This document proposes establishing a plant to produce 200 tonnes of buttons from horn annually. It estimates the current demand for horn buttons is 929 tonnes and will grow to 2,528 tonnes by 2020. The plant would employ 11 people at a total investment of 1.54 million Birr. The project is financially viable with an IRR of 30% and NPV of 1.4 million Birr discounted at 8.5%.

1. 290. PROFILE ON PRODUCTION OF
BUTTONS FROM HORN

2. 290-2
TABLE OF CONTENTS
PAGE
I. SUMMARY 290-3
II. PRODUCT DESCRIPTION & APPLICATION 290-3
III. MARKET STUDY AND PLANT CAPACITY 290-4
A. MARKET STUDY 290-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 290-7
IV. MATERIALS AND INPUTS 290-8
A. RAW & AUXILIARY MATERIALS 290-8
B. UTILITIES 290-9
V. TECHNOLOGY & ENGINEERING 290-9
A. TECHNOLOGY 290-9
B. ENGINEERING 290-10
VI. MANPOWER & TRAINING REQUIREMENT 290-12
A. MANPOWER REQUIREMENT 290-12
B. TRAINING REQUIREMENT 290-12
VII. FINANCIAL ANALYSIS 290-13
A. TOTAL INITIAL INVESTMENT COST 290-13
B. PRODUCTION COST 290-14
C. FINANCIAL EVALUATION 290-15
D. ECONOMIC BENEFITS 290-16
I. SUMMARY
This profile envisages the establishment of a plant for the production of buttons from
horn with a capacity of 200 tonnes per annum.
The present demand for the proposed product is estimated at 929 tonnes per annum.
The demand is expected to reach at 2,528 tonnes by the year 2020.
The plant will create employment opportunities for 11 persons.

3. 290-3
The total investment requirement is estimated at Birr 1.54 million, out of which Birr
668,000 is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 30 % and a net
present value (NPV) of Birr 1.4 million, discounted at 8.5 %.
II. PRODUCT DESCRIPTION AND APPLICATION
Buttons are items used in garments. Horn buttons are highly durable of all types. Most
of the time, they are used with elegant suits. The Region is endowed with large
population of cattle. This is believed to be potential resource for horns.
Buttons made from horn is resource based product that will substitute the import
III. MARKET STUDY AND PLANT CAPACITY
A. MARKET STUDY
1. Past Supply and Present Demand
Buttons are used by garment manufactures. Therefore, the local demand for the product is
influenced largely by the expansion of the local garment industry. According to the
information from the Ethiopian Investment Agency, investment permits were issued to a
total of 161 projects with a capital of Birr 990 million in the area of garment and related

4. 290-4
articles manufacturing, of which 12 are already operational and 15 are under
implementation. When the licensed projects become operational the local demand for
buttons will increase considerably.
However, since there is no domestic facility for manufacturing buttons, the products are
imported from overseas. Import of button is given in Table 3.1.
Table 3.1
IMPORT OF BUTTON ( TONNE)
Year Import
2000 11,950
2001 32,906
2002 42,770
2003 72,439
2004 77,563
2005 41,466
2006 46,228
Source :- Ethiopian Customs Authority.
As could be seen from Table 3.1, import data of buttons does not show any trend. Import
varies from 11,950 tonnes during the year 2000 to about 77,563 tonnes in the year 2004,
respectively. With such very erratic date a trend analysis could not be worked out to
estimate the present demand. Hence, the simple average of the period under
consideration is assumed to indicate present demand. Accordingly, the present demand is
estimated at 46,475 tonnes. Conservatively assuming that the share of buttons made out
of horn has a 2% share of the total estimated demand for buttons, the present demand for
horn buttons is estimated at 929 tonnes.
2. Projected Demand
The demand for buttons is related with the expansion of the garment and leather goods
production.

5. 290-5
Ethiopia has a good potential to expand the garment and the leather sector due to the
availability of the basic raw materials. Moreover, the government has given due attention
to these sectors in its industrial policy. Considering these favourable situations, the
demand for buttons is estimated to grow by an average rate of 8% per annum (see Table
3.2).
Table 3.2
PROJECTED DEMAND FOR HORN BUTTONS ( TONNES)
Year Projected Demand
2008 1,004
2009 1,084
2010 1,171
2011 1,265
2012 1,366
2013 1,475
2014 1,593
2015 1,720
2016 1,858

6. 290-6
2017 2,007
2018 2,167
2019 2,341
2020 2,528
3. Pricing and Distribution
Based on current retail price of the product and assuming profit margin for distributors
and retailers, the recommended factory-get price of the envisaged project is Birr 5 per
Kg.
The product can be distributed through the existing textile accessories distributes or by
establishing own distribution centers at strategic locations.
B. PLANT CAPACITY AND PRODUCTION PROGRAMME
1. Plant Capacity
According to the market study for horn buttons indicated above, the unsatisfied demand
for the year 2008 will be 1004 tonnes, and this figure will grow to 1,720 tonnes by the
year 2015. Therefore, the envisaged plant will have production capacity of 200 tonnes
of horn buttons per annum.
Production can be increased if the plant is made to operate double shift for 16 hours a day
without increasing investment on fixed capital.
2. Production Programme
A gradual capacity build-up is proposed for the plant so as to allow for manufacturing
skill development and for establishment of sufficient market outlets. The plant, hence,

7. 290-7
will commence production at 65% of full capacity in the first year of operation.
Production will be made to grow to 75% and 85% in the second and third year,
respectively. Full capacity production shall be attained in the fourth year and then after.
Table 3.3 below presents the details of the proposed production programme.
Table 3.3
PRODUCTION PROGRAMME
Year 1 2 3 4 and then after
Capacity utilization (%) 65 75 85 100
Production (tones) 130 150 170 200
IV. MATERIALS AND INPUTS
A. RAW AND AUXILIARY MATERIALS
The major raw material required for the production of horn buttons is raw horn obtained
from cow, ox and others. The region has a high cattle population; Sidama, Debub Omo
and Hadiya Zones are with the highest cattle population in the region having 1,258,654,
1,114,258 and 879,147 TLU respectively. At woreda level; Kuraz, Awassa Zuria, and
Soro Woredas have the highest cattle population in the region.
In addition to horn, polishing materials are very useful in the production of buttons.
These materials produce polished surface of the buttons thereby enhancing the quality
and appearance of the products. Annual requirement of raw and auxiliary material at full
production capacity is given in Table 4.1 below.
Table 4.1

8. 290-8
ANNUAL REQUIREMENTS OF RAW AND AUXILIARY MATERIALS AND
COST AT FULL CAPACITY
Sr. Description Qty Cost (‘000 Birr)
LC FC TC
No.
A. Raw Material
1 Horns (cow, oxen), etc (Tones) 205 205 - 205
B. Auxiliary Materials
2 Polishing materials Req 10 - 10
Total - 215 - 215
B. UTILITIES
Electricity and water are utilities required for production of horn buttons. A total of
10,000 kWh electrical energy is required per annum. As regards water the plant will
require a total of 200 m3 water per annum.
At the rate of Birr 0.474 per kWh for electricity and Birr 10 per m 3 for water, annual
expenditure on utilities will be Birr 6,740.
V. TECHNOLOGY AND ENGINEERING
A. TECHNOLOGY
1. Production Process
Production of horn buttons involves four distinct operations, namely:-
a) Cutting in circular or other required shape

9. 290-9
b) Hole making
c) Finishing and polishing
d) Packing and dispatching
a) Cutting in circular or other shape. This unit operation involves the use of horn
cutting circular saw, band saw machine and high speed circle cutting machine.
The raw horn is first cut by the circular saw and band saw to the required sizes.
Next the horn piece is formed into circular shape by applying the high speed
circle cutting machine. This is the cash for circular button production.
b) Hole making:- After the horn is cut into circular shape, then the required holes
are formed by a hole making machine.
c) Finishing and polishing:- This is the process by which the horn button is treated
on a lathe machine where the edge and the button face are properly polished by a
polishing material so as to give the product smooth and good-looking face.
d) Finally the polished and finished product is properly packed and dispatched to the
market.
2. Source of Technology
Address of Machinery Supplier is given below:
Sigema Wood Working
CHINA
Tel: +86-512-6586-8021
Fax: +86-512-6762-3397
B. ENGINEERING
1. Machinery and Equipment

10. 290-10
Machinery and equipment required by the plant and related cost is shown in Table 5.1
below.
Table 5.1
MACHINERY AND EQUIPMENT
Sr. Description Qty Cost (‘000 Birr)
No. (No.) LC FC TC
1 Horn cutting circular saw 1 18.00 - 18.00
2 Band saw machine 1 25.00 - 25.00
3 High speed circle cutting machine 1 65.00 - 65.00
4 Semi-automatic hole master 1 110.00 - 110.00
5 Double ended polishing lathe 1 60.00 - 60.00
6 Motorized tool post grinder 1 35.00 - 35.0
7 Circular blade and band saw 1 75.00 - 75.0
sharpening machine
8 Special steel borers 2 80 - 80.0
9 Tungsten wire hole making machine 1 45.00 - 45.00
FOB price 593 - 593.0
Freight, Insurance charges, material - 75 75.0
handling charges, Customs
CIF Landed Cost 593 75 668.0
2. Land, Building and Civil Works

11. 290-11
The total land required by the plant is 300 m 2, of which 150 m2 is built-up area. At land
lease rate of Birr 1.0 per m 2, the land lease value for 80 years is Birr 24,000. At unit cost
of building (per m2) Birr 2,000 the total cost of built-up area will be Birr 300,000. Thus,
the total investment on of land, building and civil works will be Birr 324,000.
3. Proposed Location
Location of a plant is determined on the basis of proximity to raw materials, availability
of infrastructure and distance to major market outlets. Potential weredas where raw
material is obtained in abundance are Bokagazer, Gellila, Banatsemay, Hammer, Kuraz
and Salamgo. Among these the selected wereda is Kuraz. It is therefore appropriate to
locate the envisaged plant in Omarate town.
VI. MANPOWER AND TRAINING REQUIREMENT
A. MANPOWER REQUIREMENT
The plant requires both production and administrative workers. The details of manpower
are given in Table 6.1 below.
B. TRAINING REQUIREMENT
Two weeks training for three operators is sufficient. Training can be carried out in the
workshop of Federal Micro and Small Enterprises Development Agency (FeMSEDA) in
Addis Ababa. A total of Birr 5,000 is allotted to carry out the training programme.
Table 6.1
MANPOWER REQUIREMENT AND LABOUR COST
Sr. Job Title Req. Monthly Annual
No. No. Salary Wages
A. Administration
1 Manager (finance & Administration ) 1 1,000 12,000

12. 290-12
2 Secretary 1 500 6,000
3 Sales man 1 600 7,200
4 Clerk 1 350 4,200
5 General services 2 250 6,000
6 Sub total 6 - 35,400
B. Production
1 Skilled worker 3 600 21,600
2 Unskilled workers 2 250 6,000
Sub total 5 27,600
Workers’ benefit (25% BS) - 15,750
Total 11 78750
VII. FINANCIAL ANALYSIS
The financial analysis of the buttons from horn 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 2 days
Accounts payable 30 days
A. TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at 1.54
million, of which 13 per cent will be required in foreign currency.

13. 290-13
The major breakdown of the total initial investment cost is shown in Table 7.1.
Table 7.1
INITIAL INVESTMENT COST
Sr. Total Cost
No. Cost Items (‘000 Birr)
1 Land lease value 24.0
2 Building and Civil Work 300.0
3 Plant Machinery and Equipment 668.0
4 Office Furniture and Equipment 75.0
5 Vehicle 200.0
6 Pre-production Expenditure* 229.7
7 Working Capital 45.5
Total Investment cost 1,542.1
Foreign Share 13
* N.B Pre-production expenditure includes interest during construction ( Birr 104.66 thousand )
training (Birr 5 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 693,130 (see
Table 7.2). The material and utility cost accounts for 40.47 per cent, while repair and
maintenance take 11.54 per cent of the production cost.

14. 290-14
Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items Cost %
Raw Material and Inputs 215.00 31.02
Utilities 67.4 9.72
Maintenance and repair 80 11.54
Labour direct 43.35 6.25
Factory overheads 14.18 2.05
Administration Costs 35.4 5.11
Total Operating Costs 455.33 65.69
Depreciation 154.3 22.26
Cost of Finance 83.5 12.05
Total Production Cost 693.13 100
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.
2. Break-even Analysis

15. 290-15
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 = 34%
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 3 years.
4. Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 30 % and the net
present value at 8.5 % discount rate is Birr 1.4 million.
D. ECONOMIC BENEFITS
The project can create employment for 11 persons. In addition to supply of the domestic
needs, the project will generate Birr 829,610 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.