Potential of investment in particleboard industry: A case study for the Finfinne Forest development and marketing enterprise

The Finfinne forest development and marketing enterprise was established in 1997, combining 75% and 93% of the former Addis Ababa forest development and Addis-Bah fuel wood plantation development projects, respectively. Out of the total plantation of the enterprise 98% is Eucalyptus globulus. The enterprise has a marketing problem. It did not sell what was planned in the years 1998 and 1999. The actual sales were very much less than the targets.This is due to:· Supplies of close substitutes of fuel and construction wood i.e., electricity, bricks, etc. In the capital city, the supply of these items has increased over time, thereby reducing the demand for fuel and construction wood.· An increase in the supply of forest products from around the city, entering through the main and subsidiary gates of the city, resulting in declining prices.· The manufacture of chip wood, lumber and other products from Eucalyptus (product processing) has not been given due attention as an alternative.This study was aimed at finding an alternative way to add value to the existing plantation resource, which can help the enterprise to finance the coppice management after the final felling which is necessary for sustainable production. Particleboard production was taken as an alternative to solve the problem based on the availability of raw material and demand for particleboard. The financial profitability of a medium-sized particleboard factory, with a production capacity of 50,000 m3 per year was tested. Costs and other related information about the factory's machinery and equipment were obtained from a company from finland called Valmet. Other data referring to market prices of inputs and outputs were obtained from the Ethiopian Chip Wood and Furniture Manufacturing company (ECAFCO). Two evaluation criteria; the Net Present Value and the Internal Rate of Return were used.The result showed that the proposed particleboard factory is financially profitable at a 10% discount rate. The sensitivity analysis showed that the factory continues being profitable over a wide range of changes in the prices of inputs, outputs and productivity, especially with increases in the price of wood, which is the principal raw material for particleboard. It is recommended that establishing such a medium sized factory can be an alternative solution to solve the existing market problems of the enterprise and help it to develop and use its plantation resource on a sustainable basis.