1.

Executive Summary
Alemayehu metallic, doors and frames fabrication plant project is the new establishment
conceived by the owener of Alemayehu yadeta with total investment capital of Birr 1,500,000. The
project is located in the Amhara National Regional state, Oromo nation nationality Zone, Bati Town,
kebele 03 which is around 64 kms from Dessie and around 419kms from the capital city Addis
abeba. The project is planned to produce and provide quality metallic doors and windows and metal
frames.
The project envisages fabrication of 100 tons of metallic doors, windows and frames per annum.
The total investment requirement of the project including the working capital is estimated at about
Birr 1,550 thousand; of which more than Birr 1,047 thousand is the cost of the working capital and
Birr 205 thousand is for machinery and equipments. Based on the cash flow statement, the calculated
internal rate of return (IRR) and simple rate of return (SRR) of the project is 53.3 % and 44.1 %. The
net present value (NPV) at 18 % discounting rate is about Birr 377 thousand. The plant is expected
to create employment opportunities for about 15 persons.
The project is expected to start its operation at initial capacity of 50% in the first year, 60% in the
second year and it reaches capacity of 70% in the three year and 100 % fourth year.
The major raw material required for metallic doors, windows and frames project is LTZ and welding
electrodes material. The raw materials that the project requires are locally produced.
The major utilities required metallic doors, windows and frames project are electricity and water.
The project site is accessible with water and electricity.
The project is expected to contribute to employment creation, tax revenue generation to the
government and GDP contribution, import substitution, technology transfer and it creates back ward
and forward linkage effects to other sectors.
Finally, considering the market, technical, financial, socio-economic and environmental analysis
results, the wheat flour and iodize salt project is found to viable.

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 2. BACKGROUND
The Ethiopian government has made the rapid development of industries one of its strategic
priorities. Achieving accelerated economic growth to eradicate poverty is the key objective of the
government. During the last five years period, the economy grew on average at 11% per annum. By
accelerating this growth, through industrial development, the government aims to make the country a
middle income country by 2025. The government of Ethiopia has entered in to a country partnership
programme with the United Nations Industrial Development organization (UNIDO) to enable
Inclusive and sustainable industrial development (ISID) across all industries within the industrial
sector.
Metal and engineering industries are identified as one of five priorities for existing industry
investment to build capacity and upgrade performance in terms of utilization of capacity. The
Ethiopian metal industry sector is classified into two categories basic metal and engineering
industries. Basic metal industries deal with production of metal from ore, scrap and conversion of
billet slabs etc.

2.1 The Applicant

2.1.1 Name of the Applicant
(1) Name – Alemayehu yadete
(2) Name of general manager(contact person) – Ato Alemayehu yadeta
2.1.2 Address
1. Applcant Address
Name- Alemayehu yadete
Region – Amhara
Zone – Oromo nation nationality
Town – Bati
Kebele – 03
Tel.no :-

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 2. Project Address
Name of the project - Alemayehu yadete metallic doors and windows and frame s fabrication
plant
Region – Amhara Regional state
Zone/sub city – Oromo nation nationality
Town – Bati
Kebele – 03
House No ----------------
Tel.no :- +251-917574437
2.1.3 Type of project: metallic doors and windows and frames fabrication
2.1.4 Objective of the project to produce quality metallic doors and windows and frames to
local market.
2.2 Brief History of the promoters/Project
2.2.1 The promoters
Name- Alemayehu yadeta
Nationality:- Ethiopian
As per the private assessment currently, Alemayehu yadeta has been engaged in their own
businesses for above ten years. Currently, they manage the project vehicle garage and other trade
activity of this project. They are experienced on their different private businesses. They expand their
business from small working to large metallic doors, windows and frames factory; this indicates that
they are hard workers. They are easy to communicate and committed for their work. They have
ability to manage the project properly, but for the future, they will hire project manager as well as
other necessary technical staff.

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 2.2.2 The project

Legal form of Business:

This Metallic doors, windows and frames fabrication is established by alemayehu yadeta. The
project is located in the Amhara National Regional State, Oromo Nation Nationality Zone, Bati
town, Kebclc 02 which is around 64kms from Dessic, and around 419kms from the capital city
Addis Ababa. As per the private assessment Alemayahu yadeta Metallic doors, windows and frames
fabrication project is a newly established project with a registered capital of birr 1,500,000.00. The
project has secured 100 m2 shade from Bati Town administration Industry and Investment Office.

2.3 Objective of the Project

The main business objective of the project is to produce quality Metallic doors, windows and
frames local market.

2.4 PRODUCT DESCRIPTION AND APPLICATION

Metallic doors and windows and metal frames have become more and more popular in urban and
even in rural areas. They are increasingly replacing wooden doors and windows because they are
relatively less expensive and easily accessible since they can be fabricated even in small urban
centers when there is electric power. Besides, they are feasible for mass production.

2.5 Capital Structure of the Project

The total capital of the project is Birr 1,500,000 which is sourced from the promoter private
business and government loan . In addition, as per private assessment. the promoters have planned to
cash and bank loan .

2.6 Past Performance of the Project

The Project is a new establishment and hence, it has no past operational and financial
performance.

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 3. KEY SUCCESS AND RISK FACTORS

3.1 KEY SUCCESS FACTORS

These arc the factors within the control of the operator and which should be followed in order
TO be Successful

 Generic promotion of the Metallic doors and windows and metal frames.
 Automation of the industry: Increasing automation allows to optimize production and reduce
labour although this affects employment.
 Dedicated leaders and professional management.
3.1.1 Macro Level Sucess Factors
The macro level success factors can be emanated from:
 Changes in life style
 Demographic changes
 Urbanization
 Income growth: income growth, which affects the purchasing power of consumers, is one of
the
most important factors that drive consumers to consume manufactured products such as
Metallic doors and windows and metal frames.
The macro level sucess factors for Metallic doors and windows and metal frames fabrication
can be:
 Strong government policy that support metal industries
 Large and growing number of population with respecting growing income
 Availability of Good qualityof raw materials.
 Availability of skilled .semi skilled and un skilled labor.
3.1.2 Firm Level Success Factors
The project, like any other business establishment, has been evaluated using the 5 C’s to
determine its credit worthiness which reflects its chance of success.

Character
The General Manager Ato Alemayehu Aadeta is easy to communicate and is committed for his
work. He has seven years over all experience and is hard worker and he is performing different
business activities.

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Capacity
The project is managed by Ato Alemayehu yadeta who has been engaged in his own other
businesses like vehicle and motor cycle, bajaje garage, this indicates that he is hard worker
and he has seven years experience in managing different businesses. So, considering his experience,
aproject manager to be recruited and qualified employees, the project is expected to have a very'
good management team.
Competence

The promoter have also a good knowledge of management experience as they aquired the skill
from their private busincs experience. They have seven years experiance in managing thier private
businesses effectively and easy to communicate and is committed for thier work..

Capital
The project capital is 1,500,000 birr. In addition the promoter have planned to contribute its
cash and the other source of the project is bank loan.

3.2Firm Level Risk Factors

These are the factors that are outside of the control of an operator of the industry, but are likely
to have significant impact on a business. The performance of the Metallic doors and windows
and metal frames fabrication is affected by the following key sensitivities. The main raw
materials of the project are LTZ and welding Electrodes.

 Raw material pricing: In consistency of Raw material pricing

 Production technology: Lack of Availability of well trained personnel in the Production
technology.
 Final product demand: The project may face problem of Final product demand by the
consumer
3.3 Risk Mitigation Technique
The Project relays mainly on the local supply and supply of raw LTZ, welding Electrodes and
hence. So. in order to alleviate these risks and to become successful the project can apply the
following mitigation techniques.

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 The project can see alternatives of availability, quality and prices of different classes of
welding Electrodes, L TZ:
 The project can apply automation of the factory: Increasing automation allows to optimize
production
 The project can apply generic promotion of the advantages of Metallic doors and windows
and metal frames and other similar techniques.

4 SWOT /Analysis of the Project

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for
the development of marketing plans. It accomplishes this by assessing an organizations strengths
(what an organization can do) and weaknesses (what an organization cannot do) in addition to
opportunities (potential favorable conditions for an organization) and threats (potential
unfavorable conditions for an organization).

The SWOT analysis provides information that is helpful in matching the project’s resources and
capabilities to the competitive environment in which it operates. A project should not necessarily
pursue the more lucrative opportunities. Rather, it may have a better chance al developing a
competitive advantage by identifying a fit between the firm's strengths and upcoming
opportunities.

3.4.1 Strength

• Competent Manager and his engagement in different business activities

As per private assessment .considering Ato Alemayehu yadeta relevant and sufficient
experience aquired during seven years, the proposed general manager of the project is
believed to be the main • strength of the project as he has belter communication,
engagement in different business activities and is hard worker.

3.4.2 Weakness
The project has minimal paid up capital.

3.4.3 Opportunity

 Large and growing number of population with respecting growing income.

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  High and growing local demand due to urbanization.

 Availability of Large favorable manufactural output for raw material (LTZ) production
at national level.

 Availability of good quality of raw material.

 Conducive business environment with facilitated institutional support

 The policy of the government is favorable for Metal industries

 Infrastructure Development
The government’s continuous and huge investment in infrastructural development; especially
the development of asphalted roads and electricity, gives a rise to good marketing strategy.
Hence, this enables the project to address Metallic doors and window's and metal frames
demand to its target market easily.

 Peace and Security

The relative peace and security of the project’s targeted markets is one of the major
opportunities.

 Being Priority Sector of Government

The government has given great focus for manufacturing sector in order to achieve the 5 years
GTP strategy.

3.4.4 Threats
 Market Competition
Even though there is one newly established project other than this project in the town
there is no other existing Metallic doors and windows and meta) frames Factories in the
target market area.

 Fluctuation of raw material Price

Due to seasonal nature of the raw material availability, the firm may face shortage as well
as inflation of the price of raw material.

 Problem of Final product demand

The project may face problem of Final product demand by the consumer.

 Electric power interruption

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The table below shows some of the project's strength. weakness. opportunities and threats
discussed.

Strength Opportunity
• Competent Manager • lunge and growing number of population
and his with respecting
• Individual Business 2.5 High and growing local demand due to
urbanization.

2.6 Availability of Large favorable

manufacturing output for raw
material (LTZ) production at national level.

2.7 Availability of good quality of raw

material.
Weakness Threats
• The project has • Market Competition
minimal
paid up capital  Fluctuation of raw material Price
 Problem of Final product demand
• Electric power interruption

Mitigation Mechanisms for threats and weaknesses

The threats can be successfully averted using the following means of mitigating measures:

 The promoters should store the raw material at the production season to mitigate the
risk of raw material pricing variability.
 The Project should produce quality and competitive products to win the market, it
should produce quality Metallic doors and windows and metal frames product and
advert through different medias as well as selling the product at competitive price for
the purpose of mitigating the risk which is occurred by problem of final demand by the

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 4. Market Study Of Metallic doors and windows and metal frames product

It is obvious that Metallic doors and windows and metal frames product is necessary item that is
used in a light of every semi urban and semi rural household, which implies that the product is
highly demanded. The demand for Metallic doors and windows and metal frames product is met
through both domestic production and imports in Ethiopia. The fact is the products are widely
consumed by urban population of the country.

4.1. Market Study

4.1.1 Present Demand and Supply

The use of metal doors and windows must be encouraged since this will save trees from being
cut down for timber production- which further aggravates the process of deforestation in the
Region. The use of metal doors and windows is one by which we save our natural resource-
forests at the expense of spending foreign exchange for importing the metal input. But the
foreign exchange used to buy the metal could be generated by exporting products to be obtained
from various natural resources. In addition, metal doors and windows are stronger and last
longer than wooden doors and windows.

Anybody who is familiar with the rural and urban housing situations in the Amhara Region can
easily realize the magnitude of need of metallic doors and windows in the whole Region. If we
leave aside rural homes, most homes in urban areas need better and stronger doors and windows.
Besides, new houses and other buildings are being built in almost all urban areas of the Region.
Though there are units which fabricate metallic doors and windows in many of the urban centers
of the Region, the doors and windows they produce are below acceptable standards. Their
measurements are faulty, their design, welding, grinding, painting and etc are crude, and of poor
quality. Consequently, the final products are of inferior quality. Dissatisfied with local
production of doors and windows, many home builders and almost all contractors purchase metal
doors and windows manly from Addis Ababa and to a limited extent from Bahir Dar. This
indicates that there is a good market for doors and windows with good quality (which include
precise measurements, attractive and fine design, quality and strong welding, fine and smooth
gr1 here fore. the metallic doors, windows and frames, project planned use different advertisement
mechanisms and sell its products ul reasonable price to its target market such as Oromo zone

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 and Afar Region.

4.1.2. Projected Demand

In the absence of the necessary figures regarding the use of metallic doors, windows and frames,
it is not to make demand projection. However, it is a visible fact that modem workshops working
in the area arc facing almost unlimited demand for their products as long as the products they
produce arc competent in terms of quality and price.

4.2. Marketing area and market strategy and prices of the project

2.5 Market area of the project

The project has identified Oromo zone and Afar region as major marketing areas. The target
customers of the products of the project will be individual consumers.

2.6 Marketing Strategy

The promoters have planned to sell the metallic doors, windows and frames to individual
consumers with reasonable price. It plans to produce better quality products to compete with
other homogeneous factories.

The strategy of the project is to produce and sell high quality metallic doors, windows and
frames, with high value. The project in its marketing strategy will work to establish niche in
metallic doors, windows and frames, market. The niche will come from promoting the product in
the following ways.

 Better quality : many consumers prefer metallic doors, windows and frames, with
high value. This is done by acquiring quality raw materials with a modem
production system.
 Short distribution channels: the project will promote and reach to the with out any
brokers.
 Perceived quality: there is a significant sector of the economy that is attracted to the
idea of buying high quality products from small processors who control their quality
and create an image of high quality. Consumers are likely to pay a premium for this
perceived quality.

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4.2.3 Pricing and Distribution

Currently, the average market price (cost) of fabricating metallic doors, windows and frames
ranges between Birr 46,188 and Birr 89,810 per ton of the products depending on the quality of
the products. This project plans to sell its products at Birr 64,150 per ton. Work assignments can
be secure by following different bids of work.

4.3 Plant Capacity

This project envisages fabricating 100 tons of metallic doors, windows and frames per annum.
The plant is assumed to operate in a single shift basis for 275 working days in a year. This
schedule is set by deducting 52 Sundays, 13 public holidays, 15 days for annual maintenance and
10 days for unexpected work interruptions from a given year.

4.3.1 Production Program

The production program follows gradual capacity utilization due to market reasons. Accordingly,
50 %, 75 % and 85 % capacity utilization are assumed for the first and the second and the third
years of the operation, respectively. The fourth year onwards, 100 % capacity utilization is
assumed

5. TECHNICAL ASPECT
5.1 Location and Site
Alemayehu Yadeta metallic doors and windows and frames factory project is located in the Amhara
National Regional State, Oromo Nation Nationality Zone kebele 03 which is around 64kms from
Dessie and around 419kms from the capital city Addis Ababa.
It has good access to raw materials and market out let and it is accessible at any time. Considering
factors like proximity to market/ end users, availability of raw materials and infrastructure the
project is established on appropriate location.

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 5.2 Raw Materials and Utilities

5.2.1 Availability and Source of Raw materials

All required raw materials to fabricate, doors and windows and metallic doors and windows and
frames are procured in Addis Ababa.

3. Raw Materials and Utilities

3.1 Availability and Source of Raw Materials

All the required raw materials to fabricate metallic doors, windows and frames are procured in
Addis Ababa.

3.2 Annual Requirement and Cost of Raw Materials and Utilities

Raw material for requirement for a full capacity single shift operation of the plant and the
corresponding cost estimates are given in Table 4.1.

TABLE 4.1
RAW MATERIALS REQUIREMENT

Qty. Cost'000 Birr

NO Material
Foreign Local Total
1. LTZ 100
Tons 4,618,800 4,618,800
2. Welding Electrodes
230,940 230,940
3. Miscellaneous
115,470 115,470
Total
4,965,210 4,965,210
Annual electric consumption at 100 % capacity utilization in a single shift operation of the plant
shall be 60 MWH. Total cost of electricity is estimated at Birr 33,000 per annum. The plant does not
need water for the purpose of production but it is normally needed for general cleaning. Yearly water
consumption is estimated to be100 m3, and its cost amounts Birr 265.

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 Table 4.2
UTILITIES REQUIREMENT

No. Utility Requirement Unit Price Cost

(Annual) (Birr)
1. Electricity 60 MWH Birr0.55 /KWH 33,000
2. Water 100 m3 Birr2.65 /m3 265
Total 33,265

5.3 Technology and Engineering

5.3.3 Production Process

The doors and windows are to be fabricated from metal products known as T-shape, L-shape, Z-
shape and etc. Designs are made, physical measurements are taken. Parts are cut according to sizes,
welded and ground finally, the product is coated with anti-rust and painted after locks and keys are
fitted.

There is no alternative technology for this process.

5.3.2 Machinery and Equipment

Main machinery and tools include drilling machines, grinders, welding set, workshop tools and etc.
TABLE 6.1
MACHINERY & EQUIPMENT

Item
1. Drilling Machine
2. Portable Drilling Machine
3. Double Ended Grinder
4. Flexible Shaft Grinder
5. Welding Set
6. Workshop Tools

The total cost of machinery/equipment is estimated at Birr 205,280, all of which is in local currency.

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 5.4 Civil Engineering Cost
The project has secured 100 m2 shade from Bati Town administration Industry and
Investment Office

6 Human Resource and Training Requirement

6.3 Human Resource

Details of the manpower requirement of the plant is shown in Table 7.1

TABLE 7.1
MANPOWER REQUIREMENT

Description No Monthly Salary Annual

(Birr) Salary (Birr)
A. Administration
1. Manager/ Supervisors 1 3,079 36,950
7.Seretary/Cashier 1 2,053 24,634
10. Storekeeper 1 1,540 18,475
11.Guards 2 770 18,475
Sub-Total 5 - 98,534
B. Production - -
1. Skilled workers (Operators) 8 2,053 197,069
2. Unskilled Workers (Laborers) 2
770 18,475
Benefits (20%) - 62,816
15 - 376,894

The total annual wages and salary, including 20 % benefits, amount to Birr 376,894.

6.4 Training Requirement

Since fabrication of metallic doors, windows and frames is a simple process it can easily be handled
by hiring skilled labor in the area locally.

7 Financial Analysis
7.3 Underlying Assumption

The financial analysis of metallic doors, windows and frames fabricating workshop is based on the
data provided in the preceding chapters and the following assumptions.

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 A. Construction and Finance

Construction Period 2 Years

Source Of Finance 40% Equity and 60% Loan
Tax Holidays 2 Years
Bank Interest Rate 12%
Discount For Cash Flow 18%
Value Of Land Based on Lease Rate of ANRS
Spare Parts, Repair & Maintenance 3% of the Fixed Investment

B. Depreciation

Building 5%
Machinery And Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-Production (Amortization) 20%

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 C. Working Capital (Minimum Days of Coverage)
Raw Material-Local 30 Days
Raw Material-Foreign 120 Days
Factory Supplies In Stock 30 Days
Spare Parts In Stock And Maintenance 30 Days
Work In Progress 10 Days
Finished Products 15 Days
Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

7.4 Investment
The total investment cost of the project including working capital is estimated at Birr 1.5 million as
shown in Table 8.1 below. The owner shall contribute 40 % of the finance in the form of equity
while the remaining 60 % is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
1,500 - 1,500
Building And Civil Works
256,600 - 256,600
Office Equipment
12,830 - 12,830
Vehicles
- - -
Plant Machinery & Equipment
205,280 - 205,280
Total Fixed Investment Cost
476,210 - 476,210
Pre Production Capital
Expenditure* 23,928 - 23,928
Total Initial Investment
500,138 - 500,138
Working Capital at Full Capacity
1,048,098 - 1,048,098
Total 1,548,236 - 1,548,236
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

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 7.5 Production Costs

The total production cost at full capacity operation is estimated at Birr 5.5 million (See Table 8.2).
Raw materials and utilities account for 90.9 %.

Table 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material Requirement Cost
1. Local Row Materials 4,965,210
2.Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials
4,965,210
2.      Utilities 33,265
3.      Wages and Salaries
376,894
4.      Spares and Maintenance
14,357
Factory costs
5,389,726
5.      Depreciation
39,427
6.      Financial costs
74,427
  Total Production Cost 5,503,579

7.6 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and other
profitability indicators also show that the project is viable.

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 II. Breakeven Analysis
The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 18.2 % of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback period.
The project will payback fully the initial investment less working capital in two years.

IV. Simple Rate of Return

The project’s simple rate of return (SRR) is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 41.1 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex. 2) the calculated internal rate of return (IRR) of the
project is 53.3 % and the net present value (NPV) at 18 % discount is Birr 1,352 thousands.

VI. Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.

8 Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project possesses
wide range of benefits that complement the financial feasibility obtained earlier. In general, the
envisaged project promotes the socio-economic goals and objectives stated in the strategic plan of
the Amhara National Regional State. These benefits are listed as follows:

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 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 544 thousand per
year and Birr 5.4 million within the project life. Such result induces the project promoters to reinvest
the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about Birr 2,009 thousand from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 15 professionals as well as support stuffs.
Consequently the project creates income of Birr 377 thousands per year. This would be one of the
commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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