I. EXCUTIVE SUMMARY The Company, ABC Metal Workshop is an Ethiopian owned and well established firm licensed in 2005 E.C and legally formed as a Sole Proprietorship business. Promoters of business under consideration are Ethiopian entrepreneurs at the middle age of life, with having a good character and well appreciated personality among the surrounding community. Besides, the General Manager of the company, Mrs. ABC has acquired pertinent working experiences on working different metal moldings, welding and Fabrication of metal products for local market for many years. She has been running the existing business and provides acceptable business operations with best Ethiopian manner of business personality.
However, with this business plan, the company has inspired mainly to engage in industrial activities at wide range of services coverage from Design works to Quality metal products development. Hence, currently finalizing pre-investment expansion activities that enabling to launch the proposed sheet metal products fabrication in a way it meets domestic market demand. In this regard the firm is one of top industry players that uses modern fabrication technology and techniques highly applicable in the development of metal industry in Ethiopia. Hence, having latest processing technology means, it is obvious to understand the extent of market share that such firm would enabled to maintain with new quality fabricated products. The markets of an envisaged company includes: Government Projects, Industrial Operators, Construction sector, Commercial, Agricultural Sector and Residential clients.
As clearly observable from Industry trends, the design and fabrication industry has recently been in up- scaling turn. It is company’s belief that this economic cycle has created opportunities for the company. Those markets which it wishes to serve have come to the realization that efficiency and good planning is the key to success in this new economy. Many who have previously sought to serve these clients have fallen due to lack of flexibility to meet new requirements. With positive economic changes starting to develop, these industries will be seeking to replace these suppliers to meet their needs.
Those companies which are too large to offer flexibility or too small to meet requirements will continue to suffer even in an upswing economy. This will open doors to those who can provide the knowledge, experience and capabilities to serve these existing and developing markets. Accordingly, since every fabricated product line fulfills the highest level quality standard, it is demanded all year round and potentially enjoys both central and regional markets in Ethiopia.
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Having all facts expressed above in mind along with set of strategic plans that the firm has developed so-far, the financial consideration for undertaking newly planned activities are based on previous trends, future estimates and assumptions. Thus, the total investment cost after implementation of planned new expansion activity is assumed to reach ETB 32,782,852, which encompasses (Existing Investment ETB 15,507,039 + New Additions ETB 17,275,813). Out of the additional investment cost in connection with the paint manufacturing plan, the total of additional equity contribution is expected to ETB 8,775,813; Whereas, the remaining investment cost on new project activity for about ETB 8,500,000 is sought to be found from external source as bank term loan (i.e. Lease Financing Facility) for purchase of production machinery.
On the other hand, considering the return after implementing the newly planned operation, the financial projection indicates that the business will generate net profit of ETB 3,409,122; ETB 4,923,333; ETB 6,409,045; ETB 6,953,585; and ETB 7,532,453; During 1st, 2nd, 3rd, 4th, and 5th years respectively. Furthermore, the cash flow of the business shows that the project would generate positive net cash flows throughout the operation years with the Cumulative cash in-flow for considered life span is indicated as ETB 2,268,658; ETB 6,438,935; ETB 11,802,195; ETB 18,291,373; ETB 24,922,103; and ETB 33,785,858; During Year-0; 1st, 2nd, 3rd, 4th; and 5th; years respectively.
While projecting the financial viability of planned operations, the underlying business will have an internal rate of return (IRR) =28% before tax and (IRR) = 18 % after tax that indicating the viability of the outlined investment is very attractive. Whereas, the net present value (NPV) of the project over total investment cost at 11.5% discount rate is found to be ETB 5,598,852, which is acceptable and attractive. Therefore, the overall significant increase in profitability and net-cash inflow strongly justifies growth performance and it reveals that the business is liquid and will be capable of discharging its financial liabilities with no difficulty and implies the pay-back period of newly planned operations will be during the 3rd year.
Finally, during conducting this feasibility study, the rationale behind implementation of the underlying project has been proposed based on previous trends, future estimates and current scenarios including policy frame- works. In conclusion, the implementation activities of intended project with new production technology for quality product have reliable positive impacts on the overall development of the country in many aspects. Besides, all assumptions and forecast reveals that the business operation is liquid and will be capable of discharging its financial liabilities with no difficulty. Thus, it is highly recommended and worth to finance and work with such profitable investment activities.
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II. BACKGROUND INFORMATION
2.1 ESTABLISHMENT DATA Registered Name:………………ABC Metal Workshop Address:……………………….Addis Ababa, N/S/Lafto Sub-City, Wereda---- Legal Formation……….............Sole Proprietorship Company Business Type: …………….......Metal Products Manufacturing Status of Business:……………...Existing Business; TIN Certificate. No:….…...........- Com. Registration No…….........- Business License No……..........--- Licensing Agency:…………….Addis Ababa City Trade & Dev‟t Bureau Proposed Project Type:………..Sheet Metal Products Fabrication Registered Capital:………….…ETB 500,000.00 Total Investment Out-Lay: ..…..ETB 32,782,852 (After Expansion)
2.2 COMPANY BACKGROUND AND OWNERSHIP
The Company, ABC Metal Workshop is an Ethiopian owned and well established firm licensed in 2005 E.C and legally formed as a Sole Proprietorship business. Promoters of business under consideration are Ethiopian entrepreneurs at the middle age of life, with having a good character and well appreciated personality among the surrounding community. Besides, the General Manager of the company, Mrs. ABC ABC has acquired pertinent working experiences on working different metal moldings, welding and Fabrication of metal products for local market for many years. She has been running the existing business and provides acceptable business operations with best Ethiopian manner of business personality.
However, with this business plan, the company has inspired mainly to engage in industrial activities at wide range of services coverage from Design works to Quality metal products development. Hence, currently finalizing pre-investment activities that enabling to launch the proposed project on sheet metal products fabrication in a way it meets domestic market demand. Furthermore, with this new plan the company has mainly intended to work with Government offices, Private Companies, Schools, Hospitals, Hotel Sector operators, Real Estate developers, Manufacturers and NGOs. To this end, in order to meet demands of these potential clients, the firm has inspired to make diversification on its business line, hence, planned to implement the new capacity of the manufacturing plant for production of different sheet metal products fabrication activity.
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2.3 COMPANY VISION AND MISION
2.3.1 Vision Statement
To be a leader, reputable and competitive Metal Products Fabrication Company of all Industry Solution then become sector first choice in Ethiopia as well as in Neighboring Nations by 2030.
2.3.2 Mission Statement
ABC Metal Workshop exists with the mission to provide holistically minded, inspired, technology driven and environmentally friendly quality metal based products that meeting customers’ and regulators’ requirements with reasonable profits
To ensure the delivery of clients‟ need centric focused Metal based Engineering works, Design works, Cutting edge and after sales Consultancy Services which enhance the development of quality life of the society. The Company realizes these ideals through: Strategic Business Plan Attracting and retaining skilled employees Creating and maintaining partnership on the basis of mutual benefits. Taking care of natural environment
2.4 BUSINESS OBJECTIVES
With this business plan, the main objective of the company is primarily to secure about ETB 20,000,000 bank term loan facility, to acquire fabrication machineries and fulfill working capital requirement related to manufacturing of different type of sheet metal products in demand by potentially mega-project running sectors and which in turn helps the business to properly deliver as per clients‟ order. In addition, the business specific objectives are: To fully engage in the manufacturing of different type sheet metal products for commercial purposes with new artistic manner. To embark on a sustainable plan to achieve a reliable source of products for the local (central) and regional market in Ethiopia. To become a leader in the supply of fabricated metal products among similar producers, To play a role and contributing to sector development Producing quality metal products using modern fabrication techniques and technology throughcreation of employment. To generate sustainable income for the company in order to expand the operation and other development activities in the country.
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2.5 PRODUCT DESCRIPTIONS AND APPLICATION
2.5.1 Products Description
Metallic Products have become more and more popular in urban and even in rural areas of the country. They are increasingly replacing wooden products because they are relatively less expensive and easily accessible since they can be fabricated even in small urban centers.
Metal works are machine metal parts as subcontracted by major manufacturers in Ethiopia. These orders may be from automobile plants, machine tools manufactures, construction sectors, or others. By offering new and better technology, ABC Metal Products manufacturing is intended to fabricate high quality, low cost and winning metal products that may have be done in house or subcontracted with other companies operating in bulk.
On an outsourced basis, the Company is producing, to customer specifications, any type of specialized sheet metal, steel, or alloy products. The Company also planned to maintain an extensive industrial working room that allows Company’s business line to effectively produce the products needed by the Machine and Lathe Shop’s roster of clients. To this effect, the underlying project on sheet metal fabrication line is including the following major items with various size and types and other un-listed. As Short Term Plan (Phase-I) Cable Trey Mechanical Weighing Scale Electrical Panels Coffee Bean Washing Machine Police Baton Display Boards with different Size Household Equipment such as: Onion Crushing, Juice Making, Coffee Roasting and Crushing Equipment Office Furniture of different kinds like, Filing Cabinet, etc As a Strategic Plan (Phase-II) Metal Based Automotive Body Parts Fabrication Steel bridge Bearings and Form works for bridges Steel covers for bridge bearings Block and Bricks Making Equipment Dirt Bin of all Sizes for Hospitals, Hotels and Offices throughout the country
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2.5.2 Products Application
Fabricated sheet metal components are quite common and critical in the current market of metal based fabricated products. Hence, fabricated products of sheet metal is applicable for numerous of industries, household uses, enterprises, and so on. The application range includes: sheet metal enclosures, housings, chassis, brackets, and cabinets. Sheet metal fabrication is often used for prototyping and end-use metal parts. It is an inexpensive process using laser cutting, punch presses, and press brakes. With new technologies to help automate some steps of the process, it’s also considered a speedy solution, when multiple iterations are required and speed to market is critical to success. In addition, you’ll find multiple material options for fabricated sheet metal parts, with aluminum being the most popular for prototyping, because of its low-cost. More durable parts could be made from stainless steel, CR steel, copper, and brass. Sheet metal fabrication allows for easy customization, such as creating cutouts that can be manufactured for cable connectors, fans, switches, and LED panels.
For electronic mechanism protection, the use of sheet metal enclosures, housings, and chassis provides an effective barrier for sensitive equipment. Because sheet metal fabrication allows for easy customization, you can create user interfaces on your housing, sections can be ergonomically designed for buttons, and, lastly, cutouts can be manufactured for cable connectors, fans, switches, and LED panels. These types of applications are very common for electrical cabinets, computer enclosures, and wall mounts.
Sheet metal can also be fabricated to create small parts such as brackets or cable connectors. Steel, stainless steel, aluminum, copper, and brass are all strong enough to hold larger metal or plastic components together without breaking. This is essential for those companies constructing computers, audio equipment, medical instruments, or drones, which get a tremendous amount of use and therefore have more opportunities for fatigue and breakage. It is further applicable for small custom components like gears and washers, which can be fabricated quickly and affordably, and are often used in hard drives and motherboards.
2.6 PAST PERFORMANCEC AND URRENT FINANCIAL POSITION
During previous years of operations, ABC Metal Workshop has delivered a wide range of services as involved in different contractual agreements with the Government as-well-as privately owned developments in various parts of Ethiopia. It has accomplished every projects and contractual duties on time with great satisfaction to its customers. The previous performance of the company is evidenced by its current financial position which was obviously earned from works executed so far through set of strategic plans as per the standard requires.
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Hence, the company is in its best performance indicators which can be evidenced by financial statements of recent three years that shows the NET-WORTH about ETB 4.48 Million, ETB 6.13 Million and ETB 10.25 Million during the F.Y. 2012 E.C.; 2013 E.C. and 2014 E.C. respectively. To this end, incremental rate of Service Sales has shown an average growth of 52% within three (3) years of operation and expected to do in the coming years too. On the other hand, Firm’s total Asset Position and annual revenue earning status also rose to more than tri-folds.
2.7 FUNDS REQUIRED AND USAGE
Having well developed set of strategic plans that the firm has intended to attain, the financial consideration for undertaking newly planned expansion activities are based on previous trends, future estimates and assumptions. Thus, the company’s total financial costs on existing business and additional investment costs needed for envisaged activities are worked out for about ETB 32,782,852. Out of the stated total financial investment, about ETB 15,507,039 is accounted for existing investment; ETB 8,775,813 is expected additional equity contribution of the promoter; Whereas, the remaining investment cost on new project activity for about ETB 8,500,000 that will be expected from external source (Bank Facility as Capital Lease Financing).
