Escolar Documentos
Profissional Documentos
Cultura Documentos
277-2
TABLE OF CONTENTS
PAGE
I.
SUMMARY
277 - 3
II.
277 - 3
III.
277 - 3
A. MARKET STUDY
277 - 3
277 - 6
277 - 6
277 - 6
B. UTILITIES
277 - 7
277 - 7
A. TECHNOLOGY
277 - 7
B. ENGINEERING
277 - 8
277 - 9
A. MANPOWER REQUIREMENT
277 - 9
B. TRAINING REQUIREMENT
277- 10
FINANCIAL ANLYSIS
277 - 10
277 - 10
B. PRODUCTION COST
277 - 11
C. FINANCIAL EVALUATION
277 - 12
D. ECONOMIC BENEFITS
277 - 13
IV.
V.
VI.
VII.
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I.
SUMMARY
This profile envisages the establishment of a plant for the bottling of tej with a capacity of
1.2 million liters per annum.
The present demand for the proposed product is estimated at 12 million liters per annum.
The demand is expected to reach at 21.66 million liters by the year 2022.
The total investment requirement is estimated at Birr 3.11 million, out of which Birr 1
million is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 25 % and a net
present value (NPV) of Birr 1.98 million, discounted at 8.5%.
II.
Tej is a favourite traditional drink in Ethiopia brewed from honey, local hops and water.
It is consumed at house-hold level and in small Tej-pubs in city and in rural towns as
well.
III.
A.
MARKET STUDY
1.
Tej is a favourite traditional drink in Ethiopia. It is widely consumed in most urban areas
as well as rural towns. The product has a growing local demand due to urbanization, and
prospective export market to neighbouring countries. The country's requirement for tej
has been met through domestic production. However, data on domestic production and of
the product is not available. Data on domestic consumption of tej is not available either.
Therefore, consumption data for tela, borde and korefe, a closer substitutes for tej, from
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the Revised Report on the 1995/96 Household Income, Consumption and Expenditure
Survey is analyzed in estimating the demand for tej. Table 3.1 depicts the average amount
of tela, borde and korefe consumed by different expenditure groups in urban and rural
areas according to the survey finding.
Table 3.1
DOMESTIC CONSUMPTION OF TELA, BORDE AND KOREFE
Number of
Average Annual
Total Annual
Individuals
Consumption
Consumption
in the Group
(cc)
(liters)
< 600
17,253
7,238
1,248,772
600 - 999
125,904
773
973,238
1000 - 1399
432,547
814
3,520,933
1400 - 1999
580,104
664
3,851,891
2000 - 2599
3,217,.465
885
28,474,565
2600 - 3399
6,498,555
788
51,208,613
3400 - 4199
7,844,772
720
56,482,358
4200 - 5399
1,088,5614
642
69,885,642
5400 - 6599
800,7978
952
76,235,951
6600 - 8999
881,7091
747
65,863,670
9000 - 12599
511,4961
862
44,090,964
12600 - 16199
176,5555
1493
26,359,736
16200 - 19999
67,3706
943
6,3 53,048
> 20000
97 2,722
379
3,686 ,616
Total
55,954 ,227
Income group
438,235,996
As can be seen from Table 3.1, the total consumption requirement of households for tela,
borde and korefe and hence for tej is 438235996 liters per annum. Given a total
population of 55954227 at the time the survey was conducted, the per capita consumption
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of tej is computed to be 7.8 liters. Using the total population for 2007, the current demand
of households for tej is estimated at 601590600 liters. Taking into account the proportion
of the population of the region from the total population of the country (20%) and
allowing a 90% share for existing producers in the region, the market share of the
envisage plant is conservatively estimated at 12,031,812 liters.
2.
Projected Demand
The consumption of tej is mainly associated with the urban population. Accordingly the
4% rate of urbanization is used in projecting the demand for the product. Table 3.2
depicts the projected demand for the product.
Table 3.2
PROJECTED DEMAND FOR TEJ (LITERS)
Year
Projected
Demand
2007
12,031,812
2008
12513,,084
2009
13,013,608
2010
13,534,152
2011
14,075,518
2012
14,638,539
2013
15,224,081
2014
15,833,044
2015
16,466,366
2016
17,125,020
2017
17,810,021
2018
18,522,422
2019
19,263,319
2020
2,0033851
2021
20,835,205
2022
21668,614
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3.
The retail price of tej ranges from Birr 2 to Birr 8 per liter depending on its quality.
Taking the average retail price of Birr 5 per litter and allowing margin for retailers the
envisaged plant selling price is estimated at Birr 3.50 per liter.
The envisaged plant can distribute its product to restaurants, bars and tej-pubs.
B.
1.
Plant Capacity
According to the market study, the demand of honey in the year 2008 will be 12,513,084
liters, whereas this demand will grow to 21,668,614 liters by the year 2022 . Taking only
about 9.5% of the demand of the year 2008, the envisaged plant will have an annual
production capacity of 1,200,000 liters of Tej will be installed. Production capacity is
based on a schedule of 300 working days per annum and three shifts of eight hours per
day.
2.
Production Programme
The project is assumed to start operation at 83% of its rated capacity, which reaches 91%
of the rated capacity in the second year. Full capacity production will be attained in the
third year and thereafter.
IV.
A. RAW
MATERIALS
The direct and indirect material required by the project at 100% capacity utilization is
given in Table 4.1.
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Table 4.1
RAW MATERIALS AND INPUTS REQUIREMENT
Sr.
Description
No.
Unit Price
Cost
Qty. (Tons)
(Birr)
(Birr)
Honey
200
2,800,000
2,800,000
Local hops
48
240,000
240,000
Total
B.
3,040,000
UTILITIES
Annual estimated cost of utilities at full capacity operation of the plant is given in Table
4.2.
Table 4.1
ESTIMATED ANNUAL UTILITY COST
Unit of
Annual
Cost ('000
Birr)
No.
Description
Electric power
Water
Measure
Consumption
KWh
15,000
7.104
m3
1500
15
Total
V.
A.
TECHNOLOGY
1.
Production Process
22.104
The production process involves mixing, stirring, fermenting, straining, washing, filling,
corking, packing and dispatching.
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2.
Source of Technology
ENGINEERING
1.
The plant machinery and equipment required by the plant are listed down in Table 5.1.
Table 5.1.
MACHINERY AND EQUIPMENT REQUIRMENT AND COST
Sr.
Qty
Total Cost
('000 Birr)
No.
Description
250
50
Heater
Hop grinder
Honey clarifier
Total
2.
Pcs
5 sets
1,000
The plant requires a total of 600 m2 area of land out of which 300 m2 is built-up area
which includes Processing area, raw material stock area, offices etc. Assuming
construction rate of Birr 2500 per m2, the total cost of construction is estimated to be Birr
750,000. The total cost, for a period of 80 years with cost of Birr 1 per m2, is estimated at
Birr 600. The total investment cost for land, building and civil works is estimated at Birr
750,600.
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3.
Proposed Location
According to the resource potential study of the region, the raw material is identified in
Masha,Yeki, Mizan Tefri Zuria , Bonke woredas. Based on the availability of raw
material infrastructure, utility and market out let Gresse town of Bonke woreda is selected
and recommended to be the location of the envisaged plant
VI.
A.
MANPOWER REQUIREMENT
The annual labour cost of the project is estimated to be Birr 317,250. The list of labour
together with the corresponding salary cost is presented in Table 6.1.
Table 6.1
MANPOWER REQUIREMENT ANNUAL SALARY
Sr.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
Position
Plant manager
Personnel
Commercial manager
Secretary
Purchaser
Sales man
Accountant
Accounting clerks
Shift leader
Skilled workers
Laborers
Guards
Driver
Sub Total
Workers benefit (20% of Basic salary)
Grand total
No. of
Persons
1
1
1
1
2
1
1
2
1
3
40
6
3
63
25
-
Salary ( Birr)
Monthly
Annual
1,200
14,400
700
8,400
1,000
12,000
600
7,200
1600
19,200
400
4,800
600
7,200
1,800
21,600
700
8,400
1500
18,000
10,000
120,000
900
5,400
900
7,200
10,950
253,800
2,190
63,450
317,250
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B.
TRAINING REQUIREMENT
On-the-job training on the production process is required by an expert during the start up
and trial run, production period. The total cost of training is estimated at about Birr
5,000.
VII.
FINANCIAL ANALYSIS
Construction period
1 year
Source of finance
30 % equity
70 % loan
Tax holidays
years
Bank interest
8%
8.5%
Accounts receivable
30 days
30days
90days
Work in progress
5 days
Finished products
30 days
Cash in hand
5 days
Accounts payable
30 days
A.
The total investment cost of the project including working capital is estimated at Birr 3.11
million, of which 43 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
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Table 7.1
INITIAL INVESTMENT COST
Sr.
Total Cost
No.
Cost Items
(000 Birr)
1,000.00
75
Vehicle
200
Pre-production Expenditure*
299.79
Working Capital
707.51
3,112.3
Foreign Share
80
750.00
43
B.
PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 3.71
million (see Table 7.2). The material and utility cost accounts for 82.51 per cent, while
repair and maintenance take 2.02 per cent of the production cost.
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Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Raw Material and Inputs
Cost
3,040.00
81.92
22.1
0.60
75
2.02
109.8
2.96
36.6
0.99
73.2
1.97
3,356.70
90.45
215
5.79
139.42
3,711.12
3.76
100
Utilities
Maintenance and repair
Labour direct
Factory overheads
Administration Costs
Total Operating Costs
Depreciation
Cost of Finance
Total Production Cost
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
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 =
Fixed Cost
= 25 %
3.
The investment cost and income statement projection are used to project the pay-back
period. The projects initial investment will be fully recovered within 4 years.
4.
Based on the cash flow statement, the calculated IRR of the project is 25 % and the net
present value at 8.5% discount rate is Birr 1.98 million.
D.
ECONOMIC BENEFITS
The project can create employment for 25 persons. In addition to supply of the domestic
needs, the project will generate Birr 1.29 million in terms of tax revenue.