others facilitation(Promotions, Training, Machine 1,400,000

installed and etc)
Total 1,900,000.00

 Annual Depreciation schedule of fixed asset

No Description Initial Annual depreciation
value

Rate Value

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 MILK PROCESSING PLANT

1 Building & construction 12,600,000 5% 630,000

2 Farm tools & Machineries 9,900,000 10% 1,485,000
3 Vehicles 1,350,000 10% 270,000
4 Office furniture & Equipment 900,000 10% 135,000
Total 52,750,000 5,520,000

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 MILK PROCESSING PLANT ]

Description Project year

1 2 3 4 5 6-10
1 Pre service Expense 1,500,000 200 0 0 0 0
2 Purchase animals 6,000,000 3,675,000.00 3,675,000.00 3,675,000.00 3,675,000.00 3,675,000.00
3 Feed cost, Medication and 10,000,000
others 3,181,500.00 3,181,500.00 3,181,500.00 3,181,500.00 3,181,500.00
5 Salary and wage 5,500,000 1,964,781.00 1,964,781.00 1,964,781.00 1,964,781.00 1,964,781.00
6 Travel expense 187,122.00 196,478.10 196,478.10 196,478.10 196,478.10 196,478.10
7 Protection and medical 187,122.00
expense 196,478.10 196,478.10 196,478.10 196,478.10 196,478.10
8 Repair and maintenance 834,771.00.00 876,509.55 876,509.55 876,509.55 876,509.55 876,509.55
9 Insurance 278,257.00 292,169.85 292,169.85 292,169.85 292,169.85 292,169.85
10 Depreciation 5,261,450 2,921,698.50 2,921,698.50 2,921,698.50 2,921,698.50 2,921,698.50
  Total Initial Working 29,748,723
capital 13,348,915.10 13,348,715.10 13,348,715.10 13,348,715.10 13,348,715.10
2. Summary of working capital

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 MILK PROCESSING PLANT ]

6. Financial Analysis and Evaluation

6.1 Source of fund

No Description % share Amount in birr
1 Owner Share 30 28,800,000.00
2 Bank Loan 70 67,200,000.00
Total 100 96,000,000.00

6.2 Loan Repayment Schedule

Principal Total Annual

Year Interest (10%) Remaining Balance
Payment Payment
0 0 0 0 67,200,000
1 6,720,000 6,720,000 13,440,000 60,480,000
2 6,720,000 6,048,000 12,768,000 53,760,000
3 6,720,000 5,376,000 12,096,000 47,040,000
4 6,720,000 4,704,000 11,424,000 40,320,000
5 6,720,000 4,032,000 10,752,000 33,600,000
6 6,720,000 3,360,000 10,080,000 26,880,000
7 6,720,000 2,688,000 9,408,000 20,160,000
8 6,720,000 2,016,000 8,736,000 13,440,000
9 6,720,000 1,344,000 8,064,000 6,720,000
10 6,720,000 672,000 7,392,000 0

6.5 Balance Sheet

Asset
Current Asset  
Cash 6,750,000
Inventory of raw materials and inputs 9,000,000
Total Current Asset 15,750,000
Fixed Asset  
Land, Building and Construction 12,600,000
Machineries and Equipment’s 9,900,000
Office Equipment 900,000

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 MILK PROCESSING PLANT

Vehicles 1,350,000
Total fixed Asset 24,750,000
Total Asset  
Liability  
Account payable 31,500,000
Owners Equity 13,500,000
Capital  
Total Liability & Owners’ Equity 45,000,000

2
 MILK PROCESSING PLANT ]

4.1 Revenue Projection

Sir Description project year total cash
no   1 2 3 4 5 6-10
Powdered
1 milk Sales 10,220,000.00 14,600,000.00 19,710,000.00 21,900,000.00 25,696,000.00 28,105,000.00
Flavored
Yogurt and
2 UHT Milk(lit) 2,600,000.00 2900000 3,349,500.00 3,516,975.00 4,028,535.00 4,934,955.38
Production of
Butter and
3 Ghee(kg) 240,000.00 300,000 341,250.00 358,312.50 405,168.75 425,427.19
Cheese
4 production 36,000.00 38,400 50,400.00 52,920.00 55,566.00 58,344.30
Cream and ice
5 cream 30,000.00 34,500 41,055.00 43,107.75 47,925.68 50,321.96
sales of male
6 calves 300,000.00 750,000 975,000.00 1,050,000.00 1,280,000.00 1,320,000.00
7 Sales of cows - 0 - 240,000.00 340,000.00 425,000.00

   Total 13,426,000.00 18,622,900.00 24,467,205.00 27,161,315.25 31,853,195.43 35,319,048.82

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 MILK PROCESSING PLANT ]

6.4 Profit/ Loss Statement

Revenue Year 1 Year 2 Year 3-10

Sales 13,426,000.00 18,622,900.00 24,467,205.00
Sales expenses (5%)* 1,543,500 1,980,000 2,610,000
Purchase of Raw Material 9,000,000 265,075,095 265,075,095
Gross profit 21,870,000 -225,475,095 -212,875,095
Expenses    
Salary Expense 4,500,000 4,725,000 4,961,250
Operating Expenses 1,350,000 1,417,500 1,488,375
Pre-operating Expense 900,000 945,000 992,250
Deprecation Building 630,000 630,000 630,000
Deprecation machine 1,485,000 1,485,000 1,485,000
Deprecation Vehicles 270,000 270,000 270,000
Deprecation office Equip 135,000 135,000 135,000
Lease Expense 16,340,000 16,340,000 16,340,000
Interest Expense 3,150,000 2,835,000 315,000
Total Expense  28,760,000 28,782,500 26,616,875
Profit Before Tax 30,870,000 39,600,000 52,200,000
Tax(30% ) 9,261,000 11,880,000 15,660,000
Net Profit 21,609,000 27,720,000 36,540,000

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 MILK PROCESSING PLANT ]

6.6 FINANCIAL EVALUATION

A) Profitability
Based on the projected profit and loss statement, the project will face loss on the first
year and generate a profit throughout its operation when it starts at full capacity. Annual
net profit after tax will grow from Birr 5,737,753.98 to Birr 13,334,044.65 during the life
of the project..

B) Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick
for evaluating the financial position of a firm. It is also an indicator for the strength and
weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets ( operating income divided by assets),
return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.

C) Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.
BE = Fixed Cost = 23 %
Sales – Variable Cost
D) Payback Period

The pay back period, also called pay – off period is defined as the period required
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 years.

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E) Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another way,
the internal rate of return for an investment is the discount rate that makes the net present
value of the investment's income stream total to zero. It is an indicator of the efficiency or
quality of an investment. A project is a good investment proposition if its IRR is greater
than the rate of return that could be earned by alternate investments or putting the money
in a bank account. Accordingly, the IRR of this porject is computed viable indicating
the vaiability of the project.

F) Net Present Value

Net present value (NPV) is defined as the total present ( discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value. It is a
standard method for using the time value of money to appraise long-term projects. NPV
is an indicator of how much value an investment or project adds to the capital invested. In
principal a project is accepted if the NPV is non-negative.

Accordingly, the net present value of the project is found to be is acceptable.

5. Future Development

Every business undertakings be it large or small should have future development plan. It
is a plain fact that business activities are undertook in a dynamic business nature and
different environment. Therefore, the plant will have an expansion phase depending on
the condition of the sector character particularly milk processing plant.