Chip Board Plant

Investment
Ms.c(Accounting & Finance) 3rd

This is our assignment work, and most of data pulled

out from SMEDA.

Prepared by ®
Fahad Saeed Malik
5/1/2009
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Project Report
On
CHIPBOARD PLANT

Subject
Project Management

Submitted to

Mr. Javad Iqbal

Submitted by

Fahad Saeed Malik 49

Shahid Mumtaz Ali 48

Saeed Aslam Bandasha 24

Rizwan Ali Jutt 20

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“Alif Laam Raa. A book which we have revealed to you

(Muhammad) so that You may lead the people from out of the
dark nesses into the light by their Lord’s leave to the path of
the All-Might, the Praiseworthy.”
(Al- Qur’an)

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DEDICATION
To
The students of Pakistan, who are in the
hunt for a dazzling future in this country
that can endeavor their aptitude for
every difficulty in prospect

And

To our teachers who are a rock-solid

potency for us their motivation will
empower us to face the intricacy in
future

And

To my mother,
Whose unwavering faith in me
Has been the driving force in my life—
Her unconditional love and prayers
remain my unremitting source
Of strength.
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Prelude
Project is a fundamental part of Ms.c (A/F) program because it
gives us practical knowledge of what we have learnt during our
study period. This report is written to fulfill the requirement of our
degree. Research project provides opportunities to have been
scrutiny and experience. This report process is valuable in course of
learning. This report is also a step of some chance of practical
experience form. In this report will be covering all vital information
and heir scanning exposures in the form of our observation.

In this report we have tried our level’s best efforts to cover and
elaborate necessary inferences suitable to enhance the knowledge.
We hope our efforts of transfer of knowledge through this report
will be information gaining for readers.

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Acknowledgement

This work would not have been possible without the support and
encouragement of my Teacher, Javid Iqbal under whose supervision. We
chose this topic and began the Project.

We cannot end without thanking of our all teachers, on whose constant

encouragement and love. we have relied throughout our time at the
University We are very grateful also to the examples of our other
friends, their unflinching courage and conviction will always inspire us,
and we hope to continue, in our own small way, the noble mission to
which they gave their lives. It is to them that I dedicate this work.

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 Overture
Pakistan is its way to progress and a numbers of commercial activities are in
process. Housing & construction sectors are declared as industry. With these
developments these sectors are growing drastically. The growth of allied industries is
normal practice therefore demand for chipboard has increased. Local industry is not able
to cater the local demand and every year a considerable quantity of chipboard is imported
from different parts of the world to meet the demand. Therefore it is a right Project in
this environment but for high quality board definitely.
Banking policies for housing loans are also playing an important roll in the boost of
the housing sector. The construction style has absolutely changed and demand of
chipboard and laminated board has significantly increased. Afghanistan Development
Program after the war has also contributed in opportunities to enhance considerable
export by taking part in the development of Afghanistan. Construction business is a
demanding area. Trade has opened for all the world economies from 2005 and it is
visualized that demand will increase more in future.
Due to increase in population and need of constructing new houses it is expected that
demand for chipboard will rise ultimately. Chipboard industry is a growing industry of
Pakistan which can contribute positively in the GDP. This industry has reasonable
potential to attract new markets abroad by providing high quality board.
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Executive summation

Name of the Project:

Silver Star Chipboard Manufacturing

Plant

Main Sponsors:
Fatima Group

3. Cost of the Capital:

Fixed Cost 177,967,609

Initial Working Capital 64,050,000

Total 242,0176,09

1. Date of Commercial Production:

30/06/2010

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CRUCIAL FACTORS & STEPS IN DECISIONMAKING FOR

INVESTMENT:
Before making the decision, whether to invest in setting up the Gold Chain manufacturing
unit or not, one should carefully analyze the associated risk factors. An industrial sector
SWOT analysis is given below that can help in analyzing these factors, which can play
important role in making the decision. However, a prospective entrepreneur would have to
conduct micro level SWOT analysis on the basis of the intended city/town for his business.

SWOT Analysis

Strengths:
 Continuous availability & easy access of the raw material, which mainly comprise
Wood.
 Availability of Labor and skilled craftsmen.
 Latest technology of manufacturing Chipboard with high working efficiency and
trouble free operations.
 Easy availability of spare parts.
 Own Research & Development department for new design creations.
 The life style of the people is improving and trends are continuously changing over
time and more people are now directed towards using the new style of furniture and as
well modern.

WEAKNESSES:

 Strict controls over the Labor efficiency need to be observed to reduce the risk the
minimum level

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 No state of art type of management and also machinery.

 High employment turnover rate.
 Marketing strategy is not implementing
 Heavy investment in the working capital
 No substitute of light
 OPPORTUNITIES:
 The life style of the people is improving and trends are continuously changing.
 Thus the demand for chipboard remains alive and can’t end.
 Increasing preference for the high quality of chipboard is increasing time to time
 Chipboards are popular and used in every class of the society.
 It’s a compulsory item in society for home making, offices, and every where chipboard
demand will always increase.
 As population is increasing day by day construction
 Of houses are rapid growing and diffidently the chipboard market will demanded
more?

THREATS:

 Quality & design of the Chipboard needs to be considered very

closely.
 Strict internal control and quality control procedures required.
 Established competitors in Chipboard market.
 New laminated sheets are required new style that can attract the
customers.

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 Promotional activities are required for this industry.

 Need a large amount.

6. Result of Projection:
The result of this Project is that, we are able to setting up a chipboard Manufacturing unit
and to evaluate its viability under present circumstances. Pakistan is its way to progress
and a numbers of commercial activities are in process.
Housing & construction sectors are declared as industry. With these developments these
sectors are growing drastically. The growth of allied industries is normal practice therefore
demand for chipboard has increased. Local industry is not able to cater the local demand and
every year a considerable quantity of chipboard is imported from different parts of the world to
meet the demand. Due to increase in population and need of constructing new houses it is
expected that demand for chipboard will rise ultimately. Chipboard industry is a growing
industry of Pakistan, which can contribute positively in the GDP. This industry has reasonable
potential to attract new markets abroad by providing high quality board.
One of the most common uses of chipboard is that it is the back piece, which provides Stiffness
on a scratch pad. Chipboard is the major input for the furniture industry and also used for kitchen
tops and work surface.

7. Name of the Financial Institution:

Industrial Development Bank (IDB)

8. Justification of Production:
Local industry is not able to cater the local demand and every year a considerable quantity of

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chipboard is imported from different parts of the world to meet the demand.
One of the most common uses of chipboard is that it is the back piece, which provides
stiffness on a scratch pad. Chipboard is the major input for the furniture industry and also
used for kitchen tops and work surface.
Afghanistan Development Program after the war has also contributed in opportunities to
enhance considerable export by taking part in the development of Afghanistan.
Construction business is a demanding area. Trade has open for
all the world economies from 2005 and it is visualized that demand will increase more in
future.
The demand of chipboard in Pakistan can be categorized into three broad groups of end users,
Furniture Manufacturers, Construction and Housing Industry. There could be a very small
percentage of other users.

Furniture Manufacturer
The furniture industry in Pakistan can be classified into following categories.
x Manually Operated Units
x Semi-mechanized units
x Mechanized Units
x High-tech Manufacturing Units

Chipboard and plywood are the major inputs for the furniture industry, which is the biggest user
of chipboard, accounts for approx. 60% of the total demand for the product. The wood used in
furniture making generally comprises Shesham, Chirh, Pine, Oak, Burmah, Teak, Plywood,
Kikar and Bamboos. Recently, chipboard is also extensively used for this purpose, which is
considered a healthy sign for the chipboard industry. Although the quality of chipboard so
far produced in the country has not improved up to the world standard, yet with the passage of
time for product’s diversified uses, easy to handle, economical and many other factors, the use of
chipboard is likely to increase.

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Construction Agencies
The total world spending on the construction sector in a year is US $ 3.2 trillion against US $ 5.2
billion in Pakistan, according to a report compiled by the Lahore Chamber of Commerce and
Industry (LCCI). The growth rate of construction sector in Pakistan which stood at 5.70 percent
during the early 1990s, declined to (negative 4.92) percent in 1998-99, but then recovered to the
mark of 5.15 percent in 1999-2000.As per the information mentioned above it can be envisaged
that as the construction sector will improve it will ultimately improve the chipboard industry
positively.
By keeping in view increasing population growth rate, expanding demand and supply gap and
shortfall of 6 million housing units, it is expected that chipboard usage will increase to meet the
shortfall of 6 million housing units.

Others
These include Interior decoration firms, Railways and other Government Agencies. Chipboard
is demanded by these agencies for a variety of purposes. Small quantities of chipboard are
also in demand for miscellaneous purposes. For instance, bus body makers, packing firms, film
studios, PWD, WAPDA, Municipal Committees and improvement Trusts etc use it.

9. Marketing Activities:
The marketing of the project will be based on the following strong grounds:
x Contacts with end users and Contractor
x Advertisement
x Promotion schemes
x Point of purchase displays
It is assumed that by using all above mentioned methods, project will be able to fetch
considerable market share.

Pricing
Chipboard is available with or without lamination. Different rates are charged for both products.

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Product will be provided to wholesaler at market prevailing rates, which could be different on the base
of product quality.

Distribution
The final product chipboard will directly supplied to wholesaler eliminating role of agencies. Distribution
network of product is illustrated below:

10. Company Information

Partners:
Fahad Saeed Malik
Shahid Mumtaz Ali
Saeed Aslam Bandasha
Rizwan Ali Jutt

Banks:

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Industrial Development Bank

Bank Alflah limited

Project profile
Opportunity Rational

Due to increase in population and need of constructing new houses it is expected that demand for chipboard will
rise ultimately. Chipboard industry is a growing industry of Pakistan, which can contribute positively in the
GDP. This industry has reasonable potential to attract new markets abroad by providing high quality board.
Banking policies for housing loans are also playing an important roll in the boost of the housing sector. The
construction style has absolutely changed and demand of chipboard and laminated board has significantly
increased. Afghanistan Development Program after the war has also contributed in opportunities to enhance
considerable export by taking part in the development of Afghanistan. Construction business is a demanding
area. Trade has opened for all the world economies from 2005 and it is visualized that demand will increase
more in future.

Project Brief
Gluing together wood particles with an adhesive, under heat and pressure makes chipboard. This creates a rigid
board with a relatively smooth surface. Chipboard is available in different densities i.e. 25mm, 19mm, 8mm, 5mm
and 3mm.
One of the most common uses of chipboard is that it is the back piece, which provides Stiffness on a
scratch pad. Chipboard is the major input for the furniture industry and also used for kitchen tops and work
surface.

Market Entry Timings

Pakistan is its way to progress and a numbers of commercial activities are in process. Housing &
construction sectors are declared as industry. With these developments these sectors are growing drastically.
The growth of allied industries is normal practice therefore demand for chipboard has increased. Local industry is
not able to cater the local demand and every year a considerable quantity of chipboard is imported from different

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parts of the world to meet the demand. Therefore it is right time enter into this industrial sector but for high
quality board definitely.

Business Legal Status

The status of the business should be a corporate entity and it could be either a partnership or a limited company.
However, a private limited company will be the best option.

Project Capacity & Rational

Total production capacity of plant is 200 m3 per day.

Project Investment

Cost of the project will consist of the following.

Fixed Cost 177,967,609

Initial Working Capital 64,050,000

Total 242,0176,09

Proposed Location

Lower Punjab is best location for a chipboard manufacturing unit due to easy availability of raw material, cheap
labor force and excessive water availability. In chipboard industry mango and poplar wood are the main raw
materials. This industry needs excessive water in the manufacturing process. It is important to select the site
where raw material and water availability is easy. However the investor may consider other factors like easy

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access to roads, availability of labor, transportation cost and infrastructure facilities etc. Before selecting the site.

MACROECONOMIC INDICATORS OF PAKISTAN

Demography of Pakistan

The population of Pakistan was 32.5 million in 1947. Over the last fifty-five years, it has
increased by four folds reaching to a figure of 156 Million approximately. It is expected to 172
million marks in the year 2010. The demographic details of Pakistan’s population are given
below:
Population in 2009: 170 Million
Population Density: 200/sq. km
Population Growth (percentage): 2.18%
Population Doubling Time: 32 Years
Birth Rate: 29 per 1000 population

Population Growth

At present, the annual population growth rate is around 2.10 percent. Pakistan’s population will
be twice over in less than 32 years. Punjab is the most thickly populated area and Karachi is
the most densely populated city. Keeping in view the growth rate of population of the country it
is likely that housing requirements will enhance and automatically demand for the chipboard
will increase.
Housing Sector The housing and construction sector remained neglected in the past, which
resulted in housing backlog of over 4.3 million units according to 1998 census, which is now
projected to 6.0* million units. The annual additional requirement is estimated around 570,000*
housing

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units whereas the annual production is estimated around 300,000* housing units, resulting in a
recurring shortfall of 270,000* housing units annually. It is estimated that in order to address
the backlog and to meet the housing shortfall in the next 20 years, the overall housing
construction will have to be increased to 0.82 million housing units annually
According to 1998 Population and Housing Census of Pakistan, there were over 19.3 million
housing units in the country as compared to 12.6 million enumerated in 1980, showing an
increase of 53.2 percent. The details are tabulated in the table appended herewith.

Housing Units

(Census 1998) (Houses in Millions)

On the basis of World Bank’s recommended occupancy rate of 6 persons per house, the total
number of housing units in the country roughly required was 26 million up to the end of
2005, based on the population of 156 million at present. Every year, 0.3 million new houses
should be added to the existing stock by the public & private sectors. On the other hand, 10
percent houses of the total supply are depleted/destroyed/demolished every year, resulting
into decline in available housing units to 20.0 million housing units leaving a back log of 6.0
million housing units.

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The present progress involves construction of approximately 4500 housing units/apartments

in 4 major urban centers of Karachi, Lahore, Islamabad and Peshawar at an estimate cost of
Rs. 5 billion. The execution of this program has been entrusted to the National Housing
Authority. It is estimated that approximately 8,000-10,000 laborers and skilled workers are
working on various projects including more than 5000 professional engineers and architects.
In addition, this has also provided an incentive to the 40 downstream industries including
furniture, cement, steel, electrical industries, piping etc.

Government Policies

It is high time that government provides the necessary incentives so that this industry may
play its due role in the industrial development of the country. Further, this industry, on
attaining more dimensional growth, with government assistance, may be able to earn the
badly needed foreign exchange through export of its products. A beginning in this regard has
already been made with the export of our furniture to Saudi Arabia and Gulf States.
Government has granted relief to certain industries involved in housing and construction
projects. In order to boost the Pakistan’s economy, Construction Sector is being given
special incentives in the shape of reduction in withholding tax from 6% to 1%, which will
ultimately improve the business activities of the downstream industries like furniture,
Chipboard, and Construction material industries as well. By keeping in view increasing
population growth rate, expanding demand and supply gap and shortfall of 6 million housing
units, it is expected that chipboard usage will increase to meet the shortfall of 6 million
housing units.
At Present only 10 units are in laminated chipboard manufacturing. Most of these units have
average rated capacity of approximately 30,000 sheets per/month in 3 shifts. But this sector is
also under utilized and could not attain its average capacity. Imported fine raw material will
help in the quality improvement, which may increase export rate. In the open trade era,
production of high quality product could help in achieving the export targets and the sector

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will grow accordingly. A beginning in this regard has already been made with the export
of our furniture to Saudi Arabia and Gulf States. Government has granted relief to
certain industries involved in housing and construction projects.

MARKET INFORMATION

Market potential
Pakistan is facing housing problem since its birth because of the migration of millions
of people from India to Pakistan. However situation is changing now. Many macro and
micro construction works are underway to meet the shortfall of 6.0 million houses
both by the private and public sector, which is a healthy sign for many industries
including chipboard industry. On the basis of all the factors relating to the growth rate of
population, housing industry and export potential, we can anticipate a reasonable growth
rate in demand of the chipboard and laminated board in coming future. On the basis of
the population growth and housing industry, 6% growth in demand till 2010 is
anticipated. The following table is showing the calculations.

Competitive Environment

For a newly established firm it is imperative to face a competitive environment

in the market as competition enhances a company’s ability to strive for
continuous improvement. In the field of manufacturing chipboard new entity
will be competing with a number of competitors, some of which are listed
below:

Hamza Chipboard

Gohar Chipboard
Sahar Chipboard

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Haidry Chipboard
Sun Chipboard
Sind Chipboard
Jehlum Chipboard
National Chipboard

Allied and Associated Industries

The project could be very healthy for the allied industries like housing, furniture
and automobile industries by giving them their products at internal transfer rates,
which will ultimately reduce the cost of production of allied companies, and he nce
there would be
a positive impact on the consolidated profitability of the associated companies.

Demand and Supply Gap

Chipboard Industry in Pakistan is an unorganized sector, therefore, it is hard to get

exact demand and supply gap figure. There is a meager gap between demand and
supply of chipboard in Pakistan. This gap is being filled by importing chipboard
from different
countries of the world namely China, Germany, Indonesia, Italy and Maldives
Islands.

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Target Customers

Exporters
The Pakistan government has been taking a number of steps to give a fillip to export.
But these efforts are mainly restricted to increase the traditional exports of agriculture
products and items being manufactured by big industrial units. These exports are
subject to “dordrumism” as a result of developing countries like Pakistan. The eleventh
September mishap is a concrete example.

Under such atmosphere, it is necessary that Pakistan should, along with taking steps for
safeguarding our traditional exports from the adverse effects of globalization etc, seek
other avenues to raise its exports. One of these avenues may be the development of our

woodwork and wood based industry, which has started to adopt a scientific
approach for its development.
As a result various items of wooden furniture in new design are in appreciable demand,
both domestically and internationally. Presently, we are exporting to Sri Lanka, Middle
East, Saudi Arabia, Afghanistan and some Gulf States various items of wooden
furniture.

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Chipper

Flaker

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Conveyers

Dry Dust Fisher

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Screening

Storage tank

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Refiners

Dry chip tank

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Glue blender

Glue Kitchen

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Blade grinder

Sending machine

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