Professional Documents
Culture Documents
PROFILE ON PRODUCTION OF
MINERAL WATER
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TABLE OF CONTENTS
PAGE
I.
SUMMARY
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II.
86-3
III.
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A. MARKET STUDY
86-4
86-6
86-7
A. RAW MATERIALS
86-7
B. UTILITIES
86-8
86-9
A. TECHNOLOGY
86-9
B. ENGINEERING
86-10
86-12
A. MANPOWER REQUIREMENT
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B. TRAINING REQUIREMENT
86-14
FINANCIAL ANALYSIS
86-14
86-14
B. PRODUCTION COST
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C. FINANCIAL EVALUATION
86-16
D. ECONOMIC BENEFITS
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IV.
V.
VI.
VII.
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I.
SUMMARY
This profile envisages the establishment of a plant for the production of mineral water
with a capacity of 14.14 million liters per annum.
The present demand for the proposed product is estimated at 91.94 million litters
per annum.
The
demand
is
expected
to
reach
at
1.93
billion
litters
The total investment requirement is estimated at Birr 5.57 million, out of which Birr
575,000 is required for plant and machinery.
20
% and a net present value (NPV) of Birr 2.76 million discounted at 8.5%.
II.
The simple definition of water is that it is the liquid that descents from the cloud as
rain, forms streams, lakes and seas, issues from the ground in form of springs and is a
major constituent of all living matter and that when pure consists of an oxide of
hydrogen H2O or (H2O) x in the proportion of 2 atoms of hydrogen to one atom of
oxygen and is an odorless, tasteless, very slightly compressible liquid. Water freezes
at 0oC and boils at 100oC, has a maximum density at 4oC and a high specific heat
contains very small equal concentration of hydrogen ions and hydroxide ions, reacts
neutrally and constitutes a poor conductor of electricity, a good ionizing agent and a
good solvent.
The present study considers bottling, packing and distribution of mineral water.
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III.
A.
MARKET STUDY
1.
Demand for mineral water in Ethiopia is met through local production except for
insignificant import. The domestic suppliers were for a long time a few public sector
companies. Ambo Mineral Water is the most reportable among these, enjoying the
largest share of the market in most parts of the country. Tossa and Babile had also a
long history of supplying mineral water through their geographic reach, which is
limited to specific regions.
The private sector supplier is Bure Baguna which is located 410 km north-west of
Addis Ababa. Currently, Moha Soft Drinks S.C is refurbishing the Bure Baguna
Mineral Water Factory which it bought from the Ethiopian Development Bank after it
was foreclosed following the failure of the owners to pay their debts.
Table 3.1 shows the combined production volume of mineral water by all local
producers in a ten years period (1985-1994).
Table 3.1
DOMESTIC PRODUCTION OF MINERAL WATER
Year
Production (Liters)
1987
29,837,700
1988
35,775,410
1989
37,425,700
1990
39,006,800
1991
42,141,700
1992
39,976,410
1993
39,545,100
1994
39,463,200
1995
43,260,000
1996
39,884,400
1997
73,707,900
Source: CSA, Survey of the Manufacturing and Electricity Industries, Annual Issues.
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Scrutiny of Table 3.1 reveals that production of mineral water is marked by
significant growth and the supply reached the peak volume of 73.7 million liters in
1997 registering an average annual growth rate of 11.7%.
Accordingly, assuming that the average growth rate witnessed in the past will also
continue in the near future and taking the 1997 level of production as a base the
present ( 1999) denned for the product is estimated at 91,946,536 litters.
2.
Projected Demand
The future demand for mineral water is a function of income, urban population
growth and growth of catering and recreational establishments. After considering all
the above factors, the demand for mineral water is forecasted to grow at a rate higher
than the growth of the urban population in order to take account of effects of growth
in income and other demand determing variables. Accordingly, an annual growth rate
of 7%, (which is lower than the past trend) is deemed to be a reasonable growth rate
to project future demand, and the result is as shown in Table 3.2.
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Table 3.2
PROJECTED DEMAND FOR MINERAL WATER
Year
3.
Projected
Projected
Demand
Demand Gap
(Million
Existing
(Million
liters)
capacity
liters)
2000
984.02
418.2
565.82
2001
1,052.90
418.2
634.70
2002
1,126.61
418.2
708.41
2003
1,205.47
418.2
787.27
2004
1,289.85
418.2
871.65
2005
1,380.14
418.2
961.94
2006
1,476.75
418.2
1,058.55
2007
1,580.12
418.2
1,161.92
2008
1,690.73
418.2
1,272.53
2009
1,809.08
418.2
1,390.88
2010
1,935.72
418.2
1,517.52
The factory-gate price of Ambo Mineral Water, which is Birr one /litter could be used
as a reference price for financial analysis of the project. Distribution of the product is
best undertaken through existing and would be agents with strong financial base and
channel connection in designated market territories.
B.
1.
Plant Capacity
Considering only 2.5% of the projected unsatisfied demand for the year 2000, the
annual production capacity of the envisaged plant is proposed to be 14,145,500 liters
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of mineral water on a basis of two shifts of eight hours each, per day and 300 days per
annum.
2.
Production Programme
Table 3.3
PRODUCTION PROGRAMME (LITERS)
Sr.
Production
Year 1
Year 2
Year 3
No.
1
8,516,400
9,490,950
10,545,500
In 1 litre bottle
2,800,000
3,240,000
3,600,000
11,316,400
12,730,950
14,145,500
80
90
100
Total
3
IV.
A.
RAW MATERIALS
The direct raw material required by the plant is raw water from spring or other
sources. The annual requirement for raw water at 100% capacity utilization rate of
the envisaged plant is 18,000,000 litres. It is assumed that the raw water from the
source will be acquired free of charge.
lump sum basis a royalty of Birr 2,400 per year to be paid to the regional government.
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The major auxiliary materials required by the plant basically constitute the filling and
packing materials. Some of these auxiliary materials, to name a few, are polyethylene
terephtalate (PET) bottles with pilfer proof caps, labels, polypropylene rolls for
wrapping of filled bottles. PET bottles can be either imported in their final form or
be pre-heated and blown to final size from the imported PET performs. Labels in
required size and desired number of colour print can be locally available from the
public or private enterprises.
The annual requirement for auxiliary materials at the rated capacity of the plant and
their estimated costs are shown in Table 4.1.
Table 4.1
ANNUAL REQUIREMENT OF AUXILIARY MATERIALS AND
ESTIMATED COSTS
Sr.
No.
1
2
3
B.
Description
Unit of
Meas.
20 gm PET per form PC
for 0.5 lt bottle
26 gm PET per form PC
for 1 lt bottle
Pilfer-proof
cap, PC
28mm neck diameter,
3gm/pc
Polypropylene
for Roll
wrapping of PET
bottles
Label
PC
Grand Total
Annual
Requirement
23,200,100
Cost (Birr)
FC
LC
6,472,874
580,000
Total
7,052,874
3,960,000
1,386,000
1,386,000
2,772,000
27,160,100
1,955,527
217,280
2,172,807
82,800
409,859
45,540
455,399
27,160,100
10,224,260
190,120
2,418,940
190,120
12,643,200
UTILITIES
The utilities required by the envisaged plant will be electricity, water for general
purpose, furnace oil for boiler, lubricant, fuel gas (petrol) for vehicles, dried air, steam
and compressed air.
The plant will have the required facility to produce its own
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The annual utilities requirement at full plant capacity and the estimated costs are
given in Table 4.2.
Table 4.2
ANNUAL UTILITIES REQUIREMENT AND ESTIMATED COSTS
Sr.
No.
1
2
3
4
Description
Electric Power
Furnace oil
Lubricant
Fuel gas (petrol)
Total
Unit of
Measure
kWh
lt
kg
lt
V.
A.
TECHNOLOGY
1.
Production Process
Annual
Req.
480,000
1,200
410
400
Cost Birr
336,000
3,000
3,600
1,700
344,410
The production and bottling of mineral water in PET bottles involves processes like
raw water storage and treatment, filling and capping, labeling, wrapping and
dispatching. The major operations in water storage and treatment unit include water
colour removal, raw water pumping and storage, chemicals dosage, filtration using
different types of filters, ultraviolet water disinfection or ozone generation with
recirculation system.
The chemically dosed water is fed to the cartridge filter for removal of suspended
particles up to 5 microns.
reverse osmosis module where the salts get rejected partially by means of high
pressure pump. The permeate water is blended with filtered water if required to
maintain the desired total dissolved solids level of 100 to 150 PPM. The water before
stored in the tank is disinfected by means of ozonator.
Suspended solids are removed from the raw water by using a sand filter which thereby
reduces the turbidity of water and helps in obtaining clean and clear filtered water.
Iron staining is eliminated by changing the ferrous iron to ferric iron by the ozone
oxidizing effect on the ferrous iron.
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After proper water treatment, the PET bottles are automatically conveyed and
transferred onto the rinsing rotor where they are subject to rinsing jets.
Then the
bottles are automatically transferred onto the filling rotor where they are filled with
the product. On the capping rotor, the bottle by itself picks up a cap from the chute
of the vibratory bowl feeder which ensures a continuous supply of properly oriented
caps. The caps are sterilized from inside prior to capping with the help of direct
exposure of UV lamps.
Sealing of the heat sealable labels of the PET bottles is done on labeling and shrink
wrapping machine. Finally, the labeled and sealed bottles are transferred to the
discharge conveyor and then dispatched.
2.
Source of Technology
The technology on water bottling plants can be acquired from European or Asiatic
countries. The supplier's address is given below.
a)
B.
ENGINEERING
1.
Machinery and equipment required by the envisaged plant will be for the main
production line and for the supporting units like PET stretch blowing and plastic
injection unit for PET performs and caps.
The major plant machinery and equipment required and their estimated costs are
shown in Table 5.1.
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Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT
AND ESTIMATED COSTS
Sr.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
1
2
3
4
5
6
7
8
9
10
1
2
3
1
2
3
Description
A. Water Treatment Unit
Feed tank
Feed pump
Multi-media filter
Cartridge filter
Middle tank
Middle pump
Fine filter
Micron filter
Final tank
Final pump
Ozone system
Pipes, valves and accessories
Control equipment
B. Filling, Capping and Packing Unit
Rinser, filler and capper
Accessories for the above m/c
Light checking box
Caps sterilizing cabinet
Shrink labeling m/c
Inkjet printer
Conveyor with drive motor
Extension for conveyor
Label inserting table
Air compressor
C. PET Stretch Blow Mounding
Unit
Stretch blow moulding m/c including 2 high
pressure air compressors, 1 air receiving
tank, 2 air filters, 1 air drier, spare parts and
tools
Mould for 0.5 litre PET bottle
Mould for 1.0 litre PET bottle
Total
D. Plastic Caps Production Line
Plastic injection machine
Auto Loader
Moulds for caps
Grand Total
Qty.
(Set)
FC
Cost (Birr)
LC
Total
1
1
1
1
1
1
1
1
1
1
1
1
1
13,500
2,900
44,000
44,000
13,500
2,600
5,200
53,800
13,500
2,400
66,900
7,400
19,500
289,200
1,500
410
4,900
4,900
1,500
410
600
6,000
1,500
410
7,400
800
2,200
32,200
15,000
3,200
48,900
48,900
15,000
2,900
5,800
59,800
15,000
2,700
74,410
8,200
21,700
321,400
1
1
1
1
1
1
1
1
1
1
346,500
12.100
2,400
26,800
56,500
122,410
20,410
21.200
5,100
5,400
618,600
489,200
38,500
1,410
3,000
3,000
6,410
13,600
2,410
2,400
600
600
68,500
54,410
385,000
13,400
2,700
29,800
62,800
135,900
22,600
23,600
5,700
6,000
687,500
543,500
1
1
10,200
18,200
517,600
1,100
2,000
57,400
11,410
20,200
575,000
1
1
1
169,200
7,100
59,100
235,400
1,660,800
18,800
188,000
800
7,900
6,600
65,700
26,200
261,600
184,700 1,845,500
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In addition, two trucks with trailers at estimated cost of Birr 1,600,000 and one single
cabinet pickup at the cost of Birr 260,000 are required for the project.
2.
The total land area of the plant including both open and built-up area is about 10,000
m2.
Total built-up area including factory building, office, storage for raw materials
and finished products is estimated to be 1,200 m2. Payment to land holdings for 80
years is estimated at Birr 280,000in a lease rate of Birr 0.35 per m2 per annum.
The total cost of buildings and construction including land preparation at the rate of
Birr 2,400 /m2 is estimated at Birr 1,680,000. Thus, the total investment cost for land,
buildings and civil works assuming that the total land lease cost will be paid in
advance is estimated at Birr 1,960,000.
3.
Proposed Location
VI.
A.
MANPOWER REQUIREMENT
The total manpower requirement of the plant at 100% capacity utilization will be 54
persons, of whom 21 are direct production workers and the remaining 33
administrative and supervisory staff.
The proposed manpower and the estimated annual labour cost including fringe
benefits are shown in Table 6.1.
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Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST
Sr.
Description
No.
(Nos.)
Monthly
Annual
Plant manager
2,000
24,000
Secretary
800
9,600
Quality controller
600
7,200
Personnel
750
9,000
Driver
350 x 4
16,800
Assistant driver
200 x 2
4,800
Guard
150 x 3
5,400
Accounting Clerk
350
4,200
Cashier
400
4,800
10
Sales person
400
4,800
11
Store keeper
400 x 2
9,600
12
1,700
20,400
13
Shift leader
700 x 2
16,800
14
Bottle
150 x 6
10,800
store
and
decorating
Labourer
15
Shift operator
11
350 x 11
46,200
16
350 x 2
8,400
17
150 x 4
7,200
18
Forklift operator
410
3,600
19
Mechanic
550 x 4
26,400
20
Electrician
550 x 2
13,200
21
Welder
450
5,400
22
Plumber
200 x 2
4,800
Sub-Total
54
21,950
263,400
4,390
52,680
26,340
316,080
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B.
TRAINING REQUIREMENT
The quality controller, two shift leaders, eleven shift operators, and four mechanics
and two electricians should be given a three weeks on-the-job training by the
advanced technicians of the equipment supplier during plant commissioning.
The
total cost of training is estimated at Birr 55,000, out of which 40% will be required in
foreign currency.
VII.
FINANCIAL ANALYSIS
The financial analysis of the mineral water 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%
8.5%
Accounts receivable
30 days
30 days
90 days
Work in progress
1 days
Finished products
30 days
Cash in hand
5 days
Accounts payable
30 days
A.
The total investment cost of the project including working capital is estimated at 5.57
million, of which 47 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
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Table 7.1
INITIAL INVESTMENT COST
Sr.
Total Cost
No.
Cost Items
(000 Birr)
280.0
1,680.0
575.0
Equipment
4
125.0
Equipment
5
Vehicle
200.0
Pre-production
373.5
Expenditure*
7
Working Capital
2,344.1
5,577.6
Foreign Share
N.B
47
223.53
B.
PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 13.85
million (see Table 7.2). The material and utility cost accounts for 93.78 per cent,
while repair and maintenance take 0.58 per cent of the production cost.
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Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Raw Material and Inputs
Utilities
Maintenance and repair
Labour direct
Factory overheads
Administration Costs
Total Operating Costs
Depreciation
Cost of Finance
Total Production Cost
C.
FINANCIAL EVALUATION
1.
Profitability
Cost
12,643.20
91.29
344.41
2.49
80
0.58
189.65
1.37
63.22
0.46
126.43
0.91
13,446.91
97.09
224
1.62
178.33
1.29
13,849.24
100
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.
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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
= 20%
3.
The investment cost and income statement projection are used to project the pay-back
period. The projects initial investment will be fully recovered within 6 years.
4.
Based on the cash flow statement, the calculated IRR of the project is 20 % and the
net present value at 8.5% discount rate is Birr 2.76 million.
D.
ECONOMIC BENEFITS
persons.
domestic needs, the project will generate Birr 2.39 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.