EXPANSION BUSINESS PLAN REPORT 2022

BUSINESS PLAN
FOR
TORNO AND METAL ENGINEERING

REGISTERED ADDRESS:- ADDIS ABABA CITY ADMINISTRATION

N/SILK LAFTO SUB-CITY; WOREDA-6

DECEMBER, 2022
ADDIS ABABA, ETHIOPIA

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 EXPANSION BUSINESS PLAN REPORT 2022

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY ……………………………………………3

II. BACKGROUND INFORMATION …………………………………...5

III. MARKET ANALYSIS………………………………………………..9

IV. TECHNICAL AND OPERATIONAL PLAN………………………..20

V. ORGANIZATION AND MANAGEMENT………………………….27

VI. FINANCIAL ANALYSIS……………………………………………29

VII. ANNEXES……………………………………………………………32

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I. EXCUTIVE SUMMARY
The Company, ABCTorno and Metal Engineering is an Ethiopian owned and well established firm
licensed in 2009 E.C and legally formed as a Sole Proprietorship business. Promoters of business under
consideration are Ethiopian entrepreneurs at the middle age of life, with having a good character and
well appreciated personality among the surrounding community. Besides, the General Manager of the
company, Mr. ABC has acquired pertinent working experiences on working different metal moldings,
welding and Fabrication of metal products for local market for many years. He has been running the
existing business and provides acceptable business operations with best Ethiopian manner of business
personality.

However, with this business plan, the company has inspired mainly to engage in industrial activities at
wide range of services coverage from Design works to Quality metal products development. Hence,
currently finalizing pre-investment expansion activities that enabling to launch the proposed sheet metal
products fabrication in a way it meets domestic market demand. In this regard the firm is one of top
industry players that use modern fabrication technology and techniques highly applicable in the
development of metal industry in Ethiopia. Hence, having latest processing technology means, it is
obvious to understand the extent of market share that such firm would enabled to maintain with new
quality fabricated products. The markets of an envisaged company includes: Government Projects,
Industrial Operators, Construction sector, Commercial, Agricultural Sector and Residential clients.

As clearly observable from Industry trends, the design and fabrication industry has recently been in up-
scaling turn. It is company’s belief that this economic cycle has created opportunities for the company. Those
markets which it wishes to serve have come to the realization that efficiency and good planning is the key to
success in this new economy. Many who have previously sought to serve these clients have fallen due to lack of
flexibility to meet new requirements. With positive economic changes starting to develop, these industries will
be seeking to replace these suppliers to meet their needs.

Those companies which are too large to offer flexibility or too small to meet requirements will continue to
suffer even in an upswing economy. This will open doors to those who can provide the knowledge,
experience and capabilities to serve these existing and developing markets. Accordingly, since every
fabricated product line fulfills the highest level quality standard, it is demanded all year round and
potentially enjoys both central and regional markets in Ethiopia.

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Having all facts expressed above in mind along with set of strategic plans that the firm has developed so-far,
the financial consideration for undertaking newly planned activities are based on previous trends, future
estimates and assumptions. Thus, the total investment cost after implementation of planned new expansion
activity is assumed to reach ETB 18,590,425, which encompasses (Existing Investment  ETB 9,380,800 +
New Additions ETB 9,209,625). Out of the additional investment cost in connection with the paint
manufacturing plan, the total of additional equity contribution is expected to ETB 3,709,625; Whereas, the
remaining investment cost on new project activity for about ETB 5,500,000 is sought to be found from external
source as bank term loan (i.e. Lease Financing Facility) for purchase of production machinery.

On the other hand, considering the return after implementing the newly planned operation, the financial
projection indicates that the business will generate net profit of ETB 4,517,393; ETB 6,537,446; ETB
7,340,573; ETB 10,431,751; and ETB 14,126,164; During 1st, 2nd, 3rd, 4th, and 5th years respectively.
Furthermore, the cash flow of the business shows that the project would generate positive net cash flows
throughout the operation years with the Cumulative cash in-flow for considered life span is indicated as
ETB 1,036,550; ETB 5,973,689; ETB 12,723,028; ETB 20,042,686; ETB 30,192,766; and ETB
45,107,594; During Year-0; 1st, 2nd, 3rd, 4th; and 5th; years respectively.

While projecting the financial viability of planned operations, the underlying business will have an
internal rate of return (IRR) =44% before tax and (IRR) = 23 % after tax that indicating the viability of
the outlined investment is very attractive. Whereas, the net present value (NPV) of the project over total
investment cost at 11.5% discount rate is found to be ETB 7,142,980, which is acceptable and attractive.
Therefore, the overall significant increase in profitability and net-cash inflow strongly justifies growth
performance and it reveals that the business is liquid and will be capable of discharging its financial liabilities
with no difficulty and implies the pay-back period of newly planned operations will be during the 3rd year.

Finally, during conducting this feasibility study, the rationale behind implementation of the underlying project
has been proposed based on previous trends, future estimates and current scenarios including policy frame-
works. In conclusion, the implementation activities of intended project with new production technology for
quality product have reliable positive impacts on the overall development of the country in many aspects.
Besides, all assumptions and forecast reveals that the business operation is liquid and will be capable of
discharging its financial liabilities with no difficulty. Thus, it is highly recommended and worth to finance and
work with such profitable investment activities.

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