ENTERPRISE PLANNING IMPLEMENTATION

Feasibility Report:

Paint Production Factory in Ibadan.

Client: classified, Ibadan.

 DECORATIVE COATINGS INDUSTRY

Report on Paint production in Oyo State.

FEASIBILITYSTUDYREPORT FORTHEOPERATIONSOF ***PAINTCOMPANY

INTHE ARCHITECTURAL&DECORATIVE COATINGSINDUSTRY

1.INTRODUCTION
Thechemicalindustryincludessmall,medium,andlargecompaniesthatengageintheproductionofindustrial chemicals.Thisindustryiscentraltomodernworldeconomy,convertingrawmaterials(oil,naturalgas,air,water, metals,andminerals)intomorethan70,000differentproducts. Chemicalsareusedtomakeawidevarietyofconsumergoods,aswellasthousandsofinputstoagriculture, manufacturing,construction,andserviceindustries,eventhechemicalindustryitselfconsumes26percentofits ownoutputasinput.Polymersandplastics,especiallypolyethylene,polypropylene,polyvinylchloride, polyethyleneterephthalate,polystyreneandpolycarbonatecompriseabout80percentoftheindustrysoutput worldwide. Theindustryproducesmanychemicals,suchaspetrochemicals,inorganicandorganicchemicals,fertilizers,paints, pharmaceuticals,soapsanddetergents,syntheticfibers,essentialoils,cosmeticsandpersonalcareproducts.The chemicalindustryprovidesinputstomanyothersectors,suchasautomotive,leatherproducts,glass,textilesand paperproducts. Fromtimeimmemorial,thechemicalindustryhasbeenconcentratedinthreeareasoftheworld,WesternEurope, NorthAmericaandJapan(theTriad).TheEuropeanCommunityremainsthelargestproducerareafollowedbythe USAandJapan.

ThetraditionaldominanceofchemicalproductionbytheTriadcountriesisbeingchallengedbyfeedstock availabilityandprice,labourcost,energycost,differentialratesofeconomicgrowthandenvironmentalpressures. InstrumentalinthechangingstructureoftheglobalchemicalindustryhasbeenthegrowthinChina,India,Korea, theMiddleEast,SouthEastAsia,Nigeria,Trinidad,Thailand,Brazil,Venezuela,andIndonesia.

1.1Background ThesizeoftheNigerianeconomyasmeasuredbythecountrysGDPhasincreasedbyacompoundannualgrowth rate(CAGR)of20.68%(innominalterms)between2001and2006.PresentGDPisatN24,825,000,000whilethe NigerianGDPpercapitaisatN167,700.Anoticeabletrendintheeconomysgrowthpatternistheincreasing contributionofthenonoilsector,particularlytheagriculturalandmanufacturingsectorstothenationsGDP. Itisexpectedthatintheyearsahead,otherkeysectorssuchasconstruction,consumergoodsandtourismmay begintoplaymoreimportantrolesinoveralleconomicgrowthanddevelopment.Astheongoingeconomic reformscontinuetotrickledownintoothersegments,andbaringanyunforeseencircumstances,weexpectamuch morebalancedandselfsustainingeconomyinyearstocome.

CommercialproductionofpaintcommencedinNigeriain1962byBergerPaints.Beforenow,severalkeypaint industryplayershasalsobeenincorporatedsuchasDNMeyer,InternationalPaintsWestAfricaandCAPPlc.Berger PaintsNigeriaPlcwasincorporatedon9thJanuary1959asBritishPaints(WestAfrica)Limited.

Bergercommencedbusinesson15thMarch1961byimportingpaintsfromNewcastleHeadquartersofBritish PaintsintheUnitedKingdom.Atonetime,oneoftheownersofBritishPaints(UnitedKingdom)wasCelanese CorporationoftheUSA,butlaterdivested.CelaneseCorporation(USA)showedinterestintherunningoftheBritish PaintsaswellasitssubsidiariesworldwideincludingBergerPaintsNigeriaLimited. Duringthisperiod,distributionofimportedpaintsbythecompany,inNigeria,wasdonethroughtheoutletsofPZ, BrossetteandVYBmainlybecauseoftheirstrongdistributionnetworkacrossthecountry.Localmarketforpaints wasgraduallydevelopedandthisbuiltuptheconfidenceoftheexpatriateownerstoventureintopaint manufacturingaftercriticallylookingintothepotentialofNigerianmarket.

Withtheacquisitionof6.5acresoflandedpropertyandconstructionofasmallfactoryaswellasemploymentof fortyNigeriansplusfiveexpatriates,localpaintmanufacturingcommencedinMarch1962atthepremisesofBritish Paints(WestAfrica)onObaAkranAvenue,Ikeja. Intensepaintexportactivitiesstemfromthemanufacturerswhosenationalmarketsarefairlymature,with GermanyemergingasthechiefexporterandtheUSAsecond.Thetop10exportersaccountfor75%ofworldpaint trade,asseenbelow:

Asimilaranalysisbasedonpaintimportsshowsamorefragmentedpicture,withCanadaemergingasthemost activepaintimporter,Chinasecond,followedbytheUSA,FranceandtheUK.Insharpcontrasttoexports,thetop 25countriesaccountfor75%ofpaintimports.Otherexamplesofglobalpaintindustryactivitiesinclude: 1. KenyanpaintsuppliesaredominatedbytheUSA 2. TheNigerianmarketdrawsheavilyonsuppliesfromEurope,withtheNetherlandsaccountingfor42%of Nigerianpaintimports 3. UgandatakesmorethanhalfofitspaintimportsfromGermanyandtheUK ThetotalestimatedmarketforEmulsionPaintsinNigeriaisabout1billiongallonsperannumwhilethetotal marketforallpaintproductstotals1.4billiongallonsperannum.ThepaintindustryinNigeriapresentlyhasover 1,000operators.Theseoperatorsarebroadlycategorizedintothree.Thefirstcategorymadeupofaboutseven companiescalledthepremiumpaintmakersorGradeAmanufacturersofpaints.Thisgroupconsistsof: 1. AfricanPaints 2. BergerPaints 3. ChemicalandAlliedProductsPlc 4. DNMeyerPlc 5. InternationalPaintsWestAfrica 6. PremierPaints 7. NigerianGermanChemicals

 ThenthereareSecondtiermanufacturers.Thesearethemediumsizedcompanies,theyhavebeenaroundfor sometime,buttheydonthavetheiroperationsandmarketshareasbigasthoseofthepremiumpaintmakers. Thelastcategoryiscalledthethirdtierproducersmadeupofpaintmanufacturerswhomaybedoingthatintheir bedroomsandtheirgarages.Andtheirfocusisjustonemulsion,whichisbasicallythedecoratives.Thesehavetheir marketshare,buttheproblembasicallyinthisclassificationisstickingtoquality.Themajorityoftheoperatorsin theindustryrelegatequalitytothebackground.Thisisattestedtobythenumberofadulteratedproductsandsub standarditemsinthemarket. ArchitecturalandDecorativepaintproductionhasincreasedfromlessthan50percentofproductiontoover55 percent.OthersignificanttrendsarethedeclineinsolventthinnedArchitecturalandDecorativepaintfrom12 percentto8percentandconverselytheriseinWaterthinnedfrom37percentto48percent.Therehasalsobeen anincreaseinTimberFinishesfromlessthan1percenttoover5percentandadecreaseinthinnersfrom14 percentto10percent. Thepaintindustryhasbeenexposedtotheproducersofsubstandardproductsandadulteratedproductsoverthe years.Severalcategory2playershavemadethemistakeoffollowingthisfailurestrategybyproducingsub standardproducts.

2.TECHNICALANALYSIS
2.1CertificationRequirement IntendingmembersoftheAssociation,whichshouldbeamanufacturingoutfit,arerequiredtoobtainand completeApplicationforMembershipFormfromtheundersignedandpaythefeesstipulatedbelow: 1. ApplicationForm N500.00 2. RegistrationFee N2,500 3. Annualsubscription basedonturnoverrange 4. SpecialDevelopmentLevy basedonturnoverrange 5. SalesTaxLegalLevy N20,000fordirectlyaffectedLagosbasedcompanies N10,000forothercompaniesinLagosState 6. LandUseChargeLevy N20,000 7. BuyMadeinNigeriaProducts N10,000 8. LegalLevy(MemberoutsideLagos) N10,000 IntendingmembersmayberequiredtopayBranchduesasmaybestipulatedbyeachbranch.Thecompany's CertificateofIncorporationshouldbeattachedtothecompletedApplicationForm 2.2StaffStructure TheorganizationalstructureforthePaintFactoryisaHybridstructure(oftheMechanisticandOrganic,buttending moretowardsMechanistic)withaDivisionaldesign.Themechanisticstructureimpliesthattherewillbeseveral levelsofhierarchyinstafffunctions.Itinvolvescentralizedcontrolandauthority,highcomplexityand formalization,clearlydefinedtasks,verticalcommunicationlinks,andobediencetosupervisors. TheorganizationaldesigninthepaintfactorywillworkasaFunctionalGroupwheredifferentspecializedgroups carryoutdistinctactivities.ItinvolvesGroupingbytask(eachgroupdoessomethingdifferent). Advantages 1.Allowstaskspecializationandexpertisetodevelop 2.Donthaveredundancyoffunctionsacrossgroupsthatoccursindivisionaldesign

2.3StaffRequirement Thestaffrequirementforapaintproductionwillrequirebetween20and30employees.Thestafffunctionsare describedbelow: 1.Manager:Hecontrols,overseesanddirectstheadministrative,operativeandcommercialaffairsofthefactory. Atthemediumscalelevelofoperationsofthefactory,hedealswiththeemploymentandtrainingofstaff, weighingoftheirskillsandabilitiesandalsoreviewstheirpaymentscales. 2.Accountant/FinancialController:Heexamines,records,managesandreportsthefinancialactivitiesofthe accountofthecompanyi.e.theinflowandoutflowofcompanyincomeandexpenditure. 3.Clerk:Heassiststheaccountantandthemanagerinadministrativetasks,records,andfilingofdocuments, receipts,invoicesandotherbusinessdocuments.HeactsbothasasecretaryandanassistanttotheManager. 4.Salesman:Theyworkdirectlywiththemanageronthecommercialsideoftheorganization.Theyget,retainand maintaincustomersandretailersforthesalesanddistributionoftheproductsofthefactory. 5.FactoryWorkers:Theyarecasualstaffthatoperatetheproductionlineforeachtypeofpaintbyensuringeach productionprocessisproperlycarriedout.Theyalsomaintaintheinputandoutputscheduleoftheequipment. Theyareresponsiblefortheproperutilizationoftheequipment.Someworkersareresponsibleforthepackagingof thefinishedgoodsfordistribution. 6.Supervisor:Hiscoreresponsibilityistodesignformulaefortheproductandstatetheusesofthemachinesinthe industrialchemicalprocesses.Hesupervisesthefactoryworkersandassiststhemanagerinoverseeingthe processesofproductioninthefactory. 7.QualityControl/TestingOfficer:Heisprovidesqualitycontrolformixingratesandstandardsfortheproduced paintthroughinspection,testingandanalysis. 8.Technician:Hemaintainsandrepairsthemachinesandfactoryequipmenttoensuretheyareconstantlyin optimalworkingcondition. 9.Drivers:Theytransportrawmaterialstothefactoryandfinishedgoodsoutofthefactory. 10.Cleaner:Theymaintaincleanlinessandhygieneinandaroundthefactoryandadministrativeoffice.

2.4EquipmentNeeded Thetypesofequipmentlistedbelowarerequiredforapaintfactorymajoringinanyofthe3productlineslisted below: 1. OrdinaryEmulsionlocallyknownasEmulsion 2. HighEndEmulsionlocallyknownasTexcote 3. LacquerlocallyknownasGlossy S/No Equipment 1 45HPMotorEngine 2 5HPMotorEngine 3 ElectricpropellerMixer+MixingTank 4 AttritionMill+MixingTank 5 RollerMill 6 BeadMill/SandMill TOTAL Unit 1 1 1 2 2 2 4,090,000 UnitPrice,N Price,N

2.5RawMaterials Paintiscomposedofpigments,solvents,resins,andvariousadditives.Thepigmentsgivethepaintcolor;solvents makeiteasiertoapply;resinshelpitdry;andadditivesserveaseverythingfromfillerstoantifungicidalagents. Hundredsofdifferentpigments,bothnaturalandsynthetic,exist. 2.4.1ListofRawMaterialsandtheirPrices Thefollowingtableswilldiscussthelocalandinternationalpricesoftherequiredandfrequentlyusedrawmaterials inpaintproduction(seeSection7Appendixforacomprehensivelistofall.Thefollowinglistisabrieflistofthe commonlyusedrawmaterials.Thetablescontainthepricesofthechemicals,inorganicpigmentsandthenorganic pigments(moreexpensive). 1. TitaniumDioxide(usedbyeverypaintcompanyinNigeria) 2. PVA(PolyVinylAlcohol) 3. AlkylResin 4. Calcium(locallysourced)orPotassiumCarbonate 5. Pigments 6. KetoneandMethylIsobuthylKetone(MIBK) 7. Toluene 8. Natrosol 9. Cans 10. Cartons 11. Labels

 CHEMICALNAME PolyVinylAlchohol(PVA) MIBK PotassiumCarbonate TolueneIG TolueneNG Natrosol PRODUCTNAME InorganicPigments Black CarbonBlack(Indian) CarbonBlack(imported) Syn.BlackOxide Blue UtramarineBlue PrussianBlue Green ChromocyanineGreen ChromiumOxideGreen Orange BasicLeadSilicoChromate MolybdateOrange Red Syn.RedOxide White TitaniumDioxideRutile TitaniumDioxideAnatase ZincOxide ZincPhosphate Yellow PrimeroseChrome LemonChrome MiddleChrome ZincChrome Zinctetroxychromate Bariumchromate Syn.YellowOxide ICINAME PB7 PB11 PB29 PB27 PG48 PG18 PY21 PY104 PR101 PW6 PW6 PW4 PW36 PY34 PY34 PY34 PY36 PY36 PY31 PY42 PriceperTon 335,000 580,000 336,000 240,000 960,000 642,000 495,000 345,000 606,000 144,000 495,000 195,000 414,000 414,000 519,000 399,000 144,000 PriceperTon 300,000 153,000 96,000 48,000 51,000 330,000

OrganicPigements BenzidineYellowDHG BenzidineYellowG BenzidineYellowGR BenzidineYellowHR CarbazoleVioletRL HansaYellow10G HansaYellow5G HansaYellowG LakeScarletCTL MonoazoF5RK PermanentRedF4R PermanentRedFGR PermanentRedH2BM PhthalocyanineBetaBlue PhthalocyanineBlue PhthalocyanineGreen PyrazoloneOrangeG RedBordeauxFRR RedCarmineFBB02 RedToluidine RubineTonerCABO2 SignalRed

ICINAME PY12 PY14 PY13 PY83 PV23 PY3 PY74 PY1 PR53:1 PR170 PR8 PR112 PR48:4 PB15:3 PB15:2 PG7 PY13 PR12 PR146 PR3 PR57:1 PR48:4

PriceperTon 1,446,000 1,539,000 1,836,000 4,584,000 13,794,000 1,503,000 1,803,000 1,566,000 1,086,000 5,319,000 1,848,000 3,948,000 2,565,000 1,320,000 1,500,000 1,305,000 1,704,000 2,784,000 7,698,000 1,467,000 1,229,000 1,503,000

PleasenoteICImeansImperialChemicalIndustries(ICI)isaBritishchemicalsubsidiaryofaDutchconglomerate andoneofthelargestchemicalproducersintheworld.ItisbasedinSlough,UK.Itproducespaintsandspecialty products(includingingredientsforfoods,specialtypolymers,electronicmaterials,fragrancesandflavours). Itemploysaround29,000peopleandhadaturnoverofjustover4.8billionin2006.TheCompanywasoncea constituentoftheFTSE100IndexbutsinceJanuary2008ithasbeenasubsidiaryofDutchchemicalsgroupAkzo Nobel,whichisintheprocessoffullyintegratingthetwocompanies. TheCompanywasfoundedinDecember1926bywayofthemergeroffourcompaniesBrunnerMond,Nobel Explosives,theUnitedAlkaliCompany,andBritishDyestuffsCorporation.ItestablisheditsHeadOfficeatMillbank inLondonin1928. CompetingwithDuPontandIGFarben,thenewcompanyproducedchemicals,explosives,fertilisers,insecticides, dyestuffs,nonferrousmetals,andpaints.Initsfirstyearturnoverwas27m.Inthe1920'sand30'stheCompany playedakeyroleinthedevelopmentofnewchemicalproducts,includingthedyestuffphthalocyanine(1929),the acrylicplasticPerspex(1932),Duluxpaints(1932,codevelopedwithDuPont),polyethylene(1937)and PolyethyleneterephthalatefibreknownasTerylene(1941).

2.6UsesofRawMaterials PrimePigments Theprimepigmentscontributecolor/opacity(hidingpowder)tothepaint.Thebasicwhitepigmentistitanium dioxide,selectedforitsexcellentconcealingproperties,andblackpigmentiscommonlymadefromcarbonblack.

ThemajorprimepigmentusedinbuildingpaintsistitaniumdioxideorTitan.Titaniumdioxideisawhitepigment anditsimportanceisduetothefactthat85%ofbuildingpaintsaremanufacturedinwhite.Titaniumdioxidehasa highrefractiveindexwhichmeansitbendslightandhence,addstohidingpower.Titaniumdioxidepigmentsused inpaintsareinorganicallycoatedtoenhanceitsdurabilityandotherpropertiesforuseinthepaintindustry. Otherpigmentsusedtomakepaintincludeironoxideandcadmiumsulfideforreds,metallicsaltsforyellowsand oranges,andironblueandchromeyellowsforbluesandgreens.Otherprimepigmentsaremainlyusedtoadd colour.Thesefallintotwomaingroups: 1.Earthpigments Earthpigmentswhicharemanufacturednaturallyorsyntheticallyandtendtoberelativelyinexpensive. 2.OrganicPigments Thesearemanufacturedbychemicalprocessesandarebrightredsandyellows.Howevertheycanbeextremely expensive.Theynormallyprovidepoorhidingpower. Extenders Extendersaremainlyusedtomodifytheglosslevelofpaintsasthemorepigmentinapaintfilm,theflatterthe sheenwillbe.DuetothehighcostofTitaniumDioxideanditsfineparticlesize,extendersareusedtolowerthe sheenorgloss.Extenderscanalsobeusedtoaddbodytopaintandtoincreaseisfillingproperties. Themainextendersusedare: CalciumCarbonate Barytes Talc Diatomaceousearth.

Howthepigmentaffectsgloss: GLOSS FLAT

Layerofresinontopofpigment.Resinreflectslight Pigmentprotrudingthroughresin back.Noextenderspresent. diffuseslight. ResinorBinder Thebindercanbethoughtofasgluewhichholdsthepigmentstogetherandsticksthemtothesurface.Itsother majorfunctionistoprovidemanyofthephysicalfilmcharacteristicssuchasdurabilityandflexibility. Twodistinctgroupsofbindersexist,thosethatarefoundinoilbasedpaintsandthoseusedinwaterbasedpaints. SolventorCarrier Solventsarevariouslowviscosity,volatileliquids.Theyincludepetroleummineralspiritsandaromaticsolvents suchasbenzol,alcohols,esters,ketones,andacetone.Thenaturalresinsmostcommonlyusedarelinseed, coconut,andsoybeanoil,whilealkyds,acrylics,epoxies,andpolyurethanesnumberamongthemostpopular syntheticresins. Thesolventorcarrierinpaintservestoallowtheresinandpigmentstobeappliedtoasurface.Itevaporatesafter applicationanddoesnotformpartoftheappliedfilm.Inwaterbasedpaints,thecarrieriswater.Inoilbased paints,thecarrierisusuallyaturpslikesolvent.Duetothevarioustypesofturpslikesolventswhichhavedifferent dryingtimes,thesolventinoilbasedpaintscanaffecttheapplicationpropertiesanddryingoftheappliedproducts. Note: Eventhoughthecarrierinwaterbasedpaintsiswater,thesepaintsresistwateroncethefilmhascured.However, theyshouldnotbeappliedinsituationswheretheywillbeexposedtomoistureimmediatelyafterapplication,eg. whenrainorcondensationareimminent. Additives Therearemanydifferentadditivesusedinthemanufactureofpaintinordertodetermineitsfinalperformance, characteristics.Forexample,ZincOxideisusedtoresistmildew,toprovideUVprotection,toinhibittanninstaining andtoaddstrengthtothefinalfilm. Someofthemorecommontypesofadditivesare: Fungistats:preventthegrowthofmildew, Coalescents:helpproduceauniformfilm(waterbasedpaints) DryersAntiskin:assistinoxidationforoilbasedpaints Incanpreservatives:preventbacterialattack, Thickeners:modifyviscosity,enhanceapplicationpropertiesofwaterbasedpaints, Wetedgeadditives:preventpaintfromdryingtooquicklywaterbasedpaints, Surfactants:unusedtomaintaindispersionofpowdersandresinsinwaterbasedpaints.

2.7OperationsandProcessesinPaintProduction Paintmanufactureisarelativelysimplebatchprocess.Basically,thisisaphysicalprocesswhererawmaterialssuch aspigment,apigmentvehicle,binder,solventsandadditivesaremixedinquantitiesrangingfrom1,000litersto 20,000liters.Thisprocessisnotcapitalintensive,whichaccountsforthelowcostofentryintolowtechnology paintmanufacture. Further,theplantismultipurposeratherthanspecialized,whichmeanssmallproducerscanmanufacturearange ofpaints.Asmallpaintcompanymaymanufactureunderapproximately100differenttradenamesandyetaccount forlessthan1%ofthetotalpaintsalesinthecountry.Capacitycanbeincreasedbytheadditionofdiscreteplant units.Paintproductionisconstrainedbymarketsizeandrangeofproducts,whichhasresultedinbatchproduction ratherthan24hourcontinuousshift. 1.Makingthepaste:{Stage1inthediagrambelow} Pigmentmanufacturerssendbagsoffinegrainpigmentstopaintplants.There,thepigmentispremixedwithresin (awettingagentthatassistsinmoisteningthepigment),oneormoresolvents,andadditivestoformapaste.

2.Dispersingthepigment:{Stages2&3inthediagram} Thepastemixtureformostindustrialandsomeconsumerpaintsisnowroutedintoasandmill,alargecylinderthat agitatestinyparticlesofsandorsilicatogrindthepigmentparticles,makingthemsmalleranddispersingthem throughoutthemixture.Themixtureisthenfilteredtoremovethesandparticles. Insteadofbeingprocessedinsandmills,upto90percentofthewaterbasedlatexpaintsdesignedforuseby individualhomeownersareinsteadprocessedinahighspeeddispersiontank.There,thepremixedpasteis subjectedtohighspeedagitationbyacircular,toothedbladeattachedtoarotatingshaft.Thisprocessblendsthe pigmentintothesolvent. 3.Thinningthepaste:{Stage4inthediagram} Whethercreatedbyasandmilloradispersiontank,thepastemustnowbethinnedtoproducethefinalproduct. Transferredtolargekettles,itisagitatedwiththeproperamountofsolventforthetypeofpaintdesired. 4.Canningthepaint:{Stages5&6inthediagram} Thefinishedpaintproductisthenpumpedintothecanningroom.Forthestandard8pint(3.78liter)paintcan availabletoconsumers,emptycansarefirstrolledhorizontallyontolabels,thensetuprightsothatthepaintcanbe pumpedintothem. Amachineplaceslidsontothefilledcans,andasecondmachinepressesonthelidstosealthem.Fromwirethatis fedintoitfromcoils,abailometercutsandshapesthehandlesbeforehookingthemintoholesprecutinthecans.A certainnumberofcans(usuallyfour)arethenboxedandstackedbeforebeingsenttothewarehouse.

3.MARKETANALYSIS
3.1Competition ThePaintCompaniesinNigeriacanbeclassifiedinto4categories.ThefirstcategoryaretheGradeAcompanies. Therearesevencompaniesinthiscategory.Theycommandbetween7to10%ofthetotalpaintmarketinNigeria (whichisvaluedatN1,600,000,000,000orN1.6trillionor1.6billiongallonsperannum).Eachofthesecompanies experiencesyearlyrevenueofN3billionormoreandtheyareallquotedontheNigeriaStockExchange. A 1 2 3 4 5 6 7 CompanyName AfricanPaint BergerPaintsNigeriaPlc CAPPaint DNMeyerPlc. IPWA NigerianGermanPaint PremierPaint Location Lagos Ikeja,Lagos Ikeja,Lagos Ikeja,Lagos IkejaLagos Lagos Lagos

TheGradeBcategoryofcompaniesenjoyannualrevenueofbetweenN500milliontoN3billion.Theyperformwell insalesbecauseofsuperiorregionaldistributorshipandpricing.TheycomesecondtoGradeAcompaniesinterms ofquality. B 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 CompanyName AskarPaintsNig.Ltd. ApexPaintsLimited BanexInd.Limited BillandChemical&PaintsIndustries Limited ChemstarPaintsIndustries(Nig)Plc. ChoicePaintsNigeriaLtd. CowriePaintsLtd. EaglePaints(Nig.)Ltd. HomeCharmPaintsNigeriaLtd. InternationalPaintsWestAfrica NnencoPaintsNigeriaLtd. PeaCockPaintsLtd PortlandPaints&ProductsNigPlc. Premier PresidentpaintsNig.Ltd. SellerPaintsNig.Ltd. Theo&TheoPaintsCo.Nig.Ltd. TOTAL Location Ibadan,Oyo Abeokuta,Ogun WuseAbuja Ogba,Lagos IkejaLagos Aba,Abia Benin,Edo IkejaLagos Aba,Abia IkejaLagos Okigwe,Imo Etinan,AkwaIbom Alausa,Lagos Ifo,Ogun Agege,Lagos LagosIsland,Lagos Aba,Abia

 GradeCcompaniesaremediumsscalecompaniesandsomesmallscalewithdominancewithinastateorsome states.Theyalsopossessdistributorsandmaybeobtainedatsomestrategicretailordistributionpoints.Their annualrevenuefallswithintherangeofN50milliontoN500million. C 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 CompanyName AcelandPaints AdamsonCoatings&PaintsLtd. AdmiralPaints AdvancecoatingTechnologyNig.Ltd. BaluxPaintsnigeriaLtd. BestPaintsIndustriesLtd. CamelitePaintIndustryLtd. CeliatPaintsLtd. ChiamsPaints&ChemicalsLtd ClovertexpintsLtd. DelmanPaintscompaniesLtd. EbonyPaints(Nig)Ltd EbethsPaintsInternational EmtaPaints GeneksNig.Ltd. GraduatePaints HeritagePaintsLtd. KobakPaintsLtd. LydolinePaintsLtd. MaricentChemicals&MfgCo.Ltd. MikaluxPaintsandChemicals NewGeminiPaints SacluxPaintsPlc. SandtexPaints SikkensCarPaintsLoylessLtd SloakPaintnigeriaLimited StarPaintsIndustriesLtd. TopCharmPaints WeatherHeadPaintsLtd. ZumaPaints&ChemicalCompanyLtd. TOTAL Location Ejigbo,Lagos Ikeja,Lagos IfakoIjaya,Lagos Isolo,Lagos Kano,Kano Apapa,Lagos AbeokutaExp.Way,Ogun Ikeja,Lagos Aba,Abia OsisiomaIndustrialArea LagosIsland,Lagos Enugu,EnuguState Portharcort,Rivers IpajaLagos OluObasanjoWay,Abuja Ogba,Lagos DopemuLagos OrileIganmu,Lagos IfakoAgege,Lagos Wuse,Abuja LagosIsland,Lagos Ikeja,Lagos Deidei,Abuja Wuse,Abuja EbuteMetta,Lagos Rumuene,PortHarcourt ApapaLagos Akowonjo,Lagos Suleja,Abuja Idu,Abuja

TheGradeDcompaniesaremadeupofcottagelevelandsmallscalecompanies.Theysurvivemainlyonbuilding andprojectcontractsastheirfundingdoesnotpermittieddowncashwithdistributorsandtheirmarketingand salesstructureisnotasorganizedastheotherGradecompanies.TheiryearlyrevenueisusuallyunderN50million. D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 CompanyName AgintuChemicalandAlliedProductsLtd AlliedPaintsLtd. AlphacOdinsInd.Co.Ltd. AmaluxPaints AutomobileChemicalInd.Nig.Ltd. BenGeorgeChemicalInd.Ltd BeneplasticInd.Ltd. BiluxInternationalPaintsNig.Ltd. DewabodNig.Ltd. DilimerioPaintsMfg.Co.Ltd. DruckerInd.Nig.Ltd. Ezeyeama&SonEnterprises FabexPaints FredKarleInd.Nig.Ltd. GranplastChemicalsNig.Ltd Hegemeyer HenkelChenicalNig.Ltd. InnoContinentalInLtd. KavitexInd.Ltd. KoramaCloverInd.Ltd. MandisPaintsInd.Nig.Ltd. MercityChemicalInd.Ltd. MayluxIndustriesNig.Ltd. MacoChemicalInd.Ltd. NewHarnonPaintNig.Ltd NigerPaintsLtd. NigerChemicalLtd. NimcoNigeriaLtd. PeggyChemicalInd. PhinaPaintInd.Ltd. PurecleanIndustriesltd. RainbowPaintandIndustry RojenicaNig.Ltd. SalexPantsandChemicalsInd.Ltd. SamborosIndustriesLtd. SellarPaintsNigLtd. ShaEkaChemicalandInd.Nig. SunnyPaintsLtd. UnionAdhesiveandChemicalCompany WuraPaintilesNig.Ltd. TOTAL Location Uralla Lagos Enugu Lagos Lagos Lagos Lagos Lagos Lagos PortHarcort Otta Umuahia Ibadan Lagos Aba Lagos Lagos Enugu Lagos Aba Onitsha Awka Aba Onitsha Orlu Anambra Anambra Ogun Lagos Akwa Lagos Ilesha Onitsha Lagos Nnewi Lagos Agbor Lagos Lagos Lokoja

3.2MarketSize TheTotalEstimatedMarketforallpaintproductsinNigeria(gloss,texcote,emulsion,redprimer,etc)isvaluedat 1.6billion(1,600,000,000)gallonsorN1.6trillion(N1,600,000,000,000)perannum. 3.3MarketSegments 1.EmulsionPaintSegment:ThetotalmarketforemulsionpaintinNigeriais1billiongallonsperannumorN500 billion.Theemulsionmarketisthemostaffordableandthemostactive.Severalcompanieshavedifferentproducts forthissegmentwhichincludesOrdinaryorLightEmulsion,DeepEmulsion,Texcote,Vinyletc. 2.LacquerorGlossPaintSegment:Thetotalmarketforlacquer(glossy)paintsis400milliongallonsperannumor N800billion.Theglossypaintmarketissecondonlytothatofemulsion. 3.Wood,Furniture,Marine,andotherIndustrialandArchitecturalcoatingSegment:Thetotalmarketforthe remainderofthepaintmarketis200milliongallonsperannumorN300billion. 3.4MarketShare Thefollowingchartshowsthemarketsharesofthedifferentcompaniesintheirclassifiedgrades.Eachpieshows theGrade,thenumberofcompaniesinthatgradelevelinNigeriaandthemarketshareoftheN1.6trillionturnover perannumeachgradecontrolspresently. TheindividualleadersintheGradeAcategory,suchasBerger,CAPandMeyercommandupto0.8to0.9%ofthe totalNigerianpaintmarkettotalingbetweenN10toN15billion.

M arket Share via Grade Classification

Grade A, 7 companies 6% Grade B, 17 companies 13%

Grade A, 7 companies Grade B, 17 companies Grade C, 30 companies

Grade D, 400 companies 63%

Grade C, 30 companies 18%

Grade D, 400 companies

TheGradeDcompanieshavebeenallotteddifferentnumberofcompaniesovertheyearswithsomeindustry spokesmenquotingupto800companies.However,thenumber400statedheredescribescompanieswhichhave beenproducingpaintfornotlessthan3consecutiveyearsinexcessof10,000gallonseveryquarteroftheyear.

 Someofthesecottagescaleorsmallscalepaintcompaniesproduceabout1,000gallonsofpaintonaweeklybasis. WhencontrastedwithacompanylikeAskarwhichproduces80,000gallonsonaweeklybasis(morethansome GradeDcompaniescanproduceinayear)thecriticaleffectofeconomicsofscaleinthePaintIndustryis adequatelyilluminated. 3.5CurrentDemand Differentcompanieshavetheirvaryingmarketdemandvaluesdependingontheirsales,marketpenetration, distributioncoverage,pricingandbrandacceptability.ThefollowingcasestudydepictsthedemandforAskarPaints inNigeria: 1.AskarPaints,Ibadan: AskarisaGradeBPaintcompanyinIbadan,OyoState.ItisasubsidiaryofOduagroupofcompanies,whichisco ownedbythestategovernmentsofOyo,Ekiti,Ondo,Ogun,OsunandLagos.Itsfactoryoperatesataproduction capacityof60,000to70,000cansanddrumsofpaintsweeklywhichequals80,000gallonsweekly. Throughadistributionnetworkof22majordistributorsinOyoStateand8otherdistributorsinLagosandEkiti state,itsweeklysalestotals52,000gallonsweeklyforthefollowingproducts: i. 10,000cans(1gallonor4litercan)ofemulsionpaint(Texcote,LightandDeepEmulsiontypes). ii. 5,000drums(5gallonor20literdrum)ofemulsionpaint(Texcote,LightandDeepEmulsiontypes). iii. 10,000cans(1gallonor4litercan)ofglossypaint. iv. 7,000cans(1gallonor4litercan)ofspecialpaint(redprimeroroilpaintformetalandwood). With30distributorsover3states,eachdistributorwillbeachievingsalesof1,000to2,000gallons(500to1000 cans)ofpaintweekly. 2.FabexPaints,Ibadan: FabexisaGradeCpaintcompanyinIbadan,havinggrownfromasmallscalefactorytoitspresentmediumscale. ThoughitsrevenuestillhoversbetweenN30millionandN50million,ithasestablisheditsbrandinthemarketin Ibadanandplanstodolikewiseinneighboringtowns. Throughitsdistributorsandnetworkofcontractors,Fabexpaintsachievesthefollowingmonthlysales: i. 20,000litersor5,000cansofemulsionpaint. ii. 10,000litersor2,500cansoftexcoteandmattpaint. iii. 1,200litersor300cansofglosspaint. ThissalescapacityallowsFabextoachievemonthlysalesrangeofN5,000,000toN8,000,000.

3.6ProductPricing ThetablebelowshowsacomparisonofpaintproductsfromavailablebrandsintheNigerianpaintmarket.The commonbrandsintheSouthsouthregionarelistedsuchasChemstar,Meyer,DuluxandBerger.Thereisa compositionofGradeA,BandCcompaniesandtheirdifferentpricing.Asuggestedpricehasbeenincludedinrow 9foranewstartupcompany. MARKETPRICE(NAIRA) Company S/No Name 1 2 3 4 5 6 7 8 9 Askar Apex Berger CAP Chemstar Eagle Meyer President TAF Product Name Sunshine Betalux Luz Dulux Finecoat Eagle Meyerlux President Taflux Ordinary Emulsion 5liter 600 1,600 1,900 3,500 600 500 1,800 900 900 Ordinary Emulsion 20liter 3,000 7,500 9,500 12,000 2,800 4,500 8,000 4,500 4,500 Texcote/ HighEnd Emulsion 20liter 8,500 7,500 10,000 13,500 4,000 6,500 6,000 Glossy/ Lacquer Paint 5liter 2,000 2,800 3,000 3,500 1,600 2,300 2,200 2,000

RedPrimer 5liter 2,400 2,200 2,100

Therearedifferentreasonsforthewidedisparitiesinpricingfromthedifferentcompanies.CompaniessuchasCAP (Dulux)andBergeremphasizeonqualityemployingamixtureofrawmaterials,importedandlocallysourced,and aimedatthepremiumcustomerswhoseekqualityanddurabilityaboveprice.Furthermore,thesecompanieshave beenestablishedformorethan30yearsandhaveoperations,depotsanddistributionoverthecountrywithlong standingcustomerrelationships. OthercompaniessuchasChemstar(Finecoat)andPresidentemploypricingastheirpenetrationstrategyandsellto themiddletierofthetargetmarket.WithpricesaslowasN600pergallon,ascomparedtoN1,600ormorefor otherbrands,thewidegapinpricingmakesthemapreferredchoiceforeverydayusersofpaintandthosewith lowerpurchasingpower. Othercompaniesyet,suchasAskar,leverageontheirrelationshipwithStategovernmentsandparastatalsand positionthemselvesasthepreferredsupplierofpaintproductsfortheconstructionprojectsofsuchorganizations.

4.FINANCIALANALYSIS
4.1TwoYearRevenueForecast Anewpaintfactory,Ibadanwillachievetherevenueforecastinthetablebelowaccordingtotheassumptions madeundersection4.2FinancialIntelligenceofthisreport. S/No Period No.of Revenue,N Distributors 1 Month1 1 2 Month2 3 Month3 4 Month4 5 Month5 6 Month6 7 Month7 8 Month8 9 Month9 10 Month10 11 Month11 12 Month12 TOTAL 13 Yr2,Quarter1 14 Yr2,Quarter2 15 Yr2,Quarter3 16 Yr2,Quarter4 TOTAL 7 10 12 15 1 2 2 2 3 4 4 4 5 5 5 44,836,000 21,416,000

4.2FinancialIntelligence AnewpaintfactorywillachieveaturnoverofN21millionwithinitsfirstyearofproductionanddoublethis turnoverbytheendofthesecondyear.Itwilldothisbygrowingitsdistributorsfrom1toabout15.Thefollowing assumptionsalsohold: 1.Thefactorywillhaveadailyproductioncapacityof1,440litersofemulsion,960litersoftexcoteandmatt,and 160litersofglosspaints. 2.Paintproductionisnotadailyconsistentoperation.Thereforeactiveproductionwillbeforsomeworkingdaysin themonth,whilesalesandmarketingwillworkhardtopushsalesandreconcilepayments. 3.Therewillbefluctuationsintherevenueduetoseveralfactorssuchasweatherandcompetition. 4.Theprojectedrevenueinthe2ndwillshowanincreaseinrevenueofmorethan200%basedonalarger distributionnetworkandoperationalefficiency,nothigherproductionfigures.

4.3CapitalCostsandFinancialForecasts No. Description Value(N) 1 Building&Land 2 Equipment 3 Accessories 4 TotalStartUpCost 5 1styearSalaries 6 1yrConsumables 7 1yrRawMaterials 8 Utility 9 Marketing 10 1stYearTotalCosts 11 1stYearTotalSales 12 1stYear'sNetProfit 14,815,350 21,416,000 6,590,650 18,039,300

TheestimatedprofitinthefirstyearwillbeN6,590,650.Theestimatedprofitforthe2ndyearwillbeN13,440,000. Breakevenwillbeachievedbythe3rdor4thyearofoperationsbymaintainingconsistentmarginsontheproduction costs.Inaddition,consistentquality,adherencetosafetymeasuresandpractice,andensuringawideningreach throughitsdistributionnetworkwillcomplementeffortsofthesalesandmarketingteam.

7.CONCLUSION
ThereisareliableandfavorablepremiseforthesetupofthenewstartuppaintfactoryinIbadan.Theconstruction industry,particularlythehousingsectorshallcontinuetowitnessinvestmentsinthecomingyears.Basedonall researchfindingsanddataanalysis,thesetupofanewfactoryinIbadanwillbeaviablebusinessventure. ThestartupcapitalforthisventurewillbeN18,039,300;thisincludespurchaseof1acreoflandandthe constructionofawarehouse,equipmentpurchase,andpurchaseof1yearssupplyofrawmaterials,and consumablessuchaslabelingandpackagingcontainers. ThenewpaintfactorywillachievetotalsalesofN21,416,000inthefirstyearofoperationandwouldhavespent N14,815,350oncostofoperationstherebyyieldinganetprofitofN6,590,650inthefirstfinancialyear. However,cautiousconsiderationshouldbeputinplaceinthechoiceoflocationforthisbusiness,oneffective qualitycontrolandcontinuoustrainingforthefactoryworkerstoassuremaintenanceofquality,whichwill engendertrust,commitmentandbrandloyaltyfromtheofcustomers. Formoreinformationonthisbusiness,pleasecontact: classified, Jericho,Ibadan. Tel.No:classified Email: