I.

Executive Summary
1. Project Background

 Title of the Project: Juice and Syrup Factory

 Owner of the Project: Mustafa Radi Hassan

 Project Location: Sabata Town

2. Total Investment Cost of the Project

 Fixed Investment Cost 57,051,600.76

 Working Capital 1,771,290.68

 Preliminary and Pre-Operating Expenses 1,507,000.00

 Total Cost of the Project 60,000,000.00

3. Financial Sources of the Project

 Owner Equity (30%) 18,000,000.00

 Bank Loan(70%) 42,000,000.00

 Total 60,000,000.00

4. Estimated Annual Net Profit of the project

 Over Ethiopian Birr 3 Million

5. Employment Opportunity of the Project

 At Total of 340 Permanent and Temporary employment opportunity

6. Land Required for this Investment 10. 000 M2

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 1. Introduction
This profile envisages the establishment of a plant for the production of fruit juice and syrup
with a capacity of 300 tons per annum. Fruit juices are produced and consumed for their
refreshing character and nutritional qualities being rich in vitamins and minerals. Syrup can be
used as a garnish; tenderizer and meat marinade, or drizzled as a topping on desserts, pancakes or
cereals.
The country`s requirement of fruit juice and syrup is met through local production and import.
The present (2012) demand for fruit juice and syrup is estimated at 8,122 tons. The demand for
the product is projected to reach 10,844 tones and 13,230 tons by the year 2018 and year 2022,
respectively.
The principal raw materials required are fresh fruits and sugar which are available locally.
The total investment cost of the project including working capital is estimated at Birr 1.7 million.
From the total investment cost the highest share is accounted by fixed investment cost followed
by pre operation cost and initial working capital . From the total investment cost Birr 3.5 million
or 27.31% is required in foreign currency.
The project is financially viable with an internal rate of return (IRR) of 32.74%and a net present
value (NPV) of Birr 14.34 million, discounted at 10%.
The project can create employment for 340 persons. The project will generate Birr 47.27 million
in terms of tax revenue. 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 horticulture farming sub sector and sugar producers and also generates income
for the Government in terms of tax revenue and payroll tax.

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 2. Project Area

2.1 The Project Location

The project envisage is aimed to be established in Sabata town. Sebeta is the capital town of
Sebeta Awas District of Southwest Shewa zone, Oromia Region situated at about 24km west of
Addis Ababa along Jimma road. Due to its current fast growing status, the two satellite towns of
Alemgena and Welete are considered as its administration part. Hence, based on the
geographical location of these satellite towns, administratively Sebeta is subdivided into three
local government kebeles of Sebeta as 01, Alemgena as 02 and Welete as 03 kebele.

Sebeta town is located within an approximate geographical coordinates of

8053’38.50’’N_8059’58.17’’N latitude and 38035’11.91’’E_38039’33.75’’E longitude. With
regard to relative location, it shares common boundaries with Addis Ababa in the North,
Northeast and east, Burayu town in the North, and rural villages of Sebeta Awas district to the
south and west.

Sebeta is situated at a fertile area known for its natural resources. The area is surrounded by
different chains of hills and mountains including Mts Wachacha, Hoche and seasonal marshy
plains including Furi – Gara – Bello, Gejja Ballachis and Jammo (Tesfaye, 1997; OI. NO. 2.3). It
is also known for its streams including Laga Nasi, Gasas, Laga Abba Marach and attractive
springs like Burqa Qerro; which currently located in the Middle of the town in nannery
compound (OI No. 3, 4, 8). These natural features have significant impact on the climate of the
area which is cool and attractive. Further more, some of these peaks or mountains such as Furi
and other area important in Oromia culture and religion. Furi is one of the Eight sacked
mountains of Oromo (“Saddettan Tullilu wwan Waaqaa”/BATO, 2007).

As the area is close to Finfinne, a number of factors, which were much related to the
development of the capital also contributed to the emergence and development of Sabata town.

The present Sabata town consists of four major neighborhoods (Ganda) including Sabata (01)
Alamgana (02) and Walate (03) and Furii(04). These neighborhoods were previously developed
as separate towns, though Alamgana and Walate did not have municipality of their own.
However they were highly interconnected in so many was including administration structure and
social economic activities.

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 2.2 Infrastructure
The existence of adequate infrastructure development supplement for the establishment of this
project in this city. The Project area is well adequate with sufficient infrastructure and services
among some of which are as follows.

 Road and Transport

The roads of Sebeta town are asphalted (Addis –Jimma and Alemgena-Awash Kunture/Butajira),
surfaced (few collector and internal feeder roads) and non-surfaced (most of internal roads). The
length of asphalted roads i.e. the major road starting from Welete/border of Addis Ababa up to
the western boundary of the town that extends up to Mountain view Recreation center and the
road from Alemgena-Awash Kunture/Butajira road is asphalted road. Sebeta town roads can be
grouped roughly into three major categories on the basis of type of surfacing materials as; Trunk,
collector and feeder roads.

2.3 Population and Economic Activities

2.4.1 Population
Sebeta town is one of the three towns with population size more than 10,000. The population and
housing census conducted in 1994 by Central Statistics Authority and the report obtained from
Sebeta Town Administration Office considered here to see the trend of the population size of the
town under study. In 1994 population census of CSA the total population size of the town was
14,076 and based on this size and the growth rates computed by CSA for the consecutive years,
in 2007 the total population of the town is exponentially estimated by CSA as 26,342. However,
Sebeta Town Administration office reports that the current population size of Sebeta town
(including, Dima, Alemgena, Welete and other rural villages that are administered under the
Local Government of Sebeta town) estimated more than 110,000.

According to the annual statistical report of CSA, by the end of 2007, the population size of
Sebeta town without considering Welete, Alemgena and surrounding rural villages projected
about 26,126. However, by considering the listed areas as part of the town, based on this rate of
projection, the 2007 and 2008 total population of the town was estimated nearly about 87,687
and 92,018 respectively. Hence, at the end of the planning period, 2018, it can be possible to
estimate that the population of Sebeta town will increases from 102,703 to 179,897.

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2.4.2 Economic Activities
The distribution of employed economically active population of the current Sabbata town by
major industrial division is likely help to examine the pattern of economic activity of the Town.
The current Sabbata town means when the previous Sabbata and Alemgena towns merged with
Walatte rural area (that was not urbanized during 1994, CSA) which are currently assigned as the
three kebeles of the town.

According to the survey conducted by CSA in 1994, the size of economically active population
Sabbata town was about 4,220 (M=2,438, F=1,782). The activity rate of the town was estimated to be
about 44.73 percent, which is much less than the urban average activity rate (49.7%) at national level,
the urban average rate of urban for Oromia Region (47.8%) and that of West Shoa zone (48.96 %)
since the town was under the administration of West Shoa zone.

The investigated economic data are including structure and economic role, unemployment, re-allocated
farmers condition, urban agriculture, investment, trade, tourism, micro and small enterprise,
municipality finance, human resource of the town, as well as zonal economic situation.

There are various advantages or opportunities of investment activities that exist in the town for the
local residents. According to our observation and some of the investors in the area, these activities
have opened a door of employment for many inhabitants of the area.

The multiplier outcome of economic study in healthy thought to be the basis of the town
development when overcome the problems demonstrated in the document. While the sought out
of problems only not the solution of the existing economic conditions in the area, so that the
municipality and communities tied together have to recognizes the economic problems and apply
the solution illustrated in the document

The total investment activities practicing in the area secondary economic activities stood first and
accounts (83.5%) and followed by tertiary economic activities (14.6%) and primary economic
activities (1.9%).

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Current Condition of Investments activities in the town

Currently, investment seems the major economic activity in Sabbata town as seen from the data
collected and practical observation of the study team. Based on the development goal of the
country that encourages investment activities, the town administration in collaboration with the
regional government invites potential investors to invest in different activities.

As a result of this, many investors are running their duties engaged in different activities even if
some of them are based on inefficient land utilization. Currently, more than 78 are engaged in
different types of manufacturing, around 10 engaged in flower farming within the town boundary
with much small scale industrial and other activities. On the other hand, considerable investors
are still on process in different types of activities.

 32- complete construction & expected to start production,

 33- provided land and didn’t begin any process and
 5 –terminating production due to different reasons and expected to restart the future
since the financial balance of almost all investors shows profitability.
Not only this, but also about 174 potential investors started process provided deteriorated kebele
houses through lease system to invest on it in different activities with the current application to
future investment need also shows the bright future for the community. As the result, the current
unemployment problem of the town will be solved in the near future when all these start to
produce in their full capacity.

The major potentials that attract investments to the town:

 Proximity to the capital city of Finfinne and thereby national and international market
 Government encouraging policy direction
 Conducive whether condition to live with its site situated at the development corridors
 Accessibility of every infrastructure and the current activity of the town administration to
develop more and
 The ongoing master plan for the town

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 3. Description of the Project
Packed juice is the unfermented drink obtained from sound, ripe fruits, with or without parts.
Packed juice can be produced from different fruits such as apple, mango, peach and the like.
Concentrated juice may be added, provided that any added juice concentrates shall not contribute
more than one-fourth of the total juice solids in the finished apple juice. No water may be added
directly to the finished food.
Juice drinks have a fruit content ranging between 6 and 30 percent, and also include water, fruit
aromas, sugar and, in some cases, food acids. Food acids are organic acids and are used to give
the desired sourness to food and drinks. Examples of food acids are malic or citric acid.
Syrup can be used as a garnish; tenderizer and meat marinade, or drizzled as a topping on
desserts, pancakes or cereals. It is also excellent in drinks as a flavorsome additive. It can be
added directly to a wide range of ingredients to enhance flavors and create a point of difference
to baking.
Processing of juice and syrup should comply with Ethiopian Standard (ES 360:2001). The raw
materials, additives and the processing procedures should be selected as per the standard. Juice
and syrup is a resource based product which has a local market as well as an export potential.

3.1. Objectives of the Project

The general objectives of this project are as any business company to get return on investment in
the Form of net profit. Thus the General objectives of this project will be.

 To be profitable on return on investment

 To contribute for the country economic Development

 To contribute by filling the Demand and supply Gap for this product in our country

 Contribute for the production of Products that are import substitute

 To create employment opportunity for the citizens

 To Contribute for foreign earnings for our country by exporting some parts of the project
product to other countries

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 4. Production Program and Plant Capacity

4.1. Production Programme

The production programme is indicated in Table 3.3. At the initial stage of the production, the
plant requires some years to penetrate into the market and develop skill in production. Therefore,
The plant will start its production with 75% in the first year, 85% I the second years , 90% in the
3rd year will fully operate its 100% Capacity in the 4 th year. The following Table will summarize the
Production programme of the this project

S.N Production/Capacity UOM 75% 85% 90% 100%

Utilization

1 Fruit Juice No 225 300 325 375

2 Syrup Tone 175 185 190 200

3 Others Tone 100 125 150 175

4.2 Plant Capacity

Based on the demand projection indicated in Table 3.2, capital requirement and minimum
economy of scale, the proposed plant will have production capacity 300 tonnes of apple juice and
syrup per annum. The plant is envisaged to operate in a single shift of 8 hours for 300 days per
year. However, production capacity can be double, if the plant is operated double shift of 16
hours a day based on actual market conditions.

5. MATERIALS AND INPUTS

A. RAW MATERIALS
The major raw materials required for the envisaged plant are fresh fruits, like apple, mango,
peach, etc and sugar. The annual raw materials requirement at full capacity production of the
plant and the estimated costs are indicated in Table 4.1.

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Table 4.1 ANNUAL RAW MATERIALS REQUIREMENT AND COST

The auxiliary materials required for the envisaged plant include plastic bottles and plastic sheets
which can be obtained locally from plastic factories. The annual requirement for auxiliary materials
at full capacity production of the plant and the estimated costs are shown in Table 4.2.

B. Auxiliary Materials

Table 4.2 ANNUAL AUXILIARY MATERIALS AND ESTIMATED COST

C. Technology and Engineering

1. Production Process
The production process involved in processing apple juices are:
a) Selection and preparation of apple fruits
After the apple fruits have undergone a quality inspection, i.e. after fresh, sound and suitable
varieties have been properly selected, they are first washed by rotary brusher to remove soil and
dirt from the grove and stems and leaves need to be removed from the fruit.

b) Extraction of juice
The selected apple fruits must be crushed to a pulp before pressing, the result of this being what
is known as the pomace. Pulping is often followed by the addition of enzymes, which break
down the cell walls of the fruit and thus increase the amount of juice extracted. The pomace is

9
finally pressed out in large presses. The solid matter left over from the pomace can be used as
animal feed (cattle cake).
c) Straining, filtration and clarification
To clarify the apple juice, which is still cloudy, the juice is first centrifuged - during which
process the larger particles such as broken fruit tissue, seed and skin, and various gums, peptic
substances etc settle to the bottom - and then filtered. This production step can also be supported
by enzymes which break down the turbid particles before filtering starts, thus preventing the
filters from blocking too quickly.
d) Preservation(for juice production only)
After the juice becomes free from suspended impurities, refrigeration and pasteurization at 75ºc
for about half a minute be conducted for preserving the juice extracted. Finally, the pasteurized
juice shall be cooled, filled, labeled and dispatched.
e) Juice evaporation (for syrup production only)
 Evaporation process:
This is the most critical aspect of making high quality syrup. Evaporation should be done with
uniform heating. Initially coagulation starts when juice temperature increases. This scum should
be removed during slow heating.

 Judging the end point of the syrup:

As the syrup density increases, the boiling temperature rises gradually. Slow heating is required
when frothing starts, as otherwise the syrup will get burned. When the desired temperature is
achieved, heating should be completely stopped.
 Cooling of finished syrup:
This is an important step followed after making the syrup because if quick cooling is not carried
out, the product will have a burnt taste and the color of the syrup will become dark brown.
Therefore the syrup should be cooled.

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f) Packing and storage

 Bottling:
A vacuum-based bottle filling machine has been used successfully to package the juice/syrup so
that its shelf-life is increased. The juice/syrup should be filled in sterilized bottles to avoid
fungus problems.
 Capping:
The bottles filled with the help of the bottling machine should be capped with a crown capping
machine to make them air tight.
 Labeling:
Capped bottles should be labeled properly. The label should give precise information about the
juice/syrup ingredients, date of preparation and producer’s details. Then, packaging is performed
automatically.

2. Source of Technology
The machinery and equipment required by the envisaged project can be obtained from the
following companies specialized in manufacture of machinery for juice production.
1. Pomejuice and products,
11, Bayajapur, post-pimpal kothetal,
Satana, Nasik, Mahaashtra,
India – 423204,
Tel -91-2555-242625.
2. Vicent corporation
2810E, 5th Avenue
Tampa, FL 33605
United states
Phone: (813) 248-2650
E-mail: Sharon@vicent corp.com

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 6. Market Analysis

6.1 Past Supply and Present Demand

The source of supply for fruit juice in general is mainly from import supported by some local
production. Upper Awash Agro Industry (Merit) was the only sole domestic producer of fruit
juice. The fruit juice produce by Merit was mainly orange. However, currently a few private
companies have stated to process fruit juice that includes apple, mango, peach and the like.
Nevertheless, the Manufacturing Industries Survey shows data only for orange juice. In the
absence of date for domestic production of pineapple juice and syrup the import data obtained
from Customs Authority is utilized to analyze the unsatisfied demand for the product (See Table
3.1.).

The source of supply for packed juice and syrup in general is mainly from import supported by
some local production. Currently a few private companies have started to process fruit juice that
includes apple, mango, peach and the like. Nevertheless, the Manufacturing Industries Survey
shows the data for orange juice only. In the absence of data for domestic production of juice and
syrup, the import data obtained from Customs Authority is utilized to analyze the unsatisfied
demand for the product (See Table 3.1).

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Table 3.1 IMPORT OF PACKED JUICE & SYRUP (TONS)

Source: -Ethiopian Revenue and Customs Authority.

Table 3.1 reveals that import of juice and syrup has been generally rising with minor fluctuations
in some of the years. The increasing trend could be clearly seen when the data set is analyzed by
grouping in to different periods. During the period 2001--2003 the yearly average level of import
was about 677 tons. During the next three consecutive years (2004--2006) the yearly average
import level increased to 2,267 tons. By the years 2007--2008 and 2009--2011average annual
imported quantity increased to 6,718 tones and 8,122 tones, respectively. During the last 5 years
period the average growth rate of total import was 15%.

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Effective demand for the year 2012 was considered to be more reflected by the more recent trend
and hence calculated by taking the average of the last three years, which is 8,122 tons.

Demand Projection

The future demand for processed and canned juice and syrup is a function of urbanization,
income and change in the consumption habit of the population. Considering the above three main
factors have been gaining moment over the study period and the anticipated similar trend,
demand for the product is forecasted to grow by 5% per annum (see Table 3.2).
Table 3.2 DEMAND PROJECTION UNSATISFIED FOR JUICE& SYRUP (TONS)

Demand for packed juice will increase from 8,528 tons in the year 2013 to 10,844 tons and
13,230 tons by the year 2018 and year 2022, respectively.

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 6.1 .1 Pricing and Distribution

Currently, fruit juices of various types sell for a price ranging from Birr 40 to Birr 50 per litre in
the retail market. The average is therefore about Birr 39. Taking this as reference and allowing a
30% margin for wholesaler and retailers, a factory gate price of Birr 35 per litre is proposed.

The product will find its market outlet in the food stores, supermarkets and groceries throughout
the country.

According to Ethiopian Standard, ES 360:2001, fruits used for canning shall be sufficiently ripe,
fresh, wholesome and sound, free from traces of spoilage, insects, parts of insects and foreign
matters. The additives shall be clean and shall not be harmful to human health.

The principal raw materials, additives and packing material required by the project are indicated
in Table 4.1. The major raw material, apple fruit can be grown in the region or sourced from
neighboring regions. The total cost of raw material is estimated at Birr 1,369,500.

Table 4.1 RAW & AUXILIARY MATERIALS REQUIREMENT AND COST (AT FULL CAPACITY)

B. UTILITIES
The major utilities of the envisaged project are electricity, furnace oil and water. The annual
consumption and cost of utilities is indicated in Table 4.2. The total annual cost of utilities is
estimated at Birr 414,432.

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Table 4.2 ANNUAL UTILITIES REQUIREMENT AND COST

6.2 Market Strategy

The marketing strategy will be by sharing the existing consumer and searching for the substitute
consumer. The promoter will have a capacity to supply a quality product and compete at local
market. In addition to this the investor will make price reduction and product differentiation,
increasing quality and quantity of the product in order to attract more customers.

Connection with direct buyers and are lucky to secure markets, which normally take a longer as
is well known in the cash and industrial crops for export industry there are two major marketing
channels: the commission agent and the direct sales to other impendent importers. This will
give them big support while having an immediate feedback from the markets and even sum
tolerate from the buyers in the first steps. The price level for the produces that can be achieved
by direct sales is higher and the commissions paid relatively low. The main advantage of direct
sales, though, is that the price is known and cash flow can be better managed.

6.1.2 Market Operational Dimension

The marketing tools of this product will be a marketing mix of the 4 P’s product, promotion,
price reduction and product distribution. Maintaining the quality of the product and maintaining
warranty after sale of the product and so on. The product promotion will be starting the
supplying of few and simple to extensive supply of product.

The investor has marketing strategy and operational dimension for implementing the project
strategy. Free sample distribution, conducting key persons at the target region, town and a
promoter will also be used. The investor will make price reduction for the first 2 to 3 years in

16
order to inter into the market and attract many costumers. The project promoter will have
different channel of distributions at different region.

6.2 Export and Domestic Market Share

S.N Items Export Domestic Total

1 Fruit Juice 80% 20% 100%

2 Syrup 80% 20% 100%

3 Others 80% 20% 100%

6.2.1 Marketing Information System

The phenomenal growth in information technology represents both a challenged and opportunity
of any business organization. Therefore, marketing information system of this project, in order to
be benefited forum opportunities uses the following sub-system for collecting analysis and
utilization of data.

1.1 Internal Accounting system

1.2 Marketing intelligence system

1.3 Marketing intelligence system

1.4 Market research

2. General Accounting Manual

This manual enables the farm to employ, as much as possible uniform accounting terminology,
effective control procedures, efficient budgeting, recording and reporting system.

3. General Corporate policy: Includes

3.1 Analysis of strength and weakness

3.2 Important Goals and area of effectiveness

3.3 Environmental threat and opportunity matrix

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B. ENGINEERING
1. Machinery and Equipment
The list of machinery and equipment of the project is indicated in Table 5.1. The total cost of
machinery and equipment is estimated at Birr 2.5 million, out of which Birr 2 million is required
in foreign currency. Table 5.1 LIST OF MACHINERY AND EQUIPMENT

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2. Land, Building and Civil works
The total land requirement of the project is about 2000m 2, out of which built-up area is 1000m2.
The total construction cost of building assuming a construction rate of Birr 2300 per m 2 (made of
EGA sheet roof, HCB wall, cement screed floor finish) is estimated at Birr 2.3 million. The lease
value of land, at the rate of 0.1 Birr / m 2, and for 80 years of land holding, is Birr 16,000. The
total cost of building and civil works is about Birr 2,316,000.

3. Proposed Location and Site

The envisage plant can be located in area where fresh apple fruit can be abundantly supplied and
transportation cost to deliver the product to market can be minimized. Taking this in to
consideration, Chencha, Mareka, West Abaya, Humbo and Misha woredas can be the possible
locations for the project.
From the above woredas, Humbo Tebella Town, the capital of Humbo woreda, is selected to be
the location of the proposed project.

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 7. ORGANIZATION AND MANAGEMENT

7.1 Organizational Structure

The organizational structure of the company will include all General assembly, Board of
directors, General Manager and Production Department chief technical head and Technical
qualified staffs, Administrative and Finance section, Marketing Section, and Legal and Audit
department section. The General Manager is responsible for the General assembly and board of
director while All technical departments and supportive staffs and Legal and Audit section is
directly responsible for the General Manger. The Organizational structure of the company is as
follows.

General Manger

Audit Legal Service

Section Section

Raw Material Supply Manufacturing Dep’t

Finished Product and
Department
Sales Department

Administrative and Finance

7.2 Man Power Requirements with Qualifications

The plant requires both direct and indirect manpower. The direct manpower consists of
designers, operators of workshop equipment, mechanics, welders, paints. Laborers are engaged
in manufacturing of the products executed by production & technical departments. The
administrative activities are executed by indirect workers that include plant manager, executive
secretary, heads of finance and administrations, and personnel officer, accountant and other
support giving personnel.

The manpower list and the corresponding monthly and annual salaries including fringe benefits
are given in Table 6.1 below.

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 Table 6. 1: MANPOWER REQUIREMENT AND ANNUAL SALARY

S.N Description Manpower with Qualification Quantity Monthly Salary in Annual Salary In
Birr Birr

I General Manager Office        

General Manager 1 10,000.00 120,000.0

BSC Food Industry 0
 
Secretary 1 750. 9,000.0
Diploma in Sec. Science 00 0
 
Administrative and Finance Department
II       -
Head Administrative and Finance 1 4,50 54,00
BA in Accounting 0.00 0.00
 
Accountant 3 1,50 54,00
BA in Accounting
  0.00 0.00
Casher 2 1,00 24,00
Diploma in Book Keeping 0.00 0.00
 
Drivers 2 1,80 43,20
Public Driving License
  0.00 0.00
Market, Sales and Promotion Department 3 1,500 54,00
BA in Commerce
III .00 0.00
Production Staff    
 
IV -
Manager 1 5,00 60,00
BSC Food Industry
  0.00 0.00
Production Dep’t Staffs 25 4,50 270,00
BSC Food Industry 0.00 0.00
 
Chemist 25 1,00 60,00
Dip in chemistry
  0.00 0.00
Food Production Staffs 10 1,00 120,00
TVT 0.00 0.00
 
Assistant Food Production Staffs 3 1,00 36,00
TVT in Laboratory 0.00 0.00
 
Laboratory Technician 5 1,00 60,00
Diploma in Laboratory 0.00 0.00
 
Daily Laborer 130 1,00 360,00
Reading and Writing
  0.00 0.00
Other Workers 10 1,50 180,00
Read and Write 0.00 0.00
 
Other Machine Protector 55 50 30,00
TVT in Laboratory
  0.00 0.00
Finished Product Dep't Staffs    
 
V -
Store Keeper, distribution, Guard and Other 110 1,00 120,00
staffs)   0.00 0.00
 
Total 340 38,550. 1,654,200.
 
  00 00

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 7.3. Skilled and Unskilled Workers

S.N Description Quantity Price Total

  Skilled 100 7500 750,000.00

  Semi-Skilled 80 6300 504,000.00

  Unskilled 160 2500 400,000.00

  Total 340   1,654,000.00

7.4 TRAINING REQUIREMENT

Employees have to acquire the requisite skill and knowledge to properly operate the production
machinery and equipment through short-term training. The designer, machinery operation
mechanics, welders, and manufacturing supervisor will have to participate in the training
programme that will be conducted for a period of 4 to 6 weeks. The manufacturing supervisor is
expected to have long years work experience in similar production activities.

The training programme can be conducted in enterprises (either private or public) having wide
experience in production of similar products. Other possibility is to make special arrangements
with machinery supplier.

Accordingly, the training of personnel can be part of the agreement such that all the employees
involved in production activities can be trained during erection and commissioning at the project
site. Thus, a total of Birr 5,000 is allotted for this purpose.

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 8. Financial Analysis

8.1. Total Investment Costs

Total capital requirement, also known as total project cost or total investment requirement, is composed
of three items: fixed assets, pre-operating expenses and working capital. Fixed assets is the sum total of
all costs of land and improvements, building, machinery, furniture and fixtures, vehicle, etc.

Pre-operating expenses are those necessary expenses which are incurred before the business starts
operating. These include registration fees and licenses, training costs, cost of preparing business plan,
trips to raw material and equipment suppliers, etc.

Working capital is the amount of money permanently needed in cash or in kind to keep the business
operating while it is awaiting full payment for goods sold to customers.

Working capital can be calculated by adding five factors:

1) The cost of maximum raw material stocks that will have to be stored to ensure continuous
production. In some cases this may be three to six months worth, if the raw material is difficult to
obtain or has to be imported, whereas in other cases (where raw materials are readily available)
only one or two weeks’ worth may be needed;

2) The cost of finished goods which will be kept in stock awaiting distribution to the customers;

3) The cost of work-in-process which are on the project floor but have not yet been converted into a
final product or finished goods;

4) The cost of goods already distributed to customers but which have not yet been paid for (accounts
receivable);

5) The amount of ready cash needed to pay workers and overheads.

 To determine the cost of raw material stocks, simply multiply the quantity needed by its
purchase price;

 To determine the cost of finished goods stock, multiply the number of units to be kept by
the unit production cost

 To determine the cost of work-in-process, first estimate the number of days it takes to
convert the raw material into finished goods, then multiply this by the daily production
level, then multiply the figure obtained by the unit production cost determined in. Finally
divide this figure by two.

23
  To determine the cost of goods already distributed but not yet paid for, estimate the
quantity that will be given on credit and multiply this number by the unit production cost.

 To determine the amount of cash needed in the business, add the monthly  labour cost and
overheads to the monthly  marketing expenses and the administrative expenses.

Add these five cost elements together to arrive at the total capital requirement of this project.
To calculate the total capital requirement, add the following:
+ Fixed Assets
+ Pre-Operating Expenses
+ Working capital
= Total Capital Requirement

Table 2 Total Capital Requirements

S.N Description Total

1 Fixed Capital Cost 57,051,600.76

2 Working Capital 1,771,290.68

  Sub Total 58,822,891.44

  Preliminary and Pre-Operating Expenses 1,507,000.00

  Total 60,000,000.00

8.2. Fixed Investment Cost

This includes every cost of capital investment including civil works and basic assets for the
project to run its activities. It includes, cost of construction, machineries, furniture, computers
with their accessories, vehicles, and the like which are tangible asset of the project any time.
Majority of these assets are imported from which the promoter earn encouraging advantage from
importing free of tax. On the other hands, these assets are the assets of the country economy in
general thinking not only the assets of the promoter.

24
Table: 3 - Fixed Investment cost of the project

S.N Description Total Cost

1 Land  

1 Building and Civil Work 17,387,000.76

2 Machinery and Equipment 39,490,900.00

3 Furniture and Fixture 148,700.00

4 Other Misalliance fixed 25,000.00

  Total 57,051,600.76

8.3. Work Capital Requirements

Table 4 Working Capital Requirements

S.N Description Local Cost Foreign cost Total

1 Raw Materials (3 month) 725,156.25 - 725,156.25

2 Utilities (3 months) 112,500.00 - 112,500.00

3 Wage and Salaries (2 month) 480,100.00 - 480,100.00
  Others Operating Expense (3months) 292,508.00   292,508.00

  Sub total 1,610,264.25   1,610,264.25

  Contingencies(10%) 161,026.43   161,026.43

  Net working capital 1,771,290.68 - 1,771,290.68

25
 Table 5 Annual Operating Costs of The Project

S.N Description 1st Year 2nd Year 3rd Year 4th Year
Materials and Input s 2,030,437.50 2,320,500.00 2,610,562.50 2,900,625.00
1
Utilities 315,000.00 360,000.00 405,000.00 450,000.00
2
Wage and Salaries 2,016,420.00 2,304,480.00 2,592,540.00 2,880,600.00
3
Other Operating Expenses 819,022.41 936,025.61 1,053,028.81 1,170,032.02
4
  Sub Total 5,180,879.91 5,921,005.61 6,661,131.31 7,401,257.02

  Contingencies (10%) 518,087.99 592,100.56 666,113.13 740,125.70

  Total Operating Expenses 5,698,967.90 6,513,106.17 7,327,244.45 8,141,382.72

Table: 6. Source of Finance

S.N Sources of Finance Percentage Share Total fund (‘000)

1 Owner Equity 30%

18,098,967.43
2 Bank Loan 70%
42,230,924.01
  Total 100% 60,329,891.44

Table 7 Loan Repayment Schedule

26
 No Years Installment Interest Principal

  0 - - 42,230,924.01

  1 4,223,092.40 3,589,628.54 38,007,831.61

  2 4,223,092.40 3,230,665.69 33,784,739.21

  3 4,223,092.40 2,871,702.83 29,561,646.81

  4 4,223,092.40 2,512,739.98 25,338,554.40

  5 4,223,092.40 2,153,777.12 21,115,462.00

  6 4,223,092.40 1,794,814.27 16,892,369.60

  7 4,223,092.40 1,435,851.42 12,669,277.20

  8 4,223,092.40 1,076,888.56 8,446,184.80

  9 4,223,092.40 717,925.71 4,223,092.40

  10 4,223,092.40 358,962.85 0.00

Table: 8 Annual Depreciation

No Description Total Fixed Cost Depreciation Rate Total Cost

1.0 Building and Civil Work 0.05 337,500.00

0 6,750,000.00
2.0 Machinery and Equipment 0.05 714,723.39
0 14,294,467.87
3.0 Furniture and fixture 0.05 4,575.00
0 91,500.00
4.0 Other Fixed Assets 0.01 21,135.97
0 2,113,596.79
  Annual Depreciation     1,077,934.36

9. Projected Financial Statements

The proposed project shall enter in to its activity with reasonable return as planned to perform.
Accordingly, it shall start providing its service after 1 st year of contraction work which is used as
the time for preparation period, capital good purchase and man power recruitment.

27
The business project shall start its activity with some few workers in the 1 st phase and extend its
activity as it plans to perform by increasing the number of its employees on two shifts starting
from its 2nd phase forward with the remaining planned services. In line with this, the amount of
raw materials shall increase with the increase of the service that also increases other expenses at
which the project starts to provide its services in its full potential.

The target market of the project for the 1 st year is local market on which the expected revenue
plan is based. The project customer will be increase and expand its market area expectation to
international level that may also increase its cash flow capacity as time increases and have its
own positive impact to GDP of the country as a whole.

In line with this, if the increment of cash flow of the project is positive balance, the revenues of
the capacity of the project will also increase that in turn results for the increment of the project
net profit.

9.1 Revenue Projection

The total revenue expected from this project is assumed to derive from the planned activities to
perform. These are going to be provided by the project promoter selling of assembled
machineries, manufactured construction materials, revenue from construction of buildings and
other supporting activities. The project will be fully operational after three years time starting
from the first phase. Therefore, the project income is assumed to increase from the third years to
the planning period by increasing and improving their services to hold the existing, expected and
attract new customers.

28
 Table 9.1 Projected Annual Revenue of the Project

S.N Products 1st Year 2nd Year 3rd Year 4th Year 5th Year
1 Assembled Autos
159,000,000.00 294,150,000.00 302,100,000.00 318,000,000.00 353,333,333.33
2 Auto Parts
Manufactured 79,500,000.00 147,075,000.00 151,050,000.00 159,000,000.00 176,666,666.67
3 Others
26,500,000.00 49,025,000.00 50,350,000.00 53,000,000.00 58,888,888.89
Total
265,000,000.00 490,250,000.00 503,500,000.00 530,000,000.00 588,888,888.89

29
 9.2 Projected Income Statements
No Description Project Years Project Y

0 1 2 3 4 5 6 7

I Total Sales -

265,000,000.00 490,250,000.00 503,500,000.00 530,000,000.00 588,888,888.89 654,320,987.65 727,023,319.62 807

  Operating Expenses -
5,698,967.90 6,513,106.17 7,327,244.45 8,141,382.72 8,141,382.72 8,141,382.72 8,141,382.72
9

  Administrative and Sales -

13,250,000.00 24,512,500.00 25,175,000.00 26,500,000.00 29,444,444.44 32,716,049.38 36,351,165.98
Expenses 4

  VAT(15%)  
39,750,000.00 73,537,500.00 75,525,000.00 79,500,000.00 88,333,333.33 98,148,148.15 109,053,497.94
1

II Total Cost of Good Sold  

58,698,967.90 104,563,106.17 108,027,244.45 114,141,382.72 125,919,160.49 139,005,580.25 153,546,046.64
17

  Operating profit -
206,301,032.10
385,686,893.83
395,472,755.55 415,858,617.28 462,969,728.39 515,315,407.41 573,477,272.98

63

  Less Depreciation -
11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08

  Interest -
3,589,628.54 3,230,665.69 2,871,702.83 2,512,739.98 2,153,777.12 1,794,814.27 1,435,851.42

  Sub Total  
15,217,173.62 14,858,210.76 14,499,247.91 14,140,285.05 13,781,322.20 13,422,359.35 13,063,396.49
1

  Profit Before Tax -

191,083,858.48
370,828,683.06
380,973,507.65 401,718,332.23 449,188,406.19 501,893,048.06 560,413,876.48
622

  Less Income Tax (40%) - 76,433,5

43.39
148,331,4
73.23
152,389,40
3.06
160,687,3
32.89
179,675,3
62.48
200,757,2
19.22
224,165,5
50.59

249

  Net Profit - 114,650,315.

09
222,497,209.84 228,584,104.5
9
241,030,999.34 269,513,043.7
2
301,135,828.8
4
336,248,325.89

37

9.2 Projected Cash flow Statements

Description Projected years      

30
No 0 1 2 3 4 5 6 7 8

  Cash Inflow                    

  Equity
18,098,967.43
- - - - - - - -

  Bank Loan
42,230,924.01
- - - - - - - -

  Net Profit -
114,650,315.09 222,497,209.84 228,584,104.59 241,030,999.34 269,513,043.72 301,135,828.84 336,248,325.89 336,248,325.89

  Depreciation -
11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08 11,627,545.08

  Total
126,277,860.16 234,124,754.91 240,211,649.66 252,658,544.41 281,140,588.79 312,763,373.91 347,875,870.97 347,875,870.97
60,000,000.00

  Cash out Flow                    

  Fixed investment
58,558,600.76
- - - - - - - -

  Working Capital
1,771,290.68
- - - - - - - -

  Total Cost of Capital

60,329,891.44
- - - - - - - -

  Loan Repayment -
4,223.09 4,223.09 4,223.09 4,223.09 4,223.09 4,223.09 4,223.09 4,223.09

  Total
4,223.09 4,223.09 4,223.09 4,223.09 4,223.09 4,223.09 4,223.09 4,223.09
60,000,000.000

  Net inflow
-
126,273,637.0
7
234,120,531.8
2
240,207,426.5
7
252,654,321.32 281,136,365.7
0
312,759,150.8
2
347,871,647.8
7
347,871,647.8
7
3

31
10. Environmental Aspects
The project will seriously involve itself in protecting, conserving and developing the natural and
flora of the project area in line with the Millennium development goal. To this end it will play a
vital role in participating in various organizations and the community around the project area to
form an environmental committee in charge of all environmental issues to be handled in
accordance to various environmental and water policies of 1997/1999. The owner of the project
believes to undertake several environmental issues for the conservation, development and
creation of sustainable environment around the project area like resource conservation.

The promoters of the project will participate in any forum that might be organized by concerned
authorities and the community to promote environmental issue and concept for sustainable
development in the area. In addition to this, it will introduce and use environmental friendly
technologies such as tree planting and conserving the existing tree species in the compound.

In line with this, the company is willing and more interested in protecting and even planting
natural forest of indigenous trees to make its compound attractive by creating conducive cool
climatic condition. The company as clearly described above is critically based on satisfying the
needs of the locality to be exemplary for others on nature conserving activities that contributes to
nature conservation activities for locality, national and/or Global environment in its contribution
far from the project area. It is also ready to perform EIA for the proposed project to make it
environmentally friendly and competitive industry in National wide.

32
11. Land Use Plan and Activities Plan
11.1 Implementation Strategies of the Project
When we plan to establish this project, we have plan to implement it in three phases.

 1st Phase: - requires its own machineries and working capital including construction of the
building for the project. It covers about 50% of the total investment cost of the project.

 2nd Phase: - will start at a year of completing the 1 st Phase of the project. It is worth at around
30% of the total investment cost of the project. The working hour will be doubled and
number of employees increase by 50% in this phase.

 3rd Phase: - will start immediately after completing the 2nd Phase of the project. It covers the
remaining 20% of the total the project cost. But, it can increase the service capacity of the
project by more than 30% including addition of the remaining services. The working hour
and the number of employees can also be increased.

The projects estimated cost of working capital is covered by the promoters. The fund that is to be
generated from various sources is ready to cover the cost of construction of the buildings, the
purchase of machineries, furniture, equipments, vehicles and other requirements.

33
 11.2 Project Implementation Schedule/Activities Plan
S.N Activities 20015

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar April May June

1 Acquisition of Land

2 Site Clearance

3 Installation Main Plant

4 Where house and Storage

5 Administrative and Office

Building

6 others

7 Acquisition of Machinery and

Equipment

8 Installation of Machinery

9 Acquisition of Raw Materials

10 Start Up of the Project

34
11.3 Project Land Use Plan
Apart from other requirements and inputs, land is primarily used to realize the proposed project.
The total area of land required to realize the proposed project is 40,000 m2 of land in the area of
existing industries performing their activities. Land utilization plan of the project is proposed to
be 85% to be built for the objective of the company and the remaining 15% of land will be left
for green development in the compound for the purpose of its environmental benefits,
beautification as well as air condensation. In general, to implement the project an ample land is
required based on the activities incorporated in the project.

Table: 11.1 Land Budgeting for the Proposed Project

S.N Description Length Width Total Area in M2 Remark

1 Main Plant Factory Juice and syrup 100 50 5,000  

2 Warehouse 40 30 1,200  

3 Green area 50 30 1,500  

5 Staff living room mix50 person= 40m2/person 25 10 250  

6 Project office Building 4 12 48  

7 Staff Cafeteria Building 25 20 500  

8 Free space for Loading/un loading 50 20 1,000  

9 Canteen for staff including store and office for canteen 25 10 250  

10 Guard house 8 12 96  

11 Septic tank 6 6 36  

12 Toilet and shower room 10 4 40  

14 Office for store man 6 5 30  

15 Others   Rough 50  
  Sub Total     10,000  

35
12.4 Risk Assessment

a. Threats
Local products and assembled machineries shall be considered as inferior by the local
customers. But through intensive promotion and quality production and other options
shall be applied to penetrate the local market with less profit margin.

b. Competition
Development competition shall bring change. Thus the change in design, technology,
quality service and others shall be addressed through local and international
communication.

c. Contingency Plan
With all these efforts, if the product of the industry demand may reduce, rebased or
failed, the industry shall go in to warehouse, or fully production of construction materials
or training center business which may not require much additional skill and means of
production.

36
Table of Contents
I. Executive Summary.................................................................................................................................1

1. Introduction.........................................................................................................................................2

2. Project Area.........................................................................................................................................3

2.1 The Project Location....................................................................................................................3

2.2 Infrastructure...............................................................................................................................4

2.3 Population and Economic Activities............................................................................................4

3. Description of the Project....................................................................................................................7

3.1. Objectives of the Project..................................................................................................................7

4. Production Program and Plant Capacity..............................................................................................8

4.1. Production Programme....................................................................................................................8

4.2 Plant Capacity....................................................................................................................................8

5. MATERIALS AND INPUTS.....................................................................................................................8

A. RAW MATERIALS.................................................................................................................................8

B. Auxiliary Materials...............................................................................................................................9

C. Technology and Engineering............................................................................................................9

6. Market Analysis.................................................................................................................................12

6.1 Past Supply and Present Demand....................................................................................................12

6.2 Export and Domestic Market Share.................................................................................................17

7. ORGANIZATION AND MANAGEMENT......................................................................................20

7.1 Organizational Structure..................................................................................................................20

7.2 Man Power Requirements with Qualifications................................................................................20

7.3. Skilled and Unskilled Workers.......................................................................................................22

7.4 TRAINING REQUIREMENT.........................................................................................................22

8. Financial Analysis.............................................................................................................................23

8.1. Total Investment Costs...................................................................................................................23

37
 8.2. Fixed Investment Cost....................................................................................................................24

8.3. Work Capital Requirements............................................................................................................25

9. Projected Financial Statements..........................................................................................................28

9.1 Revenue Projection..........................................................................................................................28

9.2 Projected Income Statements..........................................................................................................30

9.2 Projected Cash flow Statements.......................................................................................................31

10. Environmental Aspects........................................................................................................................32

11. Land Use Plan and Activities Plan.......................................................................................................33

11.1 Implementation Strategies of the Project...................................................................................33

11.2 Project Implementation Schedule/Activities Plan......................................................................34

11.3 Project Land Use Plan................................................................................................................35

38
 Project Proposal for Investment on

Juice and Syrup Factory

Project Promoter: Musxafa Redi Hassan

Project Location: Sabata Town

Jan, 2015

Addis Ababa, Ethiopia

39