Cement Based Concrete Products 2020

PROJECT PROPOSAL

FOR

CEMENT BASED CONCRETE PRODUCTS

PROJECT TO BE IMPLEMENTED IN OROMIA

REGIONAL STATE, BISHOFTU TOWN

PROMOTER: ZAWORE TRADING PLC

MAY, 2021

ADDIS ABABA, ETHIPIA

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Table of Contents
CHAPTER ONE - INTRODUCTION
Excutive Summary................................................................................................................................1
Description of Project............................................................................................................................1
Amount of Finance Required................................................................................................................2
Profile of Promoter................................................................................................................................2
The Applicant........................................................................................................................................2
Market Prospect.....................................................................................................................................4
Technical Feasibility..............................................................................................................................4
Organization and Management..............................................................................................................4
Financial Viablilty.................................................................................................................................4
Socio-Economic Justification................................................................................................................4
Comment on Rationale Behind Main Assumptions..............................................................................5
Key Success & Risk factors and SWOT Analysis................................................................................5
Mission and Vision Statement ..............................................................................................................6
CHAPTER TWO- PROJECT AND PRODUCT DESCRIPTION
Project Concept......................................................................................................................................7
Project Justification...............................................................................................................................8
CHAPTER THREE - MARKET ANALAYSIS
Demand and Supply Scenario..............................................................................................................10
Competitive Advantages......................................................................................................................11
Target market and Marketing Strategy................................................................................................11
Product range and product description................................................................................................12
Cement Concrete Hallow Blocks........................................................................................................12
Physical requirements..........................................................................................................................13
CHAPTER FOUR - RESOURCES
Main Resources...................................................................................................................................17
Raw materials and consumables..........................................................................................................18
CHAPTER FIVE - THE PLANT
Selection of technology.......................................................................................................................19
Production Capacity............................................................................................................................20
Details and specification of machinery and equipment’s....................................................................21
Production Process..............................................................................................................................21
Process and quality control..................................................................................................................25
Technical know-how...........................................................................................................................27

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Requirement of power and fuel...........................................................................................................27

Requirement of manpower..................................................................................................................27
CHAPTER SIX- PLANT LOCATION AND ENVIRONMENTAL IMPACT
Potential Locations..............................................................................................................................29
Environmental aspect of manufacturing process.................................................................................29
Waste generated and mitigation measures...........................................................................................29
CHAPTER SIX- FINANCIAL ANALAYSIS
Quantity to produced and Production cost..........................................................................32
Income................................................................................................................................33
Total Cost of Investment.....................................................................................................33
Working Capital Requirement............................................................................................35
Source of Finance...............................................................................................................35
Salary of Employee.............................................................................................................35
Depreciation .......................................................................................................................36
Advertising Expense...........................................................................................................36
Utilities(Electric and Water)...............................................................................................36
Communication Expense....................................................................................................37
Stationary and Others..........................................................................................................37
Insurance Expense..............................................................................................................37
Repair and Maintenance......................................................................................................37
Contingency and Others......................................................................................................38
Implementation Schedule....................................................................................................38

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I. EXECUTIVE SUMMARY

1. Project Title – Modern Cement Based Concrete Products

2. Elements Construction materials (All cement production)
1.1. Promoter – Zawore Trading PLC
1.2. Status :- New
1.3. Nationality:- Ethiopian
2. Project Location:- Oromia Regional State
Bishoftu Town
3. Land Area and Capital
3.1. Premises Requirement: - 10,000 M2 (1hek)
4. Total Capital:- 76,000,000 Ethiopian Birr
 Total Capital
4.1. Fixed Capital = 44,958,567 birr
4.2. Working Capital = 23,441,433 birr
4.3. Contingency = 7,600,000 birr
 Source Fund
4.4. Own Equity (30%) = 22,800,000 birr
4.5. Bank loan (70%) = 53,200,000 birr
5. Planned Employment of the creation of the project
 The total manpower required for the plant will be 250 employees
5.1. Permanent Worker :- 100
 Skilled and Unskilled
5.2. On Temporary Basic :- 150
 Skilled and Unskilled
6. Project Benefits for the Regional/Country
 Add value to the economy, Source of Revenue to the government , Employment opportunity,
Save Foreign currency, Benefit for the local community, Stimulate the local economy and
technology transfer

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1. Introduction
Ethiopia is one of the East African countries with the diversified climatic conditions, natural
scenery and resource bases This project envisages the establishment of a plant for the production
of prefabricated concrete with a capacity of 140,000 m 3 per annum.. Currently the country has
a total population of about 100 million of which more than 40 million is found in Oromia
regional state. Oromia is one of the regional states of Ethiopia with very fertile land, very
conducive weather condition both for crop production and animal husbandry.

The government of the Ethiopia has been excreting its maximum effort to expand investment
opportunities in the country by designing different policies and strategies that will facilitate
investment through attracting both domestic and foreign investors. Likewise, the Oromia
regional state government has been working day and night to make poverty history by making its
door open to investors both (domestic and foreign) to come and invest in the region.

Therefore, it is this ample opportunity and cumulative experience which makes the owner of the
project to envisage this concert construction materials industry in oromia special zone
surrounding finfine Zone in Bishoftu town. The owner has a deep rooted experience in the field
because he has been serving on different managerial position from expert and technical manager
to general manager. Thus, it is these experiences which primarily motivated this investor to
develop the inception of this project idea.

Hence, being one of the concert construction materials production projects, it is planned to
provide: the soap that was imported from abroad. The present economic policy of our country
which is highly inviting the private sector to work on import substitution is highly motivating the
private sector to respond to the government invitation, there by contributing their share to the
development process. The project is identified because; the highly growing population of the
country is in need of different concert construction materials.

The major raw materials required are gravel, sand and cement which are available locally. The
present demand for the proposed product is estimated at 142,888 m 2 per annum. The demand is
expected to reach at 359,816 m2 by the year 2020.

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The project is financially viable with an internal rate of return (IRR) of 19.28 % and a net
present value (NPV) of Birr 30.09 million, discounted at 8.5%.

The project creates backward linkage with:-

 Cement,
 Gravel and
 Sand producers and
 Forward linkage with the construction sector.

II. PRODUCT DESCRIPTION AND APPLICATION

Concrete is a combination of aggregates and paste. The aggregates consist of fine and coarse
aggregates. The paste is a combination of cement, water and entrained air.

Aggregates make up about 75 – 85% of the volume of concrete; and the paste 15 – 25%.

Concrete is used in the construction of :-

 Buildings,
 Roads,
 Bridges and
 Other structural requirements.

III. Project Manager

Zawore Trading PLC, the founder and major shareholder of the leading forwarding company and
project his experience in different businesses will for sure benefit the project to be successful.

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I.1 General description of project area

i. Location
The envisaged concert construction materials plant projects are to be located in the Bishoftu
Town. The envisaged town is one of the Capital City of east shoa side oromia special zone
surrounding finfine zone, growing city in the Country, From the Federal Capital of Ethiopia
surrounding 38 KMs East shoa side. Currently the town is known for its multi investment
development and establishment of industrial city.

According to the 1994 national census, the town had a population

Bishoftu

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I.2 Objectives of the Project

Currently the number of population of the country is alarmingly increasing and thus demands
huge concert construction materials plant of different types in their day to day operations. Hence
this project has the following objectives:

 To undertake the production of the concert construction materials plant though scientific
methods and modern technology.
 To serve as the source of government revenue through business income tax.
 To serve as a role model for other investors who wants to invest in similar business
undertakings.
 To contribute somewhat to the governments objectives of reducing the problem of un-
employment through creating employment opportunities to the citizens.
 To bridge the demand gap of concert construction materials plant in the country.
 To contribute in the import substitution policy of the government by locally producing
the soaps that will be imported earlier.
 To contribute some to the area of self sufficiency.

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2. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

Concrete is a composite building material made from the combination of aggregate (composite)
and a binder such as cement. The most common form of concrete is portland cement concrete,
which consists of mineral aggregate (generally gravel and sand), portland cement and water.
After mixing, the cement hydrates and eventually hardens into a stone-like material.

For a concrete construction of any size, as concrete has a rather low tensile strength, it is
generally strengthened using steel rods or bars (known as rebars). This strengthened concrete is
then referred to as reinforced concrete. In order to minimize any air bubbles, that would weaken
the structure, a vibrator is used to eliminate any air that has been entrained when the liquid
concrete mix is poured around the ironwork. Concrete has been the predominant building
material in this modern age.

Major advantage of concrete construction for buildings is the material's inherent properties of
heaviness and mass, which create lateral stiffness, or resistance to horizontal movement.

The source of supply for pre fabricated concrete is essentially from the domestic producers.
Although the expanding building and construction sector has given rise to demand for concrete,
official statistics is not available. Failing to assess the demand for prefabricated concrete based
on the supply, end use approach is applied.

One of the factors that indicate housing construction activity is trend in the provision of land by
the city administration. In this regard the city administration has provided a total of 10,000 plots
of land with a total land area of 76 million m2 during the period 1998 – 2005 to private residential
quarters, commercial buildings and real estate developers. (See Table 3.1).

From the total land provided during the period of analyses the largest share in terms of number
of plots is accounted by private residential quarter (93.9%). However, in terms of land area the

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largest (52.79 %) is provided to real estate developers followed by commercial buildings (24%)
and private residential quarter (23%).

LANDS PROVIDED BY THE CITY ADMINISTRATION FOR HOUSING AND REAL

ESTATE DEVELOPMENT (1998 - 2005)

Year Purpose, Number of Plot and Land Area in m2

Commercial Real Estate Private Total

buildings Residential
Quarter

# of Land # of Land # of Land # of Land

Plot Area Plot Area Plot Area Plot Area

1998 5 3,000 2 1,951,000 184 28,000 191 1,982,000

1999 53 28,000 0 - 689 103,000 742 131,000

2000 27 21,000 2 356,000 1,690 268,000 1,719 645,000

2001 65 83,000 0 - 2,173 326,000 2,238 409,000

2002 61 40,000 0 - 4,131 619,000 4,192 659,000

2003 98 162,000 1 58,000 1,451 218,000 1,550 438,000

2004 186 1,199,000 5 670,000 359 47,000 550 1,916,000

2005 177 133,000 15 661,000 13 27,000 205 821,000

Total 672 1,669,000 25 3,696,000 10,690 1,636,000 11,387 7,001,000

% Share 5.9 23.84 0.22 52.79 93.9 23 100 100

Source: Land Administration Bureau of the Addis Ababa City Administration, 2006

During the period under review provision of land by the city administration for housing
construction activity has registered an average annual growth rate of 49.63% indicating the high

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magnitude of housing demand and construction activity in the city both for commercial and
residential purpose.

Pre fabricated concretes are mainly used by high rise buildings. Accordingly, in order to estimate
the present demand for concrete based on end users method the present level of commercial
building construction is estimated first.

As can be seen from Table 3.1 during the period 1998 – 2005 the maximum number of plots
provided by the city administration for the construction of commercial buildings was 186 in year
2004 while the minimum was 5 in year 1998. However, during the period under consideration on
average 84 plots were annually granted for commercial building construction.

Even though during the same period plot of land provided for the construction of commercial
buildings shown a 172 % average growth rate, in order to estimate the present (2008) level of
commercial building construction it is conservatively assumed that commercial building
construction in Addis Ababa grows by 4% annually which is equivalent to the growth rate of
urban population.

Accordingly, by taking the average of 1998 - 2005 as a base and employing a 4% growth rate the
number of commercial building construction in Addis Ababa in the year 2008 is estimated at 94.

Moreover, in order to estimate the size of the commercial buildings, data on construction permits
in Addis Ababa is collected and analyzed. Table 3.2 shows the average building construction
permits given during the period 2000 – 2002 by type of building.

 Market Prospect
According to current studies the products of the project have high demand as a result the project
will have a dependable all the year round market throughout the entire project's life. The
products produced by the project will be sold through direct sale channel to buyers. The project's
main market will be main cities of the country like Addis Ababa, Mojo, D/Zeit, Nazareth/Adama
and Awassa … etc.

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Table 3.2

AVERAGE BUILDING CONSTRUCTION PERMITS GIVEN DURING THE PERIOD

2000 – 2002 BY TYPE OF BUILDING.

Types of Building Average No. of Plots ( 2000- 2002) % share

3 Storey’s 53 46.90
4 Storey’s 32 28.32
5 Storey’s 10 8.85
6 Storey’s 9 7.96
7 Storey’s 3 2.65
8 Storey’s 2 1.77
9 Storey’s 2 1.77
10 Storey’s and above
2 1.77
Total 113 100
Source “Statistical Abstract” CSA.

As can be seen from the above Table the highest number of permits was for three storey type of
buildings followed by four storey’s and five storey’s.

Accordingly, assuming that the past trend in the type of commercial building construction in
Addis Ababa will also currently apply , out of the total 94 commercial buildings estimated to be
constructed in year 2008, the estimated share of building types is shown in Table 3.3.
NUMBER OF COMMERCIAL BUILDINGS ESTIMATED TO BE CONSTRUCTED IN YEAR 2008 BY BUILDING
Types of Building % Share Estimated Number of
Commercial Buildings

3 Storey’s 46.90 44
4 Storey’s 28.32 27
5 Storey’s 8.85 8
6 Storey’s 7.96 7
7 Storey’s 2.65 2
8 Storey’s 1.77 2
9 Storey’s 1.77 2
10 Storey’s and above 1.77 2
Total 100 94

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In order to estimate pre-fabricated concert requirements by the above buildings, it is assumed

that 50% of the commercial buildings will utilize concert.

Moreover, the determination of current demand is based on specifying consumption requirement

of concrete by the end users. Accordingly, the following consumption coefficients were
developed in consultation with knowledgeable professionals and by reviewing Building
Construction Manuals (see Table 3.4).

TABLE1:- CONSUMPTION COEFFICIENT BY BUILDING TYPE AND THE

CORRESPONDING DEMAND FOR CONCRETE

Floor Prefabricated
2 Estimated
Area Wall Area (m ) Concrete Demand ( m2)
Houses Demand
Building Type that For
Use Concert
(m2) External Internal Concrete Flooring External Internal
3 Storey’s 900 486 812 22 19,800 10,692 17,864 48,356
4 Storey’s 1,200 648 1,083 14 16,200 8,748 14,621 39,569
5 Storey’s 1,500 810 1,354 4 6,000 3,240 5,416 14,656
6 Storey’s 1,800 972 1,625 4 6,300 3,402 5,688 15,390
7 Storey’s 2,100 1,134 1,896 1 2,100 1,134 1,896 5,130
8 Storey’s 2,400 1,296 2,167 1 2,400 1,296 2,167 5,863
9 Storey’s 2,700 1,458 2,438 1 2,700 1,458 2,438 6,596
10 Storey’s
and above 3,000 1,620 2,709 1 3,000 1,620 2,709 7,329
Total 15,600 8,424 14,084 47 58,500 31,590 52,798 142,888
Accordingly, as can be seen from the Table 3.4 the present (2008) demand for pre-fabricated
concrete in Addis Ababa is estimated at 142,888 m 2 but in this time 10,000 m2 find in to dukam
town

2. Projected Demand

The rapid development of high-rise buildings has created high demand for pre fabricated
concrete. The demand for pre fabricated concrete is directly related with the growth in the
construction sector which in turn depends on the overall economic development of the country.
Therefore, demand is projected at the annual average GDP growth rate achieved in the past few
years i.e. 8.%. The projected demand is presented in Table 3.5.

PROJECTED DEMAND FOR PRE FABRICATED CONCRETE

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Year Projected Demand (m2)

2009 154,319

2010 166,665

2011 179,998

2012 194,398

2013 209,949

2014 226,745

2015 244,885

2016 264,476

2017 285,634

2018 308,484

2019 333,163

2020 359,816

3. Pricing and Distribution

Based on current retail price of prfabricated concrte and allowing a profit margin for retailers and
distribution costs, factory-gate price of Birr 1,750 per m3 is recommended.
The products could be distributed to the end-users directly.
B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

The capacity of the plant is envisaged to be 144,000m 3 per year. This is made on the basis of the
projected demand for concrete and the technology recommended.

2. Production Programmer

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Concrete batching is based on straight forward and familiar technology. The plant can therefore
start operation at full capacity in the first year.

Accordingly, on the basis of single shift of 8 hours, the plant would produce about 144,000 m 3 of
concrete per year.

IV. MATERIAL AND INPUTS

A. RAW MATERIALS
The raw material requirement of the plant at full capacity operation is provided in Table 4.1
below. Gravel can be sourced from Quarry and Gravel establishments; sand from Modjo, Koka,
etc; and cement can be acquired from cement factories or imported.
RAW MATERIAL REQUIREMENT AND COST

Material Unit of Qty/Year Cost (Birr)

Measure

1. Gravel m3 122,400 18,360,000

2. Sand m3 64,800 10,692,000

3. Cement Quintal 518,400 181,440,000

Total 210,492,000

B. UTILITIES
Electricity and water are the utility requirements of the plant. These are outlined in Table 4.2
below.
UTILITIES REQUIREMENT AND COST

Utility Qty/Year Unit Rate Cost (Birr)

Electricity (kWh) 240,000 0.4736 120,000

Water (m3) 28,800 3.25 115,200

Total 235,200

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

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1. Production Process
The aggregates-sand and cement-are poured out of the respective tanks onto bins in accordance
with predetermined proportions. These are conveyed into the mixer where water is added. After
the pre set of mixing, the resultant mix –the final product- is poured onto mixer trucks for use.
The process has no negative impact on the environment.
2. Source of Technology
 One full Automatic system concert block and paver production line with 1,500 plastic pallets
 Brand- Pres Mekina, Model 2020, Model-PM 1200, Type-Double Banker , HS CODE-
847480900012
 Address of Machinery Supplier is given below, Sany Industry Town, Economic and
Technological, Development Zone,Changsha,Hunan,China Zip Code: 410100 Fax 0086 731
4031527

3. MANPOWER, OGANIZATION STRUCTURE AND MANAGEMENT

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3.1 Man Power

At the top of the organization structure, there will be a general manager with the responsibility of
supervising the overall activity of the plant. It is always true that Organization and Management
of the project plays a key role and bear direct impact on the success and profitability of the
project. The opportunities of being serviced by well skilled professionals well enable the
company to evaluate the internal weakness and strength of the company as well as to assess the
global opportunity and risks in the world market so that the company can cope up with the
dynamics of the market situation.

Therefore, it must particularly to the project under consideration, to give especial affection to
select and recruit the appropriate total manpower requirement for the plant will be employees at
full capacity.

I) Permanent Workers :- 100

 Skilled :-50
 Unskilled:-50
II) Temporary Workers:-150
 Skilled :-100
 Unskilled:-50

1.1.2. Salary Expense

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The total number of manpower, manpower list, qualification, and salary and sex composition are
listed in the table below.

S Monthly
N Description No Qualification Salary Annual Salary
1 General Manager 1 BA in Business Management 10,000.0 120,000.00
0
2 Production Manager 1 BSC in industrial Engineering 5,000.00 60,000.00
3 Supervisor 1 BSC in Production 4,000.00 48,000.00
Technology
4 Secretary 1 Diploma In Secretarial 2,000.00 24,000.00
Science
5 Public Relation 1 Dip in Social Science 4,000.00 48,000.00
Officer
6 Personnel 1 Dip in HRM 4,000.00 48,000.00
7 Planning Officer 1 Dip in Economics/Statistics 4,000.00 48,000.00
8 General service 1 Dip in management 5,000.00 60,000.00
9 Color Operator 1 Diploma in Chemical 4,000.00 48,000.00
Engineer
10 Hydraulic 1 10+2 in general Mechanic 5,000.00 60,000.00
Technician
11 Machine Operators 4 10+2 in general Mechanic 5,000.00 240,000.00
12 Marketing head 1 BA in Marketing management 5,000.00 60,000.00
13 Purchaser 1 Diploma in Purch. & Suppli 5,000.00 60,000.00
mgt
14 Administer 1 Dip in Management 5,000.00 60,000.00
15 Sales person 3 Diploma in sales management 5,000.00 180,000.00
16 Finance head 1 Dip in Accounting 5,000.00 60,000.00
17 Accountant 1 Diploma in Accounting 5,000.00 60,000.00
18 Electrician 1 10+2 in general electricity 5,000.00 60,000.00
19 Cashier 1 10+2 in bookkeeping 3,000.00 36,000.00
20 Cleaner 4 Unskilled 3,000.00 144,000.00
21 Driver 2 10 completed 3,000.00 72,000.00
22 Gardner 2 Unskilled 2,500.00 60,000.00
23 Guards/Security 4 Basics 2,000.00 96,000.00
24 Helpers and laborers 214 10 completed 1,395.00 3,247,560.00
Grand Total 250 4,999,560.00

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3.2. 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

General Manager

Executive
Secretary

Production
Department Admin & Finance Commercial
Department Department

Pre- Packing
treatment
Admin. & Financial
Inspection HRM
Marketing Sales
Fig: Organizational Structure

Hence the following section deals with the duties and responsibilities of some departments.

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3.3. Organizational Management Duties and responsibilities

1. General Manager
Duties and responsibilities

 She/he will plan, organize, direct and control the overall activities of the factory
 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
Duties and responsibilities:-

It is the core department of the project center and has the following responsibilities.

 Use modern manufacture, processing and technologies that will enhance the quality
of 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.

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 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 promoter national and international procurement procedure
 Administer and control The promoter logistic resource
 Effectively administer the promoter Procurement process domestically as well as
internationally.
 Manage the public relation of The promoter/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
promoter
All workers have responsibilities on each activity they assigned for.

B. TRAINING REQUIREMENT
The production supervisor and skilled workers require few weeks training on machine operation
and production technology. Training is assumed to be entertained during the erection and
commissioning period and the cost is in built there and hence about Birr 25,000 is sufficient to
cover expenses associated with the training programmed.

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4. FINANCIAL REQUIREMENT AND ANALYSIS

4.1. Total Initial Investment Cost

The total cost of money that is required to estimated the envisaged modern construction materials
is to be birr 76,000,000.

Table Total Initial Investment Capital

No Description Cost

1 Fixed Investment
1.1 Land, Building and Construction 22,000,000 0.00
1.2 Machines and Equipments 18,548,200 0.00
1.3 Vehicles and Motors 5,600,000 0.00
1.4 Office Furniture and Equipment 3,500,000 0.00
Total Fixed Investment Cost 49,648,200 0.00

2 Operating Expense 0.00

2.1 Raw Materials Purchase and Products 14,735,000 0.00
2.2 Salary Expense 5,000,000 0.00
2.3 Other Operating Expense 4,000,000 0.00
2.4 Pre-operating Expense 2,616,800 0.00
Total Operating Expense 26,351,800 0.00
Total Investment Cost 76,000,000 0.00
4.1.1. Fixed Investment
Building and Construction
No Description Land requirement (M2) Unit cost in Br. Total Cost in Br.

1 Production Hall 5,000 2650 13,250,000

2 Office Building 1,500 1000 1,500,000
3 Guard house 500 1000 500,000
4 Toilet and shower room 500 1000 500,000
5 Warehouse 500 1100 550,000
6 Raw material Store 500 1200 600,000
7 End product Store 500 1200 600,000
8 Show room 500 1100 550,000
9 Parking and others 500 1000 500,000
Total 10,000.00  11250

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4.1.2. Required Machinery

A. Total Cost Machinery and Equipment for modern construction materials
Sr. Description Qty. Cost in birr

No.

1 Aggregate filler 3

2 Weighing filler 3

3 Aggregate temporary 1
storage/hopper/filler

4 Cement weighing equipment 1

18,548,200
5 Mixer 1

6 Water supply and measuring 1

system

7 Compressor 2

8 Electric control system 1

Grand Total 18,548,200

4.1.3. Vehicles
SN Description Qty Unit Price Total Price(Birr) Remark
1 Pick Up model 20/21 1 2,200,000 2,200,000 Duty Free
2 Service Bus 2 1,300,000 2,600,000 Duty Free
3 Mini Bus 1 800,000 800,000 Duty Free
Total 4 800000

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4.1.4. Office Equipments

SN Description Qty Unit cost (Br). Total cost (Br).
1 Managerial chair with tables 3 10,000.00 30,000.00
2 Secretarial chairs with table 1 50000 5,000.00
3 Office Chairs with tables 6 1,350.00 8,100.00
4 Computer with printer 5 20,000.00 100,000.00
5 Shelf 1 3,500.00 3,500.00
7 Telephone machine set 2 1,500.00 3,000.00
8 Filing Cabinets 2 2,000.00 4,000.00
9 Machine Assembly, chair and table 2,000,000
10 Decoration(Carpet & Curtain) 7,500.00
11 Reserved 1,339,000
Total 78350
4.2. INITIAL WORKING CAPITAL
The initial working capital is established to be 26,351,800.00 birr
4.2.1. Material and Inputs
A. Raw and Auxiliary Materials
The major raw materials and auxiliaries required for the production of modern construction
materials shown in Table 4.1 below. All the raw and auxiliary materials are to be imported.

Material Unit of Qty/Year Cost (Birr)

Measure

1. Gravel m3 150 15,000 2,250,000

2. Sand m3 165 20,000 3,300,000

3. Cement Quintal 354 26,000 9,204,000

Total 14754000

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4.2.2. Salary Expense

As indicated in part three of this study, the total cost of salary and wage is estimated to be
5,000,000 birr.
4.2.3. Other Operating Expenses
SN Description Annual Cost in Br. Assumption Used
1 Property Insurance 30,091.95 10% of Fixed investment cost
2 Audit and Legal Fee 10,000 10% of Salary
3 Uniforms 1,600 1% of FC
4 Telephone, Fax and Postal 1,000 1000per month
5 Cleaning Gods Supplies 2,000.00 70*60br
6 Repair and Maintenance 50,229.88 900 per month
7 Advertisement 2,000.00 1000 per month
9 Stationery and other office 1,000.00 700 per month
supplies
10 Electricity 1,000.00 0.45*150,000W per year
11 Water 5,00.00 2*1000 m3 per year
12 Fuel 90,000.00 6500 lit*20 per year
13 Oil and lubricant 1,000.00 10% of fuel cost
14 Miscellaneous Expense 1,000.00 3,000 br month
15 Other related reserved 3,200,000
Total 4,000,000
4.2.4. Pre -Service Expense
SN Description Cost in br.
1 Project proposal 10,000.00
2 Licensing fee and others lizi payment 2,450,800
3 Promotion and adverting 50,000
4 Workers capacity Building 50,000
5 EIA 40,000
Total 140000

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4.1. Financial Analysis and Statements

4.1.1. Underlying Assumption

The financial analysis of the envisioned Modern construction materials product is based on the
data provided in the preceding sections and the following assumptions.

A. Construction and Finance

 Construction Period ………………………………………………………….…18 Months

 Source of finance……………………………………………..…30% equity and 70% loan
 Bank interest rate …………………………………………………………..…………10 %
 Tax holidays ………………………………………………………………………2 years
 Operating costs increase by……………………………………………..………………2%
 Operating costs and raw material increased by………………………………...………5%
 Utilities and operation expense …………………..…increase 3% per annum after 2ndyear
 Wages and Salary increase…………………………Increase 3% Per annum after 2 nd year

 Sales …………………………………………..increase by 5 % per annum after 2nd year

B. Depreciation
 Building…………………………………………………………………………….5%
 Machinery and Equipment ………………………………………………………..15%
 Office Furniture……………………………………………………………………20%

 Vehicles ………………………………………………………………………..…..15%

C. Working Capital
 Accounts Receivable…………………………………………………………….30 days
 Raw material Local …………………………………………………………..…..30 days
 Work in progress…………………………………………………………………5 days

 Finished Production ……………………………………………………………..30 days

 Cash in hand ……………………………………………………………………...5 days
 Accounts payable …………………………………………………………….…..30 days

4.1.2. Source of Fund

S Description % share Amount(in birr)
N
1 Owners Share 30 22,800,000
2 Bank Loan 70 53,200,000

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Total 100 76,000,000

4.1.3. Loan Repayment Schedule

Year Principal Payment Interest (10%) Total Annual Payment Remaining Balance

0 0 0 0 53,200,000

1 5,320,000 5,320,000 10,640,000 47,880,000

2 5,320,000 4,788,000 10,108,000 42,560,000

3 5,320,000 4,256,000 9,576,000 37,240,000

4 5,320,000 3,724,000 9,044,000 31,920,000

5 5,320,000 3,192,000 8,512,000 26,600,000

6 5,320,000 2,660,000 7,980,000 21,280,000

7 5,320,000 2,128,000 7,448,000 15,960,000

8 5,320,000 1,596,000 6,916,000 10,640,000

9 5,320,000 1,064,000 6,384,000 5,320,000

10 5,320,000 532,000 5,852,000 0

Amount of
Rate of
values of Capital Depreciation
No Capital Assets depreciation
assets (Br.) estimated
(%)
(Br.)

1 Land, Building and Construction 22,000,000 5 1,100,000

2 Machines and Equipments 18,548,200 15 2,782,230
3 Vehicles and Motors 5,600,000 15 840,000
4 Office Equipment 3,500,000 20 700,000
Total 49,648,200 5,422,230
4.1.4. Annual depreciation schedule of the fixed Asset ( birr)

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4.1.5. Balance Sheet (Beginning)

Asset

Current Asset Value in Br

Cash 3,551,800

Inventory of raw material and input 22,800,00

Total Current Asset 26,351,800

Fixed Asset

Land, Building and Construction 22,000,000

Machineries and Equipment 18,548,200

Office Equipment 3,500,000

Vehicles 5,600,000

Total Fixed Asset 79551800

Total Asset 76,000,000

Liability

Account Payable 53,200,000

Owner Equity

Capital 22,800,000

Total Liability and Owners Equity 76,000,000

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C. FINANCIAL EVALUATION
1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through
out its operation life. Annual net profit after tax will grow from Birr 11.13 million to Birr
11.20 million during the life of the project. Moreover, at the end of the project life the
accumulated cash flow amounts to Birr 133.27 million.

2. 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.

3. 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 = 27 %

Sales – Variable Cost

4. Payback Period

The pay back period, also called pay – off period is defined as the period required to
recover 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 7 years.
 171-2

5. 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 to be 19.28 %
indicating the vaiability of the project.

6. 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 at 8.5% discount rate is found to be
Birr 30.09 million which is acceptable.

D. ECONOMIC BENEFITS

The project can create employment for 32 persons. In addition to supply of the domestic
needs, the project will generate Birr 20.92 million in terms of tax revenue. The project
creates backward linkage with cement, gravel and sand producers and forward linkage
with the construction sector.

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