FEASIBILITY STUDY FOR THE ESTABLISHMENT OF CERAMIC PRODUCTS MANUFACTURING

PROJECT
Table of Contents
Pages
I. EXCUTIVE SUMMERY.........................................................................................................................1
II. BACKGROUND INFORMATION........................................................................................................7
2.1. The Applicant....................................................................................................................................7
2.2. The Project........................................................................................................................................7
2.3. Project Background...........................................................................................................................7
2.4. Objective of the Project and the Study.............................................................................................8
2.4.1. Objective of the Project.............................................................................................................8
2.4.2. Objective of the study................................................................................................................8
2.5. The company’s Vision and Mission................................................................................................10
2.5.1. Vision.......................................................................................................................................10
2.5.2. Mission.....................................................................................................................................10
2.6. A Rational to Establishment............................................................................................................10
III. PRODUCT DESCRIPTION AND RAW MATERIAL REQUIRMENT............................................11
3.1. Types of the Commodity.................................................................................................................11
3.2. Classification of the commodity.....................................................................................................14
3.3. Raw Material Requirement.............................................................................................................16
IV. MARKET STUDY...............................................................................................................................19
4.1. General overview............................................................................................................................19
4.2. World Trade....................................................................................................................................19
4.3. Ethiopian Market............................................................................................................................22
4.4. Market and Marketing Arrangement...............................................................................................24
4.5. Value Chain.....................................................................................................................................25
4.6. Marketing strategy..........................................................................................................................26
4.6.1. Destination...............................................................................................................................26
4.6.2. Promotion mechanisms............................................................................................................26
4.6.3. Product Mix.............................................................................................................................26
4.6.4. Market Entry Timing...............................................................................................................27
4.6.5. Price.........................................................................................................................................27
4.7. Marketing Arrangement..................................................................................................................27
V. KEY SUCCESS FACTORS, RISKS, DRIVERS AND SWOT ANALYSIS........................................28
5.1. Key success factors.........................................................................................................................28
5.2. Major Risk Factors..........................................................................................................................28

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5.3. Key Drivers.....................................................................................................................................29
5.4. SWOT ANALYSES........................................................................................................................30
A. Strength.............................................................................................................................................30
B. Weakness...........................................................................................................................................30
C. Opportunities.....................................................................................................................................30
D. Threats...............................................................................................................................................31
VI. ORGANIZATIONAL STRUCTURE AND MANAGEMENT..........................................................32
6.1. Organizational Structure.................................................................................................................32
6.2. Project Man Power Requirement....................................................................................................33
VII. TECHNICAL ASPECTS OF THE PROJECT...................................................................................36
7.1. Project Site/Location.......................................................................................................................36
7.2. Land, Building and Civil Works.....................................................................................................36
7.3. Plant capacity and Production Schedule.........................................................................................37
7.4. Machinery and Equipment..............................................................................................................38
7.5. Vehicle............................................................................................................................................39
7.6. Office Furniture and Equipment.....................................................................................................40
7.7. Working capital of the project.........................................................................................................41
7.8. Implementation schedule................................................................................................................42
7.9. Environmental Impact Assessment.................................................................................................43
VIII. PRODUCTION PROCESS..............................................................................................................47
8.1. Sanitary ware Production Process...................................................................................................47
8.2. Tile Products Manufacturing Process.............................................................................................49
IX. FINANCIAL ANALYSIS....................................................................................................................54
9.1. ANALYSIS.....................................................................................................................................54
9.2. Basic Assumptions..........................................................................................................................54
9.3. Total Investment Cost.....................................................................................................................55
9.4. Expected Financial Results.............................................................................................................56
9.4.1. Production Cost........................................................................................................................56
9.4.2. Revenue...................................................................................................................................56
9.4.3. Profit........................................................................................................................................56
9.4.4. Liquidity...................................................................................................................................56
9.4.5. Balance Sheet Projection.........................................................................................................56
9.4.6. Ratios.......................................................................................................................................57
9.4.7. Break-even Analysis................................................................................................................57
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9.4.8. Pay-back Period.......................................................................................................................57
9.4.9. Internal Rate of Return............................................................................................................57
9.4.10. Net Present Value...................................................................................................................58
X. SOCIO ECONOMIC BENEFITOF THE PROJECT...........................................................................59
10.1. Saving Foreign Currency..............................................................................................................59
10.2. Create Job Opportunity.................................................................................................................59
10.3. Source of Income..........................................................................................................................59
10.4. GDP Contribution.........................................................................................................................59
10.5. Technology and Knowledge Transfer...........................................................................................60
10.6. Creates linkages............................................................................................................................60
XI. CONCLUSION AND RECOMMENDATIONS.................................................................................61
XII. APPENDIXES....................................................................................................................................62

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I. EXCUTIVE SUMMERY
This project profile deals about the establishment of ceramics manufacturing project with the
objective to manufacture different types of household consumable products such as, sanitary
ware, and tiles for wale and floor finishing. The project is planned to be established in Amhara
regional state on 15 hector investment land which will be granted via lease from the government.
The selected project site is one of potentially resource full area in the country. Moreover, it has
also accessible to all basic infrastructures such as electricity, main road, water, telephone, and etc
that are crucial for smooth operation of the project and marketing of its final product.

Ethiopia is rich in mining and energy resources. The geological and mineral exploration activities
undertaken have demonstrated that Ethiopia has a rich and diverse potential for mining. The
geological setup of the country is favorable for the occurrence of metallic, industrial, and
construction minerals, dimension stones, and precious and various types of gemstones. In
mining, geological studies indicate proven deposits of industrial and precious minerals such as
tantalum, platinum, gold, quartz, silica sand and iron ore among others.

Thus, the country is known to have vast investment opportunities where local and foreign
investors can engage in. The government, in order to accommodate the interests of investors, and
ensure the favorability of the investment climate for local and foreign investors engaging in
different sectors, has continually improved the country’s investment law. Manufacturing is one
of the potential areas attracting the private sector. Although the manufacturing sector has
immense opportunities ahead, its developmental state is still insignificant in the country.

The ceramic manufacturing in the country is almost none where only limited factories are
engaged with the supply share of very minimal portion in domestic market. The lion share of
country demand has been satisfied by the import with huge amount of hard currency. The recent
economic growth of the country along with urbanization and life style change promoted the
wider use of the product. Government and non-government institutions as well as the private and
commercial buildings nowadays demands higher ceramic products in order to fully furnish their
buildings with reliable and attractive materials.
The ceramic manufacturing could be one of the main contributors for economic growth of
Ethiopia beside its effect on saving foreign currency by substituting the imports of ceramic
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product and also create employment opportunity. It is by considering these positive attributes of
the industry that the manufacturing of the products drawn the government attention to meet the
stipulated developmental agenda of the country.

The establishment of the intended project is expected to fill the gaps observed in the sector and
which is one of the government priority sectors and the government of the country has identified
it as the primary area where the country can own competitive advantage over the rest of the
world since the country has a lot of potentials.

Furthermore, the sector has many socio economic benefits to the country through supplying a lot
of job opportunities, creating backward linkages to the mining sector and forward linkage to the
manufacturing industries that are seriously seen as the dominant economic sector for
transformation of the country’s economy to middle income level in the 2030. The establishment
of this project will contribute a lot for the country’s economic development. The project is
expected to generate foreign currency by exporting at least up to 20% of its products, generate
revenues to the owners in the form of profit, to the surrounding societies in the form of salary
and wages, and to the government in the form of profit and income taxes.

The project is promoted by GRANDEVER CERAMICS MANUFACTURING PLC; the

company has many years of experience in managing different developmental projects including
the particular ceramic manufacturing project. The project will be managed by Mr Huang Bing
hun, who will be appointed as a general manager and lead on the top of the overall activity of the
organization in collaboration with the other division managers. Moreover, the company will hire
qualified and experienced project manager when the project becomes to commencing. Regarding
the market for the product it has huge unsatisfied demand both in the international and local
market. When we see the planned marketing strategy and market arrangement of the company, it
has planned to uses all marketing mixes like price, promotion and quality product and also will
have marketing workshops for local and corporate level purchases. The promoter will supply its
product with affordable price and promote its products by using different electronic, paper and
social Medias but the most important strategy of the company is producing high quality products.
In addition, the company will have strong linkage with construction companies, government
organizations and private institutions to distribute and establish long term market arrangements

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for its sanitary wear and tiles products. In related to marketing arrangement the company will
have both direct and indirect sales with a cash based selling and for this purpose the company
will have selling shop in Addis Ababa city and other regional towns in order to easily reach its
customers.

For its optimal operation the company has planned to have leased land working premises in
Arereti town with long year ownership from the government and will construct all the required
buildings. The company has already assessed the appropriate technologies and has collected
machinery offers from suppliers, vehicles and other required equipment’s that are crucial for
smooth operation of the project.

Regard to utility supply of the project, the company has planned to install the required electric
power and water supply discussing with the concerned government organ. The promoter already
considered the success factors from macro level opportunities as well as sector level success
factors that lead the project to success. In opposite to this, like that of any projects it is unhidden
fact that it has risk factors emanated from both the macroeconomic, environment as well as from
the sector which could be mitigated through careful management and purchase of appropriate
insurance policy coverage. The financial analysis on the investment outlay the intended project
has been thoroughly done and the results are summarized as follows.

The total investment cost of the project is estimated to be Birr 10.1 billion, From the total
investment cost, the highest share (birr 7.3 billion or 71%) is accounted by fixed investment cost
followed by working capital (birr 2.8 billion or 28%) and pre-production expense (birr 0.1 billion
or 1 %) respectively.

Table 1.2: Detail financial requirement of the project

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Planned
Total Project Share
Description Investment Cost
Cost (Birr) (%)
Existing Investment (Birr)
Building and Construction - 2 065 350 000 2 065 350 000
Machinery and Equipment - 5 200 004 450 5 200 004 450
Vehicles - 42 800 000 42 800 000 71%
Office Furniture & Equipment - 4 596 895 4 596 895

Total Fixed Assets 7 312 751 345 7 312 751 345

Pre-production expense 73 127 513 28 486 975 101 614 488

1%
Sub total 73 127 513 28 486 975 101 614 488
Working Capital - 2 848 697 467 2 848 697 467
28%
Sub-total - 2 848 697 466,67 2 848 697 466,67

Total 10 161 448 812 10 161 448 812 100%

With this investment amount the project will be fully sustained through revenue generating from
sales of sanitary wear and tiles ceramic products. The overall financial performance of the project
is appealing as shown by the projected financial statements. When evaluated in terms of its
profitability, there is steady increase in after tax net income showing that the project would
remarkably contribute towards wealth maximization of the owner. In addition, when viewed in
terms of the sources and uses of money or liquidly of the project measured by cash flow
statement, there is steady increment in the net cash provided by the project cash receipts after
covering the cash payments required to sustain the project operation.

Table 1.3: Summary of financial results

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The Project's Investment Summary

Investment items Amount Percentage
Fixed Investment 7 312 751 345 71%
Working Capital 2 848 697 466 28%
Pre-production Expense 101 614 488 1%
Total 10 161 448 812 100%

Source of Finance
Description Amount Percentage
Owner's Investment 10 161 448 812 100%
Total 10 161 448 812 100%
Expected Financial Results
Description Year 1 Year 10
Profit (Loss) 931 600 053 3 663 155 174
Cumulative Cash Balance 1 894 251 416 31 218 281 142
FIRR before Tax - 37%
FIRR after Tax 27%
NPV Before Tax 14 230 209 655
NPV After Tax 7 645 943 865
Sensitivity
IRR
IRR Before NPV Before NPV After
Sensitivity Analysis After
Tax Tax Tax
Tax
By decreasing Revenue by 10% 30% 19% 10 139 151 770 3 554 885 980
By increasing Operating cost by 10% 34% 24% 12 648 198 435 6 063 932 645
By increasing Investment cost by 10% 31% 21% 11 477 477 812 5 143 468 719
Thus, this business plan is carried out within the aim of evaluating the proposed project to
ascertain its economic value and liability with some level of assurance and accuracy. This
involves technical and economic evaluation. If the mentioned factors are properly measured with
the degree of assurance decide whether a project is viable or not. This report attempts to evaluate
the technical and economic evaluation of the proposed project. Thus, this report enables the
promoter to invest confidently and wisely who has prior interest in the establishment of this
project.
Accordingly, the project is found technically feasible, financially and commercially viable as
well as socially and economically acceptable. Hence, the project is worthy for implementation.

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Moreover, the project has also great contribution to the socio economic development of the
country by saving foreign currency through substituting imported goods and generating
additional hard currency by exporting the product to the international market. It can also generate
income for the company in the form of profit and for the government in the form of income and
profit tax. Hence, this feasibility study is prepared to access the profitability and financial
requirement of the project and to address project wise technical maters through conducting deep
and detail analysis.

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II. BACKGROUND INFORMATION

2.1. The Applicant
Name: GRANDEVER CERAMIC MANUFACTURING PLC

General Manager: Huang Bing Hun

Form of Business: Private Limited Company

2.2. The Project

Type: Ceramics Manufacturing Project Products: - Sanitary
wears and tiles for wale and floor

Address: Amhara Regional State, Arerti Town

Project Status: New

2.3. Project Background

The proposed ceramics manufacturing project is planned to establish in Amhara Regional State,
Arerti Town, on a total area of 15-hectare investment land which will be owned through lease
from the government. After acquiring the land, the promoter will construct the require building
for the project which are appropriate for the operation and storage area and electric power supply
for the project will be installed from EUU.

As stated early, the main objective of the project is to different sanitary wear and tiles products
for wale and floor and supply for domestic market and to some extent to the foreign market. As
per the information obtained from the general manager of the Company, the company has no any
credit relation with any local banks before except the day to day formal banking services.

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2.4. Objective of the Project and the Study

2.4.1. Objective of the Project
2.4.1.1. General Objective

The general objective of the project is to establish ceramics manufacturing plant in Amhara
Regional State, Arereti twon and supply its quality ceramics products to the local and
international market with affordable price. Apart from the major objectives, the project will
have the following specific objectives.

2.4.1.2. Specific objectives

The specific objectives of this project after engaging on ceramic manufacturing are: -

 To be profitable and get return from this investment

 To promote the market situation of the country by producing quality ceramic
products.
 To increased access to affordable and quality sanitary and tiles products to factory
developers, real-estate owners, household consumers and etc.
 It will contribute the developmental plan of the country by generating revenue tax
and employee income tax,
 To fill the demand and supply gap for this products in the country.

2.4.2. Objective of the study

The main objective of this feasibility study is to analysis the commercial, technical, financial and
socio economic viability of the identified ceramics manufacturing project, and to formulate the
project budget, time and manpower resource requirement for appropriate implementation.

Besides the above stated major objective the study has the following specific objectives which
are important for the success of this project implementation and smooth operation. Among this
some are: -

To investigate the nature of the project and to set the required technical and physical
investment items for the project implementation.

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To know and analysis skills, experiences and ability of the shareholders based on past
business experiences both technically and theoretically and assess other required staffs
for this project implementation.
To know the technical parameters required by the project or identify the technical
requirements of the project like building and civil works, machineries, vehicles, office
furniture and equipment and other accessories which are crucial for the project.
To identify the market potential of the proposed products of the project and to check the
price trends and marketing arrangements required for such product marketing.
To measure the commercial (financial) aspects of the project and make assessment on
possible sources of fund.
To check the financial viability of the project by using different financial viability
measurement tools like IRR, NPV, Payback period, cash flow and income statement.
To identify the major socio economic importance of the project based on common
measurements.
To identify the major environmental impacts imposed by the project implementation and
set appropriate mitigation measures if any.
To know the positive and negative externalities of the project and set the appropriate
operational cost for mitigation of negative externalities if any.
To be aware of on the major possible macro and sector level risk factors and to set
appropriate mitigation mechanisms for the identified risk factors around the project at any
level of this project operation.
To analysis the opportunities and threats of this project implementation in related to fund
mobilization, implementation, marketing, management & manpower and any other
aspects of project establishment.
To draw suitable conclusion and recommendation based on the available data for proper
alert decision making of the company on the implementation of this project.

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2.5. The company’s Vision and Mission

2.5.1. Vision

To be the leading, ceramic products manufacturing company in Ethiopia by the coming five years
via its quality products.

2.5.2. Mission

The mission of the company is to provide quality ceramic products with reasonable price to the
society, and narrow the demand supply gap of the particular construction products what we have
seen in the market.

2.6. A Rational to Establishment

This Ceramics Manufacturing Factory shows the best characterization of modern technology in
supplying efficient and effective products. The project is feasible enough as results of different
project management parametric tools indicates. Accordingly, the establishment of the project is
more than worthy if the following key factors to be addressed and managed properly.
• Selection of proper machineries, equipment and staff would be required to run project
successfully.
• Continuous efforts should be made for up-gradation of the manufacturing techniques.
• To attract large number of customers the product must be processed on quality
standards.

III. PRODUCT DESCRIPTION AND RAW MATERIAL

REQUIRMENT
Ceramics: The term ‘ceramics’ is derived from the Greek word ‘keramos’ meaning ‘burned earth’
and is used to describe materials of the pottery industry. Ceramics are also defined as a class of

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inorganic, nonmetallic solids that are subjected to high temperature in manufacture and/or use.
The most common ceramics are composed of oxides, carbides, and nitrides. Silicides, borides,
phosphides, tellurides, and selenides also are used to produce ceramics. Generally, the term
‘ceramics’ (ceramic products) is used for inorganic materials (with possibly some organic
content), made up of non-metallic compounds and made permanent by a firing process with
subsequent cooling. Ceramic products like crockery, sanitary ware and tiles play a very important
role in our daily lives.

3.1. Types of the Commodity

Ceramic products are basically of four types. For convenience, ceramic products are usually
divided into four sectors; these are shown below with some examples:

Advanced ceramics: - It has two classes namely, electro ceramics and advanced structural
ceramics. Electro ceramics includes electronic substrate packages, capacitor dielectric
piezoelectric ceramic, magnetic ceramic, optical ceramics, and conductive ceramics. On
other hand advanced structural ceramics includes, nuclear ceramics bio-ceramics, wear
resistance ceramics and automotive ceramics. Structural: Including bricks, pipes floor
and roof tiles, wall tiles (skirting)

Refractories: - Such as kiln linings, gas fire radian’s, laboratory wares, ceramic boas,
sinks resistor hollers steel and glass making crucibles.

White wares: - Including tableware, cookware, wall tiles, pottery products and sanitary
ware.

Technical: - Is also known as engineering, advanced, special, and in Japan, fine ceramics.
Such items include tiles used in the space shuttle program, gas burner nozzles, ballistic
protection, nuclear fuel uranium oxide pellets, biomedical implants, coatings of jet engine
turbine blades, ceramic disk brake, missile nose cones, bearing (mechanical).

Table ware: - Ceramic table wares are the items used at meals made of ceramic materials.
Typical products are plates, dishes, cups, bowls, jugs and vases.

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Sanitary ware: - Sanitary is the general nomenclature given to ceramic wares used for
sanitary facilities, water supply, drainage, sewerage, and sanitary treatment of excretion
for the purpose of comfortable living.

Ceramic tiles (wall and floor): - Ceramic tiles are thin slabs made from clays and/or
other inorganic materials, generally used as coverings for floors and walls. Ceramic tiles
are usually shaped by extrusion or dust pressing at room temperature, then dried and
subsequently fired at temperatures sufficient to develop the required properties. The most
common tile shapes are squares and rectangles, but other polygonal shapes (hexagons,
octagons, etc.) are also available. As for size, tile sides range from only a few centimeters

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(mosaics) to slabs with 60 – 100 cm sides. Thickness ranges from around 5 mm for wall
tiles to over 25 mm for some extruded tiles.

Ceramic insulator: - The ceramic electrical insulator is a material whose internal electric
charges do not flow freely, and therefore does not conduct an electric current under the
influence of an electric field.

3.2. Classification of the commodity

There are various classification mechanisms of ceramic products, which may be attributed to one
of two principal categories: application base or composition base.
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Application base: - This classification of ceramics includes white wares, structural clay
products, brick and tiles, abrasives, refractory’s, and cement ceramics. Due to their
fascinating features, ceramic products are used in an array of applications. Ceramics offer
many advantages compared to other materials. They are harder and stiffer than steel;
more heat and corrosion resistant than metals or polymers; less dense than most metals
and their alloys; and their raw materials are both plentiful and inexpensive. Ceramic
materials display a wide range of properties which facilitate their use in many different
product areas. Among the applications of ceramic products, the majors are:

 Compressive strength makes ceramics good structural materials (e.g., wall and floor
tiles in houses)

 Consumer Uses: table (dinner) ware, ceramic sanitary ware in most of modern
housing construction.

 High voltage insulators and spark plugs are made from ceramics due to its electrical
conductivity properties.

 Good thermal insulation has ceramic tiles used in ovens and as exterior tiles on the
Shuttle orbiter some ceramics are transparent to radar and other electromagnetic
waves and are used in radomes and transmitters.

 Hardness, abrasion resistance, imperviousness to high temperatures and extremely

caustic conditions allow ceramics to be used in special applications where no other
material can be used.

 Chemical inertness makes ceramics ideal for biomedical applications like orthopedic
prostheses and joint replacement (bone implants) and dental implants and
restorations.

 Glass-ceramics, due to their high temperature capabilities, leads to uses in optical

equipment and fiber insulation.
 Aerospace: space shuttle tiles, thermal barriers, high temperature glass windows, fuel
cells.

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 Consumer Uses: glassware, windows, pottery, dinnerware, ceramic tiles, lenses, home
electronics, microwave transducers.

 Automotive: catalytic converters, ceramic filters, airbag sensors, ceramic rotors,

valves, spark plugs, pressure sensors, thermostats, vibration sensors, oxygen sensors,
safety glass windshields, piston rings are all products of ceramics.

 Military: advanced ceramics are used for structural components for ground, air and
naval vehicles, missiles, sensors.

 Computers: insulators, resistors, superconductors, capacitors, ferroelectric

components, microelectronic packaging.

 Other Industries: bricks, cement, membranes and filters, lab equipment

 Communications: fiber optic/laser communications, TV and radio components,
microphones

Composition base: - it is classified into the following sub components

 Oxides ceramics: These classes of ceramics made from major contents of either
aluminum oxide, MgO or ZrO2 in the composition of ceramic forming materials.

 Silicates ceramics: Such kinds of ceramic product are made from the raw material
mostly contained of silicates such as aluminum silicates, porcelain and magnesium
silicates.

 Carbide ceramics: These kinds of ceramic product are mostly contained carbides
ingredients, like that of boron carbide, silicon carbide and tungsten carbide.

3.3. Raw Material Requirement

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The raw materials for ceramic sanitary and table ware, tile and insulator are kaolin, feldspar,
quartz, ball clay, silica sand and lime. Except ball clay, all raw materials are locally available in
the market.

Kaolin: - Kaolin is used as a skeleton former, light - colored plastic fire clays (ball clays)
are used as bonding agents for the fabrication of ceramic products, while feldspar and
quartz are added to the batch as fluxes. The most important properties of kaolin as a raw
material for the ceramic production are plasticity, strength, fired color, drying and firing
shrinkage. Dry or wet dressing of raw kaolin composed of Si02 (up to 70%), A1203(up to
22%), Fe203 (up to 1.5%), CaO ÷ MgO + alkalis (up to 3%) and characterized by
refractoriness of about 1530°C would yield white kaolin concentrate containing 46.07 to
46.85% of S102,31.78 to 39.83% A1203, 0.30 to 0.73% Fe203, 0.25 to 0.35% Ti 02, 0.15
to 0.56% Ca 0, the L.0.I. being 13.34 to 13.97%. The refractoriness of the concentrate
would be about 1690°C, its white color index ranging 65 to 88%.

Feldspar: - Feldspar is the most common raw material for ceramic products production. It
is also the most common mineral on the face of the earth making up more than half of the
earth’s crust. Most feldspar has an almost perfect ratio of flux, alumina, and silica to
make a glass at high-fire temperatures. Feldspars are important ingredients in clay bodies
and glazes. In both applications, their primary function is to supply fluxes to the
formulations, but they also provide additional alumina (Al2O3) and silica (SiO2).
Feldspars are naturally occurring minerals and are generally classified as either potash
(potassium) or soda (sodium) feldspars based upon the predominant alkali metal element
(the flux) that is present. The minerals commonly referred to as lithium feldspars are not
true feldspars, but they are alumino-silicates like feldspars and contain the fluxing
element lithium, and are used for the same purposes as the feldspars.

Quartz: - Quartz is a common raw material for ceramic and glass making industry. It is
hard usually colorless, transparent crystalline mineral with varieties. These sands are
used in glass and ceramic making, for foundry, abrasive, and hydraulic fracturing
applications and for many other industrial uses.

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Ball Clay:- Ball clays are kaolinitic sedimentary clays, that commonly consist of 20-80%
kaolinite, 10-25% mica, 6-65% quartz. Localized seams in the same deposit have
variations in composition, including the quantity of the major minerals, accessory
minerals and carbonaceous materials such as lignite. They are fine-grained and plastic in
nature. They are commonly used in the construction of many ceramic articles, ball clay is
fine dark kaolinic clay that turns white or nearly white when fired, used in the
manufacture of a wide variety of ceramic wares in combination with other clays for its
exceptional bonding properties and plasticity. Ball clay is a rare mineral, found in very
few places around the world. It is an important component in a wide range of goods
which are essential in everyday life.

Silica Sand: - Silica sand is one of the basic raw materials for ceramic tiles and sanitary
ware production. It is available abundantly in the Mugher valley. The geological survey
conducted on the Mugher valley,in the Jemma-Wonchit area of Oromia Regional State
indicates that the total reserve for silica sand is about 3,413,500tons. In addition, silica
sand is proved to be available in the Enticho units of Adigrat Group of Tigray Region.
The exploration work carried out to date indicates that there are sufficient reserves of
sandstone in the Gelemso Kulubi area but the quality and deposit has to be further
explored. Silica sand is used in the making of glass and ceramic tiles and creating molds
and castings in industrial processing, due to its high melting point. Silica sand is a type of
sand that is composed of 95% silicon that is used mainly in industries.

Lime Stone: - Lime stone is used for ceramic production, mainly for cost reduction
purpose. Lime stone is the most abundant rock type in Ethiopia. The lime stone deposits
of the country are Degachebsi, Hakim Gara, Wonchit and Jemmma, Dejen, Filiklik and
Mosobo. Calcite limestone is predominantly found within the Jurassic Antalo limestone
and the Hamanlei series. The best exposures and most interesting deposits of the Antalo
limestione are found in the central part of the Abay valley, and within the tributaries of
Abay River including the Jemma, Wonchit and Mugher river valleys. This raw material
is also available around Merhabete, 130km from A.A which has several thousands of tons
of reserve. Delga Chebsi lime stone located 23km Northeast of Dire Dawa (Wichael,
1983),Mesobo limestone near Mekele, and the Jemma-Wonchit and Muger vally
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limestone of Northern Shewa are suitable as dimension stone, cement, glass and ceramic
raw material with resource in the order of tens of millions of tons. The cement and lime
industries are the main consumers of limestone in Ethiopia. So far, the limestone of
Messobo, the Mugher valley and Dire Dawa has been well explored for utilization in the
cement production.

Plastic clay: - The opportunity study for clay resource development in Ethiopia made by
Geological Survey of Ethiopia, December 2009 shows that the country’s clay resource is
diverse and abundant. According to this study there is clay deposit in Dilla, Sululta,
Holeta, Bishoftu, Akaki, and Kality, Bebeka, Leku, Melka Gebdo, Haromaya, Hamaressa,
Gelemso,Mossobo, Mugher and Burayu areas. The reserve of Sululta, Bebeka, Melka
Jebdo, and Burayu are estimated at 10million tons, 960,000tons,
8.568million tons, and 160,000m3 respectively.
Tiles Pitcher: - Tiles pitcher is the broken ceramic tiles during manufacturing
process.

According to Geological survey of Ethiopia, the resource potential deposits of feldspar, quartz,
vein quartz and Kaolin are stated in the table below.

Table: 3.1. Identified potential area of ceramic raw material in the country.
Types of deposits Area provinces Name of deposit Minerals million tons

Feldspar Oromiya Kenticha Feldspar 0.50

Quartz Oromiya Kenticha Quartz 0.53
Vein Quartz Oromiya Kenticha Vain Quartz 0.30
Southern Nation,
Nationalities & Bombowha kaolin 0.30
Kaolin Peoples
Region(SNNPR)
Oromiya(E. Hararghe) Kombelcha Kaolin 0.29
Source: Geological survey of Ethiopia “Industrial minerals and rocks resource potential of Ethiopia”
March 2003E.

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IV. MARKET STUDY

4.1. General overview

In this part of the feasibility study the market aspect (contemporary and projected demand and
supply, contemporary and future demand-supply gap, marketing arrangement of the product,
price trend and other related) issues will be addressed. In general marketing is the flow of goods
and services from the area of production or service delivery to the area of consumption or
utilization of these services with a mutually agreed price and situations and the final exchange
between the producer and service provider with a given time, price, place and condition can have
referred as market.

Market for the ceramic product is determined by different factors such as:

 The growth in this sector by itself

 Improvement in knowledge and skills of stockholders in the sector and end users
of the product.
 Easy access for quality products with a reasonable price
 Sustainability of the product supply and its price
 Availability and Price of the substitutes
 Experiences and changes in preferences of users
 Life style of the population
 Foreign trade policy
 Market direction and/or destination of the country
 Distribution system (speed, continuity, advertising strategy and the like) 
Purchasing power of the people and etc.

4.2. World Trade

The export and import of the countries in some cases indicates the consumer and supplier
countries of the products. Therefore, this part discusses about the top ten exporters and importers
of ceramic products thereby, gives the clue on the international trade.

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4.2.1. World Ceramic Products Export

The export of ceramic products has shown increasing trend, with annual average growth rate of
9% in the past five years (2009-2013). The largest top ten exporter countries accounts for almost
more than three forth of the total world export. Their value of export and share has grown by
10% and 1% respectively within the same period while the value of export has shown increasing
trend of 6% for other countries.

China is the leading exporter of ceramic products to the world market followed Italy and
Germany. The export amount of china has reached 19 million USD with annual average growth
of 20% as of 2013. It is around 8 million for each Italy and Germany with respective annual
average growth rate of 2% and (1%).

Table 4.1: Top Ten World Ceramic Products Exporter Countries

US Dollar thousand
Years AAGR
Sr. No Exporters %
2009 2010 2011 2012 2013

1 China 8,060,552 11,099,766 14,052,567 16,745,943 19,162,590 20

2 Italy 4,759,318 4,805,574 5,185,801 4,877,837 5,233,724 2
3 Germany 3,590,651 3,683,570 4,055,743 3,796,754 3,831,382 1
4 Spain 2,792,161 2,765,023 3,131,093 3,138,500 3,463,037 5
United States
5 1,193,217 1,521,940 1,731,205 1,711,947 1,762,754 9
of America
6 Japan 1,027,402 1,407,392 1,496,505 1,355,872 1,439,623 8
7 Mexico 780,762 907,876 950,409 1,093,027 1,208,200 9

8 Poland 802,548 917,372 1,067,784 978,106 1,116,113 7

9 Turkey 675,830 787,095 882,761 954,641 1,001,296 8

10 France 960,113 960,961 1,078,352 958,850 871,995 (2)

Top Ten 24,642,554 28,856,569 33,632,220 35,611,477 39,090,714 10

% Share 0.73 0.73 0.75 0.76 0.76 1

Other 9,086,913 10,493,954 11,490,177 11,481,908 12,038,567 6

% Share 0.27 0.27 0.25 0.24 0.24 (3)

World 33,729,467 39,350,523 45,122,397 47,093,385 51,129,281 9

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Source: International Trade Center ( www.intracen.org)

4.2.2. World Ceramic Product Import

The world import of ceramic products has shown increasing trends with an annual average
growth rate of 6.1% for the census period. The world top large importer accounts less than half of
the total world import share. Moreover, their percentage of share has been decreasing in the past
few year periods with annual average rate of (5%). On the other hand, other countries share of
import of ceramic products is higher as it accounts more than half of world total import and
moreover, their share has grown by annual average growth rate of 4%. United States of America
is the largest importer countries of ceramic products followed by Germany, France and United
Kingdom accordingly. The import trend has shown decreasing trend only for France among top
ten countries however, for Saudi Arabia and Russian Federation there is an increasing trend in
the give period of time.

Table 4.2: Top Ten Ceramic Products Importers Countries

US Dollar thousand
Years AAGR
Sr. No Importers %
2009 2010 2011 2012 2013
United
1 States of 3,962,698 5,068,983 5,653,325 5,705,449 5,971,593 9.01
America
2 Germany 2,584,040 2,814,389 3,150,134 2,955,974 2,942,153 2.84
3 France 2,289,389 2,340,009 2,476,640 2,220,483 2,155,206 -1.05
United
4 1,614,720 1,707,678 1,831,303 1,459,664 1,601,944 0.49
Kingdom
Russian
5 623,374 921,251 1,208,466 1,447,618 1,521,445 20.77
Federation
6 Japan 1,003,039 1,195,943 1,345,096 1,319,223 1,342,177 6.30
Korea,
7 855,658 1,016,106 1,147,515 1,203,176 1,205,744 7.35
Republic of
8 Canada 855,961 1,034,024 1,006,782 1,089,457 1,140,797 6.22
Saudi
9 278,406 677,362 797,734 983,755 1,040,694 38.04
Arabia
10 Belgium 909,773 942,129 961,431 877,960 966,828 1.41
Top Ten 14,977,058 17,717,874 19,578,426 19,262,759 19,888,581 6.09
% Share 0.45 0.45 0.45 0.44 0.44 -0.47

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Other 18,589,797 21,779,885 24,036,170 24,371,815 25,752,986 6.92

% Share 0.55 0.55 0.55 0.56 0.56 0.38
World 33,566,855 39,497,759 43,614,596 43,634,574 45,641,567 6.55
Source: International Trade Center ( www.intracen.org
)

4.3. Ethiopian Market

In Ethiopia the destination for ceramic products is mostly local market as there is huge untouched
or not served demand in the country nevertheless; there is promising market abroad which the
country begins by exporting some in last four years. The segmentation of the market can be
based on the major consumer of the products: Government or nongovernmental institutions,
commercial centers, real estate developer and private housings.

4.3.1. Demand for Ceramic Products

The demand for ceramic products varies according to the applications of the products. The
demand for ceramic tiles and sanitary ware is the driven demand of housing unit: institutional
commercial and residential, the insulator is of electricity distribution and the table ware is of the
number of households which in turn depend on the growth of population, income, urbanization
and commercialization. The demand for ceramic products has higher correlation with the income
that the increase income induces the demand for quality housing and household equipment. The
ceramic tiles use as construction like floor, interior wall and roof; sanitary ware uses as sanitary
equipment; table ware uses as household equipment; and insulator uses as part of insulator while
distributing electricity line.

A. Demand for Ceramic Tiles and Sanitary Ware

The potential percentage of the housing units that would consumes ceramic tiles and sanitary
ware as their construction materials are those housing units that constructed using concrete;
hallow block, bricks and stone wall as alternative technology.

According to central statistical agency, population and housing census report, both the total
housing unit and the housing unit that are constructed using concrete, hallow block, bricks, stone

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wall of the country has shown increasing trend in the last thirteen years with the compound
annual growth of 2.64 and 10 percent respectively.

B. Demand for Ceramic Table Ware

The demand for table ware is best determined by the house holds while keeping other things
constant. Therefore, the demand for ceramic table ware here is determined using the per-capita
consumption of ceramic table ware in each household. In census years the per capita
consumption of household has increased by annual average growth rate of 0.00021 %. C.
Demand for Ceramic Insulator

The demanders for ceramic insulator are Ethiopian Electric Utility to use it during the expansion
of electricity line. The demand for electricity power is increasing in the country as the income of
the nation is increasing along with the life style change. According to the information from the
Marketing and Distribution department of the corporation their yearly demand for ceramic
insulator reached 1,583,820 pieces as of 2013 which is without including the Universal
Electrification Program’s demand. The amount of insulator demand is changed to ton for the ease
estimation purpose. The average 15 KV insulator piece weights 2.75 kg, 33 KV weights 8.1 kg
and busing insulator 17.5 KV weights 3.15 kg; averaging three equals 4.67kg which
approximately 5 kg/pieces. Thus, yearly total demand amount of the two departments, 1,583,820
pieces equals 7,919,100 kg or 7,919 ton.

D. Foreign Demand
The other demand for ceramic products emanates from foreign market even though the exported
amount is very minimal. Only the export of ceramic table ware is significant while the export
amount for other products is negligible. The export of ceramic table ware has shown 17 %
annual average growth during in the census years.

4.3.2. Supply of Ceramic Products

The supply of ceramic products emanates from both domestic production and import. A.

Domestic Production

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Domestically there is only limited factory, namely, engaged in production of ceramic tiles,
sanitary ware, table ware and insulator. As we have confirmed the census report actual
production of sanitary ware, tile and table ware shows a decreasing growth rate of 10%, 27% and
41% respectively. However, on the other hand the actual production of insulator shows an
increasing growth rate of 6%. The major reasons for the decreasing trend of production of
ceramic products are shortage of working capital, used outdate machinery and low quality
product production, which in turn results in declining of market for the product.
B. Import
The import amount of ceramics tiles, sanitary ware and table ware shows an increasing trend for
the past five years with average annual growth rate of 18 %, 21% and 7% respectively. On the
other hand, import of insulator for the past five years show decreasing trend by geometric
average rate 13%.

4.3.3. Demand and Supply Gap of Ceramic Products

In the country more than 90% of the product is import with huge amount of foreign currency. The
existing factory’s, production volume accounts for less than 10 %. The people import these
ceramic products for direct consumption due to excessive shortage in the country. The demand
supply gap analysis that made by considering the import in demand side shows the existence of
unsatisfied and continuously increasing demand in the country. The calculated amount of
unsatisfied demand in the country shows that if the demand and supply situation for ceramic
products continuous with the same trend the gap of unserved demand will get wide and wide in
the coming years. Therefore, the quantitative market demand supply gap analysis implies the
domestic production as a supply and import substitution must be accelerated in order to serve the
foreseen unsatisfied demand. Even if there is huge demand in local market high investment cost
requirement and working capital shortage may hesitate not to invest by new investors.

4.4. Market and Marketing Arrangement

Due to the shortage of supply in the country, the sale of factory product is contractual base that
held at the get of the factory. The buyers of the products are the government agencies mainly
Housing Agency and Ministry of Defense. The insulating materials are bought by Ministry
Defense while the rest have been sold for the Housing Agency. The above mentioned buyers
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collect the produced materials and transport by their own transport means by incurring cost up to
the destination. The sale is accomplished on contractual basis and the time and amount of
installment of payment is according to the agreement between producer/seller and both buyers.
On the other hand the imported ceramic products is distributed to customer through wholesaler
and retailer where the most payments are cash on hand and ownership transfer is at the point of
sale that the buyer transport the products by its own means of transportation.
4.5. Value Chain

The raw material is obtained from both import and local sources. The major raw materials such
as Kaolin, Quartz, Fled spar, Silica sand, Lime stone are available in the local market whereas,
the other raw materials such as ball clay and spare parts are bought from the foreign market.
After manufacturing, the factory can supply its products to the end users: Government organs,
NGOs, Commercial firms and private individuals.

Figure 4.1: Value Chain Diagram

Local areas (Kaolin, Feldspar, Foreign market (ball clay and
Quartz, Silica sand, Limestone, other inputs)
etc)

Producer

Government NGOs Commercial Private

organs Firms individuals

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4.6. Marketing strategy

Considering the potential demand on the product in Ethiopia as well as in international market
and the encouraging policy of the country for the sector, the company has decided to establish
this project by adopting his own market strategy so as to fill the huge gap in the sector. The
company has planned to use the marketing strategy of 4ps and as everybody knows the proposed
products doesn’t need complex market strategy.

4.6.1. Destination

The final destination and accessibility of a product is very crucial in every marketing activity of
any business. Thus, in the case of this project the company has planned to have heavy duty trucks
for transportation of final goods to its potential domestic clients and wholesales at any corner of
the country on their destination either when they demand in bulk or when the company win bid
tender with on destination delivery service. This type of marketing strategy will be used as one
way of market penetration especially in the domestic market. Moreover, the company has
planned to reach in all foreign markets destination by producing high ceramic products by using
modern technologies acceptable by the western standard levels.

4.6.2. Promotion mechanisms

To create good initial impression on the product of the project, the company will use the
following mechanism step by step depending on the stage of the product development.
Billboard announcement in well-known and large market areas like Merkato and other
countries especially in the first years of operation.
Developing attractive and understandable flyers, brushers and other promotional plates
Price packages and discounts
Working with companies which has proven experience in the sector those are based locally
as well multinational

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4.6.3. Product Mix

The product mix for the project will be standardized and high quality ceramic products
manufactured in different ways by using modern technology based on the purpose of the product
and it will be done in accordance with quality accepted standards of the international market.

4.6.4. Market Entry Timing

The proposed project can be established in a few months later and operates mainly in one
shift. However, when it deems necessary additional shifts of production and also product
shopping will be applied based on the market situation of the product.

4.6.5. Price

Pricing is one but the more important concept of any product marketing. Pricing of this
product depends on the quality and cost of production while consumers’ reaction and pricing
policy of competitors and world economic substation also affects pricing strategy of a
company. For penetrating the market and achieve maximum efficiency, the current market
price trend of the similar product will be assessed and set as a bench mark.

4.7. Marketing Arrangement

According to the assessment made to identify the existing marketing trend and other marketing
related practices in the country with respect to product sales, knowledge about how a certain
project will reach the desired market and thus fulfill the organizational goals is a crucial part of
any marketing study. In line with this, the current market arrangement shows a cash sales
practice is dominating the market, even there is also an advance payment on the required amount
will also be made during the product delivery. If there is a supply in the domestic market with
required quality standard there will be no problem of market since the product for Ethiopian
market is from external sources through import.

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V. KEY SUCCESS FACTORS, RISKS, DRIVERS AND SWOT

ANALYSIS
5.1. Key success factors

Ethiopia has a large territory with a large population which serves as a potential market for
such industries.
Furthermore, Ethiopia is endowed with cheap labor force.
There are Export incentive given by the government such as:-
 Export Trade Duty Incentive Schemes
 Duty drawback scheme (exporters would be refunded 100% of the duty paid on
raw materials used in the production of commodities upon exportation of the
commodity)
Authority in minimizing and/or avoiding the amount of taxes and duties paid on raw
materials they may import.
The government has made available land for investors with low costs and the selected area
has all the infrastructure, electricity, telephone, fax, water, and road.
The investors can import machinery with accessories without tax and can export the
product free of tax.
The government has been investing in capacity building for exporters to have skilled
manpower.
Selection of proper location, equipment and staff would be required to run project
successfully.
Continuous efforts should be made for up-gradation the quality of the raw material supply
and market success.
To attract large number of customers especially in the international market, the product
must be processed on high quality standards.

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5.2. Major Risk Factors

Although Ethiopia presents many opportunities for investors, it suffers from some disadvantages.
Some of these are:
High and unfair competition from imported products especially products imported which
has relatively low price but produced with poor quality standards.
Competitive wages that have to be combined with low labor productivity to realize labor
costs that are not so competitive. The causes of the low labor productivity levels are a
combination of several factors-including poor skills training, limited motivation,
inadequate workplace engineering, basic technologies employed may be semi-obsolete at
technologies, etc.
Existence of substitute product: This sector is also facing strong competitive pressure from
firms in other industries offering substitute products. The demand for low-priced,
attractive and convenient substitutes of ceramic tableware such as melamine wares,
aluminum wares, steel kitchen wares, glass wares and plastic wares are raising and the
local manufacturer of these products are also drawing significant profits from the thriving
domestic market for crockery.

5.3. Key Drivers

Existence of abundant and unexploited raw materials: Ethiopia is the country most suited
to ceramic production. This is because of all of the raw materials needed for the
productions of ceramic (kaolin, quartz, feldspar and dolomite) are available in ample
quantities,
Unfulfilled demand supply gap: The demand for ceramic product in the country has been
considerably increases in line with the expansion construction subsector mainly and other
demand drivers.
Favorable and stable investment policy: Nowadays in Ethiopia it was given high
consideration to manufacturing sector as it was believed as industries are the basis of
development. In case those industries are beneficial from the policy as it was allowed
duty free entry of raw materials and machineries,
Existence of Abundant manpower: The country has easily trainable, cheap and abundant
man power.

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5.4. SWOT ANALYSES

A. Strength
As also discussed so far, the shareholders and the general manager of the company, has a
lot of experiences and also the operation is supposed to be managed by hired professional
with appropriate experience.
The owner of the project who also going to manage the company, has an ample experience
on the production and market of such products.
The company’s commitment to improve & produce quality output in order to satisfy the
buyers & be competitive in the Market.
Use of modern technologies.

B. Weakness
Absence of formal marketing for its finished goods and this may lead to exert higher effort
to it becomes too well known.
Moreover, some of inputs are imported from aboard which are fickle for price fluctuations.

C. Opportunities
Growing demand for ceramic products market as a result of faster growth of towns and
booming of the construction sector.
A considerable change in the way of life of the people in use of locale manufactured
products.
The selected area of the project is where abundant resource is available and can make a
market linkage easily.
Abundant and cheap skill and un skill labor force.
Low land lease costs.
Government incentives through tax and providing the necessary assistance to help those
investors who are involved in manufacturing sector.

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D. Threats
Price fluctuation: The price of the output and input is highly volatile in the world market
as well in our country.
High competition from import market.
Unstable political and economic environment.

VI. ORGANIZATIONAL STRUCTURE AND MANAGEMENT

6.1. Organizational Structure
An organizational structure is mainly hierarchical concept of subordination of entities that
collaborate and contribute to serve one common aim. It will determine the modes in which an
enterprise operates and performs. One organization can be structured in many different ways and

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styles, depending on the business nature, operational period and objectives of its establishment. It
allows the expressed allocation of responsibilities for different functions and processes to
different entities.

Proper organizational structure and management will help a firm/enterprise to perform its
operation appropriately and to achieve objective of its establishment. Vice versa, incompatible
mode of organizational structure will probably lead to malfunctioning and collapse of the project.
As a result, careful assessment should be made while arranging organizational structure of an
enterprise.

In regard to this the company will be private limited company and it will be managed by one of
the shareholders who will be responsible in all over decision making at the top of the
organization under the general assembly. Moreover, the company will have two departments and
supervisors, professionals and necessary skilled and unskilled labour for the project when the
implementation comes to end. The General Manager in particular is responsible to the overall
operation, administration, coordination and management of the project. Thus, we can see that the
organizational structure of the project will be such that the General Manager will be at the top of
the management and also under her there will be assistant manager who super the general
manager. Moreover, there will be four departments and working units under each department
there will be divisions and teams as deemed necessary. The proposed departments of the
company are the Administration, Marketing and Finance section and the production and
Technical section.

The administration, marketing and finance will administer and manage the man power and assets
of the project and the marketing outlets of the product with respective professionals and experts.
On the other hand, the technical and production section will undertake and manage the
production of the product. The whole administration and managements of the project will be held
according to the organizational structure shown in the diagram below.

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General assembly

General Manager

Project Manager
Secretary

Procurement & Marketing & Production and

Administrative &
Supplies Distribution Technical
Finance Department
Department Department Department

Figure 6.1 Organizational structure of the project

6.2. Project Man Power Requirement

The General Manager of the project is well educated and enough experienced to run the project
properly. He has been engaged in various private businesses and obtained diversified managing
and marketing experience. In addition, the company will recruit qualified and experience
assistance general manager, project manager and other management staffs when the project
finalize its implementation.

Besides, the remaining professional manpower are planned to be recruited at the verge of
finalizing the project implementation and start-up of the operation. Based on the organizational
structure and work load of the proposed project, the required number of human resource with
their respective remuneration scale is depicted in the table below.
Table 6.1 Manpower requirements and respective salary
No Monthly Salary Annual
No Description
required Salary
Managing Director's Office

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1 Managing Director 1 18 500 222 000

2 Internal Auditor 5 8 500 510 000
3 Legal Advisor 3 8 500 306 000
4 Product Development Expert 30 8 500 3 060 000
5 Admin Assistant 2 6 500 156 000
Deputy Managing Director's Office

1 Deputy Managing Director 1 14 500 174 000

2 Admin Assistant 2 4 500 108 000
Production and Technical Department

1 Production & Technical Manager 1 12 500 150 000

2 Production Manager 1 10 500 126 000
3 Shift Supervisor 4 3 500 168 000
4 Production data Clerk 20 4 000 960 000
5 Machine Operators 25 2 500 750 000
6 Quality Control Manager 1 10 500 126 000
7 Quality Control Officer 15 4 500 810 000
8 Electromechanical workshop Manager 1 5 500 66 000
9 Mechanics 10 5 500 660 000
10 Electricians 15 4 500 810 000
11 Workshop assistants 8 3 500 336 000
12 laborer 300 2 500 9 000 000
Procurement and Supplies
Department
1 Procurement officer 50 3 500 2 100 000
2 Raw material Warehouse officer 15 3 500 630 000
3 Finished goods store officer 15 3 500 630 000
Selling and Distribution Department

1 Marketing Manager 1 9 500 114 000

2 sales officer 50 9 500 5 700 000
3 Document officer 10 3 750 450 000
Finance and Administration

1 Finance and Administration Manager 1 9 500 114 000

2 Finance Head 1 8 500 102 000
3 General Account 7 5 500 462 000
4 Cost Account 5 5 500 330 000

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5 Cashier 3 3 000 108 000

6 Personnel 2 5 500 132 000
7 Liaison officer 3 3 000 108 000
8 Secretary 5 3 000 180 000
9 General Service 20 4 000 960 000
10 Janitors and Cleaners 30 3 000 1 080 000
11 Drivers 20 2 500 600 000
12 Guards 15 2 500 450 000
13 Messengers 5 2 000 120 000
Grand Total 703 229 750 32 868 000

VII. TECHNICAL ASPECTS OF THE PROJECT

7.1. Project Site/Location
Theoretically location of any new plant may be based on its nearness to raw and auxiliary
materials, proximity to market, availability of skilled labor and utilities. Accordingly, the
proposed plant preferred to locate in Amhara Regional State, Arereti town on a total area of 15

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hectares of investment land that will be acquired with lease from the government and the area is
the potential raw material site and it is close to dry ports.

7.2. Land, Building and Civil Works

The area of land required for the project is 15 hectares that will be acquired from the government
via lease. Regarding, the building and civil works the company will construct all the required
buildings for production hall, raw materials and product storage after owning the land from the
responses governmental body. Office and admin building and others are built out as per the
capacity of the project for appropriate operation.

The total estimated cost of building and construction is Birr 2 billion for all required buildings
and the buildings will be comprising all the required technologies and architectural requirements
of the country. The cost of building and construction is shown in the table below.

Table 7.1: cost of building and construction

Total
Number Total
Unit Required Total
Description of development
Meas. Area Developed
Buildings cost (Birr)
(M2) Area (M2)
Main factory building (5000) M2 2 5000 10000 500 000 000,00

Main factory building (3000) M2 3 3000 9000 600 000 000,00

Office and Administration block M2 1 1000 1000 85 000 000,00

Clinic M2 1 500 500 35 000 000,00

Staff canteen M2 1 500 500 25 000 000,00

Pilot plant M2 1 500 500 40 000 000,00

Chemical store M2 1 1000 1000 95 000 000,00

Maintenance room M2 1 1000 1000 65 000 000,00

Laboratory M2 1 400 400 70 000 000,00

Spare part store M2 1 500 500 105 000 000,00

Generator House (Concrete bedding) M2 1 100 100 15 000 000,00

Guard house M2 1 100 100 2 500 000,00

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Shower, toilet and changing room M2 1 200 200 7 500 000,00

Water Reservoir M2 1 200 200 25 000 000,00

M2 open space 3000 1500 32 000 000,00

Parking
M2 open space 1000 1000 15 000 000,00
Grean area
Land development cost for site open space
M2 122 500,00 250 000 000,00
development

sub total 150 000,00 1 967 000 000

Contingency 5% 98 350 000

Total 2 065 350 000

7.3. Plant capacity and Production Schedule

The market study indicates that the unsatisfied demand for all types of ceramic products both at
contemporary and projected markets in the country as well as in the global market. The market
analysis shows that the demand will grow from year to year. Accordingly, engaging in the sector
will be attractive and hence the proposed plant is expected to produce sanitary ware and tiles for
local and international markets. At the initial stage the company has planned to start operation by
60% theoretical capacity. The plant will operate in a single shift of 8 hours a day, and for 300
working days a year.

Accordingly, gradually the company has a plan to increase its production to 90% in the fourth
year as attainable capacity. The low production level at the initial stage is meant to enable the
plant to develop market outlets, and give the new machinery operators the possibility of attaining
the required skill and experience.
7.4. Machinery and Equipment
The list of machinery and equipment required for ceramics manufacturing plant and
corresponding cost is presented in Table 7.2 below. The total cost of machinery and equipment is
estimated at Birr 5.2 billion and the machine will be imported from India.

Table 7.2: list of Machinery and equipment

Unit price Total price
Description Installed Capacity Qty
(Birr) (Birr)

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Machineries Requirements for Tomato Paste Production

Ball Mill 153.9 KW 5 75 000 000 375 000 000

Blunger 39.85 KW 5 45 000 000 225 000 000
Mixing Agitator 117.9 KW 5 65 000 000 325 000 000
Stirrer 23.217 KW 5 37 500 000 187 500 000
Filter press 52 KW 5 42 400 000 212 000 000
Pug mill 99.23 KW 5 36 500 000 182 500 000
Insulator/shaping machine 25 KW 5 32 500 000 162 500 000
Cup forming machine 104 KW 5 48 900 000 244 500 000
Table ware glazing machine 339.5 KW 5 95 000 000 475 000 000
Tunnel kiln 377 KW 5 85 000 000 425 000 000
Shuttle kiln 58 KW 5 29 750 000 148 750 000
Spray dryer 30 KW 5 55 000 000 275 000 000
Press machine 60 KW 5 61 350 000 306 750 000
Decoration kiln 84 KW 5 34 600 000 173 000 000
Tiles and table ware glaze line 20 KW 5 18 565 000 92 825 000
Dust Extractor 72.5 KW 5 21 250 000 106 250 000
Crusher 49 KW 5 79 850 000 399 250 000

Sub total 863 165 000 4 315 825 000

VAT 129 474 750 647 373 750

total 992 639 750 4 963 198 750

Auxiliary Equipment
Pallet lifting 12 500 000 25 000 000
2

Trolleys 10 545 000 21 090 000

2

Forklift 9 500 000 19 000 000

2

Boiler 7 500 000 15 000 000

2

Water circulation equipment and pump 14 500 000 29 000 000

2
Tools (Motors, Weighing Scale, Die Sets,
Filters, Sieves, Meters and Storage Tank 17 200 000 34 400 000
etc) 2

Drilling machine 19 564 000 39 128 000

2

Lath machine 11 650 000 23 300 000

2

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Sub total 102 959 000 205 918 000

VAT 15 443 850 30 887 700

total 118 402 850 236 805 700

Grand Total 1 111 042 600 5 200 004 450

7.5. Vehicle
The project planned to have ten vehicles, five Cargo Truk, three Toyota Double Cabin Pick Up,
two service Bus and one minibus used for input output transportation, administrative and staff
services respectively. The company has selected all this vehicle and included their respective
costs on the project those are appropriate in cost wise and technical parameters and this study
found that the total selected vehicle cost is Birr 42 million. The details of the selected vehicle for
the project’s smooth operation and their respective costs are depicted on the following Table .
Table 7.3 Details Vehicle

Total price
Description Unit Meas. Qty Unit Price
(Birr)

PCS
Cargo Truk 5 4 500 000,00 22 500 000
PCS
Toyota Pick-up Double Cabin 3 4 200 000,00 12 600 000
PCS
Service Bus 2 3 850 000,00 7 700 000
Total 42 800 000
10

7.6. Office Furniture and Equipment

Office furniture and equipment’s is also another important investment item which helps smooth
operation of the project. Knowing this the company has planned to purchase office equipment
and office furniture with a total cost of birr 4.5 million. The details of office furniture and
equipment are shown on the table below.

Table 7.4: The details of office furniture and equipment are shown on the table below.

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Total Cost (Birr)

Furniture

Unit price (Birr)

Description Unit meas. Qty

Imported High Quality leather

SOFASET pcs 3 118 000 354 000,000
TV Cabinet-853 pcs 2 27 850 55 700,000
LED TV 50" pcs 3 75 000 225 000,000
Guest chair pcs 105 6 500 682 500,000
Imported High quality Executive
Desk pcs 10 85 000 850 000,000
L shape table pcs 5 18 500 92 500,000
Executive swivel chair pcs 15 15 500 232 500,000
Managerial Swivel chair pcs 12 12 500 150 000,000
Managerial Table pcs 5 7 500 37 500,000
Secretarial chair pcs 3 5 500 16 500,000
Total Cost before VAT 2 696 200
15% VAT 404 430
Total Cost including VAT 3 100 630
Office equipment

HP CORI Laptop pcs 10 85 000 850 000

Lenovo CORI pcs 3 25 000 75 000
HP Lasher Jet 402D Print pcs 3 35 000 105 000
Cannon 6030W with WIFI Print pcs 3 42 000 126 000
Cannon Copy pcs 3 36 700 110 100
Fax pcs 2 17 500 35 000
Total Cost before VAT 1 301 100
15% VAT 195 165
Total Cost including VAT 1 496 265
Grand Total 4 596 895
7.7. Working capital of the project
Working capital is a measure of both a company’s efficiency and its short term financial
healthiness. Acceptingly, working capital is calculated as current asset minus current liability of a
business firm or organization. But as per the data for this feasibility study, the company has no
any assets and current liability on its hand. But theoretical for proper operation of the target
objective any company should have enough amount of working capital that enable it to operate

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smoothly and in a way that the company can use the capacity of the installed machineries more
efficiently. Based on the capacity utilization of this particular project a total of birr 2.8 billion is
determined as working capital to be owned through long term financial support for proper
functioning of the intended operations of the company.

7.8. Implementation schedule

The schedule of project implementation may start from idea generation or project identification
and goes to commencement of operation and lastly until marketing of the first bath product. All
activities have been designed to be done in short time as soon as possible. The project has
already started preparatory works in different aspects. The detail implementation schedule of the
project is shown below.
Table 7.5: Implementation schedule of the project activities
2024 2025 2026
S/N Type of Activities May- Aug- NovDec Jan- Apr- Jul- Oct- Jan- Apr- Jul-
Jul Oct Mar Jun Sep Dec Mar Jun Oct

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Fund Mobilization
1
process
Building and
2 Construction
Installation of Electric
3
Power
Procurement of
4 Machineries and
Equipment
Procurement of
5
Vehicles
Procurement of raw
6 materials

Erection and installation

7
of Machineries

Procurement of
8
Furniture & Equipment
Recruitment of
9
Employee

10 Training of Manpower

11 Trial and Testing

Commencement of
12
operation

7.9. Environmental Impact Assessment

Environment is the first concern in the current civilization process and economic buildup of a
nation. It is high time for human beings to take the right action towards saving the earth from
major environmental issues. Most environmental issues are the result of harmful human activities
on the biophysical environment. On the other hand, now a day’s environmentalism is a social,
economic and political movement to address any environmental damages through advocacy,
education and activism.

Environmental and social impacts of a proposed project, to determine their magnitude and
significance, and to define management or mitigation measures designed to avoid and minimize
where possible, or if not, to offset or compensate for adverse impacts and risks.

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The development of this project will require ancillary infrastructure such as access roads, power
lines, water pipelines and communication infrastructure to successfully implement the project.
Ideally auxiliary infrastructures would be captured as part of the project and assessed within this.
The company should have full responsibility in terms of addressing the following issues that
poses the environment.

Drainage system: - The project will be provided with storm water facilities from the roof
top through to the peripheral built drainage systems into storm water drainage systems.
Drainage pipes will be of the pvc type and will be laid under the buildings and the
driveway and will be encased in concrete. The pipes will be inclined to a degree that does
not allow stagnation of water and thus linked to storm water drainage system.

Wastewater: - A sewage treatment plant and common effluent treatment plant are to be
established within the project. It is anticipated that waste water generated by processing
activities will be recycled. Furthermore, sanitary wastewater from toilets and urinals shall
be collected in an underground sewer system that is to be constructed as part of the
processing plant ‘s sanitary facilities. A self-contained treatment system is to be put in
place to treat sanitary water. Treated wastewater is to be re-used as non-potable water.
Other wastewater from the Blocks and the factory will be channeled into the yet-to-be
constructed bio-digester located at an accessible area of the plot.

Solid waste: - Waste minimization, recycling and treatment processes shall be included in
the project operational requirements. Solid waste management will consist of a garbage
chute situated at the project staircases for easy downward transportation of garbage into
the garbage stores. All garbage stores will be protected from rain and scavenging animals
while within the premises and the guardhouse block. The waste will then be collected to
be composted, palletized, or re-cycled depending on the waste management strategy to be
adopted.

Waste management: - Wastes will be handled to ensure compliance with related

Ethiopian Legislation, and internationally accepted standards. To handle all types of
wastes properly during shed improvement, a waste management plan will be prepared,

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and implementation of the measures proposed in the plan will be monitored regularly to
comply with all relevant legislation and standards. All the records for storage,
transportation and treatment of these wastes will be kept as required by the management
plans.

Policy objectives: - The project will meet the following Specific Policy Objectives:
• Ensure ecological processes and life support systems are sustained.
• Maximize the benefits technological knowledge and skills resources but minimize
the negative impacts of their exploitation.
• Identify and develop human potentials that are underutilized.
• Incorporate the full economic, social, and environmental costs and benefits of
natural resources development.
• Prevent pollution of land, air, and water.
• Ensure the empowerment and participation of the people and their organizations.

Healthy and safety Management: - To address both occupational and community health
and safety risks. Plan is to be prepared for both the construction and operations phases. It
is to include a company policy, and measures included within are to comply with national
laws. Aspects to be covered in this Plan include:

• Health and safety training for all employees.

• Health and safety training on the use of chemical and hazardous materials.
• Provision of the appropriate Personal Protective Equipment (PPE).
• Traffic management plan and driver training.
• Accident prevention monitoring.
• Training in the use of all equipment.
• Safeguards of environmental pollution of water resources.
• Safeguards in hazardous materials handling and transportation; First Aid access
and communications; and Emergency Response Procedures.

Insuring Workers Right: - The Project needs to ensure its policy and procedural
consistency with international standards related to workers’ rights. This includes:
• Observing statutory requirements relating to minimum age for employment of
children and meeting international standards of not employing any persons under
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the age of 14 for general work and no persons under the age of 18 for work
involving hazardous activity.
• Ensuring acceptable conditions of work including observing national statutory
requirements related to minimum wages and hours of work.
• Meeting international standards related to paying all wages, including bonuses
and premium pay for overtime work, to all employees in a timely fashion and in a
manner consistent with ILO Convention 95.
• There should be clearly benchmarked payment schedules in the contracts.
• Having Contractors commit that they will not take any action to prevent
employees from exercising their right of association and their right to organize
and bargain collectively.
• Ensuring no workers are charged fees to gain employment on the Project.
• Ensuring rigorous standards for occupational health and safety are in place.
• Having to base employment decisions on principles of non-discrimination and
equal opportunity, in particular fair and equal pay, especially for women carrying
out the same work as men.

Project Code of Conduct: - It is recommended that the Project establish a Code of

Conduct for the labor force. The Code of Conduct recognizes the provision of resources
by the employer and shared responsibilities among the workers for the use of equipment,
procedures, and training. It aims to contribute to a harmonious relationship with local
communities, to reduce behaviors that could lead to social conflict, and to prevent further
environmental degradation.

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VIII. PRODUCTION PROCESS

In the manufacturing process there are a lot of process should be passed until the final product is
supplied for marketing and utilization.

8.1. Sanitary ware Production Process

The production process of sanitary ware making plant involves the following major
manufacturing operations:

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Fig: 8.1: Flow process of Sanitary Ware manufacturing process

Body Preparation: - The raw materials are roughly crushed by the jaw crusher and roll
crusher, and then sieved into designated particle sizes, weighed, and then mixed with the
required amount of wooden to be micro-reduced by a ball mill. The slip is further sieved
and passed through the magnetic filter so that it is free from iron impurity as well as
being uniform in particle size.

Slip casting: - Shaping is done by the casting mold method. The prepared cast slip is
kept one day under gentle agitation. Next, the slip is poured into a casting mold to be
dehydrated and solidified into the shape of sanitary ware. The molded ware taken out of
the mold is dried for a suitable length of time under the proper temperature moisture

Glazing: - Glazing is usually sprayed on the bodies either manually or automatically by

using a glazing machine. It is also done by dipping the molded ware in to the tank filled
with glazing.

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Firing: - When glazing is completed the molded ware is ready for firing. There are
different types of firing kiln: the simple box kiln, the shuttle kiln, the tunnel kiln, etc. In
order to save fuel or energy used for firing controlling of the draft pressure and
temperature is essential. Inside the kiln, the firing process shall be intermittent. Therefore,
it is suggested to use shuttle kiln for the envisaged plant as it is most efficient and
economical one.

Inspection: - After the final inspection will be carried out for crack, pinhole, and others,
flash tact is conducted. Then the items will be palletized and wrapping using
polypropylene for dispatch.

Storage:- The sanitary ware is allowed to cool at room temperature and taken to the
sorting area. Finally, it is stored in the warehouse until dispatching.

Fig: 8.2: Sanitary Ware products

8.2. Tile Products Manufacturing Process

The chart shows the three large blocks corresponding to the stages mentioned, while each block
includes a number of alternatives in the major current ceramic tile manufacturing techniques:
• Raw materials preparation by a dry or wet procedure,
• Forming or molding in the plastic state (extrusion) or forming in a semi-dry state
(pressing),
• Single-firing or double-firing (biscuit and subsequent applications)

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Fig: 8.3: Flow diagram of the ceramic tile manufacturing process

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Raw Material Preparation: - Once the clays and other raw materials, as well as the
additives needed in the final composition of the ceramic body, have been selected, the
first manufacturing process stage consists of comminuting these constituents, obtaining a
homogeneous mixture, and preparing the composition for the subsequent forming or
molding process.

Forming (Molding): - The following fundamental stage in the ceramic tile

manufacturing process is forming or molding. Most current products are made by
semidry pressing (raw materials with a moisture content between 5 and 7%) or by
extrusion (raw materials of clayey consistency with a moisture content between 14 and
20%). The slip casting process is innate to the manufacture of sanitary ware, tableware,
and ceramic products of complex geometry; in the case of ceramic tiles, it is only used in
making border trims and other decorative elements, and consists of filling plaster moulds
with an aqueous dispersion of raw materials (liquid clay).

Semi-dry pressing: - The raw materials, in the form of small hollow spheres with
moisture content of 5–7% or in the form of solid grains with a controlled particle-size
distribution, are subjected to mechanical pressing, which provides the ceramic tile with
its definitive shape by application of a uniform pressure between 250 and 500 kg/cm 2.
The optimization of this mechanical process has led to the manufacture of steadily thinner
tiles with greater uniformity in regard to material density per unit volume, in addition to
high green mechanical strength. That uniformity of the pressed raw material also allows
the body to dry uniformly and avoids the defects that originate in differing behavior of
the material during the drying and subsequent firing processes. This high green strength
has also allowed optimization of tile surface treatments, without the piece first needing to
be fired. In any event, semi-dry pressing has not only enabled advances in the single-fire
manufacturing process but also a considerable increase in tile size without decreasing the
quality and characteristics of the end product.

Extrusion:- After raw materials preparation, usually by the dry method, a plastic clay
mass is obtained by homogeneous mixing in water. In this case, the resulting clay has a

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moisture content of 14–20%, the body being pressed in a cylinder, through a die that
provides the tile with its final geometry. The facility used to press the clay forward,
including the mould or die and the cutter that cuts individual pieces of the same size from
the exiting column of clay, is known as an extruder or auger

Slip casting (Other Forming Processes): - Ceramic tiles may be shaped by other
methods than the foregoing two methods. One such method is the traditional process,
using manual or mechanical pressing of the clay, while another less frequent method is
slip casting, in order to obtain pieces of complex geometry. The slip casting process
consists of pouring a liquid clay composition (aqueous dispersion of clay and other raw
materials) into a plaster mould, so that it is deposited on the walls of the mould up to a
certain thickness (vacuum casting), or it is deposited between two plaster moulds. The
plaster absorbs the water of the deposited layer until an appropriate consistency is
obtained.

Drying: - As it has already been remarked, all forming processes need to incorporate
water in order to be able to take advantage of the clay’s plasticity. That water,
independently of whether a surface treatment is applied to the green piece, must be
removed before the firing process. Formerly; all ceramic objects were dried in a natural
process, in a more or less controlled way.

Glazing and Decoration: - In the past, engobes (clayey coatings) and glazes were
applied onto the ceramic body that had previously been fired (biscuit), which was usually
porous (allowing absorption of the water added by those applications), either before or
after the decorations. These applications were entirely manual and only in the case of
serial (repetitive) decorations were auxiliary items used to reproduce designs consistently
(templates for outlining the graphics and stencils to fill in surfaces with a given contour).

Firing: - It is the last step wherein the clay is fired in a kiln to form hard tiles. The firing
temperature for decorative wall tiles is usually lower than that of floor tiles. Two types of
kilns are used for this process. In a batch kiln the material to be fired is placed inside a

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kiln and the heat is applied to the kiln. After the desired temperature is reached, the tile is
removed.

On other hand in case of continuous/Tunnel kilns, the bodies to be fired pass through the
tunnel on cars, belts or sliding slabs. The tile bodies, in the process of entering from one
end and leaving from the other end, get fired. The entrance and exit temperature is only a
few degrees above the room temperature while it is at the peak and the centre of the
tunnel. The fast fire kiln, which uses ceramic rollers, is another kind of continuous kiln,
used specially for single firing technology and where the firing cycle duration is
drastically reduced.

Storage: - After firing, the tiles is allowed to cool at room temperature, stacked on
pallets and taken to the sorting area where it is separated by shade and grade. In the past,
the inspection was largely done manually however; automatic tile inspection machines
are now increasingly being used across the world by the large manufactures. It may be
noted that the technology or processing described above is as per the International
Standards and is widely used across the ceramic industries in the world.

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IX. FINANCIAL ANALYSIS

9.1. ANALYSIS
The financial analysis of this ceramic manufacturing project is based on the data presented in the
previous chapters and the following assumptions and financial analysis are designed to provide
the overall financial position and performance of the project at a time. In order to give this
overall picture, major financial reports that used on the regular base are important to show the
financial status like profit and loss statement. The detailed is presented below: -

9.2. Basic Assumptions

Number of working hours per day …………………..................................................................….8

Numbers of working shift per day…………………………………………………………………...1

Number of holyday per day…………………………………………………………………….....13

Number off work days (Sundays) per year………………………………………………………...52

Annual Number of working days…………………………………………….…………………...300

Source of finance ……………………………………………………………................ equity 100%

Discount Rate ………………….……………………………………….……………………....12%

Wage and salaries …………………………………………………………...increase 5% per annum

Fuel and lubricant …………………………………………………….... increase by 5% per annum

Depreciation…………..……………………………………….…10% original cost of all fixed assets

except vehicles which shall be 20% of original cost

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9.3. Total Investment Cost

The total investment cost of the project is calculated based on the company’s objective and the
requirement of investment items for the intended purpose and found to be Birr 10 161 448 812.

Table 9.1: The details of total investment cost of this project is depicted on the table below

Existing Planned Investment

Total Project Cost Shar
Description Investment Cost
(Birr) e (%)
(Birr) (Birr)

Building and Construction - 2 065 350 000 2 065 350 000

Machinery and Equipment - 5 200 004 450 5 200 004 450
Vehicles - 42 800 000 42 800 000 71%
Office Furniture & Equipment
- 4 596 895 4 596 895
Total Fixed Assets 7 312 751 345 7 312 751 345

Pre-production expense 73 127 513 28 486 975 101 614 488

1%
Sub total 73 127 513 28 486 975 101 614 488
Working Capital - 2 848 697 467 2 848 697 467
28%
Sub-total - 2 848 697 466,67 2 848 697 466,67
Total 10 161 448 812 10 161 448 812 100%

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9.4. Expected Financial Results

9.4.1. Production Cost

The annual production cost at its operation capacity is estimated at Birr 2.8 billion in the first
year and Birr 2.9 billion in the ten year. The detail production cost is seeing in the appendix.

9.4.2. Revenue

The total revenue expected from this project is assumed to drive from the planned activities to be
performed. The projection for the income statement is primarily derived from market based sale
estimates which is based on adequate market assessment and guaranteed sales from previous
experiences. The project revenue assumption was based on the current market prices with the
pessimistic approach and it is calculated to be Birr 5.7 billion in the first year and Birr 10.2
billion at the end of the tenth years of operation. The detail is seen in the appendix.

9.4.3. Profit

Profitability, the profit projection in the financial statement for the consecutive ten years show a
profit from the beginning year up to the tenth year and the project can earn a net profit of Birr
931.6 million and Birr 3.6 billion in the first and tenth years of operation respectively.

9.4.4. Liquidity

The cash flow projection also shows a progressive cumulative cash balance from Birr 1.8 billion
of the first project year to Birr 31.2 billion of the last projection period implying that the project
will not face liquidity constraint to finance its operational costs meeting at the same time its debit
obligation.

9.4.5. Balance Sheet Projection

Balance Sheet Projection is used to provide insight into the assets of the project and debts of the
project at a particular point in time. Total assets of the project expected to rise from Birr 10.1
billion in the beginning to Birr 34.1 billion at the end projection period. For more information,
the projected balance sheet at the annex.

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9.4.6. Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by revenue,
return on assets (operating income divided by assets), return on equity (net profit divided by
equity) and return on total investment (net profit plus interest divided by total investment) has
been carried out over the period of the project life and all the results are found to be satisfactory.

9.4.7. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point for capacity utilization and sales value estimated by using income statement projection are
computed as follows. Break Even Sales Value is achieved when Revenue= operating cost but
achieved a very minimum operation 50% capacity utilization which can be achieved at the first
years which shows high level of return on the project.

9.4.8. Pay-back Period

The pay- back period, also called pay- off period is defined as the period required for recovering
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within four years which can be said to be high period of recovery.

9.4.9. Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal rate
of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of return
that could be earned by alternate investments or putting the money in a bank account.

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Accordingly, the IRR of this project after tax is computed to be 27% indicating the viability of
the project.
9.4.10. 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 after tax at 12% discount rate is found to be Birr
7 645 943 865 which is acceptable. For detail discounted cash flow sees Appendix.

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X. SOCIO ECONOMIC BENEFITOF THE PROJECT

As stated in many literatures, Ethiopia is among the countries that have fastest economic growth
in the world and the government tries to transfer the economy towards industrialization.
Therefore, the development and establishment of such manufacturing industries are very
important to form a practical change in the sector. As such there will be a number of reasons to
be stated that the establishment of this project can achieve in the economy of this country.
Among these socio economic benefits one can easily state the followings:

10.1. Saving Foreign Currency

One of the commodities that country imported from international market is ceramic products.
Thus the implementation of this project can save this huge foreign currency that can be used for
other development programs. Then project can support this objective of the government by
supplying the products to local markets.

10.2. Create Job Opportunity

The contribution of such manufacturing industry in job opportunity creation for a lot of
workforces and there by salary/wage income generation for the employees is also significant.
The project is expected to create more than 700 permanent employments from various
disciplines.

10.3. Source of Income

It can generate revenue for the company in the form of profit, to the surrounding society in the
form of salary and wage and also the government gets income in the form of income tax from
employees’ salary and wage and profit tax from the business.

10.4. GDP Contribution

The manufacturing sector is the major contributor for economic growth of the nation and also
the government of the country has planned to be leading sector in the economy after the end of
the 10th year growth development plan. So, this project has its own contribution in attaining the
huge plan of the country in two main directions. The primary contribution is that the project can
add its own value on the economy.

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10.5. Technology and Knowledge Transfer

The development of this subsector transfer new technology and knowledge by introducing
modern production techniques that optimize production and quality of product.

10.6. Creates linkages

This project can have backward linkages to the mining sector and forward linkage to the
manufacturing sector. As a result, this project is a project which seems an imaginary for
economic growth by offering all advantages that a project can give for a country.

XI. CONCLUSION AND RECOMMENDATIONS

The proposed project site is potential area for the main raw material that will be used for factory
input. The location satisfies the requirements of project implementation (access for raw material

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availability, customer/market for output and manpower). The involvements of private investors in
production of ceramic products are welcomed in to higher return of the country development.

As to this study the projects objective is attainable and very supportive to the overall
development goal of the country in investment attraction, job creation, income generating to the
government, foreign currency saving and technology transferable to the society. In line with this
the market study of the project shows the existence of large demand for quality ceramic product.
Meanwhile, the project is found economically, financially and technical feasible. Based on the
above facts the study man easily forwarded the following recommendations.
• The promoter should expert maximum exert to implement the project as per proposed in
the study both technically and financially.
• Maximum effort should be exerted to produce quality and best type of ceramic products
with reasonable profit margin than the other competitors do.
• Any governmental organization approached for any support to the implementation of the
project is advised to support the project as the project is economically, socially,
financially and technically feasible and plays great role in the city as well the country.

In general, the business has good opportunity to fill the demand and supply gap of the intended
product with high profitable. The plant will be made to operate to the maximum capacity as
much as possible and with good quality products as per international standard. Thus, all
concerned parties involved in this project should exert maximum effort for the implementation of
the project.

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XII. APPENDIXES

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING

PROJECT

LIST OF INVESTMENT ITEMS

1. Land Holding
Total land Holding in M2 150 000 M2

Total Cost of land Holding 67 500 000 Birr

Down Payment 6 750 000 Birr

Annual Payment 1 557 692 Birr

2. General Assumptions
Working day 300 per annum

Effective work hour 8 per shift

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Number of shifts 1 per day

Theoretical capacity of Ceramic Products 1 200 Ton per hour

9 600 Ton per shift

Ton per
2 880 000 Annum
Note: the factory will start operation at 60% of average theoretical capacity and increased by
10% at its maximum level of 90%
Product Mix and shares

Average Total Revenue

Production @ full Price per @ full
S/N Product Type Share
capacity (ton) Liter Capacity
(Birr) (Birr)

1 50% 1 440 000

Sanitary Ware 5 500 7 920 000 000
2 Tiles 50% 1 440 000
1 100 1 584 000 000
Total 100%
2 880 000 9 504 000 000

3. Production @ Different Capacity

Production at capacity Utilization (tone)

Year Capacity Utilization Rate
Sanitary Ware Tiles Total

Production Amount @Full

1 440 000 1 440 000 84 000 000
capacity

864 000 864 000 50 400 000

1 60%

1 008 000 1 008 000 58 800 000

2 70%

1 152 000 1 152 000 67 200 000

3 80%

1 296 000 1 296 000 75 600 000

4 90%

1 296 000 1 296 000 75 600 000

5 90%

1 296 000 1 296 000 75 600 000

6 90%

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7 90% 1 296 000 1 296 000 75 600 000

1 296 000 1 296 000 75 600 000

8 90%

1 296 000 1 296 000 75 600 000

9 90%

1 296 000 1 296 000 75 600 000

10 90%

4. Revenue of the Project @ capacity

utilization rate

Revenue at capacity Utilization (kg)

Capacity Utilization
Year
Rate Total Revenue
Sanitary Ware Tiles
(Birr)

1 60% 4 752 000 000 950 400 000 5 702 400 000

2 70% 5 544 000 000 1 108 800 000 6 652 800 000

3 80% 6 336 000 000 1 267 200 000 7 603 200 000

4 90% 7 128 000 000 1 425 600 000 8 553 600 000

5 90% 7 128 000 000 1 425 600 000 8 553 600 000

6 90% 7 128 000 000 1 425 600 000 8 553 600 000

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7 90% 7 128 000 000 1 425 600 000 8 553 600 000

8 90% 7 128 000 000 1 425 600 000 8 553 600 000

9 90% 7 128 000 000 1 425 600 000 8 553 600 000

10 90% 7 128 000 000 1 425 600 000 8 553 600 000

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BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

OPERATING COSTS

Description PROJECT YEARS

1 2 3 4 5 6 7 8 9 10
Raw material
and Inputs 2 667 301 000 2 693 974 010 2 720 913 750 2 748 122 888 2 775 604 116 2 803 360 158 2 831 393 759 2 859 707 697 2 888 304 774 2 917 187 822
Land Rent
Payment 7 950 000 6 360 000 6 360 000 6 360 000 6 487 200 6 616 944 6 749 283 6 884 269 7 021 954 7 162 393
wages
&salary 32 868 000 34 511 400 36 236 970 38 048 819 39 951 259 41 948 822 44 046 264 46 248 577 48 561 006 50 989 056
Employees
Benefit 3 286 800 6 902 280 7 247 394 7 609 764 7 990 252 8 389 764 8 809 253 9 249 715 9 712 201 10 197 811

Utilities
12 500 000 13 750 000 15 125 000 16 637 500 18 301 250 20 131 375 22 144 513 24 358 964 26 794 860 29 474 346
Repair
&maintenance 75 800 000 77 316 000 78 862 320 80 439 566 82 048 358 83 689 325 85 363 111 87 070 374 88 811 781 90 588 017

Fuel &oil
52 000 000 54 600 000 57 330 000 60 196 500 63 206 325 66 366 641 69 684 973 73 169 222 76 827 683 80 669 067
Miscellaneous
Expense 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000
Marketing
expense 65 000 000 52 000 000 41 600 000 33 280 000 26 624 000 21 299 200 17 039 360 13 631 488 10 905 190 8 724 152

Audit Fees
3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000

Uniforms
21 500 000 22 575 000 23 703 750 24 888 938 26 133 384 27 440 054 28 812 056 30 252 659 31 765 292 33 353 557
Administrative
Expenses 32 150 000 33 757 500 35 445 375 37 217 644 39 078 526 41 032 452 43 084 075 45 238 279 47 500 193 49 875 202

Insurance
17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000

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Total 3 025 855 800 3 051 246 190 3 078 324 559 3 108 301 617 3 140 924 671 3 175 774 735 3 212 626 647 3 251 311 242 3 291 704 934 3 333 721 423

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

WORKING CAPITAL DETERMINATION

project years
Description
0 1 2 3 4 5 6 7 8 9 10

Raw
materials 2 667 301 000 2 667 301 000 2 693 974 010 2 720 913 750 2 748 122 888 2 775 604 116 2 803 360 158 2 803 360 158 2 803 360 158 2 803 360 158 2 803 360 158
Land Rent
Payment 7 950 000 7 950 000 6 360 000 6 360 000 6 360 000 6 487 200 6 616 944 6 749 283 6 884 269 7 021 954 7 162 393
Wages &
salaries 32 868 000 32 868 000 34 511 400 36 236 970 38 048 819 39 951 259 41 948 822 44 046 264 46 248 577 48 561 006 50 989 056
Employees
benefit 3 286 800 3 286 800 1 150 380 1 207 899 1 268 294 1 331 709 1 398 294 1 468 209 1 541 619 1 618 700 1 699 635

Utilities 1 041 667 1 041 667 1 145 833 1 260 417 1 386 458 1 525 104 1 677 615 1 845 376 2 029 914 2 232 905 2 456 196
Repair
&maintenance 75 800 000 75 800 000 6 443 000 6 571 860 6 703 297 6 837 363 6 974 110 7 113 593 7 255 864 7 400 982 7 549 001
Oil &
Lubricant 4 333 333 4 333 333 4 550 000 4 777 500 5 016 375 5 267 194 5 530 553 5 807 081 6 097 435 6 402 307 6 722 422

Misc. Expense 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000 2 875 000
Marketing
expense 5 416 667 5 416 667 4 333 333 3 466 667 2 773 333 2 218 667 1 774 933 1 419 947 1 135 957 908 766 727 013

Audit Fees 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000

Uniforms 10 750 000 10 750 000 11 287 500 11 851 875 12 444 469 13 066 692 13 720 027 14 406 028 15 126 330 15 882 646 16 676 778
Administrative
Expenses 16 075 000 16 075 000 16 878 750 17 722 688 18 608 822 19 539 263 20 516 226 21 542 037 22 619 139 23 750 096 24 937 601

Insurance 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000

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Total 2 848 697 467 2 848 697 467 2 804 509 207 2 834 244 625 2 864 607 755 2 895 703 567 2 927 392 683 2 931 632 975 2 936 174 262 2 941 014 519 2 946 155 253
Increase in
W/ capital - (44 188 260) 29 735 418 30 363 130 31 095 813 31 689 115 4 240 292 4 541 287 4 840 258 5 140 734

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

PROJECTED PROFIT & LOSS STATEMENT

Description PROJECT YEARS

1 2 3 4 5 6 7 8 9 10
Gross Revenue 5 702 400 000 6 652 800 000 7 603 200 000 8 553 600 000 8 810 208 000 9 074 514 240 9 346 749 667 9 627 152 157 9 915 966 722 10 213 445 724

Operating Cost
Raw material and Inputs 2 667 301 000 2 693 974 010 2 720 913 750 2 748 122 888 2 775 604 116 2 803 360 158 2 831 393 759 2 859 707 697 2 888 304 774 2 917 187 822
wages &salary 32 868 000 34 511 400 36 236 970 38 048 819 39 951 259 41 948 822 44 046 264 46 248 577 48 561 006 50 989 056
Employees Benefit 3 286 800 6 902 280 7 247 394 7 609 764 7 990 252 8 389 764 8 809 253 9 249 715 9 712 201 10 197 811
Utilities 12 500 000 13 750 000 15 125 000 16 637 500 18 301 250 20 131 375 22 144 513 24 358 964 26 794 860 29 474 346
Repair &maintainance 75 800 000 77 316 000 78 862 320 80 439 566 82 048 358 83 689 325 85 363 111 87 070 374 88 811 781 90 588 017
Fuel &oil 52 000 000 54 600 000 57 330 000 60 196 500 63 206 325 66 366 641 69 684 973 73 169 222 76 827 683 80 669 067
Miscellaneous Expense 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000 34 500 000
Marketing expense 65 000 000 52 000 000 41 600 000 33 280 000 26 624 000 21 299 200 17 039 360 13 631 488 10 905 190 8 724 152
Audit Fees 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000 3 500 000
Uniforms 21 500 000 22 575 000 23 703 750 24 888 938 26 133 384 27 440 054 28 812 056 30 252 659 31 765 292 33 353 557
Administrative Expenses 32 150 000 33 757 500 35 445 375 37 217 644 39 078 526 41 032 452 43 084 075 45 238 279 47 500 193 49 875 202
Insurance 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000 17 500 000

Total Operating cost 3 017 905 800 3 044 886 190 3 071 964 559 3 101 941 617 3 134 437 471 3 169 157 791 3 205 877 364 3 244 426 974 3 284 682 980 3 326 559 030
Profit before
Interest&depn. 2 684 494 200 3 607 913 810 4 531 235 441 5 451 658 383 5 675 770 529 5 905 356 449 6 140 872 303 6 382 725 183 6 631 283 742 6 886 886 694

Deprec.&Amort 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580

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Profit before tax 1 433 218 621 2 356 638 231 3 279 959 861 4 200 382 803 4 424 494 950 4 654 080 869 4 889 596 724 5 131 449 604 5 380 008 163 5 635 611 114

Less: Profit tax 501 618 567 824 815 431 1 147 978 001 1 470 126 031 1 548 565 282 1 628 920 354 1 711 350 903 1 795 999 411 1 882 994 907 1 972 455 940

Net profit after tax 931 600 053 1 531 822 800 2 131 981 860 2 730 256 772 2 875 929 667 3 025 160 515 3 178 245 821 3 335 450 193 3 497 013 256 3 663 155 174

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

PROJECTED CASH FLOW STATEMENT

Description PROJECT YEARS

0 1 2 3 4 5 6 7 8 9 10

Inflows

Own contribution 10 161 448 812

Net profit - 931 600 053 1 531 822 800 2 131 981 860 2 730 256 772 2 875 929 667 3 025 160 515 3 178 245 821 3 335 450 193 3 497 013 256 3 663 155 174

Depreciation - 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580 1 251 275 580

Total Inflows 10 161 448 812 2 182 875 633 2 783 098 379 3 383 257 439 3 981 532 351 4 127 205 247 4 276 436 094 4 429 521 400 4 586 725 772 4 748 288 835 4 914 430 754

Outflows -

fixed investment 7 312 751 345 - - - - - - - - - -

Working Capital &

its increment
2 848 697 467 - (44 188 260) 29 735 418 30 363 130 31 095 813 31 689 115 4 240 292 4 541 287 4 840 258 5 140 734
Pre Operating
Exspense

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Dividend - 279 480 016 459 546 840 639 594 558 819 077 032 862 778 900 907 548 154 953 473 746 1 000 635 058 1 049 103 977 1 098 946 552

Loan Repayment - 9 144 201 2 033 771 2 033 771 2 033 771 2 033 771 2 033 771 2 033 771 2 033 771 2 033 771 2 033 771

Total outflows 10 161 448 812 288 624 217 417 392 351 671 363 748 851 473 933 895 908 485 941 271 041 959 747 810 1 007 210 116 1 055 978 006 1 106 121 058

Net cash flow - 1 894 251 416 2 365 706 028 2 711 893 692 3 130 058 419 3 231 296 762 3 335 165 053 3 469 773 590 3 579 515 656 3 692 310 830 3 808 309 696
Cumulative net
cash - 1 894 251 416 4 259 957 444 6 971 851 136 10 101 909 554 13 333 206 317 16 668 371 370 20 138 144 960 23 717 660 616 27 409 971 446 31 218 281 142

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

DEPRECIATION

Project Years
Percentage
Sr. of Depreciation
Description Original cost
No Original Annually
cost 1 2 3 4 5 6 7 8 9 10

A. Depreciation

Building and 2 065 350 1 858 815 1 652 280 1 445 745 1 239 210 1 032 675
2 10% 206 535 000 826 140 000 619 605 000 413 070 000 206 535 000 -
Construction 000 000 000 000 000 000

Machinery
5 200 004 1 040 000 4 160 003 3 120 002 2 080 001 1 040 000 5 200 004 4 160 003 1 040 000
3 and 20% 3 120 002 670 2 080 001 780 -
450 890 560 670 780 890 450 560 890
Equipment

4 Vehicles 42 800 000 10% 4 280 000 38 520 000 34 240 000 29 960 000 25 680 000 21 400 000 17 120 000 12 840 000 8 560 000 4 280 000 -

Office
5 Furniture & 4 596 895 10% 459 690 4 137 206 3 677 516 3 217 827 2 758 137 2 298 448 1 838 758 1 379 069 919 379 459 690 -
Equipment

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7 312 751 1 251 275 6 061 475 4 810 200 3 558 924 2 307 649 6 256 377 5 005 102 1 251 275
Sub Total 3 753 826 739 2 502 551 159 -
345 580 766 186 607 027 898 318 580

B. Amortization

7 312 751 1 251 275 6 061 475 4 810 200 3 558 924 2 307 649 6 256 377 5 005 102 1 251 275
Total - 3 753 826 739 2 502 551 159 -
345 580 766 186 607 027 898 318 580

Depreciation Cost 1 251 275 1 251 275 1 251 275 1 251 275 1 251 275 1 251 275 1 251 275
1 251 275 580 1 251 275 580 1 251 275 580
Per Annum 580 580 580 580 580 580 580

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

BALANCE SHEET STATEMENT

PROJECT YEARS

Description 0 1 2 3 4 5 6 7 8 9 10

Assets

1.Current Assets

Cash - 1 894 251 416 4 259 957 444 6 971 851 136 10 101 909 554 13 333 206 317 16 668 371 370 20 138 144 960 23 717 660 616 27 409 971 446 31 218 281 142

Inventory 2 848 697 467 2 848 697 467 2 804 509 207 2 834 244 625 2 864 607 755 2 895 703 567 2 927 392 683 2 931 632 975 2 936 174 262 2 941 014 519 2 946 155 253

Sub-total 2 848 697 467 4 742 948 883 7 064 466 651 9 806 095 761 12 966 517 309 16 228 909 884 19 595 764 053 23 069 777 935 26 653 834 878 30 350 985 965 34 164 436 395

2.Fixed Assets
Building and
Construction 2 065 350 000 1 858 815 000 1 652 280 000 1 445 745 000 1 239 210 000 1 032 675 000 826 140 000 619 605 000 413 070 000 206 535 000 -
Machinery and
Equipment 5 200 004 450 1 858 815 000 1 652 280 000 1 445 745 000 1 239 210 000 1 032 675 000 826 140 000 619 605 000 413 070 000 206 535 000 -

Vehicles 42 800 000 4 160 003 560 3 120 002 670 2 080 001 780 1 040 000 890 5 200 004 450 4 160 003 560 3 120 002 670 2 080 001 780 1 040 000 890 -
Office Furniture &
Equipments 4 596 895 38 520 000 34 240 000 29 960 000 25 680 000 21 400 000 17 120 000 12 840 000 8 560 000 4 280 000 -

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Sub-total 7 312 751 345 7 916 153 560 6 458 802 670 5 001 451 780 3 544 100 890 7 286 754 450 5 829 403 560 4 372 052 670 2 914 701 780 1 457 350 890 -

Total Assets 10 161 448 812 12 659 102 443 13 523 269 321 14 807 547 541 16 510 618 199 23 515 664 334 25 425 167 613 27 441 830 605 29 568 536 658 31 808 336 855 34 164 436 395

Liability &Capital

Liability

Capital

Owners equity 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812 10 161 448 812

Retained earnings - 2 497 653 631 3 361 820 509 4 646 098 729 6 349 169 387 13 354 215 522 15 263 718 801 17 280 381 793 19 407 087 846 21 646 888 043 24 002 987 583

Total liab& Capital 10 161 448 812 12 659 102 443 13 523 269 321 14 807 547 541 16 510 618 199 23 515 664 334 25 425 167 613 27 441 830 605 29 568 536 658 31 808 336 855 34 164 436 395

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

Calculation of Financial Internal Rate of Return

Fixed Total Cost

Working Capital Operating Net Benefit Net Benefit
Year Revenue Asset Total Benefits Initial Inv't. Replacement Total Costs Profit Tax Including
Recovery Costs Before Tax After Tax
Recovery Profit Tax

0 - 10 161 448 812 10 161 448 812 10 161 448 812 (10 161 448 812) (10 161 448 812)

1 5 702 400 000 5 702 400 000 3 025 855 800 3 025 855 800 501 618 567 3 527 474 367 2 676 544 200 2 174 925 633

2 6 652 800 000 6 652 800 000 3 051 246 190 3 051 246 190 824 815 431 3 876 061 621 3 601 553 810 2 776 738 379

3 7 603 200 000 7 603 200 000 3 078 324 559 3 078 324 559 1 147 978 001 4 226 302 561 4 524 875 441 3 376 897 439

4 8 553 600 000 8 553 600 000 3 108 301 617 3 108 301 617 1 470 126 031 4 578 427 649 5 445 298 383 3 975 172 351

5 8 810 208 000 8 810 208 000 5 200 004 450 3 140 924 671 8 340 929 121 1 548 565 282 9 889 494 403 469 278 879 (1 079 286 403)

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6 9 074 514 240 9 074 514 240 3 175 774 735 3 175 774 735 1 628 920 354 4 804 695 090 5 898 739 505 4 269 819 150

7 9 346 749 667 9 346 749 667 3 212 626 647 3 212 626 647 1 711 350 903 4 923 977 550 6 134 123 021 4 422 772 117

8 9 627 152 157 9 627 152 157 3 251 311 242 3 251 311 242 1 795 999 411 5 047 310 654 6 375 840 915 4 579 841 503

9 9 915 966 722 9 915 966 722 3 291 704 934 3 291 704 934 1 882 994 907 5 174 699 841 6 624 261 788 4 741 266 881

10 10 213 445 724 2 946 155 253 - 13 159 600 976 3 333 721 423 3 333 721 423 1 972 455 940 5 306 177 363 9 825 879 554 7 853 423 614

IRR Before Tax 37%

IRR After Tax 27%

NPV Before Tax

14 230 209 655
NPV After Tax
7 645 943 865

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

PROJECTED FINANCIAL RATE OF RETURN
If Revenue Decreases by 10%

Fixed Total Cost

Working Capital Operating Net Benefit Net Benefit
Year Revenue Asset Total Benefits Initial Inv't. Replacement Total Costs Profit Tax Including
Recovery Costs Before Tax After Tax
Recovery Profit Tax

10 161 448 10 161 448 10 161 448 (10 161 448 (10 161 448
0 - - - -
812 812 812 812) 812)

1 5 132 160 000 5 132 160 000 3 025 855 800 3 025 855 800 501 618 567 3 527 474 367 2 106 304 200 1 604 685 633

2 5 987 520 000 5 987 520 000 3 051 246 190 3 051 246 190 824 815 431 3 876 061 621 2 936 273 810 2 111 458 379

3 6 842 880 000 6 842 880 000 3 078 324 559 3 078 324 559 1 147 978 001 4 226 302 561 3 764 555 441 2 616 577 439

Promoted by: Grandever Ceramic Manufacturing Plc. 72

 FEASIBILITY STUDY FOR THE ESTABLISHMENT OF CERAMIC PRODUCTS
MANUFACTURING PROJECT

4 7 698 240 000 7 698 240 000 3 108 301 617 3 108 301 617 1 470 126 031 4 578 427 649 4 589 938 383 3 119 812 351

(1 960 307
5 7 929 187 200 7 929 187 200 5 200 004 450 3 140 924 671 8 340 929 121 1 548 565 282 9 889 494 403 (411 741 921)
203)

6 8 167 062 816 8 167 062 816 3 175 774 735 3 175 774 735 1 628 920 354 4 804 695 090 4 991 288 081 3 362 367 726

7 8 412 074 700 8 412 074 700 3 212 626 647 3 212 626 647 1 711 350 903 4 923 977 550 5 199 448 054 3 488 097 150

8 8 664 436 941 8 664 436 941 3 251 311 242 3 251 311 242 1 795 999 411 5 047 310 654 5 413 125 699 3 617 126 288

9 8 924 370 050 8 924 370 050 3 291 704 934 3 291 704 934 1 882 994 907 5 174 699 841 5 632 665 116 3 749 670 209

12 138 256
10 9 192 101 151 2 946 155 253 - 3 333 721 423 3 333 721 423 1 972 455 940 5 306 177 363 8 804 534 981 6 832 079 041
404
IRR Before Tax 30%

IRR After Tax 19%

NPV Before Tax 10 139 151 770

5
NPV After Tax 3 554 885 980 987 520 3 3 051 824 815 3 876 061 2 936 2 111
000 - - 051 246 190 246 190 431 621 273 810 458 379

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

If Operating Costs Increases by 10%
Fixed Total Cost
Working Capital Operating Net Benefit Net Benefit
Year Revenue Asset Total Benefits Initial Inv't. Replacement Total Costs Profit Tax Including
Recovery Costs Before Tax After Tax
Recovery Profit Tax

0 - 10 161 448 812 10 161 448 812 - 10 161 448 812 (10 161 448 812) (10 161 448 812)

1 5 702 400 000 5 702 400 000 3 328 441 380 3 328 441 380 501 618 567 3 830 059 947 2 373 958 620 1 872 340 053

2 6 652 800 000 6 652 800 000 3 356 370 809 3 356 370 809 824 815 431 4 181 186 240 3 296 429 191 2 471 613 760

3 7 603 200 000 7 603 200 000 3 386 157 015 3 386 157 015 1 147 978 001 4 534 135 017 4 217 042 985 3 069 064 984

4 8 553 600 000 8 553 600 000 3 419 131 779 3 419 131 779 1 470 126 031 4 889 257 810 5 134 468 221 3 664 342 190

Promoted by: Grandever Ceramic Manufacturing Plc. 73

 FEASIBILITY STUDY FOR THE ESTABLISHMENT OF CERAMIC PRODUCTS
MANUFACTURING PROJECT

5 8 810 208 000 8 810 208 000 5 200 004 450 3 455 017 138 8 655 021 588 1 548 565 282 10 203 586 870 155 186 412 (1 393 378 870)

6 9 074 514 240 9 074 514 240 3 493 352 209 3 493 352 209 1 628 920 354 5 122 272 563 5 581 162 031 3 952 241 677

7 9 346 749 667 9 346 749 667 3 533 889 311 3 533 889 311 1 711 350 903 5 245 240 215 5 812 860 356 4 101 509 453

8 9 627 152 157 9 627 152 157 3 576 442 367 3 576 442 367 1 795 999 411 5 372 441 778 6 050 709 791 4 254 710 379

9 9 915 966 722 9 915 966 722 3 620 875 427 3 620 875 427 1 882 994 907 5 503 870 334 6 295 091 295 4 412 096 388

10 10 213 445 724 2 946 155 253 - 13 159 600 976 3 667 093 565 3 667 093 565 1 972 455 940 5 639 549 505 9 492 507 412 7 520 051 472

IRR Before Tax 34%

IRR After Tax 24%

NPV Before Tax 12 648 198 435

NPV After Tax 6 063 932 645

BUSINESS PROPOSAL FOR THE ESTABLISHMENT OF CERAMIC MANUFACTURING PROJECT

If Investment Costs Increases by 10%
Fixed Total Cost
Working Capital Operating Net Benefit Net Benefit
Year Revenue Asset Total Benefits Initial Inv't. Replacement Total Costs Profit Tax Including
Recovery Costs Before Tax After Tax
Recovery Profit Tax

0 - 11 177 593 693 11 177 593 693 - 11 177 593 693 (11 177 593 693) (11 177 593 693)

1 5 702 400 000 5 702 400 000 3 328 441 380 3 328 441 380 501 618 567 3 830 059 947 2 373 958 620 1 872 340 053

2 6 652 800 000 6 652 800 000 3 356 370 809 3 356 370 809 824 815 431 4 181 186 240 3 296 429 191 2 471 613 760

3 7 603 200 000 7 603 200 000 3 386 157 015 3 386 157 015 1 147 978 001 4 534 135 017 4 217 042 985 3 069 064 984

4 8 553 600 000 8 553 600 000 3 419 131 779 3 419 131 779 1 029 088 222 4 448 220 001 5 134 468 221 4 105 379 999

Promoted by: Grandever Ceramic Manufacturing Plc. 74

 FEASIBILITY STUDY FOR THE ESTABLISHMENT OF CERAMIC PRODUCTS
MANUFACTURING PROJECT

5 8 810 208 000 8 810 208 000 5 720 004 895 3 455 017 138 9 175 022 033 1 548 565 282 10 723 587 315 (364 814 033) (1 913 379 315)

6 9 074 514 240 9 074 514 240 3 493 352 209 3 493 352 209 1 628 920 354 5 122 272 563 5 581 162 031 3 952 241 677

7 9 346 749 667 9 346 749 667 3 533 889 311 3 533 889 311 1 711 350 903 5 245 240 215 5 812 860 356 4 101 509 453

8 9 627 152 157 9 627 152 157 3 576 442 367 3 576 442 367 1 795 999 411 5 372 441 778 6 050 709 791 4 254 710 379

9 9 915 966 722 9 915 966 722 3 620 875 427 3 620 875 427 1 882 994 907 5 503 870 334 6 295 091 295 4 412 096 388

10 10 213 445 724 2 946 155 253 - 13 159 600 976 3 667 093 565 3 667 093 565 1 972 455 940 5 639 549 505 9 492 507 412 7 520 051 472

IRR Before Tax 31%

IRR After Tax 21%

NPV Before Tax 11 477 477 812

NPV After Tax 5 143 468 719

Promoted by: Grandever Ceramic Manufacturing Plc. 75

FEASIBILITY STUDY FOR THE ESTABLISHMENT OF CERAMIC PRODUCTS MANUFACTURING
PROJECT
Promoted by: Grandever Ceramic Manufacturing Plc. 76