247 Glucose

Document Sample
247 Glucose Powered By Docstoc
					247. PROFILE ON PRODUCTION OF GLUCOSE
                            247-2




                      TABLE OF CONTENTS


                                                  PAGE


 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
                                          247-3


I.     SUMMARY


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.
                                          247-4
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


                                            Table 3.1
                  IMPORT OF GLUCOSE & GLUCOSE SYRUP (TON)


                                     Year          Quantity
                                     1997               253.5
                                     1998               437.2
                                     1999               273.8
                                     2000           1507.2
                                     2001               505.6
                                     2002               794.1
                                     2003           2217.1
                                     2004           3079.1
                                     2005           3290.8
                                     2006           8750.2
                                  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
                                         247-5
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
                                          Table 3.2
         PROJECTED DEMAND FOR GLUCOSE & GLUCOSE SYRUP (TON)


                               Year               Quantity
                               2008                   6381
                               2009                   6764
                               2010                   7170
                               2011                   7600
                               2012                   8056
                               2013                   8539
                               2014                   9052
                               2015                   9595
                               2016                   10170
                               2017                   10781
                                           247-6
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.


                                            Table 3.3
                               PRODUCTION PROGRAMME


                    Year                    1           2           3             3-10
        Capacity utilization (%)           65           75          90            100
        Production (tons)                 3900        4500        5400           6000
                                             247-7
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.


                                               Table 4.1
            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
            carbon[tones]
      5     Packing material[pcs]      lump sum              -             600            600
            Grand Total                               26,295         1,687.5         27,382.5


B.         UTILITIES


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.
                                          247-8
                                           Table 4.2
                        UTILITIES REQUIREMENT AND COST


             Sr.     Description       Quantity     Unit price      Total Cost,
             No.                                       (Birr)           Birr
              1    Electricity          450,000          0.4736
                   (kWh)                                                  213,120
              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


A.     TECHNOLOGY


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
supply:-
                                             247-9
      PRAJ Industries Limited
      PRAJ House, Bavdhan
      Pune 411021, India
      Tel: +912022905000
      Fax: +912022951718
      E mail: info@praj.net
      Web: www.praj.net


B.     ENGINEERING


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.
                                              Table 5.1
                    MACHINERY AND EQUIPMENT REQUIREMENT


                   Sr.                     Description               Qty.
                   No.                                               (No.)
                   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
                                           247-10
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.
                                      247-11
                                       Table 6.1
      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
      manager                                                             24,000
4     Finance       and     administration      1          1800
      manager                                                             21,600
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
                                           247-12
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.
                                         247-13


                                          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.
                                           247-14


                                            Table 7.2
           ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)


                                   Items                  Cost        %
                       Raw Material and Inputs
                                                        27,382.50   86.03
                       Utilities
                                                        1079.72      3.39
                       Maintenance and repair
                                                          150        0.47
                       Labour direct
                                                         214.56      0.67
                       Factory overheads
                                                          89.4       0.28
                       Administration Costs
                                                         143.04      0.45
                       Total Operating Costs
                                                        29,059.22   91.30
                       Depreciation
                                                          1725       5.42
                       Cost of Finance
                                                         1043.65   3.28
                       Total Production Cost            31,827.87 100


C.     FINANCIAL EVALUATION


1.     Profitability


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.
                                           247-15


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
current imports.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:4
posted:10/3/2012
language:Korean
pages:15