.

PROJECT PROPOSAL TO DAIRY FARM

AND MILK PROCESSING PLANT

PROMOTER:- WORKU ABAHAY

APERIL, 2021

ETHIOPIA, FINFINE

1
Contents
1. Executive Summary………………………………………………………………1
2 .INTRODUCTION........................................................................................1
2.1. Background..........................................................................................4
2. Location, Infrastructure and Premises Required.....................................6
3.1. The Economic Significance of the Project..............................................3
3.1.1. Source of Employment.....................................................................3
3.1.2 Source of Government Revenue.........................................................4
3.1.3. Source of Supply of Supplementary Foods........................................4
4. THE MARKET DEMAND POTENTIAL..........................................................5
4.1. Trends, drivers and structural characteristics of the Industry................9
4.1.1. Trend and Performance of Dairy Industry.........................................9
4.1.2. Consumption.....................................................................................11
4.1.3. Export...............................................................................................11
4.1.4. Drivers for the development of the dairy sector...............................11
4.1.5. Structure of the Industry................................................................13
4.1.6. Value chain in the dairy industry...................................................13
4.1.6.1. Direct Actors...............................................................................14
3.2. Market Demand Potential.....................................................................17
3.2.1. Demand Projection.........................................................................19
3. 2.2. Pricing, Distribution and Marketing Strategies.............................21
3.2.3. Production Technology and Process................................................21
3.3. Plant Capacity......................................................................................17
3.4. Production Programme.........................................................................17
3.5. Sales Program......................................................................................18
4. ORGANIZATIONAL STRUCTURE..............................................................19
5. FINANCIAL REQUIREMENT.....................................................................20
5.1 . Fixed Investment..............................................................................21
5.2 Expenses............................................................................................23
5.3. Summary of Financial Requirement and Source of Fund....................24
5.4. Loan Repayment Schedule..................................................................25
5.5. Financial Statement............................................................................27
6.Environmental and Social Impacts of the Project.......................................30
7. Project Implementation Action Plan..........................................................31

2
1. Executive Summary
1.Project Name DAIRY FARM AND MILK PROCESSING PLANT

2.Project Owners WORKU ABAHAY

3.Nationality ETHIOPIAN

4.Address ADDIS ABABA CITY

4.Project location AKAKI KALITI WOREDA

5.Project Composition Different types agro-industry Dairy farm, and Milk

Processing and 0il seed processing product

6.Premises Required 20,000m2 (Own land)

7. Startup Capital For implementing this project, a total of

150,000,000.00Eth birr is required. From this 30%
45,000,000.000 birr will be covered by the promoter of
the project while the rest will be covered%70or
105,000,000.00 by financial institutions.

8.Employment This project deemed to employ 320 permanent

Opportunity employees of which 219 are unskilled while the rest are
skilled.
9. For The region/ Source of income for the regional government as
country business income tax

3
2. INTRODUCTION

2.1.Backgroundof the project

The Ethiopian economy is highly dependent on agriculture. Despite being

more subsistence, agricultural production plays an important role in the
economy. In the late 1980s, agriculture contributed about 45% of national
GDP while the livestock sector, despite large population size1, contributed
about 12-16% of national GDP, 30-35% of agricultural GDP, 15% of export
earnings and 30% of agricultural employment. Livestock contributes to the
livelihoods of 60-70% of the Ethiopian population (Aklilu 2002; Ayele et al.
2003; Ejigu 2003) in one way or the other. It is raised in all of the farming
systems by pastoralists, agro-pastoralists, and crop-livestock farmers. The
rural dairy system is part of the subsistence farming systems that are
mainly concentrated in the highlands, but also in the lowlands. Pastoralism
is the major system of milk production in the lowlands. It is estimated that
about 30% of the livestock population are found in the pastoral areas.
Nevertheless, because of the erratic nature of rainfall that results in shortage
of feed availability, milk production is low and highly seasonal. Over the last
30 years, national and per capita production and consumption of livestock
products have declined (Ayele et al. 2003). During 1993-2001, per capita
income remained at about USD100. Livestock production increased by much
less than the production increase for the agriculture sector as a whole, so
relative share of livestock to agricultural GDP declined. Hence, per capita
livestock output fell by 5% while crop and agriculture grew by 14 and 6%
respectively (Halderman 2004).

Ethiopia holds large potential for dairy development. In addition, the country
enjoys diverse topographic and climatic conditions favorable for dairying.
These consist of a high central plateau ranging from 1,800 to 3,000 meters
above sea level, a rift valley that divides the country from north to south with
altitudes ranging from 1,000 to 1,800 meters above sea level and lowland
plain areas of less than 1,000 meters above sea level in altitude. Depending
4
on the altitude difference, temperature ranges from less than 100 C in alpine
areas to 350 C and more in lowland areas. Moreover, rainfall in most of the
country is adequate for crop and pasture production. The favorable climate
throughout the country supports use of improved, high-yielding animal
breeds and offers a relatively disease-free environment for livestock
development.

The proposed project envisions the establishment of a new enterprise that

will produce high-quality; competitively-priced dairy products in Akaki
Kaliti woreda districting East part of Ethiopia. The initiators have formed a
separate legal entity called “Dairy farm milk and Milk processing”. The dairy
products will be sold under the stated brand name. The initiators hope to
attract an outside equity investor and use the invested funds to purchase
specialized, high-quality, imported processing equipment that will enable
them to produce and package world-class dairy products to be sold through
both wholesalers and retailers in the Ethiopia. The preparatory stage has
been completed, and practically all key aspects have been worked out by the
initiators. The enterprise requires a production site (building and land) and a
specialized processing facility. With the purchase and installation of
processing equipment, and a complete renovation of the production site,
production can begin soon.

The owners of the project are G.M.S.D although is a new business the
farmers have been undertaking many years in Ethiopia. During their stay in
business the owners of this company has accumulated diversified skills and
has also adopted working with many people and customers. Hence, it is this
accumulated experience which initiates him to construct dairy processing
factory in Addis Ababa City, Akaki woreda.
The Addis Ababa Citiy government has been exerting his maximum effort to
expand investment opportunities in the region so as to foster the economic
development of the region and sub during the region’s big enemy that is the

5
 trap of poverty. Therefore, the government has been preparing a viable
business environment to attract many domestic and foreign investors so
that the dream of making poverty history turns to be true. Hence, it is this
viable investment policy which invited the owner to develop the interest and
motivation of opening the envisaged project in Akaki Kaliti woreda.
3. Location, Infrastructure and Premises Required
The district had a total population of about 101,265, of which 51,037 were
rural (50.7% males) and were rural (50,228 females) populations (projected
from the 1999 Population and Housing census). Young, economically
working and old age populations accounted for 45.9%, 48.9% and 5.2%
respectively. Average family sizes for rural and urban areas were 4.9 and 4.3
persons respectively. The crude population density of the district is about 30
persons per km2.
Among the highly growing Akaki Kaliti woreda are a famer association and
found on nearly about 25kms from Addis Ababa and the main road that
runs from Addis Ababa to Adama, Harar and Djibouti . The project area has
a well-developed infrastructure ei.e. it has road electricity and water.
Moreover, bank and other social services are in nearby area. Therefore, for
construction of this Dairy factory, a total of 20,000m 2of land is required
which is allocated for different purposes as follows.
No Description Land
Requirement
1 Production area 8,000
2 Raw material storage area 5000
3 Quality Control center 500
4 End product storage area 1,000
5 Office &Employees cafeteria 300
6 Waste accumulation area 1000
7 Water hole 1000
8 Free site land ,Parking and green area 3,200
Total 20000

6
3.1 The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development

of the region in the following ways:
3.1.1. Source of Employment
One of the problems that our country is faced is unemployment. Therefore,
the current objective of our government is working on tackling the problem
of unemployment either through creating self-employment or employment in
other organization. Hence, the envisaged factory deemed to contribute
somewhat to solve the problem of unemployment. Upon completion, the
project assumed to generate employment opportunities for about 223
individuals on permanent bases and a temporary basis.

3.1.2 Source of Government Revenue

To redistribute income, the government collects different forms of taxes from

different business undertakings and individuals as income tax. Among the
different forms of taxes, business income taxes are collected from
undertaking business activities. Therefore, the project will serve as sources
of revenue for the regional state of Oromia.

3.1.3. Source of Supply of Supplementary Foods

The project under discussion will produce different supplementary foods
items. But in it current plan it has a vision of establishing dairy products
that will supplement and complement the different diets. The products of
this company will be provided on the basis variety of choice and moreover
products are rich with different minerals, vitamins and other dietary fibers.

3.1.4. PROFILE OF THE COMPANY

The country's huge untapped and unexploited resources along with investment friendly
environment mentioned above have resulted in attracting both domestic and Foreign Direct
Investment. Both Domestic and FDI (Foreign Direct Investment) has been increasing from
time to time. Foreign investors from different regions including Europe, the Middle East,
North America, Asia and Africa are investing in the country. The prompter of this project,
7
G.M.S.D among these investors initiated by Stable political climate in the country and
decided to invest in dairy farm and milk processing production mainly for export market at
area mentioned above. Members of the company are currently resided in Ethiopia and they
have good educational back ground and fertile experiences in different business activities.
Generally, it is believed that with these good educational back ground and experiences in
different business activities, the company will achieve its stated objectives if proper
facilitation & after care services are provided by the concerned organs

3.1.5. Project objective

The primary objective of the proposed business venture is to produce and supply high quality
dairy farm and milk processing products which will meet national and international Standards
to satisfy ever increasing demand for pipes and fittings demand in Ethiopia.

Specifically:

 Produce and market dairy and milk products, that meets internationally accepted
standards
 Providing job opportunities at all levels of production and distribution,
 Provide excellent services with particular emphasis on quality and customer
satisfaction,
 Offer broad selections of dairy and milk processing products at competitive price and
capture key market share,
 Generate hard currency through exporting cattle and milk processing products to
neighboring countries
 Contribute for the improved health status of inhabitants of cities and towns by
providing product, which are the main component of food supply systems, with
reasonable cost,
 To be part of the revenue generation of the state in the form of taxation and other
forms
 To contribute in the growth of the country as a whole and the region in particular

8
4. THE MARKET DEMAND POTENTIAL

4.1. Trends, drivers and structural characteristics of the Industry

4.1.1. Trend and Performance of Dairy Industry

Between 1961 and 1974, milk production increased by 16.6% from 637,400
to 743,100 metric tons with an average annual growth rate of 1.6%. This
growth was largely due to the economies of scale in production as well as
marketing, subsidies in transport to the formal market, secured land tenure
and an active free market for feed and other inputs (Steal et al., 1996). On a
per capita basis, however, milk production declined during this period at an
average rate of 0.87% per annum. Processed milk production has stagnated
in the early 1960s but expanded significantly in the second half of 1960s
and early 1970s. To bridge the gap between supply and demand, dairy
imports increased significantly beginning from 1978. This was partly due to
increased food aid milk powder imports by WFP, and a level of dairy
production development that lagged far behind the demand. Imports reached
a peak of 314,700 metric tons in 1986 during the drought period (Reda,
2001). During the period between 1977 and 1989, dairy imports as a percent
of total consumption increased from 4.1% to 12.8%. Commercial imports
grew rapidly at 24.2% per year (Felleke and Geda, 2001). Further, it is
estimated that imported milk powder accounted for 23% of Addis Ababa
market. Post 1991 producer groups such as the Addis Ababa Dairy
Producers Association (AADPA) emerged encompassing 90% of all urban
dairy producers and a large proportion of per-urban producers within a
radius of 100km of Addis Ababa (Staal 1995). Milk production grew faster in
the post reform period, at an annual growth rate of 3%. Per capita milk
production stagnated though grew at a positive but insignificant rate. This
represents a reversal or termination of the negative trend in the growth of
per capita production during the previous two phases. Using rough

9
estimates from the FAO database and available information from DDE and
Felleke and Geda (2001), the contribution of imported milk to total milk
consumption declined from 24% in 1985 to less than 1% in 2000. At the
same time, the share o government-owned enterprises in total milk
production decreased markedly. In contrast, the share of smallholder
production in total consumption increased by 30% from 71% to 97%. To
sum up, total milk production in Ethiopia increased during the 1961-2000
period at an average annual rate of 1.55% though per capita production
declined as a result of the high population growth rate. However, during the
last decade production grew at a higher rate of 3%. The increased coverage
of extension services (such as better management skills) and increased use
of improved inputs (improved breeds and feed) and policy changes promoting
dairy production have contributed to faster growth of the sub-sector. Dairy
product imports during this period were relatively smaller than the previous
three decades. Most of the growth during the 90’s is concentrated in the
peri-urban and rural production systems. The emergence of private
processing industries and marketing units have stimulated producers in the
peri-urban areas and rural production systems as it offered them a new
market for their milk production. On the whole, dairy processing and
marketing function was being performed at various levels; parastatal sector
(DDE) had dominated the dairy industry scene until late 90’s where private
sector and cooperative sector appeared to play significant roles in collecting
and processing milk. Under the current market-oriented economic system,
private sector involvement in milk marketing was emerging alongside co-
operative marketing organizations. The privatization of DDaE in 2007
marked the end of the parastatal
4.1.2. Consumption
Milk Consumption in Ethiopia shows that most consumers prefer
purchasing of raw milk because of its natural flavor (high fat content),
availability and lower price. Specific upper income market segments prefer
and can afford packaged processed milk. Packaging costs alone may add up

10
to 25% of the cost of processed milk depending on the type of packaging
used. Polythene sachets of processed milk are cheaper alternatives.
Ethiopians consume less dairy products than other African countries and far
less than the world consumption. The present national average capita
consumption of milk is 19kg/year as compared to 27 kg for other African
countries and 100kg to the world per capita consumption (FAO, 2003). The
recommended per capita milk consumption is 200 liter/year. On the other
hand, they regularly consume other dairy products such as butter, ayib
(cottage cheese) and fermented milk.
4.1.3. Export
Ethiopia is not known for export of dairy products. With insignificant
quantity, milk and butter were made to few countries. Butter was mainly to
Djibouti and South Africa, targeting the Ethiopian Diaspora abroad. Milk is
solely exported to Somalia from the south Eastern region of Ethiopia. There
is a strong preference for traditional products. Ayeb, a traditional cheese is
popular and used as a condiment with many foods. Consumers add spices
and her bsto this product at home before serving. Dairy is usually consumed
at home with family and friends. Butter is consumed in more forms and in
more ways than any other market in Africa.
4.1.4. Drivers for the development of the dairy sector
Population growth: Population growth has a tremendous impact in the
growth of demand for dairy products. Ethiopian population is growing at a
rate of 2.6%, which induces additional demand for the dairy products. Based
on the Census of 2007, Ethiopian Population is about 73.09 million,
increased by 20 million from what it has been thirteen years ago.

Economic growth: For the past five years ending 2007/08, Ethiopian
economy registered an average real GDP of 11.8%. The economic growth will
contribute in increasing the leaving conditions and purchasing capabilities
of the people. Rapid growth of many cities contributes for increasing the
demand for dairy products (Mo FED 2008). Mainly Because of the impact of

11
the Global economic slowdown IMF projected that 2009’s Ethiopian Growth
rate will not exceed 7%.

Conducive Business Environment: Many private investors are now

engaged in dairy farm development and dairy product processing. Currently
there are about seven dairy processors and a number of dairy farms in
Ethiopia. In the socialist regime, private Supermarkets were small in
number and little known had small significance. All public owned
supermarkets are now privatized except two merchandise store and duty free
store. Currently there are about 70 Supermarkets in Addis Ababa, where few
of them are with more than two chains. Big towns other than Addis Ababa
have similarly 3 to 6 super markets. These supermarkets are among the
main distribution channel of the products of the dairy industry, both the
local and the imported one. In addition to the supermarkets, with the
expansion of Addis Ababa, many village shops and kiosks are opened and
are among the primary active distributers of dairy products. In reviewing
dairy and dairy related policies in Ethiopia the focus is generally on
institutional and technical developments affecting the scope of dairy
development in the overall development of the livestock sector. Development
policies adopted by the Government may differ in form, declared or
undeclared, which may affect the implementation according to legislations,
regulations, orders and decrees that may follow. Declared policies in the
early period in dairy and dairy related development share:
 Proclamation to provide for the control of animal diseases of 1961
 Order for the establishment of the institute of agricultural research
of 1966
 Order for the establishment of the dairy development Agency of
1971
 Proclamation for the establishment of joint venture of 1983 and
 Proclamation for the establishment of the national investment policy
of 2002.

12
  Increased foreign Community because of the increasing in the size
and number of international organization in Ethiopia, foreign
investments and continuing public investments. These trigger more
demands for dairy products.
 Foreign Investment: investment policies and other supports attract
foreign investors in the sector. Though few in number, foreign
investors are engaged in dairy farm and milk processing business.
 Its steady character as a quick income and involvement by most
poor population: Involvement on milk production due to its
monetary nature and, though in small amount its steady income to
cover expenses at household level it is highly regarded farm
business in per urban areas. It is also the most important business
in urban areas and involves more people than any other farm.
4.1.5. Structure of the Industry
Small portion (Less than 10%) of the national milk production is goes to the
dairy industry. 90% of the sales is channeled through the informal market.
Major portion of the milk production goes to home consumption and home
based traditional milk processing, including butter and soft cheese
production. Significant percentage of (47%) Cross-bred and exotic cows are
in Addis Ababa and nearby areas (Staal 2008) and coupled with the huge
demand size, the volume of sales in Addis Ababa is much higher than other
towns in Ethiopia.
4.1.6. Value chain in the dairy industry
The main actors in the Ethiopian Dairy industry are per-urban, urban
farmers, cooperatives, unions ,individual collectors, processors, retailers,
institutions and cafe’s.
4.1.6.1. Direct Actors
a. Smallholders
Majority of smallholder producers may be excluded from the emerging value
chain due to capacity limitations. Small producers lack the necessary
technological, organizational and institutional capacity for successful

13
participation in the value chain. They are less organized and distant from
market, lack economies of scale, face higher transaction costs and lack
institutions for risk management (Tesfaye and et al).

B .Urban and per-urban holders

Urban and per-urban smallholders are the main supplier of raw milk in the
dairy industry. Most of milk processors do not have their own dairy farms.
Even those who have their own farms are souring mainly from small holders.
For example, Sebeta Agro industry, the first private dairy processor, is
collecting 99% of raw milk from outside source though it has its own farm.
c. Cooperatives

Politicization of cooperatives mainly in the socialist regime has created the

bad ensuring sustainable supply of raw milk to the industry by coordinating
the flow of the milk from their members and assisting of members by
supplying inputs to the dairy farms. Many cooperatives are established since
1991 for marketing of raw milks of small holders in the urban and per-
urban areas. The most successful cooperatives are Ada Dairy cooperative
and some cooperatives in Selale area (all in the radius of 100 km from Addis
Ababa). Ada Dairy Cooperative has its own processing plant. Another
cooperative in Northern part of Ethiopia, has recently established a
processing plant targeting the consumers at Mekele town. A project on
livestock/dairy had helped a dairy coop to be organized in Gondar.

d. Unions
Unions are the next highest stage of cooperatives. Cooperatives are forming
unions for better marketing capabilities and better bargaining power. Selale
Union is among the active union which is doing well. Some milk marketing
cooperatives in the process of forming unions to challenge mainly unfair

14
market transactions with collectors and processors. Unions are supplying to
different private collectors and processors.

e. Individual collectors
Individual collectors are competing with processors for the raw milk.
Individual collectors mainly supplying cafe’s, institutions and restaurants.
They are responsible for the highest portion of the milk supply in the
market. Cafes and restaurants are opting for unpasteurized raw milk mainly
for bulk delivery and of the perception that they have better fat and
nutrients content and test than the pasteurized one. Individual collectors are
using their own transportation system in delivering the milk consistently.
Some of the individual collectors in the Selale milk shed are from Gurage
tribes and there is a slight decline in milk purchase when they are leaving
for holiday vacation in the month of September. The price of the milk will
slightly lower as competition will be ease among the buyers of the union.
f. Urban small holders
Urban smallholders are mainly supplying to households though house to
house delivery. Most of them are using plastic jerry can for handling the
milk. The main end consumers of house delivery are infants and children.
The delivery is often on a monthly contractual basis with minimum delivery
size of half litter. Some urban smallholders are also supplying to cafe’s and
restaurants. Recently these urban smallholders are facing a pressure from
the municipality to shut off their small farms because of health and
environment issues. Based on the discussion with the chairman of EMPPA,
it is estimated that 20% to 30% of these farms are closed in the year 2009.
Based on the information of Vet service provider of Akaki district of Addis
Ababa, the numbers of cows vaccinated in the year 2008/09 are about 600
as compared with that of the year 2007/08 which was about 1000 cows. The
decline in the size of smallholding urban farmers is believed to be one of the
contributing factors.
g. Commercial processors

15
Commercial processors are those adopting modern technology with a
majority of their output is pasteurized packed milk with the size of 500ml.
Currently there are about seven dairy processing companies operating in
Addis Ababa and nearby towns. One of the oldest state owned dairy
processing enterprise formerly called DDE or Shola is privatized in the year
2008 and named as Lame Dairy Plc. Ada Dairy initially has attempted to
produce packed milk, but not continued with pack milk production and
currently supplying its pasteurized milk mainly to Lame and sometimes to
Lema Dairy. Genesis Farm is producing cheese, butter and yogurts. Raw
milks are sold to other processors, including Lema. There are other two dairy
processors very far away from Addis. These are Dire Dawa Dairy Enterprise
(500 km away from Addis) and Cooperative based processor in Tigray region.
A dairy processing company established some years ago in the town of
Dessie (400km north of Addis Ababa) has been recently closed down because
of managerial problems. The properties are sold to a merchandise business.
There is no indication that the acquiring company will consider entry in the
dairy business.

The estimated annual production of the first three companies in the year
2008 was about 14 million liters of milk, 120,000 Kg of butter and 20,000 kg
of cheese and 90,000kg of soft cheese. Majority of the processors are
depended on external milk sources. Lema has closed its dairy farm because
of the ever increasing feeding costs and now fully depended on out growers
(individual farmers, cooperatives, big farms like Genesis farm). Main
customers of processers are Supermarkets. Village shops, large in numbers,
are important distribution channel of the processors. All of the processors
are delivering their products by their own delivery truck with insulated and
refrigerated cabins.
h. Small scale processors

16
Small scale processors are those who are limited them to small scale niche
market like for major (a certain type of cheese). Small scale processors are
directly buying raw milks from unions, cooperatives and individuals.
i. Cafe’s , Restaurants and shops
There are large number of cafe’s, kiosks and restaurants in all towns. Hot
milk and macchiato (mix of coffee and milk) are the famous drinks which
triggers the demand for milk by cafes and restaurants. Kiosks, shops and
supermarkets are selling packed milks to household buyers. Butter, cheese
and yoghurts are solely sold at supermarkets. During eve of holidays soft
cheeses are often sold at shops. Some cafes and restaurants are using
powder milk for hot milk and macchiato, which are not often chosen by
consumers.
The competitors of the local dairy products at the level of supermarkets are
the main distributers of imported powder milks, butter and cheese. Imported
products are recently becoming more expensive and there is a favorable
condition for local products.
j. Household
Household consumers are the middle and high income household, who can
afford to buy raw unpasteurized milk on a daily basis from collectors or
urban small holders. It is common to substitute mother breast feed with cow
milk when the breast dried up and mothers are back to work. Because of
price, sustainable supply and the perception that pasteurized milk is
something that certain fats are extracted, most household buyers are
inclined to unpasteurized raw milk. Institutional buyers: These are big
institutions, colleges, hospitals. Cafes and restaurants of big enterprises are
also categorized under institutional buyers. Majority of them are sourcing
from collectors
4.2. Market Demand Potential
Ethiopia is well known for its tremendous livestock potential. Yet its dairy
industry still remains undeveloped. Among other things, livestock disease,
low production breed and feed shortage has contributed to low milk

17
production in the country. Moreover, the perishable nature of the product,
poor marketing infrastructure, lack of refrigeration and preserving facilities
are mentioned as the major impediments for the development of the dairy
industry. Consequently, the milk consumption in the country has remained
very low. According to some studies, the per capita consumption of milk in
the country is about 20 kg which is below the average for Sub-Sahara Africa.
Consequent upon the low level of milk production in the country, the gap
between demand and the supply of milk is bridged through imports of
powdered milk. Besides commercial imports, food aid has also been another
source of milk supply in the country. However, food aid is frequently
associated with famine and emergency so that it is not considered as a
regular source of supply. But this project currently needs the production of
the pasteurized milk but in the future it will produce powdered milk.
In the absence of domestic production of powdered milk, imports are
considered as a proxy for demand. To estimate the present (2010) demand
for the product exponential smoothing method is, applied to the import
data. Table 1 shows the commercial import of powdered milk during the
period 2001-2008and exponentially smoothed forecast.
EXPONENTIALLY SMOOTHED FORECAST OF THE DEMAND FOR
POWDERED MILK (BASED ON IMPORT DATA )
Levelyear Trend
term
Import Term Forecast
2001 1,082.3 1,082.37 - -
7
2002 1,016.5 1023.11 -18 -
3
2003 1,631.1 1568.58 208 1005
6
2004 1,241.3 1294.82 15 1776
5

18
 2005 1,149.4 1165.52 -43 1310
9
2006 1,215.3 1206.07 -9 1123
2
2007 1,887.7 1818.67 239 1197
9
2008 2058

Source : Customs Authority, External Trade Statistics.

According to CSA 2005 report on house hold milk consumption, the total
consumption requirement of households for milk, butter, cheese, and
yoghurt is 526761355 liters, 21357750 kg, 30093056 kg, and 15946658 kg
per annum, respectively. Given a total population of 55954227 at the time
the survey was conducted, the per capita consumption of milk, butter,
cheese, and yoghurt is computed to be 9.4 liters, 0.4 kg, 0.5 kg, and 0.3 kg,
respectively.

19
 4.2.1. Demand Projection
The biggest dairy in the country, the private company Sebeta Agro Industry,
processes around 30 000 liters per day at present. Around 6 000 - 10 000
liters of this milk comes from the owner’s own dairy farm with 600 cows.
Some milk is also collected from other dairy farmers in the region. Still, the
major part of the milk processed is milk powder which is reconstituted into
liquid milk. Sebeta Agro Industry is in the process of establishing the first
UHT dairy processing facility in the country, which is expected to start
operation in September 2006. The new production lines will produce 500 ml
carton pouches (Tetra Fino Aseptic) and 250 ml portion packages (Tetra Brik
Aseptic).
The other major dairy in the country, the state owned Dairy Development
Enterprise, has been allocated a budget to upgrade its operations and is also
considering investing in UHT technology for production of long life dairy
products. At present they produce pasteurized milk in 500 ml plastic
pouches.

The demand for industrially processed milk and milk products is highly
influenced by urban population growth, income, increased household
attitude towards processed foods to save time and labor as well as the
availability of the product itself. Considering the combined effect of these
factors an annual average growth rate of 6% is applied in projecting the
demand for the products. The projected demand for the product is shown in
Table below
PROJECTED DEMAND FOR MILK AND MILK PRODUCTS
Year Milk (Liter) Butter (Kg) Cheese (Kg)

2007 12577200 535200 669000

2008 13331832 567312 709140
2009 14131742 601351 751688
2010 14979646 637432 796790

20
 2011 15878425 675678 844597
2012 16831131 716218 895273
2013 17840999 759191 948989
2014 18911458 804743 1005929
2015 20046146 853027 1066284
2016 21248915 904209 1130261
2017 22523850 958462 1198077
2018 23875281 1015969 1269962
2019 25307797 1076928 1346159
2020 26826265 1141543 1426929
2021 28435841 1210036 1512545
2022 30141992 1282638 1603297

4. 2.2. Pricing, Distribution and Marketing Strategies

Milk, butter, cheese, and yoghurt are retailed in super markets at Birr 10per
liter, Birr 70 per kg, Birr 30 per kg and Birr 11 per liter, respectively.
Allowing 30% for retail margin, a price of Birr 5 per liter, Birr 53.10 per kg,
Birr40.77 per kg, and Birr 10.46 per liter, respectively, is recommended for
milk, butter, cheese and yoghurt to be produced by the envisaged plant.
Distribution of the products could be undertaken through small retail
outlets as well as supermarkets and catering establishments.

4.2.3. Production Technology and Process

4.2.3.1. Raw Materials

The average composition of cow's milk is 87.2% water, 3.7% milk fat, 3.5%
protein, 4.9% lactose, and 0.7% ash. This composition varies from cow to
cow and breed to breed. For example, Jersey cows have an average of 85.6%
water and 5.15% milk fat. These figures also vary by the season of the year,
the animal feed content, and many other factors. Vitamin D concentrate may

21
be added to milk in the amount of 400 international units (IU) per quart.
Most low fat and skim milk also has 2,000 IU of Vitamin A added. Milk is a
perishable commodity. For this reason, it is usually processed locally within
Dairy cows are milked twice a day using mechanical vacuum milking
machines. The raw milk flows through stainless steel or glass pipes to a
refrigerated bulk milk tank.

4.2.3.2. Production flow

a. Collecting

Dairy cows are milked twice a day using mechanical vacuum milking
machines. The raw milk flows through stainless steel or glass pipes to a
refrigerated bulk milk tank where it is cooled to about 40° F (4.4° C). A
refrigerated bulk tank truck makes collections from dairy farms in the area
within a few hours. Before pumping the milk from each farm's tank, the
driver collects a sample and checks the flavor and temperature and records
the volume. At the milk processing plant, the milk in the truck is weighed
and is pumped into refrigerated tanks in the plant through flexible stainless
steel or plastic hoses.

b. Separating

The cold raw milk passes through either a clarifier or a separator, which
spins the milk through a series of conical disks inside an enclosure. A
clarifier removes debris, some bacteria, and any sediment that may be
present in the raw milk. A separator performs the same task, but also
separates the heavier milk fat from the lighter milk to produce both cream
and skim milk. Some processing plants use a standardize-clarifier, which
regulates the amount of milk fat content in the milk by removing only the
excess fat. The excess milk fat is drawn off and processed into cream or
butter.

22
c. Fortifying;Vitamins A and D may be added to the milk at this time by a
peristaltic pump,

A clarifier removes debris, some bacteria, and any sediment that may be
present in the raw milk. The milk is then fortified and pasteurized, which
automatically dispenses the correct amount of vitamin concentrate into the
flow of milk.

d. Pasteurizing;-The milk—either whole milk, skim milk, or

standardized
Milk—is piped into a pasteurizer to kill any bacteria. There are several
methods used to pasteurize milk. The most common is called the
high-temperature, short-time (HTST) process in which the milk is
heated as it flows through the pasteurizer continuously. Whole milk,
skim milk, and standardized milk must be heated to 161° F (72° C)
for 15 seconds. Other milk products have different time and
temperature requirements. The hot milk passes through a long pipe
whose length and diameters are sized so that it takes the liquid

23
 exactly 15 seconds to pass from one end to the other. A temperature
sensor at the end of the pipe diverts the milk back to the inlet for
reprocessing if the temperature has fallen below the required
standard.
e. Homogenizing;- Most milk is homogenized to reduce the size of the
remaining milk fat particles. This prevents the milk fat from
separating and floating to the surface as cream. It also ensures that
the milk fat will be evenly distributed through the milk. The hot milk
from the pasteurizer is pressurized to 2,500-3,000 psi (17,200-20,700
kPa) by a multiple-cylinder piston pump and is forced through very
small passages in an adjustable valve. The shearing effect of being
forced through the tiny openings breaks down the fat particles into
the proper size. The milk is then quickly cooled to 40° F (4.4° C) to
avoid harming its taste.
f. Packaging

 The milk is pumped into coated paper cartons or plastic bottles and is
sealed. In the United States most milk destined for retail sale in grocery
stores is packaged in one-gallon (3.8-liter) plastic bottles. The bottles or
cartons are stamped with a "sell by" date to ensure that the retailers do
not allow the milk to stay on their shelves longer than it can be safely
stored.
 The milk cartons or bottles are placed in protective shipping containers
and kept refrigerated. They are shipped to distribution warehouses in
refrigerated trailers and then on to the individual markets, where they are
kept in refrigerated display cases.

g. Cleaning;-

To ensure sanitary conditions, the inner surfaces of the process equipment

and piping system are cleaned once a day. Almost all the equipment and
piping used in the processing plant and on the farm are made from stainless

24
steel. Highly automated clean-in-place systems are incorporated into this
equipment that allows solvents to be run through the system and then
flushed clean. This is done at a time between the normal influxes of milk
from the farms

4.2.3.3. Production Process

25
Processing of raw milk mainly involves heat treatment operation usually
known as pasteurization and sterilization. These processes are discussed in
detail as follows.
A weighed amount of raw milk is pumped to a clarifier by means of the milk
pump, where it is removed of microscopic impurities. Clarified milk is next

sent to the cooler where it is cooled to about 2-5 oC, then pumped to the
storage tank. The milk is, then, preheated and pasteurized to a temperature

of about 80oC by heat exchange. Further, by the effect of ultra-high

temperature sterilizer, the fatty ingredients are homogenized in the
homogenizer and recycled to the ultra-high temperature sterilizer where it is

pasteurized instantly in about 2 seconds at high temperature of 135 oC.

Finally, cooling is achieved by means of chilled water to lower the

temperature to 3oC, after which the milk is stored in the surge tank for
filling into suitable containers for various uses. After such a process, a
specified quantity of the milk is sold as a pasteurized product while the
remaining portion is further processed in the plant for the production of
other milk products such as butter and cheese. The details of the production
processes are stated as follows.
a) Butter Production
Whole milk is partially or totally separated to produce standardized whole
milk with 3.25% milk fat, low fat milks, 1-2% milk fat, and skim milk. After

separation, cream is held in stainless steel tanks and refrigerated at (4-7 oC).

The separated cream is pasteurized in order to destroy bacteria. Following

pasteurization, rapid cooling is conducted to facilitate the formation of
butter by a churning process. By continuous churning, the entering will be
pasteurized and tempered cream is agitated vigorously by beater bars. This
action causes stripping of the fat globule membrane and aggregation of the
fat into chunks. Finally, a continuous ribbon of yellow butter streams from

26
the end of the continuous churn. Butter as a product drops into a hopper,
where it is transferred to packing machinery.
b) Cheese Production
Cheese is made from pasteurized skim milk, and in form of discrete particles
classified as small or large curd. A curd forms when the increasing lactic
acid of milk during fermentation attains the isoclectric point of casein at pH
4.6. This soft curd additionally contains lactose, salt and water. Latter, the

curd matrix is cut and cooked to about 126 oF (52oC). Separation of whey
from the curd is rapid, and is followed by two or three water washings at
warm to chill temperatures. Washing removes whey from residues and acts
as a cooking medium. After drainage of the last wash water, the chilled curd
is blended with a viscous, salted cream dressing to give 4.2% fat and 1%
salt, and is packaged.

4.3. Plant Capacity

Based on the market study, capital requirement and minimum economy of

scale, the milk processing plant will have a capacity of 500,000 liters of raw
milk per annum and producing 400,000 liters of pasteurized milk, 10,000 kg
of butter, 15,000 kg of cheese and 20,000 kg of yogurt at full operation
capacity. The envisaged plant is expected to operate in double shifts of 8
hours each a day for a total of 300 working days a year.
4.4. Production Programme
The annual production programmed is formulated based on the proposed
plant capacity. Considering the problem of market penetration and skill
development of production at the initial stage of the production period, it is
planned that the plant will start production at 75% and 85% of its rated
capacity in the first and second year of production, respectively. Full
production shall be attained in the third year and then after.
PRODUCTION PROGRAMME
S/ Description Unit Production year
no 2020 2021 2023-25

27
 1 Milk Litter 320,00 360,000 420,000
0
2 Butter Kg 8,000 9,000 11,000
3 Cheese Kg 11,000 12,000 16,000
4 Yogurt Kg 645,00 903,000 1,083,60
0 0
5 Other by 5,000 6,000 7,000
product
Capacity 70 80 100

4.5. Sales Program

Year Description Unit Qty Unit Total cost
cost
2020 Milk Litter 320,000 10 13,200,000
Butter Kg 8,000 80 640,000
Cheese Kg 10,000 60 600,000
Yogurt Kg 645,000 .30 193,500
Other by 5,000 .40 2,000
product
2021 Total 14,635,500
Milk Litter 330,000 10 3,300,000
Butter Kg 9,000 80 640,000
Cheese Kg 12,000 50 600,000
Yogurt Kg 903,000 .65 586,950
Other by 6,000 .40 2,400
product
2023- Total 25,129,350
25
Milk Litter 360,000 12 4,320,000
Butter Kg 11,000 90 990,000
Cheese Kg 16,000 45 720,000
Yogurt Kg 1,083,600 .65 704,340
Other by 7,000 .40 2,800
product
28
 Total 36,737,140

5.ORGANIZATIONAL STRUCTURE

The organizational structure of the project is designed by including all the

necessary personnel under the right division. At the top of the organizational
structure, there will be a general manager with the responsibility of
supervising the overall activity of the plant. Depending up on the nature of
the center and the amount of work to be performs; there will be auxiliary
units under the general manager. Employees under each unit will be
supervised by the unit head that is accountable for the general manager.

CEO

29
 Internal Auditing &
Inspection
General Manager
Advisor

Production
Department Marketing Department
General Administration Department

As clearly shown in the organizational structure, the integrated project

center has CEO three Departments under the general manager, Advisor
and the internal Auditing and Inspection. These departments are the
Production Department, The Marketing Department, and The General
Service Department. Under each Department there are different sections
which are undertaking different activities

Table’s manpower requirement

No. Description No. of Persons Qualification

1 General Manager 2 BA
2 Accountant 10 BA
3 Cashier 4 10 grade
th

4 Secretary 4 Dip
5 Storekeeper 14 10 grade
th

6 Salesperson/Purchaser 15 Dip
7 Cleaner and Messenger 25 8 grade
th

8 Guards 4 4th grade

9 Production Head 2 BA
10 Chemist 4 BSC
11 Operator technicians 8 BSC
12 Assistant Operators 4 BSC
13 Milk men 27 Unskilled

30
14 Temporary employee 100 -
Total 223

6. FINANCIAL ANAYSIS
The financial resource is a prime resource for undertaking any activities.
Hence for implementing this pervious project Capital total
of150,000,000.00 Ethbirr required. From this 30% or 45,000,000.00birr
will be covered by the promoter of the project while the rest%70or
105,000,000.00birr will be covered by financial institutions.Therefore, the
said amount of finance is needed for undertaking the following
6.1. ProjectInvestment

The total cost of the project is 150,000,000 birr, out of which the capital
cost of the project is 72,182,930 birr for purchasing the animals and
constructing the building and the rest is used to meet the working capital
requirement.

 Table 5-1 Project Costs (Birr)

Account Head Total Cost (birr)

Capital Cost
Land leaze 3,000,000

31
 Building/Infrastructure 20,388,500
Animals 40,000,000
Machinery & equipment 7,573,680
Furniture and Fixtures 80,000
Office vehicles 615,000
Office equipment 75,750
Pre-operating costs 450,000
Total Capital Cost 72,182,930
Working Capital
Raw material Inventory 9,688,196
Land Lease For fodder 1,320,000
Cash in hand 80,000
Total Working Capital 11,088,196

Total Project Cost 83,271,126

The proposed pre-feasibility is based on the assumption of 50:50 debt

equity ratio. However, this composition of debt and equity can be changed
as per the requirement of the investor.

Table 5-2 Project Financing

Debt 70% 105,000,000
Equity 30% 45,000,000
Total project Investment 75,671,126

Table 5-3 Project Economics

Viability Project
IRR (%) 53%
NPV 311,358,063
Pay Back Period (year) 3.26

Table 8-4 Farm Equipment Cost

Description Unit Cost Animals per Total Cost

equipment
Maize Cutter 450,000 300 450,000
32
 Milking machine 3,823,680 300 3,823,680
Milk Cooling Unit - 2300 Ltr 700,000 150 1,400,000
Generator (25 KVA) 500,000 1 500,000
Submersible pump 350,000 1 350,000
Tractor 600,000 1,000 600,000
Heavy Duty Ventilation Fans 300,000 300 300,000
Trolly 150,000 500 150,000
Total Cost 7,573,680

6.1 Herd Mix

The ideal mixed herd should consist of 100% cows for the viability of a
farm. The cows are comparatively high yielder as compared to buffaloes.

8.4.1. Breeds of Cross bred and Exotic

The Holstein cow originated in Europe. The major historical development of
this breed occurred in Netherland and more specifically in the two northern
provinces of North Holland and Friesland. Holsteins are most quickly
recognized by their distinctive color markings and outstanding milk
production. Holsteins are large, stylish animals with color patterns of black
and white or red and white. Holstein heifers can be bred at 15 months of age,
when they weigh about 325-400 kgs body weight between 24 and 27 months
of age. Holstein gestation is approximately nine months. The normal
productive life of a Holstein is Nineyears.
It has now been extensively tested in the tropical and sub-tropical areas of
Australia. Milk quality is good - protein level is 3.4 percent and butterfat is
approximately four percent.
These animals are available at an average price of $2,400 per animal
HOSTEIN. The photos of different breeds are given in annexure 4.

6.2 AnimalMarkets

33
Animal market, Government and private livestock farms are the main
sources for purchasing milk animals. There are different contractors
available in the markets that help locating the proper animals. These
contractors work on commission basis and the commission rate charged
may vary from 1-2% of the animal price.

34
 6.3 Feed
8.6.1. Ration for DairyAnimals

The ration is allowance of nutritionally balanced feed in 24 hours. It

includes dry matter and concentrate to increase animal productivity.
Wheat straw2 is also used as dry roughage along with green fodder. About
1 kg of Total mix ration on dry matter is required for the production of 2
liters of milk. These feed ingredients when mixed according to feed formula
will provide adequate energy according to energy and protein requirements
of animal inproduction.

 Table 8-5 Dry matter for Cow Feed

Dry matter description % of Total Unit Cost birr
/Kg
Silage 65% 5
Concentrate* 35% 18

8.6.2. Mineral Mixture

This is used as a feed supplement. It includes a mix of minerals

(magnesium, iron, sodium and salts). Mineral mixtures are good source of
energy and increase the animal productivity to givemilk.

8.6.3. Fodder Crop

Fodder is grown at the land, which is acquired on lease or owned by the

entrepreneur. Due to increased demand, improved forage crops such as
multi-cut oats, berseem, lucerne, Sorghum- Sudan grass hybrids, mott
grass, sorghum, maize and millet have been developed. The fodder yield
(except multi cut Mott Grass which yield 100-150 tones/ acre in 4 to 6
cuttings per year) varies between 10 tons to 40 tons per acre depending
upon the fertility of land, quality of seed and application of fertilizer.

35
  Table 8-6 Types of Dry & Green roughage

DryRoughage Green Roughage

SummerFodder Winter Fodder
WheatStraw Maize Bar seem
RiceStraw Sorghum Alfalfa (Lucerne)
OatStraw Millet Oats
Maize/SorghumStubble Mott Grass Rye Grass

2A byproduct of wheat harvesting used as dry roughage for livestock and dairy

animals
Sugarcane Baggass Sadabahar Sugarcane tops
Cotton Seed Hulls Guar
Corn Cobs
(Reference: Livestock & Dairy Development Department, Lahore)
(Reference: FAO Statistical Databases)

8.6.4. Daily Fodder Requirement

There is no fixed fodder requirement for the animals but a rule of thumb
says that an animal needs daily fodder equal to 9%-10% of its body weight
(3% of live body weight on Dry Matter Basis). According to estimates,
consumes 50-55 kg fodder daily while cow consumes about 40-45 kg.

8.6.5. Wheat Straw (

Wheat straw is major, typical, and very popular dry roughage. It is always
chaffed, and is the main or even only major dry roughage used on almost
all the dairies. Traditional threshing methods break the straw into short
pieces, bhoosa, and modern mechanical threshers have been designed to
break the straw.

36
Table 8-7 Daily Feed Requirement of Cow & Calf
Animal Daily Requirement Cost/kg Amount
(kg)
Cow
Dry 11 5 55
Concentrate 6 18 108
Total 163
Calf older than 1
year
Dry 7 5 35
Concentrate 2.5 18 45
Total 80
Calf younger than 1 year
Dry 3 5 15
Concentrate 2 18 36
Total 51

6.4 Medication

8.6.1. Vaccination &Medicine

Vaccination & medicine is required to prevent any disease outbreak in the

animal herd. Each new animal will be vaccinated before entering the farm.
It will cost birr. 2,000 for each cow per year. Vaccines are produced at
Veterinary Research Institute,
9.1. Milk Composition

Buffalo milk contains less water, more total solids, more fat, slightly more
lactose, and more protein than cow's milk. Cow's milk contains 12-14%
total solids and the butterfat content is usually between 3% and 5%.
Phospholipids are lower but cholesterol and saturated fatty acids are lower
in cow’s milk. Normally the protein in cow’s milk contains less casein and
slightly less albumin and globulin. The mineral content of cow's milk is
nearly the same as that of buffalo milk except for phosphorus, which
37
occurs in roughly twice the amount in buffalo milk.

Cow’s milk enriches the yellow pigment carotene, precursor for vitamin A,
and its yellowness is frequently used to differentiate it from buffalo’s milk
in the market. Despite the absence of carotene, the vitamin A content in
buffalo milk is almost as high as that of cow's milk. Apparently the buffalo
converts the carotene in it's diet directly to vitamin A. The two milks are
similar in B complex vitamins and vitamin C, but buffalo milk tends to be
lower in riboflavin.

9.2. Breeding Stock Development

The proposed farmer will raise breeding stock containing future dairy
animals at his own farm by selecting good off springs of high producers.
Instead of breading bull the Insemination will be done Artificial
Insemination of imported Semen of breeding bulls. The first generation (F 1)
will be capable of giving milk after 2 years in cows.

9.3. Increase in Milk Yield

The milk yield will be improved as a result of appropriate breeding systems

discussed earlier. Low yielding animals are sold in the market. On an
average, cows are productive for 9 to 10 years.

9.4. Sale Price

In this feasibility study, it is assumed that all the milk will be sold to milk
processing companies, households& milk shops etc.

9.5. Evening Milk

Milk can be stored in a milk chiller on 14.5% TS at the farm if milk

collection is not possible in the evening.

9.6. Farm Revenues

38
Farm revenue will increase with the passage of time, as the milk
production will increase with the growth in herd size as well as its quality.

9.7. Male Calves

Male calves will be sold at the farm sooner after birth for birr 10,000 per
animal. They can also be reared in separately for beef production.
USEFUL TERMINOLOGIES
Breed
Animals that, through selection and breeding, have come to resemble
one another and pass those traits uniformly to their offspring.

 Feedstuffs
Any substance of nutritive and biological value used in production of
compound feed.

 Compound feed
Any ground mixture of ingredients intended for feeding the animals. It
includes a concentrate mixture accordingly to formula.

 Dehorning
The process of removal of horns (in adult animal) or horn buds (in
young calves). The process may be done by mechanical or chemical
means.

 Heifer
The term refers to young female bovine that reaches puberty age and is ready
to breed.

 Home Mixed Feed

Feed prepared on farm.

 Oil seed Cake

Mass resulting from the processing of seeds, which is rich in protein and is
used as a source of feed for livestock, e.g. cottonseed cake, maize oil cake
etc.

39
  Ration
Amount of balance feed in 24 hours

40
 FINANCIAL ANALYSIS
6.5 IncomeStatement

Statement Summaries SMEDA

Income Statement

birr in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 42,507,520 56,594,1 82,061,0 105,760, 134,530, 173,770, 226,301, 297,867, 395,025, 527,219,
20 08 628 849 599 735 615 021 074
Cost ofgoods sold 21,057,6 22,457,0 25,879,9 31,444,2 39,545,6 50,554,8 64,795,6 83,584,5 107,828,
15 76 66 31 33 91 00 17 428
21,002,390
GrossProfit 35,536,5 59,603,9 79,880,6 103,086, 134,224, 175,746, 233,072, 311,440, 419,390,
05 32 62 618 966 844 015 504 645
21,505,130

General administration & selling

expenses 1,356,000 1,488,02 1,734,05 2,013,88 2,453,57 3,761,80 4,421,42 5,334,78 6,560,72 9,331,64
Administration expense 2 1 2 4 2 0 6 9 7
Rental expense - - - - - - - - - -
Office expenses (stationary, etc.) 27,120 29,760 34,681 40,278 49,071 75,236 88,428 106,696 131,215 186,633
Professional fees (legal, audit, 208,138 273,181 389,217 503,693 641,789 830,401 1,083,83 1,428,82 1,899,56 2,539,40
etc.) 8 3 6 2

2
Depreciation expense 1,604,658 1,604,65 1,604,65 2,676,91 2,676,91 2,676,91 5,088,46 5,098,73 5,098,73 7,065,13
8 8 0 0 0 4 0 0 4
Amortization expense 90,000 90,000 90,000 90,000 90,000 - - - - -
Miscellaneous expense - - - - - - - - - -
Subtotal 3,285,916 3,485,62 3,852,60 5,324,76 5,911,34 7,344,34 10,682,1 11,969,0 13,690,2 19,122,8
2 8 3 4 9 51 35 40 16
Operating Income 18,219,214 32,050,8 55,751,3 74,555,9 97,175,2 126,880, 165,064, 221,102, 297,750, 400,267,
83 24 00 74 618 693 980 264 829

Earnings Before Interest & 18,536,450 33,202,4 59,110,8 81,810,3 110,042, 148,161, 165,102, 270,930, 369,865, 517,903,
Taxes 13 15 79 257 014 568 162 946 048

Interest expense 6,317,085 5,308,57 4,128,74 2,748,52 1,133,85 - - - - -

0 9 6 9
Earnings Before Tax 12,219,364 27,893,8 54,982,0 79,061,8 108,908, 148,161, 165,102, 270,930, 369,865, 517,903,
43 66 53 398 014 568 162 946 048

Taxable earnings for the year 10,912,564 25,882,8 52,711,1 76,084,0 105,133, 143,268, 192,128, 262,546, 358,753, 503,031,
23 67 50 040 529 109 539 787 635
Tax 2,728,141 6,470,70 13,177,7 19,021,0 26,283,2 35,817,1 48,032,0 65,636,6 89,688,4 125,757,
6 92 12 60 32 27 35 47 909
NET PROFIT/(LOSS) AFTER 9,491,223 21,423,1 41,804,2 60,040,8 82,625,1 112,343, 117,070, 205,293, 280,177, 392,145,
TAX 38 74 41 38 882 541 528 499 139

2
 6.6 Balance Sheet Statement

Statement SMEDA
Summaries
Balance Sheet

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

Assets
Current assets
Cash & Bank 1,400,00 4,944,713 18,085,8 49,103, 95,985, 161,354 264,253 403,805 592,737, 849,575 1,302,937
0 79 934 655 ,022 ,904 ,823 821 ,812 ,580
Raw material inventory 9,688,195 10,100, 11,135,6 13,235,2 16,692,9 21,836,0 29,049,0 38,666,3 51,727,5 69,038,2 -
Pre-paid annual land - 554 38 71 27 14 64 16 78 83 -
lease - - - - - - - - -
Total Current Assets 11,088,1 15,045,26 29,221,5 62,339, 112,678 183,190 293,302 442,472 644,465, 918,614 1,302,937
95 7 17 204 ,582 ,036 ,968 ,139 399 ,095 ,580

Fixed
assets 3,000,00 3,000,000 3,000,0 3,000,0 3,000,0 3,000,0 3,000,0 3,000,0 3,000,00 3,000,0 3,000,000

Land 0 00 00 00 00 00 00 0 00

Building/ 20,388,5 19,369,07 18,349,6 28,173, 26,612, 25,050, 57,255, 54,005, 50,755,7 70,253, 65,866,42
Infrastructure 00 5 50 965 353 741 578 644 09 760 6
Animals 40,000,0 40,000,00 40,000,0 40,000, 40,000, 40,000, 40,000, 40,000, 40,000,0 40,000, 40,000,00
00 0 00 000 000 000 000 000 00 000 0
Revaluation Surplus/ - 1,600,000 9,848,0 16,799, 26,585, 38,274, 53,121, 71,711, 95,175,5 124,593 (39,200,0

2
 (loss) 00 000 000 000 000 850 00 ,604 00)
Net value of animals 40,000,0 41,600,00 49,848,0 56,799, 66,585, 78,274, 93,121, 111,711 135,175, 164,593 800,000
00 0 00 000 000 000 000 ,850 500 ,604
Machinery & 7,573,68 7,068,768 6,563,8 14,009, 12,974, 11,939, 21,753, 19,995, 18,237,0 28,913, 26,326,68
equipment 0 56 912 936 959 455 247 39 893 0
Total Fixed Assets 71,732,9 71,728,27 78,371,6 102,512 109,621 118,633 175,418 189,068 207,433, 266,936 96,077,45
30 2 13 ,663 ,753 ,843 ,855 ,856 776 ,195 8

Intangible assets
Pre-operation costs 450,000 360,000 270,000 180,000 90,000 - - - - - -
Training costs - - - - - - - - - - -
Total Intangible Assets 450,000 360,000 270,000 180,000 90,000 - - - - - -
TOTALASSETS 83,271,125 87,133,538 107,863,130 165,031,868 222,390,335 301,823,880
468,721,823 631,540,995 851,899,175 1,185,550,2901,399,015,038

Liabilities & Shareholders' Equity

Current liabilities
Accountspayable - - - - - - - - - - -

TotalCurrentLiabilities - - - - - - - - - - -

Other liabilities
Longtermdebt 35,698, 28,752,2 20,626,5 11,120,6 - - - - - -
177 77 55 11
105,000,000
Total LongTermLiabilities 35,713, 28,783,0 20,672,6 11,182,1 76,875 61,500 46,125 30,750 15,375 -
552 27 80 11
105,000,000

2
Shareholder
s' equity 105,000, 105,000 105,000, 60,430,2 60,430,2 60,430, 105,045 105,192 105,192 140,375, 140,375,8
Paid-up 000 ,000 000 71 71 271 ,193 ,808 ,808 854 54
capital
Gain/ (Loss) on - 1,600,00 9,848,00 16,799,0 26,585,0 38,274, 53,121, 71,711, 95,175, 124,593, (39,200,0
revaluation of anim 0 0 00 00 000 000 850 500 604 00)
Retained earnings - 8,184,42 27,596,5 67,129,9 124,192 203,042 310,494 454,590 651,500 920,565, 1,297,839
3 41 16 ,953 ,734 ,131 ,212 ,117 457 ,184
Total Equity 105,000, 51,419, 79,080,1 144,359 211,208 301,747 468,660 631,494 851,868 1,185,53 1,399,015
000 986 03 ,187 ,224 ,005 ,323 ,870 ,425 4,915 ,038
TOTAL CAPITAL AND 83,271,1 87,133, 107,863, 165,031 222,390 301,823 468,721 631,540 851,899 1,185,55 1,399,015
LIABILITI 25 538 130 ,868 ,335 ,880 ,823 ,995 ,175 0,290 ,038

2
 6.7 Cash FlowStatement

Statement Summaries SMEDA

Cash Flow Statement

Birr in actuals Year0 Year1 Year2 Year 3 Year 4 Year5 Year6 Year7 Year 8 Year9
Year10

Operatingactivities
Net profit - 8,184,42 19,412,1 39,533, 57,063, 78,849, 107,451 144,096, 196,909, 269,065,3 377,273,
3 18 375 037 780 ,397 082 905 40 726
Add: depreciation - 1,604,65 1,604,65 1,604,6 2,676,9 2,676,9 2,676,9 5,088,46 5,098,73 5,098,730 7,065,13
expense 8 8 58 10 10 10 4 0 4
amortization expense - 90,000 90,000 90,000 90,000 90,000 - - - - -
Raw material inventory (9,688,195 (412,359) (1,035,08 (2,099,6 (3,457,6 (5,143,0 (7,213,0 (9,617,2 (13,061, (17,310,7 69,038,2
) 5) 32) 56) 87) 50) 52) 262) 05) 83
Cash provided by (9,688,195 9,482,09 20,087,0 39,143, 56,387, 76,488, 102,899 139,551, 188,931, 256,837,9 453,361,
operations ) 8 66 776 666 978 ,882 919 998 90 768

Financingactivities
Change in longtermdebt 105,000,000 (5,937,385) (6,945,901) (8,125,721) (9,505,945)
(11,120,611) - - - - -
Change in shorttermdebt - - - - - - - - - - -
Add: landlease expense - - - - - - - - - - -
Landleasepayment - - - - - - - - - - -
Issuance of shares 105,000 - - 18,794, - - 44,614, 147,615 - 35,183,04 -

2
 ,000 709 922 6
Cash provided by / (used 83,271, (5,937,385 (6,945,90 10,668, (9,505,94 (11,120, 44,614, 147,615 - 35,183,04 -
for) financing 125 ) 1) 987 5) 611) 922 6

Investing activities
Capital expenditure (72,182, - - (18,794, - - (44,614, (147,615) - (35,183,04 -
930) 709) 922) 6)
Cash (used for) / (72,182, - - (18,794, - - (44,614, (147,615) - (35,183,04 -
provided by investing 930) 709) 922) 6)

NET CASH 1,400,0 3,544,713 13,141,16 31,018, 46,881,7 65,368, 102,899 139,551, 188,931,9 256,837,9 453,361,
00 6 055 21 367 ,882 919 98 90 768

2
 Year 1 Yea Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year Year 11
r2 10
1 2 3 4 5 6 7 8 9 10 11
Animals
Average # of cows 198 18 2 24 27 32 38 46 56 68 83
9 0 0 8 7 8 5 2 3 6
4
# of lactating cows 158 15 1 19 22 26 31 37 45 54 66
1 6 2 2 2 0 2 0 6 9
3
# of calve 176 16 1 12 14 17 21 26 32 38 47
4 4 7 0 0 5 4 3 8 2
3
Calve older than one year 0 88 8 99 11 13 15 18 22 27 33
(Cows)/Heifer 0 3 3 6 7 3 3 1
Total animals older then 198 27 2 33 39 46 54 65 78 95 11
one year 7 8 9 1 0 4 2 5 6 67
4
Total Animals 374 44 4 46 53 63 75 91 11 13 16
1 2 6 1 1 9 6 09 43 40
8

Animals Sold During the

Year
# of Cow Progeny sold 0 0 0 0 0 0 0 0 0 0 0
# of culled cows sold - - 2 30 3 3 3 36 3 3 4
6 2 4 5 6 8 1
# of low yielders (cows) - 10 1 13 1 1 2 27 3 4 4

2
 2 6 9 2 2 0 8
# of Male Calve sold 88 82 7 63 70 85 10 13 16 19 23
2 7 2 2 4 6
Total Animals Sold 88 92 1 10 11 13 16 19 23 28 33
1 7 8 8 7 8 7 1 6
0

2
Production of milk (ltrs) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Cows 3,168 3,780 4,896 5,760 6,672 7,848 9,312 11,160 13,488 16,392 20,064
Milk for calve 704 656 573 507 561 682 859 1,056 1,294 1,551 1,889

Net Annual milk 899,360 1,140, 1,577 1,917,2 2,230,3 2,615,692 3,085,4 3,688,0 4,450,9 5,416,8 6,633,8
production 260 ,800 36 84 03 11 74 70 46

Revenue from Sale of

Milk 114,048 136,08 176,2 207,360 240,192 282,528 335,232 401,760 485,568 590,112 722,304
Daily 0 56
Annual 41,627, 49,669 64,33 75,686, 87,670, 103,122,7 122,359 146,642 177,232 215,390 263,640
520 ,200 3,440 400 080 20 ,680 ,400 ,320 ,880 ,960

Other Revenue
Sale ofCulledCows - - 1,794,0 1,929,6 2,058,000 2,083,2 2,145,9 2,189,5 2,277,5 2,437,1
1,584,000 00 00 00 60 80 61 61
Sale of Low Yielder Cow - 960,00 1,185, 1,345,0 1,585,0 1,865,000 2,225,0 2,745,0 3,243,2 3,984,8 4,830,0
0 000 00 00 00 00 50 38 00
Sale of Calves 880,000 820,00 716,5 634,125 701,700 852,150 1,073,5 1,319,8 1,616,9 1,939,0 2,361,3
0 75 50 25 38 75 50
880,000 1,780, 3,485, 3,773,1 4,216,3 4,775,150 5,381,7 6,210,7 7,049,7 8,201,4 9,628,5
000 575 25 00 50 85 68 74 11
Total Annual Revenue 42,507, 51,449 67,81 79,459, 91,886, 107,897,8 127,741 152,853 184,282 223,592 273,269
520 ,200 9,015 525 380 70 ,430 ,185 ,088 ,354 ,471

2
3