Garment Project Profile Final

8/19/2019 Garment Project Profile Final

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Project profile on garment industry

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TABLE OF CONTENTS

Contents Page

s

Table of contents................................................................................................................................... ITables: ..................................................................................................................................................... II

1. Executive Summary.................................................................................................................... 1

2. Product escription and !pplication..................................................................................... 2

". #ar$et Study% Plant &apacity and Production Program....................................................

".1 #ar$et Study....................................................................................................................

".1.1 Supply'emand !nalysis.........................................................................................

".1.2 Projected emand...................................................................................................

".1." Pricing and istribution..........................................................................................

".2 Plant &apacity and production capacity......................................................................".2.1 Plant &apacity............................................................................................................

".2.2 Production program.................................................................................................

2

2

2

(

12

1"1"

1)

). *a+ #aterials and ,tilities.....................................................................................................

).1 *a+ #aterials....................................................................................................................

).2 ,tilities...................................................................................................................

1-

1-

1

-. /ocation and Site........................................................................................................................ 1

. Tec0nology and

Engineering......................................................................................................

.1 ProductionProcess............................................................................................................

.2 Source of

tec0nology.......................................................................................................

." #ac0inery and Euipment...............................................................................................

.) /and use% building and civil

+or$s..................................................................................

1(

1(

2222

2"

(. #anpo+er and Training

*euirement......................................................................................

(.1 #anpo+erreuirement.................................................................................................

(.2 Training

reuirement.....................................................................................................

2)

2)

2-

. 3inancial

!nalysis.........................................................................................................................

2-

2-

2


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.1 ,nderlying

!ssumption....................................................................................................

.2 Pre'production

cost..........................................................................................................

." Total investment

cost.......................................................................................................) Production

&osts................................................................................................................

2

2

2(

4. 3inancial

Evaluation.....................................................................................................................

2(

TABLES

Table PagesTable: ".1 Export plans of $nitted and +oven garments......................................................................

Table: ".2 !pparel products exported from year 2552 up to 2511.................................................

Table: "." !pparel products imported from year 2552 up to 2511..................................................

Table: ".) 6orld and Et0iopia7s !pparel import demand projection for years 2511'2522........

Table: ".- !pparel supply gaps projected for years 2511'2522.......................................................Table: ". Summary of apparel surplus import demand projected for years 2511'2522.........

Table: ".( Sales plan for t0e envisaged plant........................................................................................

Table: ". Estimated !verage selling prices of unit $ilogram for different product

categories.........................................................................................................................................

Table: ".4 !nnual sales plan for t0e envisaged plant...........................................................................

Table: ".15 Production plan.........................................................................................................................

Table: ).1 *a+ materials reuirement and cost at full capacity........................................................

Table: ).2 ,tilities reuirement and cost at full capacity..................................................................

Table: .2 #ac0inery and euipment reuirement and cost...............................................................

Table: (.1 #anpo+er reuirement and annual salary............................................................................

Table: .1 3inancial assumptions................................................................................................................

4

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415

11

12

1"

1)

1-

1

22

2)

2-

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Table: .2 esign% consultancy% training and test run costs...............................................................

Table: ).2 Investment cost........................................................................................................................

Table: ).2 Production cost at full capacity.............................................................................................

2

2

2(

1. Executive Summar

!ccording to 2511 trade report% by International Trade &enter 8IT&9% t0e total apparel

products imported by t0e +orld +as about 14%(%54%555 ,S in value% from +0ic0

about "%"2)%555.55 ,S +as imported by Et0iopia. Ta$ing t0ese values as a base line

and average gro+t0 rate of 2 and ) respectively% t0e present 8251"7s9 +orld import

demand for apparel products is estimated to be 25)%("%2)(%555.55 ,S% +0ic0 is

approximately about -5 billion pieces;year% and t0e amount to be imported by Et0iopia

is estimated to reac0 45%12"%2".55 ,S% +0ic0 is approximately about 22million

pieces;year. T0ere is a total production capacity of about (" million +oven and $nitted

garments existing current in t0e country% from +0ic0 only about (- 8-.2- million

pieces9 is utili


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T0is project profile envisages t0e establis0ment of a garment factory +0ic0 is to be

engaged in production of different apparel products suc0 as trouser% jac$et% coat%

s0irt% blouses% baby garments% etc +it0 a capacity of 1%-55%555pcs;annum. T0e

envisaged factory is intended to sale 4 of its products to t0e international mar$et

and t0e rest "1 to t0e domestic mar$et so t0at it enables t0e project promoter to

reac0 t0e vast mar$et opportunities bot0 internationally and locally.

T0e total investment cost is estimated to be =irr )%55)%.-5% out of +0ic0 1)." is

reuired for plant and mac0inery% 1".- is for +or$ing capital% )- for building and

civil +or$% and t0e rest 2(.2 is to be expended for land lease% ve0icle% office

euipment% and ot0er prep'production expenses. T0e project +ill create employment

opportunity for )44 persons.

T0e project is financially viable t0at it +ill reac0 brea$even point approximately at

2 of t0e capacity and 0as a paybac$ period of "years.

?enerally% t0e project 0as a bac$+ard lin$age effect +it0 textile industries% +0ic0 are

enormously developing t0roug0out t0e country. T0e establis0ment of suc0 factory +ill

0ave a foreign exc0ange saving and earning effect to t0e country by exporting to t0e

+orld mar$et and substituting t0e current imports.

!. Pro"uct "escri#tion an" a##lication

!pparels are ready to +ear garment products produced t0roug0 different

manufacturing processes t0at involve different steps% beginning +it0 t0e idea or

design concept and ending +it0 a finis0ed product.

T0e major products of t0e envisaged factory include trousers% coats% jac$ets%s0irts% blouses% baby garments% and etc. T0ey can be used eit0er as casual clot0es

or +or$ing clot0es under different operations accordingly.

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ifferent fabric types@ suc0 as cotton fabrics% polyester fabrics% nylon fabrics%

polyester'cotton blended fabrics% denim fabrics% and ot0ers% are used to

manufacture t0ese products tailored to customers7 reuirement.

$. %A&'ET ST()* AN) PLANT CAPAC+T*

$.1 %A&'ET ST()*

$.1.1. Su##l,)eman" Analsis

T0e population of t0e +orld is ever gro+ing and almost reac0ing seven billion at t0is

point in time. =esides t0is% t0e economy of majority of t0e +orld population is also

seen increasing from time to time. T0is +as due to t0e economic policy

improvements adopted by most part of t0e +orld continents li$e !frica% East and

#iddle !sia% and Sout0 !merica to increase t0e +elfare of t0eir people. !nd it is

obvious t0at t0e more improved t0e economic +elfare of people% t0e more t0ey

expend on purc0ase of apparel and food.

T0erefore% as long as t0e people7s expending capacity continues improving parallel

+it0 population gro+t0% it ma$es t0is time t0e most strategic for textile industries

in general and garment factories in particular t0an ever before.

=esides t0e globally increasing demands for textile products% t0ere are also a

number of advantages and incentives t0at motivate project promoters in !frica in

general and in Et0iopia in particular. !mong t0ese are:

Tax free and unlimited uota mar$et for textile products in economic giant

continents li$e ,S and Europe.

(5 by "5 loan sc0eme of evelopment =an$ of Et0iopia

Provision of land necessary for investment at reduced rate

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uty free import of mac0ineries and euipments% construction materials

8t0ose not available locally9% and spare parts 8+0ose value not greater t0an

1- of t0at of investment capital goods9

Exemption from export tax on local products

uty dra+bac$ sc0emes on export sales

2 to ( or more years7 income tax exemption% for exporting investors

" to - years 0olyday for loan repayment

Provisions of loss carry for+ard privileges% for about 0alf of t0e tax

exemption period% and ot0er.

!long +it0 t0e above incentives and motivations t0e textile manufacturing industries

are migrating to !frica and ot0er poor countries due to t0e increase of labor cost in

countries li$e Tur$ey% Italy and ot0ers. An t0e contrary% Et0iopia 0as relatively lo+er

cost labor force and good source of ra+ material. !ll t0e listed reasons fueled t0e

textile sector to s0o+ up dramatic c0ange in number and influence t0e economy of t0e

country.

Even t0oug0% t0ere is apparel production capacity of about 25 million pieces of +oven

garment and -" million pieces of $nitted garments per year in t0e country 8attainable

capacity in 2512;1"' source TII 9% t0ere is still bigger domestic and international

apparel product demand.

T0e mar$et segment for proposed project is 4 targeted to t0e international mar$et

and "1 to local mar$et for t0e coming 15 years. Et0iopia 0as exported fe+ amount of

apparel products for t0e past 15 years despite t0e fact t0at t0e mar$et for

developing nations are still at large and t0e government 0ad planned in its five years7

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?ro+t0 and transformation plan to export apparel products as it is depicted in t0e

follo+ing table.

Table ".1 Export plan of $nitted and +oven garment

Bear8E&9 Cnitted ?arment

8million ,S9

6eaved ?arment

8million ,S9

Total

8million ,S9

?ro+t0 *ate

89

2515;11 "- "5 - '

2511;12 (5 5 1"5 155

2512;1" 1- 1"- 24" 12-

251";1) 2)- 215 )-- --

251);1- "-5 "55 -5 )"

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Table $.! List o- a##arel #ro"ucts ex#orte" -rom ear !! u# to !11

a/ Ex#ort in Net,%ass 0'g

Products Category2002GC

2003GC 2004 GC 2005 GC

2006GC 2007 GC 2008 GC 2009 GC

2010GC

201GC

Men's suits, jackets,trousers etc & shorts 159.00 35,781.00 26,074.80 73,497.80

127,464.73 101,580.33 230,794.83 63,259.93 79,146.87 N

Men's hirts 0 26,898.00 113,882.10 34,918.02137,871.6

8 34,035.38 133,414.37 37,887.51 84,623.30N

!o"en's #$ouses an% shirt 0 0 16,053.00 3,343.10 14,044.80 4,588.74 3,329.15 79,551.63 17,302.40N

!o"en's suits, jackets,

%resses skirts etc & shorts 2,608.00 10,929.00 56,354.30 168,343.60

132,173.7

5 114,430.25 178,382.56 29,748.88 15,147.27

N

a#ies ar"ent 12,000.00 3,206.00 1,617.00 190.00 60.00 0 0 619.00 62.00N

Sub Total

14,767.0

0

76,814.0

0

213,981.2

0

280,292.5

2

411,614.

96

254,634.7

0

545,920.9

1

211,066.9

5

196,281.

84

N

(thers 35,716.00 41,306.00 481,825.90 156,163.38 90,865.30 97,335.35 251,502.14 172,913.76

573,969.2

3

N

TOTAL SU

50!483"

00

118!120

"00

695!807"

10

436!455"

90

502!480

"26

351!970"

05

797!423"

05

383!980"

71

770!251

"07

N

Source2 Extracte" -rom Et3io#ian Custom 4 &evenue Aut3orit5s &e#ort )ata Base

b/ Ex#ort in C+F 6alue 0(S)

ProductsCategory

2002GC

2003GC 2004 GC 2005 GC 2006 GC 2007 GC 2008 GC 2009 GC 2010 GC 2011

Men's suits, jackets,

trousers etc & shorts 1252.66

109,395.3

8 133,701.84 416,199.55 256,069.92 383,349.92 640,583.54 181,833.87 372,782.61

5,523

Men's hirts 0 81,672.84 296,523.54 150,779.52 332,130.43 161,705.54 897,504.22 173,275.85 302,803.55

3,010

!o"en's #$ouses an%shirt 0 0 104,850.00 9,673.67 24,351.95 15,328.78 17,170.95 134,671.80 114,523.37

1,707

!o"en's suits, jackets,%resses skirts etc &shorts

29,985.7

0

109,022.9

4 252,770.04 558,504.26 387,911.84 180,010.20 932,301.12 80,681.26 75,125.11 934,0

a#ies ar"ent

14,927.5

2 4,789.11 2,601.42 913.75 651.59 0 0 4,465.41 556.88 1,0

Sub Total

46,165.8

8

304,880.

27

790,446.8

4

1,136,070

.75

1,001,115

.73

740,394.4

4

2,487,559

.83

574,928.1

9

865,791.5

2

11,17

(thers 93!812"56

136!632"52

1!281!530"73

712!240"8

283!456"27

389!269"79

1!211!135"26

949!765"65

5!504!117"22

3!904

9


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TOTAL SU139!97

8"44441!512

"792!071!97

7"571!848!31

1"551!284!57

2"001!129!66

4"233!698!69

5"091!524!69

3"846!369!90

8"74

15!07

Source2 Extracte" -rom Et3io#ian Custom 4 &evenue Aut3orit5s &e#ort )ata Base 0-or !..!,!.1. an" -rom +nternational Tra"e

Center5s &e#ort )ata Base 0-or !.11

Table $.$ List o- a##arel #ro"ucts im#orte" -rom ear !! u# to !11

a/ +m#ort in Net,%ass 0'g

Products

Category 2002 GC 2003 GC 2004 GC 2005 GC 2006 GC 2007 GC 2008 GC 2009 GC 2010 GC

2

Men's suits,ackets, trouserstc & shorts 3,386,339 3,158,269 3,117,306.1 3,338,977.9

3,975,624.03

4,607,668.03

4,174,741.29

2,803,183.56

2,567,027.71

Men's hirts1,058,841.0

01,075,427.0

01,166,219.6

71,362,717.4

41,400,606.9

31,261,987.1

81,090,756.9

6 858,196.921,089,465.7

8

!o"en)s $ouse& hirts

1,424,375.00

3,352,335.00

4,408,382.15

5,282,327.25

4,428,796.86

3,909,073.72

3,793,738.67

3,086,521.82

3,559,410.19

!o"en's suits,ackets, %resseskirts etc &horts 733,204.00

1,094,561.00

1,732,912.63

2,025,307.75

1,895,197.33

1,940,545.21

2,158,051.19

2,386,480.43

3,126,041.46

a#ies ar"ents1,024,064.0

01,091,768.0

01,272,262.0

01,332,488.8

61,930,724.1

71,564,047.9

81,517,166.1

81,822,585.2

51,879,744.8

6

Sub Total

7,626,823.

00

9,772,360.

00

11,697,082

.55

13,341,819

.20

13,630,949

.32

13,283,322

.12

12,734,454

.29

10,956,967

.98

12,221,690

.00

thers

2!475!49

2"00

3!875!49

5"00

3!467!175

"47

3!505!380

"22

3!782!793

"26

4!237!241

"26

4!048!017

"78

4!080!570

"40

4!672!460

"83

TOTAL SU10!102!31

5"0013!647!85

5"0015!164!25

8"0216!847!19

9"4217!413!74

2"5817!520!56

3"3816!782!47

2"0715!037!53

8"3816!894!15

0"83

Source2 Extracte" -rom Et3io#ian Custom 4 &evenue Aut3orit5s &e#ort )ata Base

b/ +m#ort in C+F 6alue 0(S)

ProductsCategory 2002 GC 2003 GC 2004 GC 2005 GC 2006 GC 2007 GC 2008 GC 2009 GC 2010 GC 2011Men's suits,ackets, trouserstc & shorts

13,766,670.83

13,130,278.60

15,001,308.90

17,974,381.63

21,889,123.00

27,225,822.62

23,062,478.78

18,855,294.69

18,717,243.38

27,84

Men's hirts2,789,159.2

53,120,870.9

34,394,774.9

35,401,072.2

76,247,318.3

95,660,860.3

24,315,687.6

53,953,866.7

05,282,019.7

418,99

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!o"en)s $ouse& hirts

4,045,438.95

7,245,238.58

10,129,091.21

15,484,537.70

14,248,330.31

15,172,403.72

15,250,053.17

14,174,649.41

18,983,938.03

7,109

!o"en's suits,ackets, %resseskirts etc & shorts

3,264,093.32

5,306,697.13

7,667,497.75

9,547,458.51

8,900,725.81

11,233,351.41

11,693,413.43

15,651,913.47

21,326,958.79

5,801

a#ies ar"ents2,963,509.0

53,761,129.4

45,278,856.5

55,986,315.1

89,204,267.3

17,254,710.4

35,974,899.6

78,188,282.5

38,610,384.6

92,402

Sub Total

26,828,87

1.40

32,564,21

4.68

42,471,52

9.34

54,393,76

5.29

60,489,76

4.82

66,547,14

8.50

60,296,53

2.70

60,824,00

6.80

72,920,54

4.63

62,1

thers7!855!640"

0112!833!37

9"9111!622!54

2"2913!378!08

2"7514!295!12

8"3518!309!52

6"8718!820!71

9"8822!052!31

4"5425!984!85

8"821!17

TOTAL SU34!684!51

1"4145!397!59

4"5954!094!07

1"6367!771!84

8"0474!784!89

3"1784!856!67

5"3779!117!25

2"5882!876!32

1"3498!905!40

3"4383!32

Source2 Extracte" -rom Et3io#ian Custom 4 &evenue Aut3orit5s &e#ort )ata Base 0-or !..!,!.1. an" -rom +nternational Tra"e Center5s &e#ort )ata Base 0-or !.11

11


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$. 1.!. Pro7ecte" )eman"

3rom previously presented export and import records 8Table ".2 a% b and Table "." a%

b9 of apparel products of t0e nation% t0e follo+ing facts could be recogni


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!ccording to t0is report 8IT& report9% t0e average gro+t0 rate for apparels7 +orld

import for t0e years 255( ' 2511 +as 2% and about 1 for t0e years 2515'2511.

T0e Import gro+t0 rate for Et0iopia +as reported as ) for t0e years 255( '2511

and ( for t0e years 2515'2511. 8=ut according to data obtained from E&*!% it +as

indicated t0at t0ere +as reduction in import by 1).( for t0e year 2515'2511% +0ic0

+as noted as t0e result of data differences from one source to t0e ot0er9.

/i$e+ise@ regarding export% it +as indicated in t0e IT& report t0at t0e gro+t0 rate

+as 4" for t0e year 255('2511 and 2( for t0e years 2515'2511% for Et0iopia.

!ccording to t0e ?ro+t0 and Transformation Plan 8?TP9 of t0e country% it +as

targeted to increase t0e export of apparel products% in general% as presented in table

".1 above.

T0erefore% assuming t0at t0e +orld and national imports continues to increase +it0

t0e same average gro+t0 rate of t0e year 255( F 2511% +0ic0 is 2 and )

respectively@ and ta$ing t0e values of 2511 as t0e base line% +0ic0 +as

14%(%54%555.55 ,S and "%"2)%555.55 ,S respectively% +e can predict t0at

t0e demands of apparel products in general to 0ave t0e follo+ing trends.

*ear 8orl" +m#ort 0(S) National +m#ort0(S)

8orl" /Exce#t Et3io#ia/+m#ort 0(S)

2511 14%(%54%555.55 "%"2)%555.55 14%(52%(-%555.55

2512 255%(21%15%55.55 %-%45.55 255%"-%1-"%)5.55

251" 25)%("%2)(%555.55 45%12"%2".)5 25)%)%12"%(1.5

251) 25%"5%4(1%455%55 4"%(2%1(.4) 25%("(%2)"%("2.5

251- 21"%55(%-41%)55.55 4(%)((%24).- 212%415%11)%15-."-

251 21(%2(%()"%255.55 151%"(%".)5 21(%1%"%1".5

251( 221%1"%54%155.55 15-%)"1%))1.45 221%-5(%%-.15

251 22%5)-%"5%555.55 154%)%44.5 22-%4"-%(11%"55.)5

2514 2"5%-%2(%255.55 11)%5")%)(.5 2"5%)-2%2"2%--2.)52525 2"-%1((%-42%55.55 11%-4%5"".-5 2"-%5-%44%-.-5

2521 2"4%1%1))%)55.55 12"%""4%().5 2"4%(-(%5)%-2-.25

2522 2))%(%((%"55.55 12%2("%)4.5 2))%--5%)4"%"5.25

Table ".): 6orld and Et0iopian !pparel Import projections for years 2511 '2522

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!ssuming t0at t0e factories available in t0e year 2511 are remaining to exist and

continue to produce and sale t0e amount imported in t0at year% +e can calculate t0e

supply gaps resulted in t0e mar$et because of t0e demand gro+t0s in t0e follo+ing

consecutive years. T0ese can be obtained by deducting t0e supply of t0e year 2511

from t0e projected ones for t0e years covered in t0e plan% as presented in Table ".-.

&onsidering t0e export and import situations of apparel products at national and global

levels% +e can reasonably conclude t0at t0ere is very 0uge mar$et demand for t0e

mentioned products bot0 locally and globally. T0erefore% it +ill be t0e matter of

competing and ta$ing t0e mar$et s0are

Table ".-: !pparel Supply ?aps Projected for t0e years 2511'2522

a; Gational supply gap

*ear National +m#ort

0(S)

National Su##l

0(S)

Su##l 9a#

0(S)2511 "%"2)%555.55 "%"2)%555.55 5.5

2512 %-%45.55 "%"2)%555.55 "%""2%45.55

251" 45%12"%2".)5 "%"2)%555.55 %(44%2".)5251) 4"%(2%1(.4) "%"2)%555.55 15%)5)%1(.4)

251- 4(%)((%24).- "%"2)%555.55 1)%1-"%24).-

251 151%"(%".)5 "%"2)%555.55 1%5-2%".)5

251( 15-%)"1%))1.45 "%"2)%555.55 22%15(%))1.45

251 154%)%44.5 "%"2)%555.55 2%"2)%44.5

2514 11)%5")%)(.5 "%"2)%555.55 "5%(15%)(.5

2525 11%-4%5"".-5 "%"2)%555.55 "-%2(2%5"".-5

2521 12"%""4%().5 "%"2)%555.55 )5%51-%().5

2522 12%2("%)4.5 "%"2)%555.55 ))%4)4%)4.5

b; 6orld supply gap

14


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*ear 8orl" /Exce#t Et3io#ia/

+m#ort 0(S)

8orl" /Exce#t -or

Et3io#ia/ Su##l 0(S)

8orl" Su##l 9a#

0(S)2511 14%(52%(-%555.55 14%(52%(-%555.55 5.5

2512 255%"-%1-"%)5.55 14%(52%(-%555.55 "%4"2%"%)5.55

251" 25)%)%12"%(1.5 14%(52%(-%555.55 (%4)"%"-%(1.5

251) 25%("(%2)"%("2.5 14%(52%(-%555.55 12%5")%)(%("2.5251- 212%415%11)%15-."- 14%(52%(-%555.55 1%25(%")4%15-."-

251 21(%1%"%1".5 14%(52%(-%555.55 25%)"%51%1".5

251( 221%-5(%%-.15 14%(52%(-%555.55 2)%5)%451%-.15

251 22-%4"-%(11%"55.)5 14%(52%(-%555.55 24%2"2%4)%"55.)5

2514 2"5%)-2%2"2%--2.)5 14%(52%(-%555.55 ""%()4%)(%--2.)5

2525 2"-%5-%44%-.-5 14%(52%(-%555.55 "%"-%2"1%-.-5

2521 2"4%(-(%5)%-2-.25 14%(52%(-%555.55 )"%5--%5"4%-2-.25

2522 2))%--5%)4"%"5.25 14%(52%(-%555.55 )(%)(%(2%"5.25

T0erefore% surplus demands for apparel products at +orld level and national level could

be summari


16/36

capacity of t0e plant for local mar$et. !ccordingly% 5.5- of t0e +orld surplus demand

of year 251"7s projection for apparel demand% +0ic0 is "%4(1%(4.55 ,S% for export@

and 2 of t0e 251"7s national total demand% +0ic0 is 1%52%)-.55 ,S% for local

mar$et are considered to set t0e total production capacity of t0e plant to be

envisaged.

T0e average price per unit $ilogram of garment products varies from year to year due

to t0e effect of factors li$e inflation and ot0ers. !n average of - increment in

average selling price per unit $ilogram of t0e products is assumed to calculate t0e

sales ac0ievement over t0e plan year.

T0e follo+ing Table portrays t0e amount planned for export and local mar$et% +0ic0 is

calculated based on assumptions stated above.

Table ".( Sales plan for t0e envisaged project 8Export H /ocal sales9

#ea

r

$or%d Sur&%us

'(&ort )e(a*d

+US),

-.&ort P%a*

+US),

/ato*a% Tota%

'(&ort

)e(a*d

+US),

Loca% Sa%es

P%a* +US),

Tota%

Sa%es P%a*

251"

(%4)"%"-%(1.5 $:;;!:?>>.

6!062!851"00

251-

1%25(%")4%15-."- 4:$:!:;>. 154%)%44.5 !:$:4?!.

7!369!43

2"00

2514""%()4%)(%--2.)5 ?:$!!:4$. 11)%5")%)(.5 !:41?:4>:??1. 11%-4%5"".-5 !:?$=:!4>.

8!124!79

9"00

2521)"%5--%5"4%-2-.25 ?:>=


17/36

2"00

!s presented in t0e table about 4 of t0e total sale +ill be targeted for export and

t0e remaining "1 is reserved for local mar$et.

$.1.$ Pricing an" )istribution

=ased on import data analy


18/36

$.! Plant ca#acit an" #ro"uction #rogram

$.!.1 Plant ca#acit

=ased on sales plan presented under Table ".( and t0e average sales price presented

under Table ".% +e can get t0at t0e annual production capacity of t0e plant +ill be

()5%2(- Cg of garments totally. 3rom t0e total products: ' 2- 81-%5Cg9 +ill be:

#ens suits% jac$ets% trousers etc H s0orts@ 2- 81-%5Cg9 +ill be: #ens S0irts@ 25

81-%5-Cg9 +ill be: 6omens blouses and s0irt@ 25 81)%5--9 +ill be: 6omens suits%

jac$ets% dresses s$irts etc H s0orts@ and 15 8()%52(Cg9 +ill be: =abies ?arments.

T0e follo+ing Table presents summary of t0e production capacity of t0e plant%

converting t0e measuring units from Cg to pieces. Total of "25 +or$ing days per

annum% 0our per day in one s0ift is assumed to set t0e plant capacity.

!ccordingly% a total of 1%)4"%2)2 pieces of different garments +ill be produced on

155 capacity utili


19/36

Note t0at t0e average +eig0t for unit product categories is ta$en by estimation%

ta$ing t0e si?@ !n" ear 0;?@

$r" ear an"

above 01@

#ens suits% jac$ets% trousersetc H s0orts Pcs 4%41 155%) 15-%(-)

#ens S0irts LL ))4%)-1 -52%"2 -2%(

6omens blouses and s0irts LL )14%)4 )%)1 )4"%-1(

6omens suits% jac$ets% dresses

s$irts etc H s0orts LL 155%(( 112%-22 11%)))

=abies ?arments LL 254%() 2")%)22 2)%(5

Total 1:!=;:!?4 1:41>:?


20/36

improvement in operators7 performance% even more production capacity could be

ac0ieved +it0 t0e same plant setup.

4. &aD %aterials an" utilities

4.1 &aD %aterials

T0e ra+ materials reuired to produce garments include fabrics% buttons% se+ing

t0reads% and accessories li$e o+ever% in t0e near future all t0e ra+

materials +ill be expected to be available locally as t0ere are a number of projects

in t0e pipeline and also some bonded +are0ouses to be opened locally by foreign

manufacturers.

Table ).1 belo+ presents annual reuirements and corresponding costs of ra+

materials at full production capacity.

Table ).1 *a+ materials reuirement and &ost at full capacity

S/

N

%aterial

(/

%

(nit Cost 0Birr

t#e t Price LC FC Total Cost

1 3abric $g (5%2

4

-.5

5

-"(-5.55 44)-.55 %"2)%--.5

2 =uttons $g 1-%--) -5.

-

11%".55 (2%2".55 (45%421.5

" Se+ing

t0read

$g %(4 ().-

-

4%2".55 --%4"(.55 --%225.5

) !ccessorie

s

' /ump

sum

' -1%5)5.55 242)22".55 "%))5%2".5

- Pac$ing

material

' LL LL ' 2%5)%1-.55 5 2%5)%1-.5

9ran" Total ?;:1.


21/36

4.! (tilities

Electricity and +ater are t0e t+o major utilities reuired by t0e envisaged plant. Total

annual cost of major utility items at full operation capacity of t0e plant is =irr

21%"55.55. etails are s0o+n in t0e table belo+:

Table ).2 ,tilities *euirement and &ost at full capacity

S;G ,tility

!nnual *euirement

8C60;year9

,nit

price;C60

Total

&ost8=irr9 *emar$s

1 Electric po+er 12%555C60 5.-- 4%"55.55"-5m;n M 1-56;m;n M

0rs;day M "55days;year

2 6ater 15%555 #" ".5 "%555.55 25#";dayM"55day;yea

" 3uel and oils 12%555lit 1).- 1()%555.55 )5lit;dayM"55day;yea

Total !>1:$.

?. Location an" Site

/ocation of t0e plant is determined on t0e proximity of ra+ materials% availability of

infrastructure% availability of s$illed man po+er and distance to potential mar$et

outlet.

In vie+ of t0is% t0e envisaged plant +ill be establis0ed in one of t0e follo+ing potential

investment areas in Arimia regional state suc0 as ?elan% u$em% =is0oftu% /aga Tafo%

Sebeta% ot0ers% +0ic0 are located near !ddis !baba.

21


22/36

=. Tec3nolog an" Engineering

=.1 Pro"uction #rocess

?enerally% apparel manufacturing process involves Product esign% 3abric Selection and

Inspection% Patternma$ing% ?rading% #ar$ing% Spreading% &utting% =undling% Se+ing%

Pressing or 3olding% 3inis0ing and etailing% yeing and 6as0ing% N& etc.

T0e major processes involved in t0e production processes of apparel products of t0e

envisaged factory are discussed as under.

&eceiving -abrics

,nder t0is process step t0e fabric to be used in production process of apparels +ill be

received from t0e supplier. epending on t0e type of procurement and type of

products% t0e supplier could be eit0er t0e manufacturer% or +0ole seller or retailer.

T0e fabrics received from t0e supplier are preserved in t0e ra+ material stores

temporarily before t0ey are issued for next step.

Fabric &elaxing

D*elaxing refers to t0e process t0at allo+s material to relax and contract prior to

being manufactured. T0is step is necessary because t0e material is continually under

tension t0roug0out t0e various stages of t0e textile manufacturing process% including

+eaving% dyeing% and ot0er finis0ing processes. T0e relaxing process allo+s fabrics to

s0rin$ so t0at furt0er s0rin$age during customer use is minimi


23/36

3abric relaxing could be done eit0er manually or mec0anically. #anual fabric relaxing

typically entails loading t0e bolt of fabric on a spinner and manually feeding t0e

material t0roug0 a piece of euipment t0at relieves tension in t0e fabric as it is pulled

t0roug0. #ec0anical fabric relaxing performs t0is same process in an automated

manner.

Nuality assurance process is integrated into t0is process to ensure t0at t0e uality of

t0e fabric meets customer standards. T0is step is performed by manually spot'

c0ec$ing eac0 bolt of fabric using a bac$lit surface to identify manufacturing defects

suc0 as color inconsistency or fla+s in t0e material. 3abrics t0at fail to meet customer

standards are returned to t0e supplier 8manufacturer or +0ole seller of retailer9.

S#rea"ing: Form Laout: an" cutting

!fter fabric 0as been relaxed% it is transferred to t0e spreading and cutting area of

t0e garment manufacturing facility. T0e fabric is first cut into uniform plies and t0en

spread eit0er manually or using a computer'controlled system in preparation for t0e

cutting process. 3abric is spread to:

• allo+ operators to identify fabric defects@

• control t0e tension and slac$ of t0e fabric during cutting@ and

• Ensure eac0 ply is accurately aligned on top of t0e ot0ers.

T0e number of plies in eac0 spread is dependent on t0e fabric type% spreading met0od%

cutting euipment% and si


24/36

of t0e garment forms using eit0er manually operated cutting euipment or a

computeri


25/36

garment +ill be re+or$ed or mended at designated se+ing stations. T0is labor'

intensive process progressively transforms pieces of fabric into designer garments.

S#ot Cleaning an" Laun"r

In addition to identifying manufacturing defects% employees tas$ed +it0 performing

uality assurance are also loo$ing for cosmetic fla+s% stains% or ot0er spots on t0e

garment t0at may 0ave occurred during t0e cutting and se+ing processes. Spots are

often mar$ed +it0 a stic$er and ta$en to a spot'cleaning area +0ere t0e garment is

cleaned using steam% 0ot +ater% or c0emical stain removers.

Some customers reuest t0at a garment be fully laundered after it is se+n and

assembled@ t0erefore% garment factories often 0ave an on'site laundry or 0ave

subcontract agreements +it0 off'site laundry operations. &ommercial laundry facilities

are euipped +it0 at least t0ree types of mac0ines: +as0ers% spinners% and dryers.

Some facilities also 0ave t0e capability to perform special treatments% suc0 as stone'

or acid'+as0ing.

+roning

!fter a garment is fully se+n and assembled% it is transferred to t0e ironing section of

t0e facility for final pressing. Eac0 ironing station consists of an iron and an ironing

platform. T0e irons are similar loo$ing to residential models% but 0ave steam supplied

by an on'site boiler. 6or$ers control t0e steam +it0 foot pedals and t0e steam is

delivered via over0ead 0oses directly to t0e iron. In most facilities% t0e ironing

platforms are euipped +it0 a ventilation system t0at dra+s steam t0roug0 t0e ironing

table and ex0austs it outside t0e factory.

Pacaging an" S3i##ing

25


26/36

In t0e last steps of ma$ing a product retail'ready% garments are folded% tagged% si


27/36

=.! Source o- Tec3nolog

T0e mac0inery and euipments reuired to manufacture apparel products areconventional and available in different tec0nological levels% in general. Selection among

alternatives +as made based on t0e competitive advantages it provides to t0e

sta$e0older in t0e context of t0e country. T0e major criterions ta$en in to

consideration are: resource utili


28/36

Sr. (nit Cost o- %ac3ine 0(S)

No. )escri#tion t. Price LC FC TC1 Single needle stitc0ing mac0ine 1( 55.55 15-%55.55 15-%55.5

2 ouble needle stitc0ing mac0ine 14 (-5.55 1)%2-5.55 1)%2-5.5

" Aver loc$ mac0ine -- 55.55 ))%555.55 ))%555.5

) Inter loc$ 8cover stitc09 mac0ine )2 55.55 ""%55.55 ""%55.5

- =ar tac$ing mac0ine 4 55.55 (%255.55 (%255.5

=lind stitc0 mac0ine " 22-.55 (-.55 (-.5

( ig:44$.

3reig0t% Insurance% customs H =an$ c0arges% #aterial 0andling cost 8159 "5%)5)."5 ' "5%)5)."Sub total $?:>4.$ $$:4$.

$$>:>4


29/36

floor space of t0e buildings +ill cover total area of "55m2 8See !ppendix'19. T0e

total estimated cost of building at t0e rate of =irr %555 per m2 is =irr 21%55%555.55.

T0e lease period for t0e land is 5 years on average% and t0e payment of lease prices

is in )5 years. T0e land lease rate of =irr .- ;#2

;year is adopted% +0ic0 is t0eminimum lease rate in Aromia 1st grade to+ns. 15 do+n payment is expected at t0e

initial year of land acuisition. !ccordingly% t0e total lease cost of =irr "%54)%555% of

+0ic0 =irr "54%)55.55 +ill be paid in advance in t0e first year and t0e remaining =irr

2%()%55 +ill be paid in eual installments of =irr 4%1- .55 +it0in )5 years% after

t0e grace period of " years annually.

ead 1 -%555.55 5%555.55

( Tec0nical >ead 1 -555.55 5%555.55

Nuality >ead 1 -%555.55 5%555.55

4 Production supervisor 4 "1%-55.55 "(%555.55

11 Nuality &ontrol supervisor ) 1)%555.55 1%555.5512 #ec0anical maintenance supervisor 1 "%-55.55 )2%555.55

1" Electrical maintenance Supervisor 1 "%-55.55 )2%555.55

1) #ac0ine Aperators H 0elpers )1 )1%555.55 )%442%555.55

1- Nuality Inspectors 11 11%555.55 1"2%555.55

1 #ec0anic ) -%255.55 2%)55.55

1( Electrician " "%455.55 )%55.55

1 #ar$eting #anager 1 (%-55.55 45%555.55

29


30/36

14 Sales person 2 -%555.55 5%555.55

25 !dministration manager 1 (%-55.55 45%555.55

21 ?eneral service personnel 1 2%-55.55 "5%555.55

22 >* Personnel 1 2%-55.55 "5%555.55

2" Gurse 2 )%555.55 )%555.55

2) ?uard %)55.55 (%55.55

2- #essengers " 1%55.55 21%55.552 river " "%555.55 "%555.55

2( &leaner - "%555.55 "%555.55

2 3inancial manager 1 (%-55.55 45%555.55

24 !ccountant 2 (%555.55 )%555.55

"5 &as0ier 1 1%-55.55 1%555.55

"1 Purc0asers 2 "%555.55 "%555.55

"2 Store Ceepers 2 "%555.55 "%555.55

Sub Total 4;; =4:$. olidays - years

=an$ Interest rate .-5

iscount for cas0 flo+ .-5

Qalue of /and =irr .-5;#2;year

Spare parts H *epair and #aintenance - of t0e fixed investment

B. )e#reciation Amortiation

=uilding -

30


31/36

#ac0inery and Euipment 15

Affice 3urniture 15

Qe0icles 25

Pre'Production 8!mortiand 25 days

!ccounts payable "5 days

>.! Pre,#ro"uction Ex#enses

T0e total cost reuired for design% consultancy% training and commissioning is

estimated to be =irr ". million.

Table .2 esign% consultancy %training and test run cost

S;

G escription

Estimated

=udget8=irr9

1 Engineering% esign H consultancy fee "55%555.552 Training 155%555.55

" &ommissioning and test run +it0 15 contingency 255%555.55

) At0er pre'production expenses -55%555.55

- Interest during construction 2%--%-55.55

Total $:=?>:?.

&emar2 At0er pre'production expenses include costs li$e costs of registration%

licensing and formation of t0e company including legal fees% commissioning

expenses% etc.

>.$ +nvestment Cost

31


32/36

T0e investment cost of t0e project including +or$ing capital is estimated at =irr ").2(

million. T0e o+ner s0all contribute "5 812%""-%155.559 of t0e finance in t0e form of

euity +0ile t0e remaining (5 82%(1%41".559 is to be financed by ban$ loan.

Table ." Total Initial Investment

+tem LC FC Total/and "%54)%555.55 ' "%54)%555.55

=uilding and &ivil 6or$ 1)%5)5%555.55 (%-5%555.55 21%55%555.55

Affice Euipment ' 55%555.55 55%555.55

Qe0icles ' %555%555.55 %555%555.55

Plant mac0inery and euipment ' %-2%15.-5 %-2%15.-5

Total Fixe" investment cost 1:?. $:=?>:?.

Total initial investment cost 1.? 41:?$4:=>.?6or$ing capital at full capacity =:4


33/36

; Financial Evaluations

;.1 Pro-itabilit

=ased on t0e projected profit and loss statement 8see appendix 29% t0e project +ill

generate a profit beginning from t0e first year of operation and increase on +ardst0roug0out its operation life. !nnual net profit after tax +ill gro+ from =irr 15.-

million to =irr 1.1- million during t0e life of t0e project. #oreover% at t0e end of t0e

project life t0e accumulated cas0 flo+ amounts to =irr 1-).)- million.

;.! Financial &atios

In financial analysis financial ratios and efficiency ratios are used as an index or yard

stic$ for evaluating t0e financial position of a firm. It is also an indicator for t0estrengt0 and +ea$ness of t0e firm or a project. Some of t0ese ratios calculated for t0e

first year of t0e project life are:

*eturn on sales K Get income;*evenue

K 15%--%(4);45%(4%"5

K 5.12 8129

*eturn on euity K Get profit;Euity

K 15%--%(4);1)%)51%)55

K 5.(- 8(-9

*eturn on investment K Get profit;Total Investment

K 15%--%(4);)%55)%

K 5.2" 82"9

T0ese financial ratios for all years of t0e operation life of t0e project are found to be

satisfactory and 0ence indicate t0at it is profitable and viable.

33


34/36

;.$ Brea,even Analsis

T0e brea$'even analysis establis0es a relations0ip bet+een operation costs and

revenues. It indicates t0e level at +0ic0 costs and revenue are in euilibrium. To t0is

end% t0e brea$'even point of t0e project including cost of finance +0en it starts to

operate at full capacity 8year "9 is estimated by using income statement projection.

=EP K 3ixed &ost; 8!verage ,nit selling price F !verage Qariable cost per unit

product9

K %-2"%(5 8(1.22 ' --.-)9 K %-2"%(5;1-.

K 1% 5-- pieces 8=EP in production volume9

K =irr 24%24%4"4.55 8=EP in Sales volume9

K 2(.() 8=EP in percentage9

;.4 Pabac Perio"

T0e paybac$ period is defined as t0e period reuired to recover t0e original

investment outlay t0roug0 t0e accumulated net cas0 flo+s earned by t0e project.

!ccordingly% based on t0e projected cas0 flo+ it is estimated t0at t0e project7s initial

investment +ill be fully recovered +it0in " years.

;.? +nternal &ate o- &eturn

T0e internal rate of return 8I**9 is t0e annuali


35/36

;.= Net Present 6alue

Get present value 8GPQ9 is defined as t0e total present 8discounted9 value of a time

series of cas0 flo+s. GPQ aggregates cas0 flo+s t0at occur during different periods of

time during t0e life of a project in to a common measuring unit i.e. present value. It is

a standard met0od for using t0e time value of money to appraise long'term projects.

GPQ is an indicator of 0o+ muc0 value an investment or project adds to t0e capital

invested. In principal a project is accepted if t0e GPQ is non'negative. !ccordingly% t0e

net present value of t0e project at .- discount rate is found to be =irr -2.(- million

+0ic0 is acceptable.

;.< ECONO%+C BENEF+TS

;.


36/36

;.

Documents

Garment Project Profile Final