247. PROFILE ON PRODUCTION OF GLUCOSE
TABLE OF CONTENTS
I. SUMMARY 247-3
II. PRODUCT DESCRIPTION & APPLICATION 247-3
III. MARKET STUDY AND PLANT CAPACITY 247-4
A. MARKET STUDY 247-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 247-6
IV. RAW MATERIALS AND INPUTS 247-7
A. RAW & AUXILIARY MATERIALS 247-7
B. UTILITIES 247-7
V. TECHNOLOGY & ENGINEERING 247-8
A. TECHNOLOGY 247-8
B. ENGINEERING 247-9
VI. MANPOWER & TRAINING REQUIREMENT 247-10
A. MANPOWER REQUIREMENT 247-10
B. TRAINING REQUIREMENT 247-10
VII. FINANCIAL ANALYSIS 247-12
A. TOTAL INITIAL INVESTMENT COST 247-12
B. PRODUCTION COST 247-13
C. FINANCIAL EVALUATION 247-14
D. ECONOMIC BENEFITS 247-15
This profile envisages the establishment of a plant for the production of glucose with a capacity
of 6,000 tones per annum.
The present demand for the proposed product is estimated at 6020 tones per annum. The
demand is expected to reach at 10781 tones by the year 2017.
The plant will create employment opportunities for 45 persons.
The total investment requirement is estimated at about Birr 27.49 million, out of which Birr
12 million is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 15 % and a net present
value (NPV) of Birr 6.49 million discounted at 8.5%.
II. PRODUCT DESCRIPTION AND APPLICATION
Glucose, also known as corn syrup or starch syrup, is a concentrated water solution of partially
hydrolyzed starch. It contains dextrose, maltose and other higher oligosaccharides derived from
starch by acid or enzyme hydrolysis.
Glucose and glucose syrup have many uses, industrial as well as non industrial. The primary
field of utilization is in the manufacture of confectionery, caramel coloring, brewing and wine
making, infant foods, canning, baking and dairy factories and pharmaceutical products besides
being used as humectants in tobacco and tanning industries. It is also used as raw material in
the paper and adhesives industry.
Glucose and glucose syrup is a resource based product that will substitute the current import.
III. MARKET STUDY AND PLANT CAPACITY
A. MARKET STUDY
1. Past supply and present demand
Glucose and glucose syrup has wide applications in the manufacturing sector. Among the users
of the product are pharmaceuticals, breweries, tobacco producers, paper factories, adhesive
industries and food processing and canning industries. Due to unavailability of domestic
production the country’s requirement for the product is met through import. Import of glucose
and glucose syrup for the past 10 years is shown in Table 3.1
IMPORT OF GLUCOSE & GLUCOSE SYRUP (TON)
Source: Customs Authority
Table 3.1 reveals that the country's requirement of glucose and glucose syrup has been growing
in the last 10 years. The yearly average supply during the period 1997-1999 has been about 321
tons. During the next consecutive years i.e. 2000-2002 it grew to a yearly average of 935 tons.
A substantial growth of import has been registered in the recent four years. During year 2003
Ethiopia imported 2217 tons and increased to more than 3000 tons by the year 2004 and 2005.
The quantity imported in year 2006 was exceptionally very high which amounts to 8750 tons.
This substantial increase is believed as a result of the expansion and establishment of new
factories in the country.
Although the quantity imported in the year 2006 was 8750 tons the current demand estimation
has relied on the average import level of the recent two years. Accordingly, current effective
demand is estimated at 6020 tons.
2. Demand Projection
Demand for the product will grow with the expansion and development of the user industries.
Annual growth of 6% is applied to forecast the demand assuming the manufacturing sector to
grow as in the previous periods. The demand projection based on this assumption is presented
in Table 3.2
PROJECTED DEMAND FOR GLUCOSE & GLUCOSE SYRUP (TON)
3. Pricing and Distribution
Based on the import price obtained from Customs Authority a factory gate price of Birr 4,670
is adopted for sales revenue projection. The product can be directly sold to the user industries.
B. PLANT CAPACITY AND PRODUCTION PROGRAMME
1. Plant Capacity
Based on the market study the envisaged plant will have annual production capacity of 6000
tons. The plant will operate in a single shift of 8 hours a day, and for 300 days a year.
2. Production Programme
Production will commence at 60%, and then will grow to 75%, 90% and 100% in the second
year, third year and the fourth year and then after, respectively. Detail production programme
is shown in Table 3.3 below.
Year 1 2 3 3-10
Capacity utilization (%) 65 75 90 100
Production (tons) 3900 4500 5400 6000
IV. MATERIALS AND INPUTS
A. RAW AND AUXILIARY MATERIALS
The major raw material used to produce glucose and glucose syrup is starch which can be
obtained locally. The presence of starch rich agricultural products in the region can attract
potential investors in the region and there fore there is a high possibility of producing starch in
the region in the near future. Other raw materials required in small amount to produce Glucose
and Glucose syrup are hydrochloric acid, soda ash and activated carbon. Soda ash can be
obtained locally while hydrochloric acid and Activated carbon will be imported. Annual
consumption of raw and auxiliary materials at full production capacity is given in Table 4.1
below. The total cost of raw material is estimated at Birr 27,382,500.
RAW AND AUXILIARY MATERIALS REQUIREMENT AND COST
Sr. Cost, ['000 Birr]
No. Description Qty LC FC TC
1 Starch [tones] 7,500 26,250 - 26,250
2 HCl (30%)[tones] 75 - 337.5 337.5
3 Soda ash[tones] 30 45 - 45
4 Activated 150 - 750 750
5 Packing material[pcs] lump sum - 600 600
Grand Total 26,295 1,687.5 27,382.5
Electricity, water and fuel oil are the utilities required by the envisaged plant. Details of
utilities are shown in Table 4.2. The total cost of utilities is estimated at Birr 1,079,720.
UTILITIES REQUIREMENT AND COST
Sr. Description Quantity Unit price Total Cost,
No. (Birr) Birr
1 Electricity 450,000 0.4736
2 Water (m3) 10,000 5.51 55,100
3 Furnace oil (lt.) 150,000 5.41 811,500
Grand Total 1,079,720
V. TECHNOLOGY AND ENGINEERING
Starch is converted into ordinary glucose and glucose syrup through a process called
hydrolysis. In this process, the wet starch is mixed with a weak solution of hydrochloric acid
and is heated under pressure. The hydrochloric acid and heat breakdown the starch molecules
and convert them into a sugar. The hydrolysis can be interrupted at different key points to
produce glucose syrup of varying sweetness. The longer the process is allowed to proceed, the
sweeter the resulting syrup. This syrup is then filtered or otherwise clarified to remove any
objectionable flavour or colour by adding activated carbon. It is further refined and evaporated
to reduce the amount of water. To produce a glucose syrup powder, the liquid glucose syrup is
passed through a vacuum drum or spray dryer to remove 97% of the water. This produces a
crystalline corn syrup powder. Then the final product is cooled and packed.
2. Source of Technology
The technology for the production of glucose and glucose syrup can be obtained from china,
India, and European countries. The following Indian company can be contacted for technology
PRAJ Industries Limited
PRAJ House, Bavdhan
Pune 411021, India
E mail: email@example.com
1. Machinery and Equipment
The list of machinery and equipment required by the envisaged plant is given in Table 5.1
below. The total cost of machinery and equipment with the envisaged capacity is estimated at
Birr 12 million.
MACHINERY AND EQUIPMENT REQUIREMENT
Sr. Description Qty.
1 Hydrochloric acid tank 1
2 Blender/mixer 1
3 Hydrolysis tank 1
4 Wooden neutralization vat 1
5 Filter 1
6 Centrifuge 1
7 Vacuum dryer 1
8 Cooling tower 1
9 Baby boiler 1
10 Vessels and tanks 1
2. Land, Building and Civil Works
The total land requirement, including provision for open space is 5000 m2, of which 3000 m2
will be covered by building. Estimating unit building construction cost of Birr 2,800 per m2,
keeping into consideration the buildings will be constructed from EGA sheet roof, prefab steel
wall and cement tile floor. The total cost of building will be Birr 8,400,000. The cost of land
leasing is Birr 0.2 per m2, and for 80 years land holding will be Birr 80,000. Thus, the total
investment cost of land, building and civil works will be Birr 8,480,000.
3. Proposed Location
Glucose and glucose syrup factory should be located at an area where there is sufficient raw
material, market for its finished product and basic infrastructure like road, electricity and water
are available. It would be, therefore, advisable to locate the plant in Alaba special woreda,
Alaba Kulito town.
VI. MANPOWER AND TRAINING REQUIREMENT
A. MANPOWER REQUIREMENT
The plant requires workers, and their annual expenditure, including fringe benefits, is estimated
at Birr 429,120. For details see Table 6.1 below.
B. TRAINING REQUIREMENT
The production operators will be trained on the operation and maintenance of machinery for
about four weeks during commissioning by the expert of machinery supplier. The total cost of
training is estimated at Birr 50,000.
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST
Sr. Description Req. Salary, Birr
No. No. Monthly Annual
1 Plant manager 1 2500 30,000
2 Secretary 1 700 8,400
3 Production and technical 1 2000
4 Finance and administration 1 1800
5 Commercial manager 1 1800 21,600
6 Accountant 3 2700 32,400
7 Purchaser 2 1800 21,600
8 Sales man 1 900 10,800
9 Production supervisor 1 900 10,800
10 Mechanic 2 1200 14,400
11 Electrician 2 1200 14,400
12 Chemists 2 1800 21,600
13 Operators 4 2000 24,000
14 labourers 6 1800 21,600
15 personnel 1 900 10,800
16 Time keepers 2 900 10,800
17 Clerk 3 1050 12,600
18 Store keeper 2 1000 12,000
19 Driver 3 1350 16,200
20 Guard 3 900 10,800
21 Cleaner 3 600 7,200
Sub total 45 357,600
Employee benefit (20% BS) - - 71,520
Total - 429,120
VII. FINANCIAL ANALYSIS
The financial analysis of the glucose 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 30days
Raw material, import 90days
Work in progress 5 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 27.49
million, of which 57 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 80
2 Building and Civil Work 8,400.00
3 Plant Machinery and Equipment 12,000.00
4 Office Furniture and Equipment 150
5 Vehicle 250
6 Pre-production Expenditure* 1,321.29
7 Working Capital 5290.69
Total Investment cost 27,492.0
Foreign Share 57
* N.B Pre-production expenditure includes interest during construction (Birr 1.12 million)
training (Birr 50 thousand) and Birr 150 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 31.82 million (see
Table 7.2). The material and utility cost accounts for 89.43 per cent, while repair and
maintenance take 0.47 per cent of the production cost.
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items Cost %
Raw Material and Inputs
Maintenance and repair
Total Operating Costs
Cost of Finance
Total Production Cost 31,827.87 100
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 = 30 %
Sales – Variable Cost
3. Payback 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 6 years.
4. Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 15 % and the net present
value at 8.5% discount rate is Birr 6.49 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 7.62 million in terms of tax revenue. The establishment of
such factory will have a foreign exchange saving effect to the country by substituting the