Economic Analysis of Production of Essential Oil using Steam Distillation Technology

Abstract

This paper examines the economical analysis of producing essential oil from leafy part of Eucalyptus citriodora plant using steam distillation technology. The specific objectives were to examine the viability or otherwise of this method of producing essential oil in terms of net profit generated, return on investment and pay back period. The data used in this study were obtained from series of test-run carried out on the fabricated essential oil pilot plant and other input costs were based on the current market price available in Zaria Area Council, Kaduna State. The results showed that the total estimated cost of the pilot plant (direct fixed cost) with capacity to produce 0.864 litres/hour of crude essential oil was N1,453,493:00 and annual operating cost (AOC) of N 4,026,492:00. The plant is expected to produce 840 litres of distilled essential oil per annum with expected annual selling price of N6,300,000:00 and profit after tax (PAT) of N1, 818,806.00 at 20% tax rate. The return on investment (ROI) was 125%, internal rate of return (IRR) of 29.64% and pay back period (PBP) of 0.75 years. From the profitability analysis and measure of return on investment carried out based on the various assumptions and projections made, it was quite obvious that the production of essential oil using steam distillation technology is highly profitable which should be attractive to potential investors.