Advanced Ceramic and Red Clay Bricks Manufacturing Project Proposal 2024

Table of Contents
1. INTRODUCTION...............................................................................................................................1

2. OBJECTIVES.....................................................................................................................................3

3. PRO PROJECT LOCATION..............................................................................................................3

4. PRODUCT DESCRIPTION AND APPLICATION............................................................................3

5. LAND REQUIREMENT & UTILIZATION PLAN...............................................................................5

6. MARKETING.........................................................................................................................................6

6.1 Marketing Strategy............................................................................................................................6

6.2. Projected Demand................................................................................................................................7

6.3. Pricing and Distribution....................................................................................................................7

7. TECHNICAL ANALYSIS......................................................................................................................8

7.1. RAW MATERIAL INPUTS............................................................................................................8

7.2. Implementation Approach................................................................................................................8

7.3. TRAINING................................................................................................................................10

7.4. Plant Layout & Civil Works......................................................................................................10

7.5. Machinery and Equipment.........................................................................................................10

7.6. . Utilities...................................................................................................................................11

7.6.1. Electric Power....................................................................................................................11

8. PRODUCTION PROGRAM.............................................................................................................11

9. MANUFACTURING PROCESS......................................................................................................12

10. HEALTH & SAFETY OF WORKERS.........................................................................................12

11. MANPOWER REQUIREMENTS & ORGANIZATION..............................................................13

11.1. Manpower...................................................................................................................................13

11.3. Organization.................................................................................................................................15

12. FINANCIAL REQUIREMENTS AND ANALYSIS.........................................................................16

12. FINANCIAL REQUIREMENTS AND ANALYSIS.........................................................................16

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12.1. General.........................................................................................................................................16

12.3. Operating cost...............................................................................................................................18

12.4. Working capital............................................................................................................................20

12.5. Source of investment cost.............................................................................................................20

12.4. Depreciation Allowance...................................................................................................................21

13. FINANCIAL EVALUATION.............................................................................................................23

13.1. Profitability...................................................................................................................................23

13.2. Break-even Analysis.....................................................................................................................23

13.3. Net Present Value.........................................................................................................................23

13.4. Internal Rate of Return (IRR).......................................................................................................25

13.5. Payback Period.............................................................................................................................25

13.6. Return on Investment (ROI).........................................................................................................25

14. ECONOMIC BENEFITS OF THE PROJECT....................................................................................27

15. Environmental Issues...........................................................................................................................27

16. Project implementation plan................................................................................................................28

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 EXECUTIVE SUMMARY

 Type of project: - ADVANCED CERAMIC & RED CLAY BRICKS

MANUFACTURING PROJECT (Industry)

 Level of the Project: - New

 Implementer & Owner:- DAWIT AYELE GETANEH

 Source of Investment:- Domestic

 Project Location:- South Ethiopia Region, Gamo Zone Zone, Boreda Woreda

 Land Size:-30,000m2

 Product type:- Advanced ceramic products and related building materials

 Source of Finance: - Own equity: - Birr.30899691.3 Bank Loan: - Birr 72,099,279.7

 Total Initial Investment capital Birr 102,998,971.00

 Fixed cost Birr 94,668,792

 Working Capital: - Birr 6,532,142.00

 Sales Revenue at full Capacity: - Birr 243,696,208.00

 Foreign exchange requirement 2,585,817.2 USD

11. Job Opportunity 396 employees

total Male Female

1 Permanent workers 79 46 33
2 Casual workers 317 212 105
Total 396 258 138

IMPLEMENTATION APPROACH
 Advanced Ceramic and Red Clay Bricks Manufacturing Project Proposal 2024

The envisaged project will focus on backward and forward linkages for income generation for
young people in the area of the project. Therefore, the approach focuses on supporting small
cooperative unions to supply clay soil to the project under reference.

The young people will be organized in unions which will be managed by professionals who have
extensive experience and knowledge in the sector.

The following criteria shall be considered for the supply of clay soil in order to facilitate the clay
bricks manufacturing unit.

i) The supplying youth should have active membership and potential of clay soil supply
to the project good

ii) The members of the union should transport the clay soil to the site of the factory
using the transport facilities prepared by the project

iii) The project will have good connectivity to other villages also where clay soil can be
dug. It is envisaged in the project to make clay soil supplying union (CSSU) at kebele
level. The CSSU perform functions of backward, forward and lateral co-ordinations
and linkages. Efforts will be made to establish institutional ties ups for the supply of
clay soil from the nearby villages.

The back up support services can be classified into two parts. Establishment of Forward
Linkages for clay soil supply. Negotiations will also be undertaken for better terms and
conditions with assured clay soil supply.

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1. INTRODUCTION
The manufacturing of Construction materials are one of the opportunities which play a critical
role in bringing about rapid and sustainable economic development, particularly; ceramic
building materials and red clay soil bricks would contribute a lot to steel in different forms,
cement and cement products, wooden items, metal hard wares, PVC construction materials and
other products also contribute a lot. Ceramic tiles and other products are one of the construction
impute which play vital role in the construction industry.

The term Ceramics are broadly defined as inorganic nonmetallic materials that exhibit such
useful properties as high strength and hardness high melting temperatures chemical inertness and
low thermal and electrical conductivity but that also display brittleness and sensitivity to flaws.
As practical materials they have history almost as old as human kind. Traditional ceramic
products made from common naturally existing minerals such as clay, and sand have long been
the object of the potter, the brick maker and the glazier. Modern advanced ceramics on the other
hand are often produced under exacting conditions in the laboratory and call into play the skills
of the chemists, physicist and the engineer. Containing a variety of ingredients and manipulated
by a variety of processing techniques. Ceramics are made into a wide range of industrial
products, from common floor tiles nuclear fuel pellets yet all these disparate products owe their
utility to a set of properties as ceramic like and these properties in turn owe their existence to
chemical bonds and ceramic structures that are peculiar to the material. The composition
structures and properties of industrial ceramics their processing into both traditional and
advanced materials and the products made from these materials are the subject of many articles
particular tradition on advanced ceramics and bio ceramics. Most of the ceramic articles are the
imported ones. Locally produced ceramics articles are almost limited to a small number.

It is estimated that the construction sector accounts for nearly 25 per cent contribution to the
country's GDP. The fact remains that in a developing economy like Ethiopia, the construction
becomes the major activity in various spheres of developments are it power, road, urban
infrastructure and housing, education, health, communication, etc. The construction industry

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covers a wide range of sectors in the economy. The most important in the context of Ethiopia's
being hydroelectric power generation and distribution, roads and bridges, urban infrastructure
development, housing, government and private building complexes, expansion of health and
education facilities viz. construction of hospitals and schools. With such a base of the
construction industry sector, it is desirable to have a more construction materials manufacturing
factories current and future scenario of development of the construction intensive sector of the
economy in order to help the boosting scenario of construction industry in the country and fulfill
resultant demand of construction materials.

Though there is a boom in the construction industry in the whole corridor of the country, there is
still High demand for building materials such as the one under discussion which prevails in the
current construction sector. Construction is concentrated in large infrastructure projects. There
are many investment opportunities in the building of roads, railways, waterways, residence
houses, schools and health facilities.

In the construction industry, building materials used are divided into three categories: local
materials; domestically manufactured with partially imported materials; and fully imported
materials such as steel, glass and finished products including ceramic products. The main walling
material for homebuilding is bricks of different types. One of these is red clay bricks. Most
residence house projects use bricks made of red clay soil to minimize the cost of building.

These days in order to minimize the shortage of residence houses governments are trying to
reduce the cost of building by using the cheapest construction materials. One of these materials is
red clay soil bricks because they are cost effective in building houses for the public. The project
under study has a plan to produce ceramic tiles and other products using red clay as an input
because brick is made of clay or shale formed, dried and fired into durable ceramic products.

Based on this consideration, Ato DAWIT AYELE GETANEH has planned to establish
Advanced ceramic manufacturing plant and bricks of red clay in South Ethiopia region, Gamo
Zone Boreda Woreda a on a planned land size of 30,000m2 with the capital outlay of

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Birr102,998,971.00 to produce clay bricks and tiles. The project will create job opportunities for
396 people of the area.

2. OBJECTIVES
The project understudy has the following objectives:-

1. Produce different construction materials such as ceramic tiles and other products to
supply them to the local market.

2. Create revenue for the owner of the project by producing construction materials

3. To create wealth in the country and discharge its social obligations to the Ethiopian
government such as payment of various taxes

4. To combine the acquired natural resource, man power, knowledge, work experience and
financial resources to make the best possible use of these resources.

5. Satisfy the ever increasing demand for construction materials

6. Generate income for the government in the form of tax

7. Create job opportunities for the surrounding people.

3. BACK GROUND OF PROJECT AREA

Gamo zone is located in southern part of the country /Ethiopia /, Southern Southe Ethiopia
Region /SER/. It lies at about 505 km south east of Addis Ababa, which is the capital city of the
country. It is roughly lies between 5.57o- 6.72o north, latitude and 36.38 o- 37.99oeast, longitude.

Geographically, it is bordered by Wolayta and Dawro zone to the North, Derashe and Amaro
special woreda to the South, Oromia Region and Amaro special woreda to the East and Gofa
zone to the West.

The Zone has 14 Woredas and 4 Town Administrations with total kebeles of 296 (urban and
rural). The total area of the zone is 8,013.4 km2 with largest and smallest woredas of Kucha and

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Kogota respectively. The farthest and nearest woredas are Kucha Alfa (239 km) and Gacho Baba
(24.5 km) respectively. Concerning the number of kebele administrations Chencha woreda has
the largest number of kebeles i.e. 30 and Kogota and Kucha Alfa with smallest number of
kebeles (each has 8 kebeles). On the other hand, the four town administrations i.e. Arba Minch
town / The Zonal Center which is 505 km far from Addis Ababa and 275km from the regional
center Hawassa city / which have 11 kebeles,

11 woredas including four town administrations have 24 hour electric light services with some
rural kebeles and these woredas have full automatic and half automatic telecommunication
service. 12 woreda centers and town administrations have all weather road access.

Population is the total number of people in a defined geographical area in a particular point of
time. It is characterized by its size, population growth rate, age and sex structure and spatial
distribution of population. These outcomes of population dynamics are in continuous change
due to the demographic process of fertility, mortality and migration.

Population size and density are the two main characteristics used to describe and understand
populations. For example, populations with more individuals may be more stable than smaller
populations based on their genetic variability, and thus their potential to adapt to the
environment. Alternatively, a member of a population with low population density (more spread
out in the habitat), might have more difficulty finding a mate to reproduce compared to a
population of higher density.
All the population problems center on the issue of whether changes in the structure of the
population add to or subtract from the economic well-being of the Nation.

For any Socio- economic development endeavors availability of realistic, current (up to date) and
demographic data pertinent to the zone is very crucial. Hence, among various demographic
variables, information on population size and distribution are very crucial for planning,
monitoring, and evaluation of any development programs. Since population has direct relation
with development efforts, planning and implementation of any development programs require
the actual size of population and distribution size and other major population dynamics.

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According to 1999 E.C. National population and housing census result, the total population size
of the Gamo Zone was 1,123,388. Based on this with the average annual growth rate of 2.9%, the
Zonal population size projected and estimated to be 1,719,601 in 2013 E.C of whom 855,406 are
Male and 864,195 Female.

Population Density can be defined as the average number of people that inhabited per square
kilometer. In 2013 E.C the total size of population is estimated to be 1,719,601 while the total
area of the Zone is 8,[Link]. Hence in 2013 E.C the crude population density of Gamo zone
was 266 persons per [Link] excluding water body. There is variation in population density from
one woreda to another. As shown in the table and chart below, Kemba town is the most densely
populated with an estimated 12,197 persons per [Link] followed by Selamber town 10,637
persons per [Link] while the least populated woreda is Garda Marta with an estimated 110
persons per [Link] followed by Kucha Woreda 126 persons per [Link].

ARBAMINCH is an administrative and business center of Gamo Zone and which covers the
whole 6 kebeles which are in comp orated into three main areas called ‘Limat Woze, secha’ and
‘sikela’. The total area of the town is estimated 5557 hectare. According to the information from
the town administration, the total population of the town is estimated 184,034 and this makes the
town first populous town in the zone. Poverty is the leading development problem remains a
major challenge of the town. Productivity in the town facing major challenges, the major
contributory factor of this problem is: rapid urbanization, rural – urban migration, epidemics, etc

4. PRO PROJECT LOCATION

In any manufacturing plant, the decision of the location of the project should be given due
attention; because the site selection has its own influence on the target market designed.

The project under reference has been decided to be established in Boreda Woreda administration
area because of its proximity to the raw materials and market outlet. It is also easier to run the
project without any difficulty since it is not far from the metropolitan city. That is why the
location of the project under consideration has been decided to be in Boreda Woreda area. This
area has also better infrastructure facilities.
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5. PRODUCT DESCRIPTION AND APPLICATION

As the name implies ceramic tiles are used in the construction sector as finishing products.
Ceramic tiles are one of these finishing materials which are used in the construction of houses
and others. Raw materials for ceramic products include sand, red clay soil, quartz silica, sand
flint or chart and others. Ceramic tiles are made from burned clay soil used in the construction of
houses particularly residence houses. They are cost effective and are strong resistance to various
shocks.

Most tiles are pigmented to give them an "earthy" look similar to terra-cotta tiles. Ceramic tiles
are used primarily indoors because they're not frost-proof, and clay tiles are usually finished with
a top coat tiles are wall & floor tiles made of clay together with other ingredient. The process of
manufacturing is called the "LENOBLE" process, which at present is used in many factories.
The most common ones range from surface sized of 20 cm x 20 cm to 60 x 40 cm having
thicknesses in the range of 1 to 3 cm. The product is applied for floor or wall finishing in
building construction and for out-doors pavement work.

Flooring Covering tiles both sheet and tile - has become a valued design tool for many interior
designers and architects, particularly those designing for heavy-traffic locations such as retail
stores, or for rooms where hygiene is especially important such as a hospital operating room.

Wall covering tiles has had resurgence for both residential and commercial interiors, driven by
interior designers and architects seeking more original and exciting design options. The reasons
for wall tiles are both aesthetic and practical - wall-covering offers a wide range of finishes and
colours with enhanced durability.

5. LAND REQUIREMENT & UTILIZATION PLAN

The required land size for the project understudy has been 30,000m2 which will be leased from
the Government through its channels. The land utilization plan has been indicated in the
following table 1.

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Table 1. Land use plan

No Description Total area in m2 total

1. Main factory Building sites for blocks (shades 10,000
2. Shades for ceramic tiles production 10,000
3. Warehouse for raw materials 1000
4. Warehouse for finished products 1000 22,000
5. Office building temporary 500
6. Workers dining center 500
7. Workers first aid Clinic 500
8. Boreholes 200 1700
9. Roads 1000
10. Guard room 300
11. Separate Workers toilet 200
12. Parking lot 1500
13. Green corners 1500 4500
Reserve 1800

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Total 30,000

6. MARKETING

6.1 Marketing Strategy

The marketing strategy will basically comprise of promotional advertisement, exhibitions, to
potential users of the product. The target of the promotional work is to convince buyers that
construction materials are produced in a maximum quality and strength and also aimed at
satisfying the needs of the customers, as well as contributing to the development efforts of the
construction industry

The project envisions all endeavors across who are highly involved in the business, particularly
the contractors and other concerned bodies. The project also needs to obtain helpful supports
from the external institutions and firms which will be contacted as the need arises, and which are
well known for their long year of experience & expertise in the production and supply of
construction materials and other inputs. In addition, the project understudy tries to work closely
with government institutions such as the Ministry of construction & ministry of Industry &
Trade, Ethiopian Chamber of Commerce, and the Ethiopia banks for the settlement of local
market situations and other related issues.

6.2. Projected Demand

The construction sector is one of the fastest growing sectors of the economy, exhibiting 7- 12%
growth rate in 2002-2012. In fact, building construction is booming as a result of policy reforms
related with urban land, creating opportunities for building materials supply. Accordingly the
demand for all types of bricks and tiles products is assumed to grow by 8%, which is parallel to
the growth rate registered by the construction sector during the recent past

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Table 2 demand projection of all types of tiles

Year Amount
2011 950,656
2012 1,045,721
2013 1,150,294
2014 1,265,323
2015 1,391,855
2016 1,531,041
2017 1,684,145
2018 1,852,559
2019 2,037,815
2020 2,241,597
2021 2398509
2022 2566405
2023 2874374
2024 3219299
2025 3605615

6.3. Pricing and Distribution

The current price of cement tiles ranges between Birr 145 per m² to 170 per m² depending on
composition (marble chips, granite chips, etc.) design and coloring matter. For the envisaged
plant a factory-gate price of Birr 150/m2 is recommended. The plant will directly sell its product
to the end-users at the premises of the factory.

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7. TECHNICAL ANALYSIS

7.1. RAW MATERIAL INPUTS

Raw materials used by the plant are of local origin. Local raw materials include sand, clay soil,
silica, quartz coal for burning of wet clay bricks marble chips and granite chips (ryolite). Raw
Materials of foreign origin include resins, pigments and lubricants. The raw materials together
with annual requirement and cost are given in Table.3 below.

Table 3 inputs materials in tons

No Amount Cost
1. Clay Soil in tons 154 1,126,583
2. Coal tons 6.0 2,707,812
3. sand 10,651 125,651
4. silica (chert 4.200 32,913
5. Marble chips in ton 12,000 450 317
6. Pigments kg 32,000 22,000
7. Granite chips in ton 17,500 36,940
8. Resins in kg 5600 23,250
9. Packing materials 54,320 32,890
Total 4,558,356

7.2. Implementation Approach

The envisaged project will focus on backward and forward linkages for income generation young
people in the area of the project. Therefore, the approach focuses on supporting small
cooperative unions to supply clay soil to the project under reference.

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The young people will be organized in unions which will be managed by professionals who have
extensive experience and knowledge in the sector. The following criteria shall be considered for
the supply of clay soil in order to facilitate the clay bricks manufacturing unit.

i) The supplying youth should have active membership and good potential of clay soil
supply to the project

ii) The members of the union should transport the clay soil to the site of the factory using
the transport facilities prepared by the project

iii) The project will have good connectivity to other villages also where clay soil can be
dug.

It is envisaged in the project to make clay soil Supplying union (RCSSU)at kebele level. the
RCSSU perform functions of backward, forward and lateral co- ordinations and linkages. Efforts
will be made to establish institutional ties ups for the supply of RED clay soil from the nearby
villages. The back up support services can be classified into two parts. Establishment of Forward
Linkages for RED clay soil supply. Negotiations will also be undertaken for better terms and
conditions with assured RED clay soil supply.

7.3. TRAINING
Two persons who will be selected members of the clay soil suppliers union will be given
trainings how to benefit from supplying clay soil to the ceramic tiles and clay bricks
manufacturing plant. In the first phase ten members shall be duly trained and four members of
the RCSSU will be trained as trainees of other people

7.4. Plant Layout & Civil Works

The project will be established on 30,000m2 of land that will be leased from Boreda Woreda
administration. The facilities will incorporate the production of CERAMIC TILES and clay
blocks and different size of ceramic tiles. The project will also consider the manufacture of other
construction materials. The envisaged factory will comprise workers quarters, offices, canteen,

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and parking lots. Designing of the plant would be undertaken immediately after the land lease
contractual agreement signed with the concerned Government body.

7.5. Machinery and Equipment

The construction materials manufacturing process will adopt the latest available technology both
in terms of facilities and management strictly as per the standards achieved by such firms.

List of machines and FOB price

1. Fulang Machine fully automatic hydraulic clay soil compressed pressure interlocking
brick making machine 9,800 usd

2. Automatic clay interlocking brick making machine from China for Ethiopia market
52,000usd

3. automatic clay brick making machine 142560 usd

4. concrete block making machine brick 18,900 usd

5. Clay Brick Making Machinery

6. DF10-10 Largest Automatic Interlocking clay bricks making machine
7. LT5-10 Autoamtic Clay Brick Production Machine 174200
8. LT5-10 Autoamtic Clay Brick Production Machine 146000
Total FOB price in $173,330

Currency rate Br.52.00

7.6. . Utilities
The major utilities required by the envisaged clay bricks manufacturing plant include
electricity, water, communication facilities oil and lubricants.

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7.6.1. Electric Power

Electric power is going to be supplied from the national grid through a line 1,200 KVA
transformer. The step-down voltage for the operation of the project is a three-phase. The full
capacity power consumption per hour is estimated to be 8 KW.

Table 4 Annual utility Consumption

No Unit Cost in birr

1. power Kw 126,480
2. Water M3 37,678
3. Lubricants lit 84,124
4. Communication facilities -- 43,000
Total 291282

8. PRODUCTION PROGRAM
The plant would have the necessary machines and equipment to begin its production at the end of
the first year. It has planned to produce 44,000 pieces of red clay soil bricks in the initial year
and increase this output by ten percent every year. The project planned to produce 4700,00
ceramic tiles in the initial year and the production of ceramic tiles also planned to increase in the
same rate. The earmarked project would fairly satisfy the annual demand throughout the year.
After that increase in the demand could be met by capacitating the skills and knowledge of
employees. An

Increase in the quality and capacity of the various machines and working hours also will be
considered.

9. MANUFACTURING PROCESS
2.2.2. Brick preparation

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The raw materials were dry blended in the mechanical mixer. Normal proctor test based on the
requirements will be carried out to determine the amount of required water for the pressing
processing. The moisture content of each formula was optimized. The higher amount of Clay soil
increased the optimum moisture content of the mixture. After forming, the curing process was
done within a period of 14 days, the common curing period used in local clay soil brick industry.
During the curing period, the brick samples were wrapped with plastic sheet for the first 7 days.
Then, the bricks were placed to an open space for another 7 days.

The production of red clay soil bricks factory uses the clay soil in the area. The different
materials inputs are assumed to be ready at the site of the plant. The ready- made raw materials
together with water are mixed in the right proportion by a mixer and measured amounts are
poured into the flexible molds. Mixing and pouring can be done manually or automatically. Each
mold containing the measured mix is made to travel the length of the vibrating table for about
one minute.

10. HEALTH & SAFETY OF WORKERS

The technicians will be trained in the safe and appropriate manner in the recommended
operational procedures of machinery and basic first aid support of basic safety equipment such as
First Aid kits. Personal and lifesaving protection gears, and appropriate protective equipment
such as gloves will be issued. Furthermore the plant will have its own clinic within its own
factory premise. The clinic will have two nurses who will provide first aid for the workers.

11. MANPOWER REQUIREMENTS & ORGANIZATION

11.1. Manpower
The project requires a significant manpower having various skills capable of ensuring the
smooth operation during the project lifespan. It is stressed at this stage that the selection and
training of employees will be given due consideration, in light of the

Job training will assist in operational efficiency and reliability of services as well as profitability.

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Therefore, 396 workers are needed for both line functions & support purposes. The first category
or workers is those who carry out the overall management of the project to transform inputs into
the desired output to achieve the project objectives. The second category of workers is those who
engage in running technical aspects of the project. The annual salary & allowance of employees
is estimated to be Birr 2,736,430

Table 5 Required Man power details

No Job Title Field Monthly Annual

salary/ wages salary
(Birr)
1. General manager 1 Mgt degree 2 7,000 84,000
2. Technical head (Engineer) 1 Techno Bsc 2 6,500 78000
3. Marketing manager 1 Marketing 2 6,500 78000
degree
4. Admin and Finance head 1 Mgt 2 5000 60000
5. Supervisor 1 Mgt degree 1 5500 66000
6. Production manager 1 Econ- 1 4500 54000
7. Sales section head 1 Marketing dip 1 4,000 24,000
8. Senior Accountant 1 Account dip 1 3500 42,000
9. Junior accountant 1 Account dip 1 3200 38,400
10. Nurses 1 Nursing 1 3500 84000
11. Cashier 5 [Link] 1 3500 84000
12. Store keeper 2 Dip sup mgt 1 3500 84000
13. Secretaries 2 Dip sec science 1 3500 84,000
14. Sales personnel 2 Marketing dip 1 3500 84,000
15. Purchaser 2 Sup mgt Dip 1 3500 84,000
16. Machine operators 24 Dip in 1 2500 720000
mechanic
17. Office girl/boy 2 10th 1 1600 19200
18. Daily laborers 317 -- 1 1500 520000
19. Janitors 2 10th 1 1500 36000
20. Drives 24 12th & 3rd 1 4500 216000
driving license
21. Guards 3 10th 1 2500 90,000
Total 396 2,736,430

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11.3. Organization
The organization structure of the project consists of four sections under the project manager
namely, marketing manager production manager technical head, and finance and administration
head with working units under department.

Qualified professional management team (heads of the production, marketing technical and
administrative section) will be reporting to the general manager of the project the four sections
are responsible for the overall activities of the project for an efficiently execution of works.

Project manager

Technical head Finance & admin mgr

Production manager Marketing mgr

Supporting

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12. FINANCIAL REQUIREMENTS AND ANALYSIS

12.1. General
The ceramic tiles and red clay soil bricks manufacturing project under consideration designed
and intended to put on the market the best quality ceramic tiles and red clay soil bricks which is
acceptable among the public. The Financial analysis and evaluation consists of capital
investment as well as operation costs; capital investment costs include fixed investment cost, pre-
investment capital expenditures and working capital.

The financial analysis and evaluation has been conducted taking into account the following
assumptions:-

1. Even though the estimated project production life is more than 5years, the financial
analysis has been undertaken for a period interval of 5 years only, during which time
most of the capital investment items are assumed to be depreciated.

2. The project is anticipated to be implemented in two phases, in phase one it will construct
those buildings and shades that are required for the manufacturing of clay bricks and
ceramic tiles. In the second phase, construction will be accomplished and become
operational.

3. The time required accomplishing the construction works as well as import and erection of
machinery and equipment for phase 1 is assumed to last one year.

4. It is assumed that 30% of the total capital investment costs could be from promoter's own
equity and the remaining will be from bank loan

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12.2. Components of Project cost

The components of project cost includes as shown in the table below.

Item No Description Construction Amount br. Remarks

area in m2
I Pre investment cost 1698037
ii Construction
1 Clay bricks making site shade 10,000 6000000 Birr 3000/m2
2 Tiles making site shades 10,000 4500000 3000/m2
3 Office building 200 600000
Warehouse 2000 13000000 6500/m2
4 Workers quarter 200 600000 24700000
5 Guard room 100 300,000
6 Road 200 600000
7 Clinic 200 600000 1500000
8 borehole 200 1,680,000
9 External and internal roads 200 600,000
10 Separate resting room 150 300,000 2580000
Sub total 28780000
Table 6 investment costs details

qty currency rate LC FC in S

II Machinery & equip 54 30,679,712
I
extrusion machine set 54 20750472 384,268
Clay brick production machine set 54 6804000 126000
Equipment set -- 2125240 00
Excavator 2 54 18567250 00

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Loader 5 54 7000000 00
Damp truck 5 54 18000000 00
Installation 54 1,476,000 28384
Sub total 77722962 1439314.1

Medium Trucks (FSR) 2 54 6840,000 126666

Toyota Pick up 2 2 54 6,754,968 125092
Long truck 1 1 54 7,538,640 139604
IS424 2 54 6,764,680 125271
Van 1 54 1,438,640 26641
Service bus (COASTER) 1 54 4,600,000 85185
Sub total 32823960 607851.11
5125240 99,546,922 25852817.2

Table 7 office supplies

V Office supplies Qty Unit price Total Remark

1. Tables and charis 25 4,500 112,500
2. Desk top computers 10 12,000 120,000
3. Lap tops 5 15,000 75,000
4. Printers 2 2,300 6,900
5. Ups 2 1,456 5,824
6. Fax machine 1 6000 6,000
7. Copier machine 2 23,000 66,000
8. Fixed telephone 2 1000 5,000
9. Mobile telephone 3 2,000 6,000
10. Refrigerators 2 4,500 9,000
11. TV-with at elite dish and 2 6,000 12,000

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decoder
Sub total 385,120

12.3. Operating cost

Operating costs have been calculated as total costs and all cost elements required for
computation have been estimated and scheduled in line with the envisaged capacity build-up
program of the project under reference. Therefore, the detail and total operating costs of the
project has been given in table 8 below.
Table 8 operating cost details
Item no Description Amount br. Amt
1. Raw materials 4558356
2. Salary of employees 2,736,430
3. Property insurance 107,500
4. Marketing expenses 62,143
5. Auditing & legal fees 24,308
6. Utilizes 212,787
7. Staff training 26,250
8. Office supplies 385,120
9. Uniforms for 46 persons 44250
10. Repair & maintenance 42,255
11. Miscellaneous expense 254,000
Total 8,453,399

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12.4. Working capital

Working capital is the financial means required for smooth operation and maintenance of a
project. Mathematically, it is a difference between current assets and liabilities. Hence the
working capital has been calculated to be Birr 6632142.00.

Table 9 summary of total cost

Sr. Cost Items currency rate LC FC Total

No.
1. Land building & civil 28780000 28780000
works
2. Machinery & equipment 32554472 602860.59 32,679,712
3. Vehicles 32823960 607851 32823960
4. Office supplies 385,120 00 385,120
5. Fixed cost 94668792 00 94668792
6. Initial Working Capital 6632142 00 6632142
7. Pre investment cost 1698037 1698037
Total 102998971 1210711.59 102998971

12.5. Source of investment cost

The total investment costs for the envisaged project have been calculated to be Birr 102,998,971.
The finance for the project under discussion will be covered from promoter's own equity and
bank loan. The amount of the loan capital to be obtained and the financial costs to be incurred
thereof have been determined to be Birr 72,099, 279.7. The remaining balances which is 30% of
the total project cost Birr 30,899,691.3 will be covered from promoter's own equity.

Debt equity ratio

Table 10 Source of Investment cost and its percentage share

Description Total Financial Bank Loan Owner's Equity

requirement investment

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 Advanced Ceramic and Red Clay Bricks Manufacturing Project Proposal 2024

Investment cost 102998971 72099279.7

Total 102998971 72099279.7
Debt Equity Ratio 100% 70% 30%

Table 11 Loan repayment schedule calculated at 12% but as per the bank rate

Beginning balance Disbursement Principal Year ending balance Interest

(72,099,279.7) 00 00 (72,099,279.7) 00
1. 66091006.4 14660186.86 6008273.3 66091006.4 8651913.56
2. 60082733.1 13939194.06 6008273.3 60082733.1 7930920.76
3. 54074459.8 13218201.27 6008273.3 54074459.8 7209927.97
4. 48066186.5 12497208.47 6008273.3 48066186.5 6488935.17
5. 42057913.2 11776215.68 6008273.3 42057913.2 5767942.38
6. 36049639.9 11055222.88 6008273.3 36049639.9 5046949.58
7. 30041366.6 10334230.08 6008273.3 30041366.6 4325956.78
8. 24033093.3 9613237.29 6008273.3 24033093.3 3604963.99
9. 18024820 8892244.49 6008273.3 18024820 2883971.19
10. 12016546.7 8171251.7 6008273.3 12016546.7 2162978.4
11. 6008273.3 11 7450258.90 6008273.3 6008273.3 1441985.6
12. 00 6729266.1 6008273.3 00 720992.8

Table 12 Revenue Forecast

Ite m Production 1 year 2nd 3rd year 4th year 5th year
A Ceramic Floor tiles pc 44,000 48400 53240 58564 64420
price/pc 52 52 52 52 52
sales 2464000 2516800 2768480 3045328 3349840

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B Red Clay Bricks pc 4,700,000 5170000 5687000 6255700 6881270

price/pe 8.00 8.00 8.00 8.00 8.00
sales 37600000 41360000 45496000 50045600 55050160
Total 40064000 43876800 48264480 53090928 58400000

Revenue is assumed to increase by 10% every year. Keeping all other variables constant, gross
revenue of the project at full capacity will be Birr 243,696,208 as shown in the above, table the
full capacity of the project understudy will be the tenth year.

12.4. Depreciation Allowance

Deprecation is the reduction in the value of the fixed assets that takes place in the process of
production. Depreciation allowance for the project under reference is calculated to Birr
4733439.6

Table 13. Production cost

No Description/year 1 2 3 4 5

1 Operating cost 8,453,399 9298739 10228613 11251474 12376621

2 Financial cost 8651913.56 7930920.76 7209927.97 6488935.17 5767942.38

depreciation 4733439.6 4733439.6 4733439.6 4733439.6 4733439.6

Total 21838752.16 21963099.36 22171980.57 22473848.7 22878002.9

7 8

Table 14 income statement

Description/Year 1 2 3 4 5

Sales 40064000 43876800 48264480 53090928 58400000

Operating cost 8,453,399 9298739 10228613 11251474 12376621
Operating 31610601 34578061 38035867 41839454 46023379
income
Operational 78.9 78.81 78.81 78.81 78.81

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margin
Total production 21838752.16 21963099.36 22171980.57 22473848.77 22878002.98
cost
Gross Profit 18225247.84 21913700.64 26092499.43 30617079.23 35521997.02
Tax 00 00 9132374.8 10715977.73 12432698.95
Net profit 18225247.84 21913700.64 16960124.62 19901101.49 23089298.06
Ratios
GP/sales 45.49 49.94 54.06 64.09 66.03
Net profit/sales 45.49 49.94 35.14 37.48 39.54

13. FINANCIAL EVALUATION

13.1. Profitability
According to the projected income statement, the project will generate profit in the first year of
operation. Important ratios such as profit to total asset, net profit to equity (return on equity), and
net profit plus interest on investment (return on total investment )show an increase trend during
the life time of the project period. The income statement and the other indicators of profitability
show that the project is viable.

Based on the projected income statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will grow from Birr19314466.65 to Birr25,168,966.84
during the life of the project. Moreover, at the end of the project life, the accumulated cash flow
amounts to Birr 243,696,208.00.

13.2. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenues are in equilibrium. To this end, the break-even
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point of the project including cost of finance when it starts to operate at full capacity (year 10) is
estimated by using income statement projection. BE = Fixed cost/Sales - Variable Cost = 40.08%

13.3. 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 principle a project is accepted if the NPV
is non-negative. Accordingly, the net present value of the project under reference at 18%
discount rate is found to be Birr + 68,274,492.32 which is acceptable and viable see the detail in
table below

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The Net Present value at 18% discount factor shows +74936161.94

13.4. Internal Rate of Return (IRR)

The discounted cash flow shows cash surplus throughout the project life The Net Present Value
of the project under study at 18% discount rate is computed to be Birr +68,274,492.32 and the
financial internal rate of return of the project is computed to be 34.2%. This indicates that the
project is financially viable.

13.5. Payback Period

The payback period, also called pay off period is defined as the period required recovering the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow of this construction materials manufacturing
project, it is calculated that the project's initial investment will be fully at 7.8 years.

13.6. Return on Investment (ROI)

The Project Return on investment (ROI) is one of the most used profitability ratios because of its
flexibility. That being said, one of the downsides of the ROI calculation is that it can be
manipulated, so results may vary between users. When using ROI to compare investments, it's
important to use the same inputs to get an accurate comparison. Return on investment of the
project under consideration has been calculated as follows.

ROI = Av. Profit/investment costx100

28139447.4/102998971x100-27.32%

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13.7. Cash flow statement

The financial performance of the project shows good financial capacity and positive cash balance

Cash Flow Statement for Discounting

The projected cash flow statement reveals that the project will have positive cash flow
throughout its life starting from its initial year of operation. Summary of cash flows during the
project's 5 years of operating life is as follows:

CASH FLOW STATEMENT FOR DISCOUNTING

Description YEARS
0 1 2 3 4 5
Cash inflow 40064000 43876800 48264480 53090928 58400000
Revenue 40064000 43876800 48264480 53090928 58400000
Scrap value 00 00 00 00 00
Total outflow 102998971 21838752.16 21963099.36 31304355.37 33189826.5 35310701.93
Investment cost 102998971
Operating costs 8,453,399 9298739 10228613 11251474 12376621
interest 8651913.56 7930920.76 7209927.97 6488935.17 5767942.38
depreciation 4733439.6 4733439.6 4733439.6 4733439.6 4733439.6
Rent 00 00 00 00 00 00
Profit tax 9132374.8 10715977.73 12432698.95
Net cash flow (-102998971) 18225247.84 21913700.64 16960124.62 19901101.49 23089298.06
NPV at 18%(br)
68,274,492.32
IRR 34.2%
Payback period 7.8 Years
Rate of return 27.32%

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14. ECONOMIC BENEFITS OF THE PROJECT

In analyzing and evaluation of the financial aspects of the project under reference, the current
average price per unit of soap pellets and a kilo of liquid and powder detergent at local market
has been taken as a base. The project is envisaged to reach full capacity operation at fifth year
after commencement of its activities, which are assumed to begin with 50% of the installed
capacity. L L According to the computation in the income statement section above the project
will generate a total income (sales revenue) of Birr243,696,208 within five years. The project
income statement shows a steady growth of sales starting from Br 40,064,000 in year one
reaching its peak of Br. 58400000. The cumulative cash flow statement also shows steady
growth which makes the project viable. Other economic benefits of the project is that the
creation of jobs for at least 185 people of the area. The project also benefits the Government
through the payment of taxes. Hence the project generates Birr 35,862,367.89 in the form of tax
for the government within five years

15. Environmental Issues

Clay bricks are lighter than those made of cement and they require less energy and thus fewer
emissions to transport and install. Clay bricks are obtained from clay soil. It is obvious that while
production process they will have no environmental impacts. Therefore, the project under
consideration will have its own environmental management plan (EMP) which will be designed
based on the environmental management system (EMS) approach of the ministry of environment
and Forestry standards. The project will perform, check and act together with a philosophy of
continual improvement of the mitigating mechanism of environmental problems in relation to the
project under reference throughout its operation phases. To make effective environmental
management easier, the project environmental management plan (EMP) may contain a number
of separate management strategies. This will actually be shown in a separate environmental
impact assessment study after this project has been accepted and approved by the concerned
government body.

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16. Project implementation plan

First phase tentative implementation plan of the project

March 2022 – February 30/2023

No Activities Feb Mar Apr May June July Aug Sept Oct Nov. Dec Jan
1 Designing the project
& preparation for land
acquisition
2 Signing land contract
3 Land clearing
4 Submission of loan
application
5 Water well drilling
6 Temporary store &
guards room building
7 Importing machines &
other materials
8 Machine installation
9 1st phase recruitment
10 Store building
Office building
Residence area
building
Starting operation
Enter into market

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17. REPORTING, MONITORING AND EVALUATION

Monitoring and evaluation will be an integral part of the process implementation periodic
monitoring will be conducted by the project. Periodic monitoring focuses on follow up of the day
to day activities of each activities project evaluation on the other hand focuses on the impacts
based on its achieving will be processed on participatory with its stakeholders

17.1. Monitoring
Monitoring activities include measuring the physical performance and quantity of the work done,
correlation of the work done with set plan and time table.

17.2. Reporting
The project will report major accomplishments of the months to respective government bodies
every six month. The report will be submitted to Gamo Zone investment and Industry
development department.

17.3. Evaluation
Evaluation will be conducted three times during the project life years. At the beginning, in
meddle and at the end of project life years. The evaluation based on the overall goal and purpose.
The scope of the evaluation will be:
 The extent to which purposes the project have be fulfilled
 The expected profit will be maximized
 Impact contributed to socio economic development of countries

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