257.

PROFILE ON PRODUCTION OF ETHYL

ACETATE
 257-2

TABLE OF CONTENTS

PAGE

I. SUMMARY 257-3

II. PRODUCT DESCRIPTION & APPLICATION 257-3

III. MARKET STUDY AND PLANT CAPACITY 257-4

A. MARKET STUDY 257-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 257-6

IV. RAW MATERIALS AND INPUTS 257-7

A. RAW & AUXILIARY MATERIALS 257-7
B. UTILITIES 257-7

V. TECHNOLOGY & ENGINEERING 257-8

A. TECHNOLOGY 257-8
B. ENGINEERING 257-9

VI. MANPOWER & TRAINING REQUIREMENT 257-9

A. MANPOWER REQUIREMENT 257-9
B. TRAINING REQUIREMENT 257-10

VII. FINANCIAL ANLYSIS 257-11

A. TOTAL INITIAL INVESTMENT COST 257-11
B. PRODUCTION COST 257-12
C. FINANCIAL EVALUATION 257-13
D. ECONOMIC BENEFITS 257-14
 257-3

I. SUMMARY

This profile envisages the establishment of a plant for the production of ethyl acetate with a
capacity of 50 tonnes per annum.

The present demand for the proposed product is estimated at 28 tonnes per annum. The
demand is expected to reach at 50 tonnes by the year 2022.

The plant will create employment opportunities for 18 persons.

The total investment requirement is estimated at Birr 3.38 million, out of which Birr 1.89
million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 13 % and a net
present value (NPV) of Birr 708,880, discounted at 8.5%.

II. PRODUCT DESCRIPTION AND APPLICATION

Ethyl acetate, CH3 COOC2H5, also know as vinegar naphtha, is a highly flammable liquid. It
is soluble in organic solvents. It is used as solvent in paints and varnishes, as flavouring
agent and in the formulation of medicines and pharmaceuticals.
 257-4

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

The major consumers of ethyl acetate in Ethiopia are laquer and adhesive industries. Other
users are pharmaceuticals and plastic industries. Currently, their requirement is entirely met
through import. Imported quantity of ethyl acetate in the past ten years is given in Table 3.1.

Table 3.1
IMPORT OF ETHYL ACETATE (TONNENES)

Year Import
1997 0.6
1998 10.7
1999 16.9
2000 0.1
2001 4.0
2002 2,8
2003 5.3
2004 19.8
2005 8.1
2006 56.4

Source :- Customs Authority.

As could be noted from Table 3.1, there were years in which recorded imported figures were
unusually low or high, probably indicating that high imports in some years were used as
buffer stocks for the following years. For instance, during the period 1998 and 1999 the
quantity imported was 10.7 tonnes and 16.9 tonnes. But in the following four consecutive
 257-5

years i.e., from 2000-2003 the imported quantity ranged from 0.1 tonne to 5.3. tonnes. The
imported quantity during 2004 has sharply increased to 19.8 tonnes but followed by a low
import figure of about 8 tonnes but followed by a low import during year 2000. An
exceptionally high import figure has been registered during year 2006 which amounts to
about 56 tonnes. The high import figure in the year 2006 could be due to the establishment
of new chemical, plastic and pharmaceutical industries in various parts of the country.

In the absence of a trend in the imported quantity the recent three years average has been
considered to reflect the current effective demand. Accordingly, current effective demand is
estimated at 28 tonnes.

2. Projected Demand

Demand for ethyl acetate will grow with the development of the manufacturing sector mainly
the chemical and pharmaceutical industries. Considering this an annual average growth rate
of 6% is applied to forecast the future demand (see Table 3.2).

Tale 3.2
PROJECTED DEMAND FOR ETHYL ACETATE (TONNENES)

Year Projected Demand

2008 29.7
2009 31.5
2010 33.3
2011 35.3
2012 37.5
2013 39.7
2014 42.1
2015 44.6
2016 47.3
2017 50.1
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3. Pricing and Distribution

Based on the past two years average CIF price, Birr 30,000 per tonne is recommend as a
factory gate price. The product can be directly sold to the end users without intermediaries.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

The annual production capacity of the project is 50 tonnes of ethyl acetate, based on 3 shifts
per day and 300 working days per annum.

2. Production Programme

Considering the gradual development of processing skill and marketing of the product, the
rate of capacity utilization during the 1st and 2nd year of production will be 70 and 90%,
respectively. Full capacity will be attained in the third year and then after. Table 3.3 shows
the production programme of the proposed project.

Table 3.3
PRODUCTION PROGRAMME

Sr. Product Production Programme

No. 1 2 3-10
1 Ethyle acetate (tonne) 35 45 50
2 Capacity utilization rate (%) 70 90 100
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IV. MATERIAL AND INPUTS

A. RAW AND AUXILIARY MATERIALS

The principal raw materials are acetic acid, sulphuric acid and ethyl alcohol. The last two
chemicals are locally available. Table 4.1 shows the annual raw and auxiliary materials
requirement and cost of the project.

Table 4.1
ANNUAL RAW AND AUXILIARY MATERIALS REQUIREMENT AND COST
(TONNES)

Sr. Raw Material Qty Cost (‘000 Birr)

No. FC LC Total
1 Acetic acid 25 208.33 41.67 250
2 Ethanol 18.75 - 103.13 103.13
3 Sulfuric acid (98%) 3.0 - 13.5 13.5
4 Packing material 0.5 0.5
Grand Total 208.33 158.8 367.13

B. UTILITIES

Electricity, furnace oil and water are utilities of the proposed project. Table 4.2 indicates the
annual utility requirement and cost at full capacity.

Table 4.2
ANNUAL UTILITIES REQUIREMENT & COST

Sr. Utility Unit Qty Cost (‘000

No. Birr)
1 Electricity kWh 60,000 28.44
2 Furnace oil Kg 8,750 47.34
3 Water m3 2,000 20.00
Total 95.78
 257-8

3. Proposed Location

Aletawondo is selected as the location of the envisaged project.

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Process Description

Ethyl acetate is manufactured by heating acetic acid and ethyl alcohol in the presence of
concentrated sulfuric acid and distilling the crude ethyl acetate so obtained.

CH3COOH + C2H5OH CH3 COOC2H5 +H2O

The qualitative amount of alcohol and acetic acid are taken in a conical bottom reactor filled
with stirrer and jacketed with steam coil. Temperature is maintained at 50-60oC. The
reaction is completed in about 10 min. The products of the reaction are transferred to crude
ethyl acetate storage tank. The crude product is then distilled and packed.

2. Source of Technology

The following company may be ready to submit its offer for the turnkey plant.

Universal Industrial Plants Manufacturing Company

A 104/2, Okhla Industrial State
Tel. +91-11-4386250
Fax. +91-11-4386234
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B. ENGINEERING

1. Machinery & Equipment

The list of machinery and equipment is indicated in Table 5.1. The total cost of machinery is
estimated at Birr 1,897,000, of which Birr 1,580,830 is required in foreign currency

Table 5.1
LIST OF MACHINERY & EQUIPMENT

Sr. Machinery No.

No.
1 Reaction vessel 1
2 Distillation column (with reboiler) 1
3 Condenser 1
4 Storage tanks 4
5 Boiler 1

2. Land, Building & Civil Works

The total area of the project is 1,500 m2 of which 400 m2 is a built-up area. The cost of
building is estimated at Birr 600,000. The lease value of land is about Birr 120,000 at a rate
of Birr/m2/year for 80 years.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The list of manpower and annual labour cost are indicated in Table 6.1. The total annual cost
of labour is estimated at Birr 229,500.
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Table 5
MANPOWER REQUIREMENT & LABOUR COST

Sr. Manpower Req. Monthly Annual Salary

No. No. Salary (Birr) (Birr)
1 General manager 1 3,000 36,000
2 Accountant 1 2,000 24,000
3 Production head 1 2,000 24,000
4 Chemist 1 1,500 18,000
5 Operators 4 2,800 33,600
6 Labourers 6 2,400 28,800
7 General service 4 1,600 19,200
Sub total 18 1,5300 183,600
Benefits (25% BS) 3,825 45,900
Total 19,125 229,500

B. TRAINING REQUIREMENT

Training of workforce will take place during plant erection by the experts of machinery
supplier. The cost of training is estimated at Birr 20,000.
 257-11

VII. FINANCIAL ANALYSIS

The financial analysis of the ethyl acetate 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 years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30days
Work in progress 2days
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 3.38
million, of which 42 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
 257-12

Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (‘000 Birr)
1 Land lease value 120
2 Building and Civil Work 600.00
3 Plant Machinery and Equipment 1,897.00
4 Office Furniture and Equipment 100
5 Vehicle 250
6 Pre-production Expenditure* 328.92
7 Working Capital 92.67
Total Investment cost 3,388.6
Foreign Share 42

* N.B Pre-production expenditure includes interest during construction ( Birr 178.92

thousand ) training (Birr 30 thousand ) and Birr 120 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 1.35 million (see
Table 7.2). The material and utility cost accounts for 34.16 per cent, while repair and
maintenance take 8.39 per cent of the production cost.
 257-13

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

Items Cost %
Raw Material and Inputs
367.13 27.09
Utilities
95.78 7.07
Maintenance and repair
113.65 8.39
Labour direct
147.24 10.87
Factory overheads
49.08 3.62
Administration Costs
98.16 7.24
Total Operating Costs
871.04 64.28
Depreciation
315.7 23.30
Cost of Finance
168.29 12.42
Total Production Cost 1,355.03 100

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.
 257-14

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 = 57 %
Sales – Variable Cost

3. Pay Back 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 13 % and the net
present value at 8.5% discount rate is Birr 708,880.

D. ECONOMIC BENEFITS

The project can create employment for 18 persons. In addition to supply of the domestic
needs, the project will generate Birr 1.93 million in terms of tax revenue