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142. PROFILE ON PRODUCTION SUGAR FROM BEET

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TABLE OF CONTENTS

 

PAGE

I. SUMMARY

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II. PRODUCT DESCRIPTION & APPLICATION

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III. MARKET STUDY AND PLANT CAPACITY

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A. MARKET STUDY

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B. PLANT CAPACITY & PRODUCTION PROGRAMME

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IV. RAW MATERIALS AND INPUTS

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A. RAW & AUXILIARY MATERIALS

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B. UTILITIES

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V. TECHNOLOGY & ENGINEERING

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A. TECHNOLOGY

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B. ENGINEERING

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VI. MANPOWER & TRAINING REQUIREMENT

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A. MANPOWER REQUIREMENT

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B. TRAINING REQUIREMENT

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VII. FINANCIAL ANALYSIS

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A. TOTAL INITIAL INVESTMENT COST

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B. PRODUCTION COST

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C. FINANCIAL EVALUATION

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I.

SUMMARY

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This profile envisages the establishment of a plant for the production of suger from beet with a capacity of 8,000 tonnes per annum.

The present demand for the proposed product is estimated at 10,818 tonnes

The demand is expected to reach at 21,280 tonnes

by the year 2017.

per annum.

The plant will create employment opportunities for 337 persons.

The total investment requirement is estimated at about Birr 187.99 million, out of which Birr 90 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of present value (NPV) of Birr 60.18 million discounted at 8.5%.

15

%

and a net

II PRODUCT DESCRIPTION AND APPLICATION

Sugar, or sucrose, is a carbohydrate that occurs naturally in every fruit and vegetable in the plant kingdom. It is the major product of photosynthesis, the process by which plants transform the sugar energy into food. Sugar occurs in greatest quantities in sugar cane and sugar beets from which it is separated for commercial use.

There is no difference in the sugar produced from either cane or beet. The sugar beet grows best in a temperate climate and stores its sugar in its white root. Sugar from both sources is produced by nature in the same fashion as all green plants produce sugar-as a means of storing the sun's energy.

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III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past supply and Present Demand

Sugar production is the country is made from sugar cane in all factories namely, Metehara, Wonji-Shoa and Fincha. As a result sugar from sweet potato and beet root to the county is supplied only from import. Import of sugar by type for the past three years is shown below.

Table 3.1 IMPORT OF SUGAR BY TYPE (TON)

Year

Cane Sugar

Cane or beet Sugar

Beet Sugar

Total

2004

17,495

36,282

-

53,777

2005

31,083

6,525

151

37,759

2006

49,002

3,405

-

52,407

Total

97,580

46,212

151

143,943

Source:- Customs Authority.

As could be seen from Table 3.1 the total amount of sugar imported to the country in the past three years was around 144 thousand tons. Of the total amount 97,580 tons or 68% is cane sugar while the remaining 46,363 tons or 32% is registered as cone or beet sugar. The annual average of cane or beet sugar is about 15,454 tons. Assuming 70% of the imported sugar under the title cane or beet sugar belongs to pure beet sugar the quantity amounts to 10,818 tons. This amount is assumed to reflect the current unsatisfied effective demand for beet sugar in the country.

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2. Demand Projection

The main factors that influence the demand for sugar are population, income, consumption habit and the growth of the service and the manufacturing sector mainly catering institutions like hotels, restaurants and bars as well as the food and beverage industries. Urban population growth rate in Ethiopia is 4% per annum. A substantial amount of the rural population is also expected to consume sugar as a result of higher income and change in the consumption habit. The agricultural sector has been growing more than 10% in the past recent years and will have a positive impact on income and increased purchasing power of the rural population. The industrial sector has been also growing by about 7%. The combined effect of the above factors is assumed to increase demand for beet sugar by about 7% per annum. The demand projected on the basis of the above argument is shown in Table 3.2.

Table 3.2 PROJECTED DEMAND FOR BEET SUGAR (TON)

Year

Quantity

2008

11,575

2009

12,385

2010

13,252

2011

14,180

2012

15,173

2013

16,234

2014

17,371

2015

18,587

2016

19,888

2017

21,280

Demand for beet sugar will increase from 11,575 tons in the year 2008 to 15,173 tons and 21,280 tons by the year 2012 and 2017 respectively

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3. Pricing and Distribution

Based on the average producers price Birr 4700 per ton is taken for sales revenue projection.

The product can be distributed by selecting competent distributors in various parts of the country.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

The market study reveals that there is high demand for sugar both in local and international market. So, the factors for determining capacity are availability of raw material and minimum economies of scale for the sugar plant.

The minimum economic of scale for plantation white sugar production from sugar beet is 8,000 tones per annum.

2. Production Programme

The sugar plant will be set into operation for 270 days per year, working in three shifts (8 hours each) per day. Production will start at 75% of full capacity during the first year and then rise to 85% and full capacity (100%) in the second and third year of operation, respectively.

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IV. MATERIALS AND INPUTS

A. RAW AND AUXILIARY MATERIALS

The main raw material is sugar beet, which is a temperate climate biennial root crop. It produces sugar during the first year of growth in order to see it over the winter and then flowers and seeds in the second year. It is therefore sown in spring and harvested in the first autumn/early winter. As for sugar cane, there are many cultivars available to the beet farmer. The beet stores the sucrose in the bulbous root, which bears a strong resemblance to a fat parsnip.

SNNPRS is believed to have suitable soil and weather conditions for growing sugar beet. Establishment of sugar industry needs to be integrated with the development of sugar beet farming. In this profile it is assumed that out-growers handle sugar beet supply.

Table 4.1 indicates the annual raw material requirement at full capacity operation of the plant and the cost estimates.

Table 4.1 ANNUAL RAW MATERIALS REQUIREMENT AT FULL CAPACITY PRODUCTION

Sr.

   

Cost ('000 Birr)

No.

Description

Qty.

FC

LC

TC

1

Sugar beet

20,000 MT

-

9,000

9,000

2

Industrial & laboratory Chemicals

-

300

100

400

3

Materials and Supplies

-

1250

250

1500

4

Packing Materials (pp bags 50 kg)

65,000

-

144.95

145

 

TOTAL

1,550

9,495

11,045

B.

UTILITIES

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Electrical Power: One of the big differences between a beet sugar factory and its cane sugar counterpart is with respect to energy. Both factories need steam and electricity to run and both have co-generation stations where high pressure steam is used to drive turbines which produce the electrical power and create the low pressure steam needed by the process. However the beet factory does not have a suitable by-product to use as fuel for the boilers, it has to burn a fossil fuel such as coal, oil or gas. This is partly because the pulp will not burn properly and partly because the animal feed business has been built from the availability of the pulp.

The annual expenditure on utilities is estimated at Birr 16,048,310.The total amount of utilities required and their cost is shown in Table 4.2

Table 4.2 ANNUAL REQUIREMENTS OF UTILITIES

Item

   

Annual

Unit

Estimated Cost (Birr ‘OOO)

No.

Utilities

UOM

Consumption

Cost

F.C

L.C

T.C

1

Electricity

Kwh

350,000

0.4736

-

165.76

165.76

2

Water

M

3

300,000

2

-

600

600

4

Furnace oil

M

3

2000

5.41

-

10.82

10.82

 

Grand Total

     

-

776.58

776.58

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V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Process Description

White beet sugar is made from the beets in a single process, rather than the two steps involved with cane sugar.

A typical sugar content for mature beets is 17% by weight but the value depends on the variety and it does vary from year to year and location to location.

The main process description of the envisaged plant is as follows:

Harvesting The beets are harvested in the autumn and early winter by digging them out of the ground. They are usually transported to the factory by large trucks because the transport distances involved are greater than in the cane industry. This is a direct result of sugar beet being a rotational crop which requires nearly 4 times the land area of the equivalent cane crop which is grown in mono-culture. Because the beets have come from the ground they are much dirtier than sugar cane and have to be thoroughly washed and separated from any remaining beet leaves, stones and other trash material before processing.

Extraction The processing starts by slicing the beets into thin chips. This process increases the surface area of the beet to make it easier to extract the sugar. The extraction takes place in a diffuser where the beet is kept in contact with hot water for about an hour. Diffusion is the process by which the colour and flavour of tea comes out of the tea leaves in a teapot but a typical diffuser weighs several hundred tons when full of beet and extraction water. The diffuser is a large horizontal or vertical agitated tank in which the beets slices slowly work their way from one end to the other and the water is moved in the opposite

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direction. This is called counter-current flow and as the water goes it becomes a stronger and stronger sugar solution usually called juice. Of course it also collects a lot of other chemicals from the flesh of the sugar beet.

Pressing The exhausted beet slices from the diffuser are still very wet and the water in them still holds some useful sugar. They are therefore pressed in screw presses to squeeze as much juice as possible out of them. This juice is used as part of the water in the diffuser and the pressed beet, by now a pulp, is sent to drying plant where it is turned into pellets which form an important constituent of some animal feeds.

Carbonatation The juice must now be cleaned up before it can be used for sugar production. This is done by a process known as carbonatation where small clumps of chalk are grown in the juice. The clumps, as they form, collect a lot of the non-sugars so that by filtering out the chalk one also takes out the non-sugars. Once this is done the sugar liquor is ready for sugar production except that it is very dilute.

The next stage of the process is therefore to evaporate the juice in a multi-stage evaporator. This technique is used because it is an efficient way of using steam and it also creates another, lower grade steam which can be used to drive the crystallization process.

Boiling For this last stage, the syrup is placed into a very large pan, typically holding 60 tons or more of sugar syrup. In the pan even more water is boiled off until conditions are right for sugar crystals to grow. In the factory the workers usually have to add some sugar dust to initiate crystal formation. Once the crystals have grown the resulting mixture of crystals and mother liquor is spun in centrifuges to separate the two, rather like washing is spin-dried. The crystals are then given a final dry with hot air before being packed and/or stored ready for dispatch.

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Product The final sugar is white and ready for use, whether in the kitchen or by an industrial user such as a soft drink manufacturer. As for raw sugar production, because one cannot get all the sugar out of the juice, there is a sweet by-product made: beet molasses. This is usually turned into a cattle food or is sent to a fermentation plant such as a distillery where alcohol is made. It does not have the same quality smell and taste as cane molasses so cannot be used for rum production.

Effluent treatment The Effluent (waste water) from sugar factory contains organic materials, which will have to be contained and treated prior to disposal to the environment. The objective of treatment of such effluent is to reduce the biological and chemical oxygen demands to allowable levels. This can be achieved by carrying out primary clarification, aeration, fuel clarification and sludge drying. The sludge so obtained can be used as organic fertilizer.

2. Source of Technology

The address of machinery supplier is given below:-

National Heavy Engineering Pvt . ltd Pune Bombay Road

Phone 91-2114-222261 Fax: 91-2114-222762 E-mail: Sales export@nhecl.com info@nhecl.com

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B.

ENGINEERING

1.

Machinery And Equipment

Machinery and equipment required for the production of sugar are presented in Table 5.1.

The total cost of plant machinery and equipment is estimated at about Birr 90 million, out

of which Birr 80 million is required in foreign currency. Due to the nature of the

technology the machinery and equipment are supplied as a package and turnkey project.

Table 5.1

LIST OF MACHINERY AND EQUIPMENT

Sr.

 

No.

Plant/Station Description

1

Beet weighment

2

Beet unloading

3

Beet preparation (Sets of sharp knives)

4

Juice extraction plant (Diffuser and screw press)

5

Pressed beet dryer

6

Juice treatment section

7

Clarification and filtration

8

Multi stage evaporators

9

Vacuum Pans

10

Centrifugal machines

11

Sugar handling and bagging

12

Vapor Condensing plant

13

Steam Generation and distribution plant

14

Power Generation and distribution plant

15

Power evacuation system

16

Bagasse handling system

17

Automation

18

Fabrication workshop

19

Laboratory

20

Plant water system

21

Fire fighting system

22

Piping, insulation and cladding, Chutes, gutters and structures

23

Sugar Store

24

Beet Molasses Store

25

Heating, Ventilation, and Air conditioning

26

Auxiliary Equipment and Various tanks

27

Effluent treatment plant

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2. Land, Building and Civil Works

The total land requirement is 50,000 square meters. This includes space required by plant, administration building, auxiliary facilities, etc, and open space for waste treatment plant, open storage for can sugar, molasses storage area, and other utilities. The space requirement by the plant is estimated at 24,000 square meters the cost of land at a lease rate of Birr 1 per m 2 for 95 years is about Birr 50,000. The total cost estimate of building and civil works at unit cost of Birr 2800 per m 2 is about Birr 84.0 million. Therefore, the total cost estimate of land, building and civil works is about Birr 84,050,000.

3. Proposed Location

According to the resource potential study of the region, the raw material is identified in Woredas like Ofa and Essera. Based on the availability of raw material infrastructure, utility and market out let Gessuba town of Ofa woreda is selected and recommended to be the location of the envisaged plant.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The envisaged sugar plant requires production manpower specialized in the areas of chemical (process) engineering, mechanical and electrical engineering, chemists, production operators, mechanics and electricians. The details of manpower required for accomplishing plant production and administrative functions are presented in Table 6.1.

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Table 6.1 MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr.

   

Monthly

Annual

No.

Description

Qty.

Salary (Birr)

Salary (Birr)

1

Plant Manager

1

4,500

54000

2

Executive Secretary

1

1,200

14400

3

Legal service head

1

3600

43200

4

Planning and programming service hear

1

3600

43200

5

Quality Control Service Head

1

3,600

43200

6

Audit service head

1

3600

43200

7

Telephone operator

1

850

10200

8

Administration Department

1

3,500

42000

9

Finance Department

1

3,500

42000

10

Technical Department

1

3900

46800

11

Production Department

1

3900

46800

12

Workshop head

1

3900

46800

13

Secretary

4

3,200

38400

14

Chemical Engineer

3

6,000

7200

15

Mechanical Engineer

3

6,000

7200

16

Electrical Engineer

2

6,000

7200

17

Chemists

3

5700

68400

18

Administrative Personnel

1

1800

21600

19

Sales Head

1

1500

18000

20

Purchase Head

1

1500

18000

21

Market Research and Promotion Division Head

1

2500

30000

22

Medical director

1

2800

33600

23

Nurse

3

4500

54000

24

Pharmacy keeper

2

1900

22800

25

Cleaners

6

1800

21600

26

Clerks

5

4500

54000

27

Production Operators

30

30,000

360000

28

Technologist

2

2000

24000

29

Lab Technician

10

9000

108000

30

Mechanics fitters

10

8500

102000

31

Welders

9

8100

97200

32

Helper to welder

9

4950

59400

33

Grease man

4

2400

28800

34

Power plant operators

27

6300

75600

35

Semi-Skilled Laborers

70

35000

420000

36

Unskilled Laborers

90

27000

324000

37

Messengers

4

1200

14400

38

Drivers

4

2000

24000

39

Guards

20

7000

84000

 

Sub Total

 

-

2,599,200

BENEFITS (25% OF SUB-TOTAL BENEFITS (25% OF SUB-TOTAL)

 

-

519840

 

TOTAL

337

0

3,119,040

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B. TRAINING REQUIREMENT

Trainings is required for production operators, engineers, chemists and technicians. Three months training needs to be planned and executed overseas in the country of technology supplier. The total cost of training is estimated at about Birr 500,000 out of which Birr 500,000 is required in foreign currency.

VII. FINANCIAL ANALYSIS

The financial analysis of the

previous chapters and the following assumptions:-

beet sugar

project is based on the data presented in the

Construction period Source of finance

1 year 30 % equity

8%

Tax holidays Bank interest

70 % loan years

Discount cash flow

8.5%

Accounts receivable

30 days

Raw material local

30 days

Work in progress

2 days

Finished products

30 days

Cash in hand

5 days

Accounts payable

30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr

187.99 million, of which 57

per cent will be required in foreign currency.

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Table 7.1 INITIAL INVESTMENT COST

Sr.

 

Total Cost

No.

Cost Items

(‘000 Birr)

1

Land lease value

50.0

2

Building and Civil Work

84,000.0

3

Plant Machinery and Equipment

90,000.0

4

Office Furniture and Equipment

200.0

5

Vehicle

500.0

6

Pre-production Expenditure*

11,139.8

7

Working Capital

2,109.5

 

Total Investment cost

187,999.3

 

Foreign Share

57

* N.B Pre-production expenditure includes interest during construction ( Birr

(Birr 400 thousand ) and Birr 100 thousand costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc.

10.63 million ) training

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 32.57 million (see Table 7.2). The material and utility cost accounts for 36.29 per cent, while repair and maintenance take 1.54 per cent of the production cost.

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Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items

Cost

%

Raw Material and Inputs

11,045.00

33.91

Utilities

776.58

2.38

Maintenance and repair

500

1.54

Labour direct

1271.42

3.90

Factory overheads

523.81

1.61

Administration Costs

1047.62

3.22

Total Operating Costs

15,164.43

46.56

Depreciation

8920

27.38

Cost of Finance

8488.33

26.06

Total Production Cost

32,572.76

100

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.

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2. Break-even Analysis

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 =

3. Pay Back Period

Fixed Cost Sales – Variable Cost

=

59

%

The investment cost and income statement projection are used to project the pay-back period. The project’s initial investment will be fully recovered within 6 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is present value at 8.5% discount rate is Birr 60.18 million.

D. ECONOMIC BENEFITS

15 % and the net

The project can create employment for 337 persons. In addition to supply of the domestic needs, the project will generate Birr 45.80 million in terms of tax revenue.