162. PROFILE ON PRODUCTION OF MOSAIC
TABLE OF CONTENTS
I. SUMMARY 162-3
II. PRODUCT DESCRIPTION & APPLICATION 162-3
III. MARKET STUDY AND PLANT CAPACITY 162-4
A. MARKET STUDY 162-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 162-6
IV. RAW MATERIALS AND INPUTS 162-6
A. RAW & AUXILIARY MATERIALS 162-6
B. UTILITIES 162-7
V. TECHNOLOGY & ENGINEERING 162-8
A. TECHNOLOGY 162-8
B. ENGINEERING 162-9
VI. MANPOWER & TRAINING REQUIREMENT 162-11
A. MANPOWER REQUIREMENT 162-11
B. TRAINING REQUIREMENT 162-12
VII. FINANCIAL ANALYSIS 162-12
A. TOTAL INITIAL INVESTMENT COST 162-13
B. PRODUCTION COST 162-14
C. FINANCIAL EVALUATION 162-15
D. ECONOMIC BENEFITS 162-16
This profile envisages the establishment of a plant for the production of mosaic tiles
with a capacity of 45,000 sq.m per annum.
The present demand for the proposed product is estimated at 1.77 million sq.m per annum.
The demand is expected to reach at 4.28 million sq.m by the year 2020.
The plant will create employment opportunities for 45 persons.
The total investment requirement is estimated at Birr 5.63 million, out of which Birr 3.45
million is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 25 % and a net
present value (NPV) of Birr 3.77 million discounted at 8.5%.
II. PRODUCT DESCRIPTION AND APPLICATION
Mosaic tiles are one of the most essential building materials used for covering & decorating
walls & other interior spaces of buildings. The development of the tile manufacturing industry
is closely related to the development of the construction industry.
The plant uses such raw materials as clay, silica & feldspar which are available in abundance in
the region. The processing technology is relatively simple and it is a labour intensive industry.
The project is resource based. Moreover, at present the country import a significant quantity
of the products. Therefore, the project is both resource based and aimed at import
III. MARKET STUDY AND PLANT CAPACITY
A. MARKET STUDY
1. Present Demand and Supply
The country’s demand for mosaic tiles is met through imports. Table 3.1 depicts the amount
of imports of mosaic tiles during the period 2000 - 2006.
As shown in the Table, the amount of imports was erratic. During the period under reference,
imports varied from 347,318 sq.m in the year 2003 to 3.13 million sq.m in the year2006.
Imports averaged at 1.34 million sq.m during the period under consideration.
IMPORTS OF MOSAIC TILES (IN sq.m)
Source: Customs Authority, External Trade Statistics.
Taking into account the substantial fluctuations in the supply of the products, the average
annual supply of the product during the last three years (2004 – 2006 ) is considered as the
effective demand for the products for the year 2007.
Accordingly, he present demand for the products (i.e., for 2007) is thus estimated at
2. Projected Demand
The construction sector is one of the fast growing sectors of the economy, exhibiting 7%
growth rate in 1999 -2004. In fact, building construction is booming as a result of policy
reforms related with urban land, creating opportunities for building materials supply.
Accordingly the demand for mosaic tile is assumed to grow by 7%, which is parallel to the
growth rate registered by the construction sector during the resent past (See Table 3.2).
PROJECTED DEMAND FOR MOSAIC TILES
Year Projected Demand
3. Pricing and Distribution
The current price of cement tiles ranges between Birr 55 per m2 to 90 per m2. For the
envisaged plant a factory-gate price of Birr 75 per m2 is recommended. The plant will directly
sell its product to the end-users at the premises of the factory.
B. PLANT CAPACITY AND PRODUCTION PROGRAMME
1. Plant Capacity
Calcination takes place in a tunnel kiln for 33 hours at a temperature of l250oC. The plant
capacity therefore, depends on the capacity of the tunnel kiln. For the purpose of this study,
considering the fierce competition form plastic tiles and the required investment a plant capacity
of 900 tons or 45,000 m2 is envisaged. This would mean a daily production capacity of 3 tons,
working in 3 shifts a day for 300 days a year. The tunnel kiln can be made to have a single
chamber for calcination.
Owing to a relatively high energy requirement of the production process, it is preferable to
operate the plant continuously. Besides, energy saving and recovery methods are devised and
implemented. In addition, good maintenance practice, and careful monitoring of the operation
are required to minimize operating costs as much as possible.
2. Production Programme
The plant is initially made to operate at 75% of the installed capacity. It then gradually builds
its capacity up to 85% and l00% of the installed capacity in the second and third years,
As the plant will be new and to be equipped with new machinery, production build up is made
to start at reduced capacity and gradually raise to full capacity. This low production level at the
initial stage is to develop substantial market outlets for the product. Machinery operators will
also get enough time to develop the required skills and experience.
IV. MATERIAL AND INPUTS
A. RAW AND AUXILIARY MATERIALS
The basic raw materials required by mosaic tiles producing plant include Portland cement, white
cement and sand. All these materials can be purchased locally. In addition to the principal raw
materials identified above, mosaic tiles production requires marble chips, mineral colours and
chemicals. These materials provide different colours to the product and serve as bonding agents
in the process of production. Table 4.1 presents the list of raw and auxiliary materials required
by the envisaged plant together with their quantities and costs.
RAW AND AUXILIARY MATERIALS REQUIREMENT AT FULL CAPACITY
Qty. Cost Birr
No. Item (tons) F.C L.C Total
l Portland cement 180 - 93,150 93,150
2 White cement 144 - 149,040 149,040
3 Sand 540 - 93,150 93,150
4 Marble 72 - 17,250 17,250
5 Mineral Colours and chemicals 5,175 - 5,175
Total 5,175 352,590 357,765
Utilities required by the plant include electricity, water and fuel oil. Water is required for
drinking and for other general purposes. Electricity is required to operate production
machineries and lighting. Fuel oil is the heat source in the tunnel kiln for the calcination of the
product. Quantities required and associated costs are given in Table 4.2.
UTILITIES REQUIREMENT (AT FULL CAPACITY)
No. Items Qty. Cost Birr
l Electricity 360,000 KWH 171,023
2 Water 7,500 m3 41,250
3 Heavy Fuel Oil 97,500 lit 527,475
V. TECHNOLOGY AND ENGINEERING
1. Production Process
A number of operations are required in the production of mosaic tiles. These include crushing,
pulverizing, drying, ageing, forming, glazing, calcination, screening, back mounting on paper
It is assumed that quarrying of the mineral raw materials will be carried out by a separate firm.
The required raw materials are purchased and stored at the site of the plant from where feeding
to the plant is effected.
Crushing: The mined mineral raw materials are crushed by hammers to the size of
about 20 cm prior to the primary crushing in a jaw crusher. It is then further crushed in
an impeller breaker to the 4 mesh size and below.
Pulverizing: The crushed mineral raw materials and powdery raw materials are
blended in a fixed mixing ratio for pulverization in a ball mill together with water. The
pulverization continues for about l7 hours at a rotation speed of l7 rpm.
Drying: The mixture of raw materials and water is what is called slip. This slip is
sprayed on a spray dryer (made out of metal having cylindrical shape) and dried at a
temperature of about 450 - 500oc. The drying process will produce powder having
residual moisture content of 7%.
Ageing: Here the dried powder is left for ageing for 48-72 hours to facilitate subsequent
Forming: After the ageing is completed, the powder is put into metallic moulds
according to sizes and formed by applying the pressure of 300-350 kg/cm2.
Glazing: Glazing materials are produced from outside the plant. The glazes are sprayed
on to the formed semi finished products until the glazing reaches a prescribed thickness
while moving on a net conveyor.
Calcination: The net operation is to put the glazed semi-finished product into a
refractory box and then place it on a cart. The cart is then placed into tunnel kiln at
l250oc for about 33 hours.
Screening, back mounting on paper and packing: The products calcined in the kiln
are screened. Many tiles are arranged to be back mounted on papers. After back
mounting, the products go through inspection prior to delivery as finished products.
2. Source of Technology
The technology required is simple and widely applied for many years in countries such as
western Europe, China, India & Korea. It would be possible to obtain the latest technology
for the manufacturing of mosaic tiles from the following companies.
1) ITTFLYGT, Srl
Country of orgin: Italy
2) Muhak Co., LTD
Home page: WWW.muhak.Co.kr.
1. Machinery and Equipment
The list of machinery and equipment required by a mosaic tile producing plant is given in Table
MACHINERY AND EQUIPMENT REQUIREMENT AND COST OF MOSAIC TILE
No. Description Qty Cost, Birr
l Saw crusher 1
2 Impeller Breaker 1
3 Vibrating screen 1
4 Conveyor belt 1
5 Bucket Elevator 1
6 Fret mill 1
7 Ball mill 1
8 Spray dryer 1
9 Friction press 1
10 High pressure press 1
11 Glazing machine 1
12 Tunnel kiln 1
13 Tile mould of different size and fixtures -
Sub-total 3. 0 million
Freight Insurance, Bank charges, Inland 0.45 million
Total Cost 3.45 million
2. Land, Building and Civil Works
The plant requires building to accommodate production hall, stores (raw material and finished
products) and offices. The total building area is 400 m2 while land area including provision for
open space is 800 m2. At the rate of Birr 2,500 per m2, building cost is estimated at Birr
1,000,000 including expenditure for site preparation and other civil works. Payment to land rent
is estimated at Birr 400 per annum.
3. Proposed Location
Location selection for a particular plant is made based on assessment of the requirement of
the specific plant.
In case of mosaic tiles manufacturing plant the major raw material required i.e. cement is not
currently produced in SNNPRS therefore it has to be obtained from other regions. Moreover,
auxiliary materials required such as resins, pigments and lubricants have to be imported.
Therefore, as the envisaged plant have to transport the raw materials required road connection
becomes a critical factor in the selection of possible locations. Moreover, availability of other
infrastructures is also important.
Accordingly on the basis of the above discussions three woredas, namely Meskan, Kebena
and Alaba special woreda have been identified as a possible locations.
Moreover, after analysing the comparative advantages and disadvantages of the selected
woredas the capital of Kebena woreda i.e. Wolkite town is selected as the best location.
VI. MANPOWER AND TRAINING REQUIREMENTS
A. MANPOWER REQUIREMENT
The total manpower required by the plant is 45 personnel. The list of manpower is presented in
No. Description Quantity (No.) Month Salary Annual
1 Plant Manager 1 2500 30000
2 Secretary 1 800 9600
3 Accountant 1 1500 18,000
4 Sales man 1 800 9600
5 Clerks 2 700 8400
6 General Services 3 600 7200
7 Production 3 4500 54000
8 supervisor 15 10500 126000
9 Skilled workers 18 3600 43200
Sub-total 45 25,500 306,000
Training Cost - 20,000
Benefits (15% BS) 45,900
Grand Total 45 371,900
B. TRAINING REQUIREMENT
Training is required for production supervisors and production workers like kiln operator. The
training can be conducted at plant site during erection and commissioning period. A total of
Birr 20,000 is allotted for carrying out the training activity.
VII. FINANCIAL ANALYSIS
The financial analysis of the mosaic tiles project is based on the data presented in the
previous chapters and the following assumptions:-
Construction period 1 year
Source of finance 30 % equity
70 % loan
Tax holidays 3 years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30 days
Raw material, import 90 days
Work in progress 2 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
A. TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr 5.63
million, of which 17 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
INITIAL INVESTMENT COST
Sr. Total Cost
No. Cost Items (‘000 Birr)
1 Land lease value 32.0
2 Building and Civil Work 1,000.0
3 Plant Machinery and Equipment 3,450.0
4 Office Furniture and Equipment 125.0
5 Vehicle 450.0
6 Pre-production Expenditure* 466.0
7 Working Capital 116.9
Total Investment cost 5,639.9
Foreign Share 17
* N.B Pre-production expenditure includes interest during construction ( Birr 316.02 thousand ) training
(Birr 20 thousand ) and Birr 130 thousand costs of registration, licensing and formation of the company
including legal fees, commissioning expenses, etc.
B. PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 2.42 million (see
Table 7.2). The material and utility cost accounts for 45.29 per cent, while repair and
maintenance take 4.13 per cent of the production cost.
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items Cost %
Raw Material and Inputs 357.76 14.76
Utilities 739.75 30.53
Maintenance and repair 100 4.13
Labour direct 223.14 9.21
Factory overheads 74.38 3.07
Administration Costs 148.76 6.14
Total Operating Costs 1,643.79 67.83
Depreciation 527.5 21.77
Cost of Finance 252.11 10.40
Total Production Cost 2,423.40 100
C. FINANCIAL EVALUATION
According to the projected income statement, the project will start generating profit in the
first year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total investment)
show an increasing trend during the life-time of the project.
The income statement and the other indicators of profitability show that the project is viable.
2. Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.
BE = Fixed Cost = 32 %
Sales – Variable Cost
3. Pay Back Period
The investment cost and income statement projection are used to project the pay-back period.
The project’s initial investment will be fully recovered within 4 years.
4. Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 25 % and the net
present value at 8.5% discount rate is Birr 3.77 million.
D. ECONOMIC BENEFITS
The project can create employment for 45 persons. In addition to supply of the domestic
needs, the project will generate Birr 2.44 million in terms of tax revenue. The establishment
of such factory will have a foreign exchange saving effect to the country by substituting the