60 40 Corn Flake Axum
60 40 Corn Flake Axum
60 40 Corn Flake Axum
ESTABLISHMENT
of
At
Tel. 0914301612
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Project proposal for the establishment of corn flakes factory @ Axum town
Table of content
1. EXECUTIVE SUMMARY........................................................................................................... 4
2. INTRODUCTION........................................................................................................................ 6
3. MARKET STUDY....................................................................................................................... 9
4. TECHNICAL STUDY................................................................................................................ 12
6. ENVIRONMENTAL IMPACT.................................................................................................. 24
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Project proposal for the establishment of corn flakes factory @ Axum town
Tables
TABLE 1: SUMMARY OF INITIAL INVESTMENT COST..........................................................5
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Project proposal for the establishment of corn flakes factory @ Axum town
1. EXECUTIVE SUMMARY
The initial investment cost of the project is estimated birr 27.09 million. From this birr
24.26 million is for fixed cost and birr 2.84 million for working capital. The major
breakdown of the total initial investment cost is shown in the following Table.
TABLE 1: SUMMARY OF INITIAL INVESTMENT COST
The necessary constructions such as machinery house, office, store, toilet & shower, land
preparation and other necessary structures will be constructed. (See table -8).
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Project proposal for the establishment of corn flakes factory @ Axum town
2. INTRODUCTION
They have involved in many businesses and got more than 22 years of experience in
various business activities including construction sectors. Their close experience on
different business coupled with the motivation of the government to investment has
kindled the idea of establishing corn flakes manufacturing plant at Axum town where
there is no such an establishment.
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Project proposal for the establishment of corn flakes factory @ Axum town
the main raw material. Flavours, like sugar or salt, are also added. Maize, the main raw
material, is itself a corn grain.
Corn Flakes are used mainly as break-fast food along with milk. They are also used for
making any delicious food by cooking. It is also being given to patients, since it
contains carbohydrates, protein and starch. This food acts as a stimulant for patients.
Corn flakes are mainly consumed by upper strata of society, in hotels, hospitals,
nursing homes etc. It is economical, convenient, nutritious and flavorful food suitable
for daily consumption. People getting modernized they need some sophistication in
their food also the need of which fulfilled by corn flakes. The per capita consumption
of corn flakes has increased many times as compared to last decade.
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Project proposal for the establishment of corn flakes factory @ Axum town
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Project proposal for the establishment of corn flakes factory @ Axum town
3. MARKET STUDY
The above table reveals that in 2006/07 alone a little less than half of the total
demand is met through import. A report by UNIDO in 2003 pointed out that there is
a worthwhile demand of corn flakes in the capital city, Addis Ababa alone mainly
by the international community, but also to a great extent by the affluent population
due to its ease and fast preparation. However, the fact that the price of imported
corn flakes is relatively high, being 50 times, the price of maize utilized to produce
it, the demand for the product is likely to increase substantially if production takes
place locally at a reasonable price.
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Project proposal for the establishment of corn flakes factory @ Axum town
The 2006 statistical abstract confirm that there are 12.2 million people living in the
urban places of Ethiopia. With average family size of 5, this represents roughly 2.5
million families. If we conservatively assume that only 2.5 percent of these families
are able to demand the product, the number of families with potential demand will
be 62,500 families. With further conservative assumption of 1 kilogram of
cornflakes consumed per a family per week with the reduced price, the annual
demand would be 3000 tons of corn flakes. This demand analysis increases when
the international community and demand of hotels, restaurants and cafes is added in
the computation. Moreover, the advancement of modernization in the urban places
is likely to boost the demand for the product under study. Thus, taking a
conservative consideration of 4 percent growth of urbanization per annum, the
future demand of corn flakes 2007/8, 2008/9 and 2009/10 estimated at 3120, 3245
and 3375 respectively. The projected demand is indicated in the following table.
According to table 4, forecasted demand reaches 3,375 tons by 2009/10 and increases by
48% within 10 years (2019/20)
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Project proposal for the establishment of corn flakes factory @ Axum town
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Project proposal for the establishment of corn flakes factory @ Axum town
4. TECHNICAL STUDY
Based on the outcome of market study and considering the minimum economic scale
of production, the envisaged plant will have production capacity of 1106 tons of corn
flakes per annum at full production capacity. This capacity is proposed on the basis
of a single shift of 8 hours per day and 300 working days per annum,
The project is assumed to start operation at 75% of its rated capacity, which reaches
85% of the rated capacity in the second year. Full capacity production will be
attained in the third year and thereafter.
The project implementation will take around sixteen months. The planned project
implementation activities are shown in Table-bellow.
year 1 year 2
Activity 3rd
1st 2nd 3rd 4th 1st 2nd 4th
quarte
quarter quarter quarter quarter quarter quarter quarter
r
Construction and site work
remain activities
Procurement of machinery &
equipment with transport
Electro-mechanical installation
Commissioning
Start-up
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Project proposal for the establishment of corn flakes factory @ Axum town
Sugar is another raw material used for the manufacture of corn flakes. There are
three large-scale sugar establishments in the country. These establishments have
production capacity 280,000 tons of sugar annually. White sugar, which is used in
the manufacture of corn flakes, is mainly exported to the neighboring countries such
as Djibouti, Kenya and Yemen in quantities ranging between 30,000 to 50,000 tons
per annum.
In addition to the existing cane sugar establishments, new sugar projects are
currently under construction. After the completion of these new sugar projects, the
annual production of cane sugar in the country may reach about 1.4 million tons.
This exhibits the presence of ample raw material. Other ingredients including cocoa
powder and flavors are imported from abroad.
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Project proposal for the establishment of corn flakes factory @ Axum town
The major auxiliary materials required for the envisaged plant are packing materials
which comprise carton box, printed polypropylene film, scotch tape, polypropylene bag,
and sewing thread for bags. The annual requirement for the auxiliary materials at full
capacity production of both long cut and short cut pasta are given in Table 7.
4.5.1. Utilities
Electric power and water are the power and utilities required for the envisaged
plant. Annual requirement for power and utilities at full capacity production along
with the estimated costs is shown in Table below
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Project proposal for the establishment of corn flakes factory @ Axum town
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Project proposal for the establishment of corn flakes factory @ Axum town
content to the desired degree about 20%. The dried material is kept in demoisturing
tank for few hours in order to provide the residual moisture to become equally
distributed. This is a very important process for uniform pressing in the flakes. The
flakes may be thin or thick, depending on the moisture i.e. more the moisture, more the
thinner and less the moisture, more the thicker. These grits are again gorn washed in a
gorn separator and are stored in storage tanks for further processing.
Peeling and
Cleaning
Corn Degerming Classifying
coo
g
kin
Draying
Packing Cooling
Rolling and
toasting
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Project proposal for the establishment of corn flakes factory @ Axum town
4.6.2. Engineering
4.6.2.1. Machinery
The machineries required for producing corn flakes are Automatic corn flakes machine
(Mixer, Extruder Cooker, Coating Machine, Packaging Machine etc.)
Machine Description
The production line adopts the technology of two kinds of different texture and taste of the
product in the double screw extrusion co extruding advanced at the same time, the production
market popular sandwich rice crisp, Gamigo puffing food variety of sandwich; also, can
transform the mold and auxiliary equipment, puffed food production and nutrition powder,
cereals porridge and various shapes. The automatic production line to "features for a wide
range of raw materials, easy operation and repair, low energy consumption, high output" in the
domestic leading level.
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Project proposal for the establishment of corn flakes factory @ Axum town
The total cost of machinery is estimated to be Birr 8,800,000. of which Birr 7,026,936
is in foreign currency.
4.6.2.1. Equipment
The equipment required by the plant are listed down in Table 10.
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Project proposal for the establishment of corn flakes factory @ Axum town
unit total
S/N Description unit quantity price price
1 Managerial chair, high back pcs 5 1400 7,000
2 Open book shelf pcs 1 1800 1,800
3 Wooden filling cabinet, four pcs 1 1600
drawers 1,600
4 Coat hunger pcs 20 500 10,000
5 Executive sec. Desk and chair set 1 3300 3,300
6 Office desk pcs 5 1950 9,750
7 Arc joint table pcs 1 380 380
8 Computer table pcs 1 1960 1,960
9 Brand desktop computer with set 3 14060
42,180
network access
1 Mobile drawer pcs 1 1090
1,090
0
1 Swivel chair pcs 3 1200
3,600
1
1 Curtains & Interior Decoration
2 for office
1 Guest chair with arm seat pcs 10 850
8,500
3
Sub Total 91,160
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Project proposal for the establishment of corn flakes factory @ Axum town
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Project proposal for the establishment of corn flakes factory @ Axum town
The plant will require a total of 75 permanent workers of whom 62 are production
workers while the remaining balance, i.e, 13 are administrative workers. Annual cost of
labor is Birr 2,328,000. The human resource required by type of job and the monthly
and annual salary is indicated on Table 13. The project also employs greater than 23
workers during construction phase.
General
Manager
Secretary
Accountants
Operators, Purchaser
Quality Control , Sales Person
clerk
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TABLE 13: MANPOWER AND COST
Monthly
Item Required Work Total monthly
Position Education Level Salary
No. Number Experience
[Birr]
Salary [Birr]
A Administrative and technical
1 General Manager 1 BA. Management 5 6,000 6,000
2 Secretary 1 Diploma in Sec science 4 2,800 2,800
3 Production & Technical Manager 1 Bsc. Food Eng. 4 5,000 5,000
4 Accountants 1 Diploma in Finance 4 2,400 2,400
5 Purchaser 1 Diploma in Finance 4 3,500 3,500
6 Sales Person 2 Diploma in Marketing 4 3,700 7,400
7 Mechanics 1 Diploma in electric 4 1,400 1,400
8 Electricians 1 Diploma in electric 4 1,400 1,400
9 Guards 4 4th Grade 0 1,000 4,000
B Production 0
1 Operators 24 TVET Graduates 4 2,500 60,000
2 Quality Control 1 Diploma. Food Eng. 4 3,600 3,600
3 Clerks 2 TVET Graduates 4 2,600 5,200
4 Unskilled Labour 35 8th Grade 0 1,500 52,500
Total 62 121300
Employee Benefit: 25% of Basic 38,800
salary
Grand Total 194,000
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5.2. Training requirement
operators and leader/head should be given two weeks training on production technology,
machine operation and maintenance. On-the-job training on the operation of machines is
required by an expert from the supplier of the machinery equipment during the erection
and trial-run, production period. The total cost of training is estimated at about Birr
50,000. See table-14
N TOTAL
O DESCRIPTION PRICE BIRR
Registration, licensing and formation of the
company including legal fees, commissioning
1 expenses, etc. 100,000
2 Land tax for the 1st year 10% of total 100,000
3 Training 50,000
Total 250,000
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Project proposal for the establishment of corn flakes factory @ Axum town
6. Environmental impact
The implementation of corn flakes manufacturing project will have a pack of social and
economic benefits. It plays a role on the country’s economic development activity; as the
project create a considerable employment opportunity for the citizens, generates income for
local community. Operation of the project also creates a sustainable market opportunity for the
users of in the region and also in the country and it also saves foreign currency, stabilizes the
availability and price of respective products.
The main adverse environmental impacts potentially arise from issues associated with the
operation of the firm and theses impacts are minimal. Impacts are related to the solid and liquid
wastes, air pollution created during the operation of the firm and occupational health and safety
for workers employed with the company. Mitigation measures are available for all of the
anticipated environmental impacts and have been included in the project design.
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Project proposal for the establishment of corn flakes factory @ Axum town
The project cost estimates for the proposed “corn flakes manufacturing Business” have
been formulated on the basis of discussions with industry stakeholders and experts.
The projections cover the cost of land, machinery and equipment including office
equipment, fixtures etc. Some specific assumptions relating to individual cost
components are given as under.
To renovate the factory / office premises in every year, a cost would be incurred for
which an amount equivalent to 1.5% of the total factory/office construction cost is
estimated.
depreciation treatment
1. Machinery
2. Land & Building Construction
3. Vehicles
4. Furniture and Fixtures etc.
working capital requirements
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Project proposal for the establishment of corn flakes factory @ Axum town
For the purpose of this pre-feasibility, it has been assumed that the corn flakes
manufacturing unit is engaged in local sales. For the purpose of increasing awareness
about its product, the entity will be required to place some advertisements in local
publications. These arrangements would result in additional cost to the business for
which an amount equivalent to 1% of the annual sales has been assumed.
miscellaneous expenses
Miscellaneous expenses of running the business are assumed to be birr 107,143 per
year. These expenses include various items like daily consumables, traveling
allowances etc.
The total investment cost of the project including working capital is estimated at Birr
27.09 million, of which birr 24.26 million will be for fixed cost. The major
breakdown of the total initial investment cost is shown in Table 16
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Project proposal for the establishment of corn flakes factory @ Axum town
The annual production cost at full operation capacity is estimated at Birr 29.29 million
(see Table 17). The material and utility cost accounts for 79 per cent, salary accounts
7.95 while other costs take 13.05 per cent of the production cost.
i) Profitability
According to the projected income statement, the project will start generating profit in
the first year of operation. Important ratios such as profit to total sales, net profit to
equity (Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the life-time of the project. The income
statement and the other indicators of profitability show that the project is viable.
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Project proposal for the establishment of corn flakes factory @ Axum town
0 27,093,025
1 5,253,432 5,253,432
2 6,418,990 11,672,422
3 8,132,126 19,804,548
4 5,717,037 25,521,584
5 5,779,754 31,301,338
6 5,874,497 37,175,835
7 5,980,609 43,156,445
8 6,099,455 49,255,900
9 6,232,563 55,488,463
10 16,049,832 71,538,295
Total 71,538,295
PBP (payback period) Year 4.2719
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.
Accordingly, the net present value of the project at 12% discount rate is found to be
The project can create employment for 75 permanent and 23 temporary persons. In
addition to supply of the domestic needs, the project will generate Birr 18.94 million in
terms of tax revenue during project life.
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Project proposal for the establishment of corn flakes factory @ Axum town
1. Conclusion
The project has clear social and economic benefits and will contribute to the reduction
of poverty. The project will create considerable employment opportunities for the local
community. During the construction and operation phase, the project will create direct
job opportunity 75 permanent workers mainly from the local community. The project
also creates job opportunities for greater the 23 workers during construction. operation
of the project also creates a sustainable market opportunity for corn flakes consumers
and distributers.
In addition to this the project is expected to support the knowledge and skill transfer
effort made by the regional government to the local community and generate income to
the government in different forms of taxes from its operation and sales activities.
2. Recommendations
The company should assist the local community by offering employment opportunities,
The company should give emphasis to support small enterprises through creating
supply chain of raw materials and product distribution schemes to and from the
company.
The proponent should create tight contact with the regional and federal governmental
sectors and institutions in order to easily access the market, develop new products
required.
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Annex 1: Annual revenue
Type of
S/N products year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
Corn flakes 18,254,36 20,688,278 24,339,15 24,339,15 24,339,15 24,339,150 24,339,150 24,339,150 24,339,15 24,339,150
1 300gm 3 0 0 0 0
Corn flakes 6,163,811 6,985,652 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414 8,218,414
2 350gm
Corn flakes 2,821,129 3,197,279 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505 3,761,505
3 500gm
Corn flakes 2,489,231 2,821,129 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975 3,318,975
4 700gm
l TOTAL 29,728,533 33,692,338 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044 39,638,044
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Project proposal for the establishment of corn flakes factory @ Axum town
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Project proposal for the establishment of corn flakes factory @ Axum town
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Project proposal for the establishment of corn flakes factory @ Axum town
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Annex 5: Bank repayment Schedule
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Annex 6: CASH FLOW STATEMENT
year 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10
A. CASH IN FLOW
Equity Contribution 12128180
Bank Loan 13546512
27310423 3095181 3641389 3641389 3641389 3641389 3641389 3641389 3641389 36413897
Net Sales 3 7 7 7 7 7 7 7
Net Working Capital 2836665
Salvage Value 6751250
25674692 27310423 3095181 3641389 3641389 3641389 3641389 3641389 3641389 3641389 46001812
Total Cash Inflow 3 7 7 7 7 7 7 7
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Project proposal for the establishment of corn flakes factory @ Axum town
Total area=10,000m2
Buildup area=6000m2
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