Project on Integrated Baltina and Spices Processing and Supply 2015

ON;

Septmber, 2015
Bahir Dar,

[Project owner] Mr Tewachew Worku Ademe

 Project on Integrated Baltina and Spices Processing and Supply

Contents
List of tables .............................................................................................................. 2
OWNER PROFILE ................................................................................................. 4
1. Vision ,Mission, and value statements ............................................................. 5
Gantt Chart presentation ........................................................................................ 7
2 Executive Summary .............................................................................................. 7
3.Product Description and Application ................................................................. 5
4. Market Study, Plant Capacity and Production Program ................................ 6
4.1. Market Study........................................................................................................................ 6
4.1.1Present Demand and Supply ........................................................................................... 6
4.2. Projected Demand ................................................................................................................ 9
4.3 . Pricing and Distribution .................................................................................................... 10
4.4. Farm Size .......................................................................................................................... 10
4.5. Production Program ........................................................................................................... 10
5.Raw Materials and Utilities................................................................................ 10
5.1 Availability and Source of Raw Materials .......................................................................... 10
5.2. Annual Requirement and Cost of Raw Materials and Utilities.......................................... 11
6. Location and Site................................................................................................ 11
7. Technology and Engineering ............................................................................ 12
7.1 Production Process .............................................................................................................. 12
7.2. Machinery and Equipment ................................................................................................. 12
8.Civil Engineering Cost ........................................................................................................... 12
9.Human Resource and Training Requirement .................................................. 13
9.1. Human Resource ................................................................................................................ 13
9.2 . Training Requirement ....................................................................................................... 13
10.Financial Analysis ............................................................................................. 14
10.1. Underlying Assumption ................................................................................................... 14
11. Investment ........................................................................................................................... 14
11.2 Production Costs ............................................................................................................... 15
12.Financial Evaluation ............................................................................................................ 16
13.Economic and Social Benefit and Justification .............................................. 17
14. CONCLUSION................................................................................................. 18
ANNEXES................................................................................................................. 1

[Project Owner] Mr Tewachew Worku Ademe Page 1

 Project on Integrated Baltina and Spices Processing and Supply

List of tables
Table 1: Spices export as compiled to Total Agricultural Exports ................................................. 7
Table 2: Crop area and production (smallholder farms, Meher season);averaged over 2004/05–
2007/08 Area cultivated .................................................................................................................. 8
Table 3: Ethiopian Potato production (Qt) from year 2006/07 to 2010/11..................................... 9
Table 4: Ethiopia Baltina and spices production (Qt) from year 2010/11 to 2014/15 .................... 9
Table 5: Demand-Supply Gap for Baltina and spices from 2015-2020........................................ 10
Table 6: Material and Utility Requirement ................................................................................... 11
Table 7: Machinery and Equipment .............................................................................................. 12
Table 8: Human Resource Requirement ....................................................................................... 13
Table 9: Total initial investment ................................................................................................... 14
Table 10: Production Cost ............................................................................................................ 15

[Project Owner] Mr Tewachew Worku Ademe Page 2

 Project on Integrated Baltina and Spices Processing and Supply

[Project Owner] Mr Tewachew Worku Ademe Page 3

 Project on Integrated Baltina and Spices Processing and Supply

OWNER PROFILE

Title: - TEWACHEW WORKU ADEME

INTEGRATED BALTINA AND SPICE PROCESSING
AND SUPPLY
 Owner of the Project: Tewachew Worku
ADEME
 Legal entity: private ownership investment
Address:
 Region: Amhara
 Zone: Bahir Dar
 Woreda: Bahir Dar Zuria
 Kebele: Around Fasilo and Tana sub city
Phone No. + 251928958317

 Lands needed for the project 3 hectar.

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 Project on Integrated Baltina and Spices Processing and Supply

1. Vision ,Mission, and value statements

1.1 Vision
To become the most competitive and leading Different Baltina and Spices production
Campony in Ethiopia by providing market driven and Export based products by 2025.

1.2 Mission
o To become the most competitive and leading Different Balitina and Spices production
Company in Ethiopia by providing market driven and customer based Production whose
quality and price “value proposition” is always better than its competitors,
o To ensure being a Crop Production Farm of choice to its customers, employer of choice
to its employees and an investment of choice to its Owner,
o To contribute positively to Agro -industry development of Amhara Region in general and
Bahir Dar city to which it operates in particular ,

1.3 Values
 Export based Differt types of Baltina and spices Production
 competitiveness
 A commitment to excellent ,and quality product
 innovation, Team sprit
 diversity
 creativity
 honesty
 integrity
1.4.Environmental Analysis (SWOT Analysis)
1.4.1 Internal Environmental Analysis
A) Strength
Well organized management and there craftsman and team skill may be our capabilities,
marketing skills, and good buyer/producer relations are our strengths.

B)Weakness
o Our Limited financial resources, new brand image may be the source of our weaknesses
in Export Market.

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 Project on Integrated Baltina and Spices Processing and Supply

1.4.2 External Environmental Analysis

C) Opportunities
 Our government current Investment policy and support which is also applicable for this
project.
 Huge demand of Ethiopian Baltinas and spices by itself in the foreign market and its
scarce supply
 Finance institutions willingness to work with investors by lease financing.
 Mass Production is one among from previously overlooked market segment in Amhara
region.
D)Threats
 New competitive company may enter into the market
 Land and finance loan may not supplied as quick as the project time.
 It may not supplied enough water and electric power for health and related
welfare services consistently.
Coping mechanism
 Producing the necessary requirement and establishing constant discussion with
Bahir Dar city Administration and financial institutions.

Major Tasks to Be Conducted...

Tasks Start Duration End date

date
project proposal preparation sep-1 8 sep-9
Financial institution agreement sep-10 5 sep. 15
collecting performs from Agri. sep-16 9 sep-25
equipment suppliers
EIA preparation sep-26 14 Oct-30
Electricity and water facilitation Oct-08 18 Novt-10
Construction of Health Centre Oct-30 45 Nov-15
Requiting human resource Nov-20 35 Jan-25
Machine Equip. shipment Jan-26 60 Mar-26

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Land Preparation and start up the work Apr-30 30 Jun-30

Gantt Chart presentation

50000
40000
30000
20000
10000
0

Duration

Duration
Start date

2 Executive Summary
Tewachew Worku Ademe Baltina and Spice processing and supply shop will be start as private
domestic investors. The project will provide qualitative cereal domestic consumption product
such as shero, lentil, paper, bean, pea, and bulla, beso, abish and different spices for domestic
customer of the societies of Bahir Dar and around in order to make the healthy in their life.
Our initial statement to Investors and Financial Lenders, this BALTINA and spices business plan
is a candid disclosure of the different traditional business and it set realistic business expected
and reduced any questions about the profitability of this business venture.
Entrepreneurs have a tendency to paint the Tewachew Worku Ademe Baltina and spices
processing and supply shop business plan with a very optimistic brush, highlighting strengths
and camouflaging the risks. We, as business owners, have a vested stake and financial
commitment in the success of this project. Our intent is to have a definitive business, financial,
and marketing plan that not only serves our need for capital financing, but also is utilized as our
daily business roadmap. We have taken all precautions to validate or success our business and

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 Project on Integrated Baltina and Spices Processing and Supply

financial models, focusing on realistic projections.Demand projection divulges that the demand
for Crop is substantial and is increasing with time . Accordingly, the planned company is set to
produce 7670 quintals annually. The total investment cost of the project including working
capital is estimated at birr 20 milion and creates more than 201 job opportunity and birr
3,036,912 of income. For this project the total land requirments will be about 3 hectare.
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 42.8% of capacity utilization and it will
payback fully the initial investment less working capital in 3 years. The result further show that
the calculated IRR of the project is 32% and NPV discounted at 18% of birr 342,268.85

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue and employment creation.

Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

3.Product Description and Application

Ethiopia’s crop agriculture is complex, involving substantial variation in crops grown across the
country’s different regions and ecologies. Major crops used to prepare different baltinas and
spices (sowbee,been, season, Telba, Tikur Azmud, Nech Azmud, chickpice,Akuri Ater, Suf,
Teff,wheat, maize, sorghum, and barley) are the core of Ethiopia’s agriculture and food
economy, accounting for about three-fourths of the total area cultivated, 29 percent of
agricultural gross domestic product (GDP) in 2005/06 (14 percent of total GDP), and 64 percent
of calories consumed (FAO various years). There has been substantial growth in cereals in terms
of area cultivated, yields, and production since 2000, but yields are low by international
standards, and overall production is highly susceptible to weather shocks, particularly droughts.
Thus, raising production levels and reducing their variability are essential aspects of improving
food security in Ethiopia, both to help ensure adequate food availability and to increase rural
household incomes. Cultivated crop area (13 million hectares in 2007/08) accounts for a
relatively small share (about 13 percent) of the total area of Ethiopia, because most land is not
suited for cultivation. Cereals dominate Ethiopian crop production. Cereals were grown on 73.4

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 Project on Integrated Baltina and Spices Processing and Supply

percent of the total area cultivated by a total of 11.2 million farmers. Together, these holders
produce a yearly average of 12 million tons of cereals. Teff accounts for 28 percent of the total
cereal area cultivated, while maize comprises 27 percent of total annual cereal production, but
only 19 percent of cereal area cultivated.
After cereals, the second most important crop group (in terms of acreage) is pulses. In 2004/05–
2007/08, 6.4 million holders grew pulses on 12.4 percent of the total area cultivated. Total pulse
production averaged 1.5 million tons per year. Oilseeds form the third most important crop
group. In 2004/05–2007/08, they were cultivated on 6.9 percent of the total area cultivated by 3.1
million holders who produced an average of 0.5 million tons of oilseeds yearly. Coffee is a major
cash crop, accounting for 3.8 percent of GDP (and 19 and 35 percent of the quantity and value of
exports, respectively, in the period) but occupied only 2.7 percent of total area cultivated (that is,
306,000 hectares). Chat, another stimulant crop, was cultivated by 2 million farmers on 1.3
percent of the total area cultivated, and it accounted for 5 percent of total export earnings.
Vegetables and root crops together were cultivated on 281,000 hectares comprising 2.6 percent
of the total area cultivated.

4. Market Study, Plant Capacity and Production Program

4.1. Market Study

4.1.1Present Demand and Supply

1. Distribution of Cultivated Land by Farm Size and raw materilas for this project
The Central Statistical Agency (CSA) classifies Ethiopian farms into two major groups:
smallholder “peasant” farms and large commercial farms. Smallholders and larger farms are
defined as those that cultivate less and more than 25.2 hectares, respectively. The majority of
farmers in Ethiopia are smallholders. Their farms are often fragmented, produce mostly for the
farmers’ own consumption, and generate only a small marketed surplus. Large farms (averaging
323 hectares per farm) are state or private property, and they sell agricultural products at local
markets or abroad. modern farm management practices and inputs (for example, machinery,
irrigation, fertilizers, pesticides, and improved seeds) than do smaller farms. Large farms are not
widespread in Ethiopia, and the contribution of these farms to total agricultural output is limited.

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 Project on Integrated Baltina and Spices Processing and Supply

It is estimated that large farms make up less than 4 percent of total production in the country
(Ethiopia, CSA 2009). A recent study, however, suggests that international investors are making
large-scale acquisitions of farmland in lowland areas of Ethiopia. Of the approved documented
projects, it is estimated that approximately 603,000 hectares are under contract, with government
leases for up to 50 years (Cotula et al. 2009).
Ethiopia is a homeland for many spices, such as korarima (Aframonum Korarima), long pepper,
Black cumin, Bishops weed (‘Nech azmud’) and coriander. As a result, the history of spice use
in Ethiopia is an ancient one and spices have always been and remain as basic food items in the
diet of the Ethiopian people. The cultivation of spice for centuries are predominantly stayed
traditional by small scale land holding farmers. Recently the average land covering by spices has
been a222,700ha and the production reached 244,000 ton/ annum.The seed spices potentials area
are Amhara and Oromia regions while for the low land spices dominantly produced and potential
in SNNP and Gambela regions. In general the total potential for the low land spices is estimated
to be 200,000 ha.

Table 1: Spices export as compiled to Total Agricultural Exports Ton 000USD

Item 2005/2006 2006/2007 2008/2009 2008/2009

Value Qt. Value Qt. Value Value Qt.
Qt.
Spices 8555 9867 13040 10751 14264 10837 15441 354075

886,067 1,023,185 1,307,515

Total
Agri.
Source: MOTI Annual Magazine 2008
As can be seen from the above table, export of spices from Ethiopia is very small as compared to
the available potential, currently contributing only about 1% of the Country’s total agricultural
export.

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 Project on Integrated Baltina and Spices Processing and Supply

Table 2: Crop area and production (smallholder farms, Meher season);averaged over 2004/05–
2007/08 Area cultivated

Table 1. Crop area and production Production .

(smallholder farms, Meher
season);averaged over 2004/05–2007/08
Area cultivated .
Crop Number Share in Level Share Level
in total
of holders total (%) (ha) (metric tons)
(%)

Grain 11,519,148 92.7 10,382,365 79.8 14,090,273

Cereals 11,156,837 73.4 8,230,211 68.3 12,062,972
Teff 5,462,782 20.9 2,337,850 13.6 2,407,948
Maize 7,287,931 14.2 1,595,238 18.8 3,314,286
Wheat 4,118,164 12.8 1,439,098 13.0 2,293,308
Sorghum 4,253,534 12.8 1,429,886 12.5 2,216,181
Barley 3,842,462 9.1 1,024,390 7.5 1,326,422
Pulses 6,377,027 12.4 1,384,499 8.5 1,495,547
Spices 3,127,131 6.9 767,655 3.0 531,754
Vegetables 4,936,741 1.0 106,585 2.4 424,825
Root crops 4,757,733 1.6 174,826 8.3 1,473,292
Fruit crops 2,658,415 0.5 51,078 2.3 403,459
Chat 2,068,262 1.3 141,881 0.7 126,427
Coffee 3,049,120 2.7 305,940 1.2 210,671
Hops 1,685,422 0.2 23,457 0.1 26,311

2. Different Baltina and spices production trend in Ethiopia

Ethiopia’s Baltina and spices production can be divided into private peasant production and
commercial farm production as per CSA report of agricultural sample surveys. Table 3 shows

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 Project on Integrated Baltina and Spices Processing and Supply

Ethiopia’s production of this products from year 2006/07 to 2010/11.

Table 3: Ethiopian Potato production (Qt) from year 2006/07 to 2010/11

Ethiopia Baltina and Spice (Qt)

Products 2006/07 2007/08 2008/09 2009/10 2010/11

Baltina and spice by 3,256,568.00 4,025,080.00 3,846,457.00 5,723,325.00 4,473,335.00

Private Peasant
Baltina and spices by 47,923.00 5,979.00 8,860.00 36,203.00 140,648.00
Commercial company
Total Potato 3,304,491.00 4,031,059.00 3,855,317.00 5,759,528.00 4,613,983.00
Production

As shown in table 3, most of the Different Baltina and spices in Ethiopia are produced by private
peasant compared to commercial company production. For year 2010/11 the total production in
Ethiopia is 4,613,983.00 quintal. From the total produced amount 4,473,335.00 quintal is from
private peasants and 140,648.00 quintal is from commercial projects. The average growth rate
production by private peasant is 8.26 and the average growth rate production by commercial
farm is 31%. With this growth rate, estimation of different Baltina and spices production from
2012 to 2015 is presented in Table 4

Table 4: Ethiopia Baltina and spices production (Qt) from year 2010/11 to 2014/15

Estimated Ethiopia Baltina and spices production (Qt)

Potato 2010/11 2011/12 2012/13 2013/14 2014/15
Baltina and spice
by Private Peasant 4,473,335.00 4,842,832.47 5,242,850.43 5,675,909.88 6,144,740.03
Baltina and spices
by Commercial 140,648.00 184,248.88 241,366.03 316,189.50 414,208.25
Farm
Total Potato
Production 4,613,983.00 5,027,081.35 5,484,216.47 5,992,099.38 6,558,948.28

4.2. Projected Demand

The forecasted demand supply gap analysis indicates that there is a large gap to be met. This
could create a good marketing opportunity for new entrants like the proposed project. Table 5
presents the forecasted gap between demand and supply

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 Project on Integrated Baltina and Spices Processing and Supply

Table 5: Demand-Supply Gap for Baltina and spices from 2015-2020

Demand/Supply Gap in kg
Projected Supply of
Domestic Projected Demand- Supply
Year different Baltina and
Demand in Qt Gap
spices Chips
2015 3,456,789.00 2,456,890.00 999,899.00
2016 4,212,098.00 2,987,635.00 1,224,463.00
2017 6,745,097.00 3,879,870.00 2,865,227.00
2018 6,978,012.00 4,678,543.00 2,299,469.00
2019 7,865,945.00 5,234,708.00 2,631,237.00
2020 10,423,563.00 7,423,540.00 3,000,023.00

4.3 . Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the selling price is
set to be birr 18,500 per quintal. In distributing the product the envisaged plantation shall make
use of the available retail and wholesale network.

4.4. Farm Size

In consideration of the expected demand for Baltina and spices as presented earlier the envisaged
plantation is set to produce 7670 quintals annually within Baltina and spices processing machine
constructing on 3 hectares of land.

4.5. Production Program

The program is scheduled based on the consideration that the envisaged plantation will work 275
days in a year, where the remaining days will be holidays and for maintenance. During the first
year of operation the company will operate at 80 percent capacity and then it grows to 90 percent
in the 2nd year. The capacity will grow to 100 percent starting from the 3rd year. This
consideration is developed based on the assumption that sample market already exists and
logistics barriers be eliminated within the first two years of operation.

5.Raw Materials and Utilities

5.1 Availability and Source of Raw Materials

The main inputs used in producing different Baltina and spices are pulse crops, spices,
pepper,Cereals,Pulse and oilseed, water and polyethylene packaging bags. While polyethylene

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 Project on Integrated Baltina and Spices Processing and Supply

bags can be accessed from domestic suppliers, the firm shall make use of water pump
equipments(if necessary) to pump water from the nearby river or other source.

5.2. Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged farm is
listed in table 6 here under
Table 6: Material and Utility Requirement

Material and Input Quantity Total Cost

L.C. F.C.
920 Qt 3,200,000
spices, pepper,Cereals,Pulse and
oilseed Seed
Polyethylene Bag (100 kg) 7670 pcs 61,360
Total Material Cost 2,261,360
Utility
Electricity 60,000kwh 300,000
Diesel 100,000 lit 1,800,000
Water 1,500m3 375 000
Total Utility Cost 2,475,000
Total 4,736,360

The total material and utility cost at full capacity of operation is estimated to be birr 4,736,360
per year

6. Location and Site

The appropriate locations for the envisaged project in view of the availability of appropriate land
as well as market for the output are Bahir Dar city Administration ,Bahir Dar Woreda and
Dagmawi menilik sub city while the supply shope will open Ate Tewodros Sub city, Fasilo, Tana
and Belayzelek as considered as suitable areas for spices, shero, lentil, paper, bean, pea, and bulla,
beso, abish and different spices demands.

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 Project on Integrated Baltina and Spices Processing and Supply

7. Technology and Engineering

7.1 Production Process

In the production process, the first task is establishing the factory, collecting the inputes from
different parts of the region.. Thus, starting date for the the project depends on the access of land
aquisisoun. If the land aquisision process ends in the short time by the governmet side the project
starts its production as soon possible.

7.2. Machinery and Equipment

The machineries and equipment required for plantation is detailed in table 7 below
Table 7: Machinery and Equipment

Machinery and Equipment Unit Quantity Unit price Total price

Processor Machine complete No 2

670,420.00 1,340,840.00
Separator machine No 1
436,089.00 436,089.00
Mixser No 1
360,986.00 360,986.00
Different sized cars No 2
1,274,621.50 2,549,243.00
Grinder No 2
156,421.00 312,842.00

Total 5,000,000.00

The, total cost of machinery and equipment is estimated to be about birr 5 miliion. The grinder,
mixer and processor machine can be purchased from METIC or Nazareth metal complx factory
Plant while different sized cars are imported from abroud based on investor acts of Ethiopia.

8.Civil Engineering Cost

The total site area for the envisaged plantation is estimated to be 3 hectare. From these, 0.2 ha is
required for stores, 1.5 hectars for machinery shades, 0.012 for office building and 0.05 ha for
man and women separate residence building, 0.125 ha for Health Center construction and the rest
1.113 ha for production ware house, packing and collecting the productions..

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9.Human Resource and Training Requirement

9.1. Human Resource
The list of required manpower for the envisaged plant is stated in table 8 below
Table 8: Human Resource Requirement

Position No. Monthly Total Annual

Required Salary Salary
Manager 1 6956 83,472
Administration/Finance Head 1 3500 42,000
Accountant 1 2000 24,000
Secretary 1 1000 12,000
Sales person 4 1200 57,600
Store Keeper 4 800 38,400
Technician 2 1000 24,000
Crop production facilitator 25 1000 300,000
Daily Laborers 150 1300 2,340,000
Cleaners 4 600 28,800
Tractor Operator 1 1400 16,800
Electrician 1 1220 14,640
Mechanic 2 1000 24,000
Clerk 1 800 9,600
Guards 3 600 21,600
Benefit (20%)
Total 201 3,036,912

The project will create 201 job opportunity and about birr 3,036,912 of income. The
professionals and support staffs for the company shall be recruited from Bahir Dar city and
around Bahir Dar.

9.2 . Training Requirement

On job training of key personnel shall be conducted primarily with the aim of the production
technology and machinery maintenance. For this purpose birr 45,000 will be allocated as training
expense.

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10.Financial Analysis
10.1. Underlying Assumption

The financial analysis of this project is based on the data provided in the preceding chapters and
the following assumptions.

A. Construction and Finance

Mobilization and Preparation period 1 year
Source of finance 30% equity and 70% loan
Tax holidays 1 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 1% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Cash in Hand 30

11. Investment
The total investment cost of the project including working capital is estimated at Birr 20 million
as shown in table 7 below. The Owner shall contribute 30% of the finance in the form of equity
while the remaining 70% is to be financed by bank loan.

Table 9: Total initial investment

Items L.C F.C Total

Land 11,900 11,900

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Building and civil works 3,000,000 3,000,000

(for Health center and other
services)
Land Preparation 500,000 500,000
Health Center Office 2,000,000 2,000,000
equipment
Vehicles 1,000,000 1,000,000
Machinery & equipment 5,000,000 5,000,000
Total fixed investment cost 11,511,900 0 11,511,900
Raw material Cost 2,261,360 2,261,360
Utility(Electric, Diesel, Oil 2,475,000 2,475,000
and water) cost
Salary and Training Cost 3,036,912 0 3,036,912
Working capital 714,828 0 714,828
Total 20,000,000 0 20,000,000

11.2 Production Costs

The total production cost at full capacity operation is estimated at Birr 9,583,984 as detailed in
table 10 below.

Table 10: Production Cost

Items Cost
1. Raw materials 3 351,390
2. Utilities 2 277,725
3. Wages and Salaries 3 309,320
4. Spares and Maintenance 55,624
Plantation Costs 1,444,059
5. Depreciation 51,624
6. Financial costs 38,301
Total Production Cost 9,583,984

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12.Financial Evaluation
I. Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 13%, 31% and 29% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 42.8% of capacity utilization.

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in 3 years.
IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 27.6%
V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
32% and the net present value at 18 % discount is Birr 342,268.85

VI. Sensitivity Analysis

This proposed project is profitable even with considerable cost increment. That is, the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector.

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13.Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that promotes the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. These benefits
are listed as follows

A. Profit Generation

The project is found to be financially viable and earns a profit of birr 50.54 million within the
project life. Such result induces the project promoters to reinvest the profit which, therefore,
increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about birr 5.5 from corporate tax
payment alone. Such result create additional fund for the regional government that will be used
in expanding social and other basic services in the region
C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 201 personnel in addition to several
temporary laborers. Consequently the project creates income of birr 3,036,912 per year. This
would be one of the commendable accomplishments of the project.
D. Pro Environment Project

The proposed production process is environment friendly.

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14. CONCLUSION
This comprehensive review has identified gaps and recommended short, medium, and long term
interventions to address the gaps. The recommended integrated Baltina and spices plans will help
optimize the company design; thereby improving storage space and product safety. The
recommended types, specifications and quantities of shelving and handling equipment will
inform and rationalize the selection and procurement of the equipment. The specifications and
pictures included in the station equipment and handling materials. Implementation of these
comprehensive improvement recommendations is expected to improve the efficiency and
effectiveness of the national supply chain logistics management system, and thereby increasing
availability and access to quality service deliveries.

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 Project on Integrated Baltina and Spices Processing and Supply

ANNEXES

Annex 1: Total Net Working Capital Requirements (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0.00 0.00 80% 90% 100% 100%

1. Total Inventory 0.00 0.00 8969.89 10091.13 11212.36 11212.36

Raw Materials in Stock- Total 0.00 0.00 4484.95 5045.56 5606.18 5606.18

Raw Material-Local 0.00 0.00 4484.95 5045.56 5606.18 5606.18

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 0.00 0.00 0.00 0.00

Spare Parts in Stock and Maintenance 0.00 0.00 0.00 0.00 0.00 0.00

Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00

Finished Products 0.00 0.00 0.00 0.00 0.00 0.00

2. Accounts Receivable 0.00 0.00 0.00 0.00 0.00 0.00

3. Cash in Hand 0.00 0.00 33778.47 38000.78 42223.09 42223.09

CURRENT ASSETS 0.00 0.00 38263.42 43046.35 47829.27 47829.27

4. Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00

Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 38263.42 43046.35 47829.27 47829.27

INCREASE IN NET WORKING CAPITAL 0.00 0.00 38263.42 4782.93 4782.93 0.00

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 1: Total Net Working Capital Requirements (in Birr) (continued)

PRODUCTION
5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 11212.36 11212.36 11212.36 11212.36 11212.36 11212.36

Raw Materials in Stock-Total 5606.18 5606.18 5606.18 5606.18 5606.18 5606.18

Raw Material-Local 5606.18 5606.18 5606.18 5606.18 5606.18 5606.18

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 0.00 0.00 0.00 0.00

Spare Parts in Stock and Maintenance 0.00 0.00 0.00 0.00 0.00 0.00

Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00

Finished Products 0.00 0.00 0.00 0.00 0.00 0.00

2. Accounts Receivable 0.00 0.00 0.00 0.00 0.00 0.00

3. Cash in Hand 42223.09 42223.09 42223.09 42223.09 42223.09 42223.09

CURRENT ASSETS 47829.27 47829.27 47829.27 47829.27 47829.27 47829.27

4. Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00

Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL NET WORKING CAPITAL REQUIRMENTS 47829.27 47829.27 47829.27 47829.27 47829.27 47829.27

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 295260.00 343089.27 594000.00 668250.00 742500.00 742500.00
1. Inflow Funds 295260.00 343089.27 0.00 0.00 0.00 0.00
Total Equity 118104.00 137235.71 0.00 0.00 0.00 0.00
Total Long Term Loan 177156.00 205853.56 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 0.00 0.00 594000.00 668250.00 742500.00 742500.00
Sales Revenue 0.00 0.00 594000.00 668250.00 742500.00 742500.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 295260.00 295260.00 501470.59 519255.65 617002.41 606857.34
4. Increase In Fixed Assets 295260.00 295260.00 0.00 0.00 0.00 0.00
Fixed Investments 281200.00 281200.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 14060.00 14060.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 38263.42 4782.93 4782.93 0.00
6. Operating Costs 0.00 0.00 360337.46 404676.65 449015.83 449015.83
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 61067.76 63365.82
8. Interest Paid 0.00 0.00 102869.71 45961.15 38300.96 30640.77
9.Loan Repayments 0.00 0.00 0.00 63834.93 63834.93 63834.93
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 47829.27 92529.41 148994.35 125497.60 135642.66
Cumulative Cash Balance 0.00 47829.27 140358.68 289353.03 414850.63 550493.28

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 2: Cash Flow Statement (in Birr): Continued

PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 742500.00 742500.00 742500.00 742500.00 742500.00 742500.00
1. Inflow Funds 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 742500.00 742500.00 742500.00 742500.00 742500.00 742500.00
Sales Revenue 742500.00 742500.00 742500.00 742500.00 742500.00 742500.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 601495.21 597820.28 592458.14 523261.08 523261.08 523261.08
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 449015.83 449015.83 449015.83 449015.83 449015.83 449015.83
7. Corporate Tax Paid 65663.88 69649.14 71947.19 74245.25 74245.25 74245.25
8. Interest Paid 22980.57 15320.38 7660.19 0.00 0.00 0.00
9. Loan Repayments 63834.93 63834.93 63834.93 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 141004.79 144679.72 150041.86 219238.92 219238.92 219238.92
Cumulative Cash Balance 691498.07 836177.80 986219.65 1205458.57 1424697.49 1643936.41

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 594000.00 668250.00 742500.00 742500.00

1. Inflow Operation 0.00 0.00 594000.00 668250.00 742500.00 742500.00

Sales Revenue 0.00 0.00 594000.00 668250.00 742500.00 742500.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 295260.00 295260.00 398600.88 409459.57 453798.76 512381.65

3. Increase in Fixed Assets 295260.00 295260.00 0.00 0.00 0.00 0.00

Fixed Investments 281200.00 281200.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 14060.00 14060.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 38263.42 4782.93 4782.93 0.00

5. Operating Costs 0.00 0.00 360337.46 404676.65 449015.83 449015.83

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 61067.76 63365.82

NET CASH FLOW -295260.00 -295260.00 195399.12 258790.43 288701.24 230118.35

CUMMULATIVE NET CASH FLOW -295260.00 -590520.00 -395120.88 -136330.46 152370.79 382489.13

Net Present Value (at 18%) -295260.00 -250220.34 140332.60 157507.84 148908.89 100586.85

Cumulative Net present Value -295260.00 -545480.34 -405147.73 -247639.89 -98731.00 1855.85

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 742500.00 742500.00 742500.00 742500.00 742500.00 742500.00

1. Inflow Operation 742500.00 742500.00 742500.00 742500.00 742500.00 742500.00

Sales Revenue 742500.00 742500.00 742500.00 742500.00 742500.00 742500.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 514679.71 518664.97 520963.02 523261.08 523261.08 523261.08

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 449015.83 449015.83 449015.83 449015.83 449015.83 449015.83

6. Corporate Tax Paid 65663.88 69649.14 71947.19 74245.25 74245.25 74245.25

NET CASH FLOW 227820.29 223835.03 221536.98 219238.92 219238.92 219238.92

CUMMULATIVE NET CASH FLOW 610309.43 834144.46 1055681.44 1274920.36 1494159.27 1713398.19

Net Present Value (at 18%) 84391.82 70267.42 58937.29 49428.75 41888.77 35498.96

Cumulative Net present Value 86247.67 156515.09 215452.38 264881.13 306769.89 342268.85

Net Present Value (at 18%) 342,268.85

Internal Rate of Return 32.0%

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1 2 3 4 5

Capacity Utilization (%) 80% 90% 100% 100% 100%

1. Total Income 594000.00 668250.00 742500.00 742500.00 742500.00

Sales Revenue 594000.00 668250.00 742500.00 742500.00 742500.00

Other Income 0.00 0.00 0.00 0.00 0.00

2. Less Variable Cost 255731.06 287697.45 319663.83 319663.83 319663.83

VARIABLE MARGIN 338268.94 380552.55 422836.17 422836.17 422836.17

(In % of Total Income) 56.95 56.95 56.95 56.95 56.95

3. Less Fixed Costs 156230.40 168603.20 180976.00 180976.00 180976.00

OPERATIONAL MARGIN 182038.54 211949.35 241860.17 241860.17 241860.17

(In % of Total Income) 31 32 33 33 33

4. Less Cost of Finance 102869.71 45961.15 38300.96 30640.77 22980.57

5. GROSS PROFIT 79168.83 165988.21 203559.21 211219.40 218879.60

6. Income (Corporate) Tax 0.00 0.00 61067.76 63365.82 65663.88

7. NET PROFIT 79168.83 165988.21 142491.45 147853.58 153215.72

RATIOS (%)

Gross Profit/Sales 13% 25% 27% 28% 29%

Net Profit After Tax/Sales 13% 25% 19% 20% 21%

Return on Investment 29% 33% 28% 28% 28%

Return on Equity 31% 65% 56% 58% 60%

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 4: NET INCOME STATEMENT (in Birr):Continued

PRODUCTION
6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 742500.00 742500.00 742500.00 742500.00 742500.00

Sales Revenue 742500.00 742500.00 742500.00 742500.00 742500.00

Other Income 0.00 0.00 0.00 0.00 0.00

2. Less Variable Cost 319663.83 319663.83 319663.83 319663.83 319663.83

VARIABLE MARGIN 422836.17 422836.17 422836.17 422836.17 422836.17

(In % of Total Income) 57 57 57 57 57

3. Less Fixed Costs 175352.00 175352.00 175352.00 175352.00 175352.00

OPERATIONAL MARGIN 247484.17 247484.17 247484.17 247484.17 247484.17

(In % of Total Income) 33 33 33 33 33

4. Less Cost of Finance 15320.38 7660.19 0.00 0.00 0.00

5. GROSS PROFIT 232163.79 239823.98 247484.17 247484.17 247484.17

6. Income (Corporate) Tax 69649.14 71947.19 74245.25 74245.25 74245.25

7. NET PROFIT 162514.65 167876.79 173238.92 173238.92 173238.92

RATIOS (%)

Gross Profit/Sales 31% 32% 33% 33% 33%

Net Profit After Tax/Sales 22% 23% 23% 23% 23%

Return on Investment 28% 27% 27% 27% 27%

Return on Equity 64% 66% 68% 68% 68%

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
638349.2 717518.1 819671.3
TOTAL ASSETS 295260.00 7 0 8 898327.90 982346.55
178622.1 332399.3
1. Total Current Assets 0.00 47829.27 0 8 462679.90 598322.55
Inventory on Materials and Supplies 0.00 0.00 4484.95 5045.56 5606.18 5606.18
Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Finished Products in Stock 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Receivable 0.00 0.00 0.00 0.00 0.00 0.00
Cash in Hand 0.00 0.00 33778.47 38000.78 42223.09 42223.09
140358.6 289353.0
Cash Surplus, Finance Available 0.00 47829.27 8 3 414850.63 550493.28
Securities 0.00 0.00 0.00 0.00 0.00 0.00
590520.0 538896.0 487272.0
2. Total Fixed Assets, Net of Depreciation 295260.00 0 0 0 435648.00 384024.00
281200.0 562400.0 562400.0
Fixed Investment 0.00 0 0 0 562400.00 562400.00
281200.0
Construction in Progress 281200.00 0 0.00 0.00 0.00 0.00
Pre-Production Expenditure 14060.00 28120.00 28120.00 28120.00 28120.00 28120.00
103248.0
Less Accumulated Depreciation 0.00 0.00 51624.00 0 154872.00 206496.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
638349.2 717518.1 819671.3
TOTAL LIABILITIES 295260.00 7 0 8 898327.90 982346.55
5. Total Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00

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 Project on Integrated Baltina and Spices Processing and Supply

Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00

Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
383009.5 383009.5 319174.6
6. Total Long-term Debt 177156.00 6 6 4 255339.71 191504.78
383009.5 383009.5 319174.6
Loan A 177156.00 6 6 4 255339.71 191504.78
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
255339.7 255339.7 255339.7
7. Total Equity Capital 118104.00 1 1 1 255339.71 255339.71
255339.7 255339.7 255339.7
Ordinary Capital 118104.00 1 1 1 255339.71 255339.71
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 79168.83 245157.03 387648.48
165988.2
9.Net Profit After Tax 0.00 0.00 79168.83 1 142491.45 147853.58
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
165988.2
Retained Profits 0.00 0.00 79168.83 1 142491.45 147853.58

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 Project on Integrated Baltina and Spices Processing and Supply

Annex 5: Projected Balance Sheet (in Birr): Continued

PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 1071727.34 1170407.07 1274448.93 1447687.85 1620926.76 1794165.68
1. Total Current Assets 739327.34 884007.07 1034048.93 1253287.85 1472526.76 1691765.68
Inventory on Materials and Supplies 5606.18 5606.18 5606.18 5606.18 5606.18 5606.18
Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Finished Products in Stock 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Receivable 0.00 0.00 0.00 0.00 0.00 0.00
Cash in Hand 42223.09 42223.09 42223.09 42223.09 42223.09 42223.09
Cash Surplus, Finance Available 691498.07 836177.80 986219.65 1205458.57 1424697.49 1643936.41
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 332400.00 286400.00 240400.00 194400.00 148400.00 102400.00
Fixed Investment 562400.00 562400.00 562400.00 562400.00 562400.00 562400.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 28120.00 28120.00 28120.00 28120.00 28120.00 28120.00
Less Accumulated Depreciation 258120.00 304120.00 350120.00 396120.00 442120.00 488120.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 1071727.34 1170407.07 1274448.93 1447687.85 1620926.76 1794165.68
5. Total Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 127669.85 63834.93 0.00 0.00 0.00 0.00
Loan A 127669.85 63834.93 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 255339.71 255339.71 255339.71 255339.71 255339.71 255339.71
Ordinary Capital 255339.71 255339.71 255339.71 255339.71 255339.71 255339.71
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 535502.06 688717.78 851232.43 1019109.22 1192348.14 1365587.06
9. Net Profit After Tax 153215.72 162514.65 167876.79 173238.92 173238.92 173238.92
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 153215.72 162514.65 167876.79 173238.92 173238.92 173238.92

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[Project Owner] Mr Tewachew Worku Ademe Page 12