SMEDA Corrugated Packages

Pre-Feasibility Study
CORRUGATED PACKAGES
Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
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Tel: (042) 111-111-456, Fax: (042) 6304326-27
Helpdesk@smeda.org.pk
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Helpdesk-khi@smeda.org.pk Helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
January , 2007
Pre-feasibility Study Corrugated Packages
1 INTRODUCTION TO SMEDA ....................................................................................................5
2 PURPOSE OF THE DOCUMENT ...............................................................................................5
3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT.....................6

3.1 STRENGTHS .............................................................................................................................6
3.2 WEAKNESSES ..........................................................................................................................6
3.3 OPPORTUNITIES .......................................................................................................................6
3.4 THREATS.................................................................................................................................6
4 PROJECT PROFILE ....................................................................................................................6
4.1 OPPORTUNITY RATIONALE ......................................................................................................6
4.2 PROJECT BRIEF........................................................................................................................7
4.3 MARKET ENTRY TIMING ..........................................................................................................7
4.4 PROJECT CAPACITY AND RATIONALE .......................................................................................7
4.5 PROJECT INVESTMENT .............................................................................................................8
4.6 RECOMMENDED PROJECT PARAMETERS ............................. ERROR! BOOKMARK NOT DEFINED.
4.7 PROPOSED LOCATION ..............................................................................................................8
5 SECTOR & INDUSTRY ANALYSIS ...........................................................................................8
5.1 SECTOR CHARACTERISTICS ......................................................................................................8
6 MARKET INFORMATION..........................................................................................................9
6.1 MARKET POTENTIAL ...............................................................................................................9
6.2 TARGET CUSTOMERS ............................................................................................................. 10
7 PRODUCT ................................................................................................................................... 10
7.1 PRIMARY FUNCTIONS ............................................................................................................ 10
7.1.1 Protective Function.......................................................................................................... 10
7.1.2 Loading and Transport Function ...................................................................................... 10
7.2 SECONDARY FUNCTIONS........................................................................................................ 10
7.2.1 Sales Function ................................................................................................................. 10
7.2.2 Promotional Function ...................................................................................................... 10
7.3 SERVICE FUNCTION ............................................................................................................... 11
7.4 PRODUCTION PROCESS FLOW ................................................................................................. 11
7.5 PRODUCT MIX ....................................................................................................................... 13
7.6 RAW MATERIAL REQUIREMENT ............................................................................................. 13
7.6.1 Take Up Factor (Liner Paper).......................................................................................... 14
7.6.2 Waste Margin................................................................................................................... 15
7.6.3 Major Suppliers of Raw Material...................................................................................... 15
7.7 SALES PRICE ......................................................................................................................... 15
8 TECHNOLOGY AND PROCESSES.......................................................................................... 15
8.1 MACHINERY & EQUIPMENT REQUIREMENT ............................................................................ 16
8.2 REPAIR & MAINTENANCE ...................................................................................................... 17
8.3 ERECTION & INSTALLATION .................................................................................................. 17
8.4 OFFICE EQUIPMENT ............................................................................................................... 17
8.5 FURNITURE AND FIXTURES .................................................................................................... 18
8.6 MOTOR VEHICLES ................................................................................................................. 18
9 LAND & BUILDING REQUIREMENT..................................................................................... 18
9.1 COVERED AREA REQUIREMENT ............................................................................................. 18
9.2 RENT COST ........................................................................................................................... 19
PREF-79 /Jan, 2007/Rev 2

9.3 UTILITIES REQUIREMENT ....................................................................................................... 19

10 HUMAN RESOURCE REQUIREMENT................................................................................... 19
11 PROJECT COSTS....................................................................................................................... 20
11.1 ESTIMATED TIME FOR PROJECT COMPLETION .......................................................................... 20
12 FINANCIAL ANALYSIS ............................................................................................................ 22
12.3 PROJECTED BALANCE SHEET ............................................. ERROR! BOOKMARK NOT DEFINED.

12.4 PROJECTED CASH FLOW STATEMENT ................................. ERROR! BOOKMARK NOT DEFINED.
12.5 RAW MATERIAL COSTS ......................................................................................................... 25
13 KEY ASSUMPTIONS ................................................................................................................. 26

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and
provide a general idea and information on the said area. All the material included in this document
is based on data/information gathered from various sources and is based on certain assumptions.
Although, due care and diligence has been taken to compile this document, the contained
information may vary due to any change in any of the concerned factors, and the actual results may
differ substantially from the presented information. SMEDA does not assume any liability for any
financial or other loss resulting from this memorandum in consequence of undertaking this activity.
The prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-79
Prepared by SMEDA-Punjab
Issue Date September, 2004
Up-dation Date January, 2007
Issued by Library Officer

1 INTRODUCTION TO SMEDA
Small and Medium Enterprise Development Authority (SMEDA) was established with the
objective to provide fresh impetus to the economy through the launch of an aggressive
SME support program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME development
approach. A few priority sectors were selected on the criterion of SME presence. In depth
research was conducted and comprehensive development plans were formulated after
identification of impediments and retardants. The all-encompassing sectoral development
strategy involved recommending changes in the regulatory environment by taking into
consideration other important aspects including finance, marketing, technology and human
resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits and
vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear,
textiles, surgical instruments, transport and dairy. Whereas the task of SME development
at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s
areas of operation.
Along with the sectoral focus a broad spectrum of business development services is also
offered to the SMEs by SMEDA. These services include identification of viable business
opportunities for potential SME investors. In order to facilitate these investors, SMEDA
provides business guidance through its help desk services as well as development of
project specific documents. These documents consist of information required to make
well-researched investment decisions. Pre-feasibility studies and business plan
development are some of the services provided to enhance the capacity of individual SMEs
to exploit viable business opportunities in a better way.
This document is in the continuation of this effort to enable potential investors to make
well-informed investment decisions.
2 PURPOSE OF THE DOCUMENT

The objective of a pre-feasibility study is primarily to facilitate potential entrepreneurs in
project identification for investment. The project pre-feasibility may form the basis of an
important investment decision and in order to serve this objective, the document/study
covers various aspects of project concept development, start-up, production, marketing,
finance and business management. The document also provides sectoral information, brief
on government policies and international scenario, which have some bearing on the project
itself.
This particular pre-feasibility relates to Corrugated Packages. Before studying the whole
document one must consider following critical aspects, which form the basis of any
investment decision.

3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR

INVESTMENT
Before making the decision, whether to invest in the corrugated packaging business or not,
one should carefully analyze the associated risk factors. A SWOT analysis can help in
analyzing these factors which can play important role in making the decision.
3.1 Strengths
 Corrugated packages provide efficient and convenient unit for marketing of the
product.
 They allow weighing of produce as well as handling and transport to be
accomplished in fewer steps.
 When compared with wooden crates, corrugated boxes are light to carry and are
preferred by air freight companies.
 They are recyclable unlike non-recyclable packaging that has to be burnt at the end
of its life.
3.2 Weaknesses
 Corrugated packages are not reusable.
 They cannot be produced economically on a small scale. Cost of labour for each
batch and cost of overheads keep on decreasing with the increasing production.
 They are easily damaged by water and rough handling unless impregnated with
wax at extra cost.
 They offer most practical and economic choice for packaging but availability of
suitable designs at the right price remains the greatest challenge to improvements.
3.3 Opportunities
 Corrugated packages allow for easy printing of labels and can be manufactured to a
wide range of sizes, shapes and strength specifications.
 Manufacturing sector of Pakistan showed a record growth of 12.6% in the year
2003-2004, which in turn increases the demand for packaging facilities as well.
3.4 Threats
 Innovations in the packing industry like plastic crates, plastic bags etc. may affect
the market demand for corrugated packages.
4 PROJECT PROFILE
4.1 Opportunity Rationale
Corrugated Packaging is visible wherever goods are produced, transported and displayed.
Since its invention years ago, corrugated packaging has ensured efficient safe and sanitary
transit of goods, protecting and wrapping about 70% of the world’s liquid and solid
materials from producer to consumer.

In Pakistan, the demand for corrugated packages is increasing, as the growth in the
manufacturing industry touched a level of 12.6 %1 last year Corrugated packaging protects
the product during storage, transportation and handling. Thus the package, by virtue of its
protective function-becomes a vital link in the distribution chain. Also corrugated cartons
offer the most practical and economic choice for packaging for inter island trade.
Product range includes consumer packages, food and non food-packages, transport
packages.
4.2 Project Brief

The proposed project will be producing corrugated packages. Corrugated packages are
paperboard made from one or more plies of fluted paper, which is glued onto, paper or
cardboard. The said business will be producing 7-ply corrugated sheets.
Different sizes of boxes will be produced to facilitate the customers nationwide. The
proposed business will be manufacturing corrugated boxes for meeting the local demand.
4.3 Market Entry Timing

Corrugated Packages are used in so many different sectors that the demand never gets
affected with seasons, changing trends and emerging attributes. So the proposed business
can be started at any time of the year.
At the commencement of the proposed business, it is important that the entrepreneur must
have good public relations in the market and should have some orders in hand.
4.4 Project Capacity and Rationale

The proposed corrugated packaging facility will handle 5000 boxes per day of proposed
sizes in 8 hours shift. Details are given in the following table.
Table 4-1 Project Capacity

Hours utilized by one batch 2
Number of product lines 4
Maximum box capacity per day per shift 5,000
The industry norm is to run the unit for one shift per 8 hours. However, it can vary
depending on the level of orders received from the market. This feasibility is based on one
shift of 8 hours.
1
Federal Budget 2005-06

4.5 Project Investment

Total project cost is Rs. 5.9 million.
Table 4-4-1 Project Costs

Capital Investment 4,432,560
Working Capital Requirement 1,541,201
Total Investment 5,973,761
Table 4-4-2 Project returns

IRR % 34%
Pay Back period Yrs. 5
NPV Rs. 7,204
4.6 Proposed Location

Selection of a district or a particular city for a project has an imperial effect on fixed and
operational costs. The proposed location should be located near the industrial areas as this
would reduce the transport cost. Suitable locations in Pakistan for setting up the proposed
business are mentioned in the table below:
Table 4-2 Suitable Locations

City Location
Lahore Kot Lakhpat, Bund Road, Multan Road,
Sheikhupura Road, Kasur Road,Raiwand Road
Rawalpindi Peshawar Road, Peer wadhai
Karachi Korangi Industrial Area, Landhi Industrial Area
Faisalabad Sargodha Road, Jharanwala Road
Sargodha Bhalwal-Kotmomon Road,
5 SECTOR & INDUSTRY ANALYSIS

5.1 Sector Characteristics
The numbers of corrugated packaging facilities in Pakistan has increased at a rapid pace
over the last few years. The size of this sector is still growing. Large corrugated packaging
facilities have been set up in the industrial areas of Pakistan. Approximately 2,000
corrugated packaging facilities are being operated in Lahore. Few of them are as follows:
 Fine Packages
 Packages Limited
8

 Roshan Packages
 Al-sheikh Packages
 Convertec Packages
 Bismillah Packages
 General Packages
Similarly, large corrugated packaging facilities are also working in prime business
locations in Karachi and Rawalpindi, Faisalabad.
6 MARKET INFORMATION
6.1 Market Potential
The trend for packaging has changed from the primitive packaging (wooden boxes) to a
modern and up-to-date packaging (corrugated packaging). Nowadays, corrugated
packaging is used by almost every manufacturer and supplier or perishable, non perishable
and fragile products. Corrugated Packages have inherent benefits as they are environment
friendly and have recycling capability. This is the major reason, the international market
prefers corrugated packages.
Trade Flow of Corrugated Packages (Pakistan)2
Year Import (US$) Export (US$)

2003 211,953,808 8,374,225
2004 225,411,291 11,766,966
2005 296,908,438 6,125,474
Top Export Partner3
Partner Trade Value (US$)

Afghanistan 5,495,404
Iran 3,830,161
United Arab Emirates 3,308,145
United Kingdom 2,017,029
USA 1,748,040
2
UN comtrade
3
UN comtrade

6.2 Target Customers

As mentioned above, the target customers are manufacturers and suppliers of all types of
goods. Following are some of the target clients for a manufacturer of corrugated
packaging.
 Pharmaceutical Industry
 Textile Industry
 Home Appliances
 Garments
 Confectionary
 Fruits and Vegetables
 Shoes
 Cosmetics
7 PRODUCT
The proposed project will be producing 7 ply corrugated packaging boxes of different sizes
which will be serving several purposes. The functions of the product can be classified into
three different categories.
7.1 Primary Functions
7.1.1 Protective Function

The protective function of packaging essentially involves protecting the contents from the
environment and vice versa. This is intended to ensure full retention of the utility value of
the packaged goods or in other words it is intended to protect the goods from loss, damage
and theft.
7.1.2 Loading and Transport Function

Convenient goods handling entails designing transport packaging in such a manner that it
may be held, lifted, moved, set down and stowed easily, efficiently and safely. Packaging
thus has a crucial impact on the efficiency of transport, handling and storage of goods.
7.2 Secondary Functions
7.2.1 Sales Function

The purpose of the sales function of a package is to enable or promote the sales process
and to make it more efficient
7.2.2 Promotional Function

Promotional material placed on the packaging is intended to attract the potential purchaser
and to have a positive impact upon the purchasing decision.
10

7.3 Service Function

The various items of information printed on packaging provide the consumer with details
about the contents and use of the particular product i.e. dosage information on medicines.
7.4 Production Process Flow

A 7 ply corrugated box consists of 7 layers of sheets. 2 sheets of kraft paper are used on
both sides and 5 sheets of flutter paper are used in between them. 3 three sheets of flutter
paper will be lined and 2 sheets will be of plain flutter paper. A 7 ply sheet is shown in the
figure below:
11

Figure 7-1 7 Ply corrugated sheet

Kraft Paper Flutter paper (plain)
Kraft Paper
Flutter Paper (lined)
The process of manufacturing starts from corrugating followed by cutting in accordance
with different shapes and sizes, pasting, rotary, bending according to the design and finally
stapling to form a shape and to remain strongly intact.
Figure 7-2 Process Flow
Corrugating Cutting Pasting
Slanting/
bending Rotary Printing
Stapling
The above process takes approximately 8 hours to complete from corrugation to stapling.
Each process is explained as below:
a) Corrugation: - In this process the flutter paper is firstly heated up, then passed over
the tray, which contains pasting fluid, along with the kraft paper. It is then passed
through a corrugating machine, where 5-ply paper corrugated board is manufactured by
using glue making unit and reel stand.
b) The Liner paper can also be used instead of Flutter paper for better quality upon
clients’ special request.
c) Cutting: - The sheet is cut according to the required size using a paper cutter.
d) Pasting: - The corrugated sheet is then pasted on to another set of corrugated sheet,
making it 7 Ply.
12

e) Printing: - It is then printed as required by the customers i.e. fragile, some object,
recycle after use etc.
f) Rotary: - In this process the flaps and the Four Corners of the box are made using
rotary machine.
g) Slanting: - The sheet is bent in this process, forming a box shape.
h) Stapling – To give the box a firm and a proper shape, they are finally stapled.
7.5 Product Mix

Different sizes of boxes are produced for various target industries. They are as follows:
Table 7-1 Product Range

Sizes Measurements Target Industry
A 24” x 24” x 8” Textile Sector
B 14.54” x 10.5” x 6.25” Pharmaceutical Sector
C 19.69”x17.72”x13.78” (50cm x 45cm x 35cm) Multi purpose
D Others Fridge, Electronic products etc.
Production capacity varies with the size of the box. Production for each size of box will be
taking one batch of two hours. Proposed production for each size at 100% capacity will be
as under:
Table 7-2 Product Mix

Box Sizes Per Day Production Per Annum Production
24”x24”x8" 750 225,000
14.54”x10.5”x6.25 1,000 300,000
19.69”x17.72”x13.78” 750 225,000
Others(avg.) 500 150,000
Total 3,000 900,000
7.6 Raw Material Requirement
Following raw material are used in corrugated packages.
 Kraft paper
 Flutter paper (Plain)
 Flutter paper (Liner)
 Pasting fluid (Silicate)
Raw material used for each size of box and their costing is shown in the tables below 4:
4
Calculations for quantity required are provided in the Financial Analysis section.
13

Table 7-3 Raw Material Costing for 24”x24”x8”

Raw Material Used No. of Quantity Rs./Kg Total Cost
Papers Required (Kg.) (Rs.)
Liner Paper 2 0.53 55 29.15
Flutter Paper (Plain) 2 0.51 15 7.65
Corrugated Flutter 3 1.1 15 16.5
Total 7 53.3
Table 7-4 Raw Material Costing for 14.54”x10.5”x6.25”
Kraft Paper 2 0.15 55 8.25
Flutter Paper (Liner) 3 0.30 15 4.5
Total 7 14.85
Table 7-5 Raw Material Costing for 19.69”x17.72”x13.78”
Kraft Paper 2 0.07 55 3.85
Flutter Paper (Liner) 3 0.13 15 1.95
Total 7 6.7
Table 7-6 Raw Material Costing for Miscellaneous Sizes
Liner Paper 2 0.53 55 29.15
Corrugated Flutter 3 1.1 15 16.5
Total 7 53.3
7.6.1 Take Up Factor (Liner Paper)
A 7 plied corrugated sheet consists of 2 kraft papers on both sides, 2 plain flutter papers
and three sheets of lined flutter paper. The proposed business will only be buying kraft
paper and plain flutter paper from the market. A plain flutter paper is converted into a lined
flutter paper during the process of corrugation. A lined flutter paper consumes more flutter
paper and the take up factor is 40% on average. In other words, a lined flutter paper is 40%
heavier than a plain flutter paper.
While costing for lined flutter paper it is very important that the cost of additional take up
of flutter paper is considered.
14

7.6.2 Waste Margin

Wastage is a common feature for corrugated packages business. It is estimated that 1% of
the total production goes into waste. But as the wastage occurs during the production
process, it is generally charged to the client. The wastage on the other hand is sold as scrap
by the manufacturer at the rate of Rs.8.00 per kg.
7.6.3 Major Suppliers of Raw Material

The raw materials are easily available in Lahore and other major cities. Some of the
suppliers in Lahore are having their sales point on Bund road and Gunpat road.
7.7 Sales Price

It is generally observed in the corrugated packages business that the sales price is fixed
25% above the cost of raw material consumed for the proposed box size. This 25%
includes the profit margins, cost of pasting fluids and printing costs.
On the other hand, cost of printing is approximately Rs.1 per box and pasting fluids are
available at the rate of Rs.6 per kilogram. Consumption of pasting fluids depends upon the
size of the box.
This particular pre-feasibility assumes that the sales prices are 25% above the cost of raw
material which include the costs of printing and pasting fluids.
Table 7-7 Sales Prices
Box Sizes Sales Prices (Rs.)
24”x24”x8" 67
14.54”x10.5”x6.25 19
19.69”x17.72”x13.78” 8
Others(avg.) 67
8 TECHNOLOGY AND PROCESSES

In Pakistan, there are several manufacturers of corrugated packaging machines. There are
around 10 suppliers in Lahore i.e. Muhammad Hussain in Misree Shah, Mr. Shafiq in Shah
Jamal, almost 42 suppliers in Karachi and 2 suppliers are in Islamabad. These machines
can also be imported from the following countries. However, the cost of imported
machinery is too high as compared to local machinery.
 German
 Brazil
 Sweden
 USA
 Taiwan
 China
 Korea
15

The locally manufactured machinery is comparable to the imported machinery in terms of

production and quality of the output, whereas price wise, local machinery has an edge over
imported machinery. Some of the corrugation machinery manufacturers are listed below:
 Chughtai Engineering Works, Lahore
 Prime Tech International, Lahore
 Sama Engineering works, Karachi
The above mentioned suppliers also export the corrugated packaging machinery to
Tashkent and South Africa, which proves the fact that local machinery is comparable to
international standards.
8.1 Machinery & Equipment Requirement

The major cost involved in establishing a well-equipped corrugated packaging facility is
primarily the cost of plant and machinery. Basically there are three types of machineries
available in the market, which are as follows:
Table 8-1 Machinery Types

Machine type Estimated Cost of Plant
Semi automated corrugation plant Rs. 1.9 million
Fully automated corrugation plant Rs. 8 million
Production capacity for the three types varies. Fully automated machinery employs lesser
labor and gives the highest production but as the proposed business will be order based, it
is recommended that initially it should concentrate on capturing the market while keeping
the project costs at lower end therefore the proposed project will be operating on manually
operated corrugation machine.
There is a huge difference in the costs of the three types of machineries. As the total
project cost is directly related with the cost of machinery, the proposed project will be
using manually operated corrugation machine set.
Manually operated corrugation machine set comprises of 9 machines to form a complete
corrugated setup.
Details of required machinery are shown in the table below:
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Table 8-2 Details of Machinery

Machines No. of Machines Price per Machine Total Cost(Rs.)
(Rs.)
Corrugation Machine 1 250,000 250,000
Pasting 105” 1 50,000 50,000
Pasting 65” 1 35,000 35,000
Rotary 105” 1 50,000 50,000
Rotary 65” 1 35,000 35,000
Came Slote 85” 1 100,000 100,000
Flexo Printing Machine 1 700,000 700,000
Hand Cutter 60” 2 30,000 60,000
Dye Cutting Machine 40x60 1 500,000 500,000
Staple Machine 52” 2 50,000 100,000
Total 12 1,880,000
8.2 Repair & Maintenance
A regular inspection is imperative for the smooth running of machines. The maintenance
cost can be suppressed by these regular checkups. However, maintenance will be required
to ensure its long life and better output.
Annual repair & maintenance of the plant and machinery is estimated to be 1 % of the total
machinery cost in the initial year and this rate is expected to grow at 0.05% in the
proceeding years.
Spare parts i.e. Rollers, Bearings and Cutter Blade are easily available from the suppliers
of the machinery.
8.3 Erection & Installation

Erections and installation cost is assumed to be 5% of the total cost of machinery.
8.4 Office Equipment

Following office equipment will be required for the proposed project:
Description No. Cost Per Unit(Rs.) Total(Rs.000)
Split Unit 1 25,000 25.00
Computer 2 20,000 40.00
Printer 1 15,000 15.00
Telephone sets 4 500 2.00
Fire Extinguish 2 4,000 8.00
Fax machine 1 10,000 10.00
Total 10,000.00
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Depreciation on office equipment will be charged at 10% per annum on straight-line basis.
8.5 Furniture and Fixtures

Following furniture and fixtures will be required for factory and sales outlets.
Table 8-4 Details of Furniture and Fixtures

Description No Cost Per unit Total(Rs.000)
Sofa Set 2 Seat 2 4000 8.00
Chairs 10 500 5.00
File Cabinets 3 6000 18.00
Office Table 3 5000 15.00
Total 46,000.00
Depreciation on furniture and fixtures will be charged at 10% per annum on straight-line
basis.
8.6 Motor Vehicles
Along with the above mentioned machinery and equipment the proposed business will also
be using two shehzore trucks. Each truck will cost approximately Rs. 649,000. Motor
vehicles will be depreciated at 10% on straight-line method.
9 LAND & BUILDING REQUIREMENT

9.1 Covered Area Requirement
Covered area requirement and construction costs are listed in the table below.
Table 9-1 Covered Area Requirement

Section Total Area (Sq. ft.)
Production Hall
Storage Area 1,125
Finished Goods Area 900
Plant & Machinery Area 5,625
Wastage Area 900
Total Production Area 8,550
Administrative Block 900
Total Covered Area 9,450
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Free Area 1,800

Total Area Requirement 11,250
9.2 Rent Cost
As no major construction costs are involved in the proposed building so it is recommended
that the area should be acquired on rent basis. The rent cost for the business varies with
location. This project is proposed to be located in Kot Lakhpat industrial area, Lahore. An
area of 2.5 kanal can be obtained on monthly rent of approximately Rs. 50,000 to 75,000.
9.3 Utilities Requirement

 Electricity
 Telephone
 Gas
 Water
10 HUMAN RESOURCE REQUIREMENT

Following staff would be required for the proposed project:
Table 10-1 Human Resource Requirement

Direct Labor
Total annual
Designation Per month Salary No. of employees salaries
Production
Supervisor 16,000 1 192
Semi Skilled
Workers 6,000 30 2,160
Indirect Labor
Total annual
Designation Per month Salary No. of employees salaries
Administrative
Staff
Security gaurd 5,000 2 120
Peon 4,000 2 96
Driver 5,000 1 60
Accountant/Admin 15,000 1 180
Selling & Marketing
19

Staff
Purchase Manager 22,000 1 264
Marketing Manager 22,000 1 264
Total Human
Resource 39
11 PROJECT COSTS
Break down of total project cost is in the table below:
Table 11-1 Project Costs
Table 11-1
Project Summary Cost Rs. (1000)
Plant and Machinery 1,880
Furniture an fixture and Vehicles 1,444
Pre operating Expenses 925
Erection and Installation ( 5% of total 94
machinery Cost)
Contingencies 90
Fixed Assets 4,433
Initial working Capital 1541
Total Project Costs 5,974
11.1 Estimated time for project completion

The proposed project will be taking around 7 to 8 months for completion. Activities to be
performed before the regular operations start are as under:
1. Fifteen days for completion of initial formalities, i.e., selection of suitable location
and renting of building etc.
2. One month for sanction of loan (in case, if financing has to be arranged through
bank).
3. Five to Six month for purchase of machinery.
4. One month for furnishing and staff appointments.
20

This project can take-off within five to six months as well, as some of the activities will be
in progress simultaneously.
21

Pre-feasibility Study Corrugated
Packages
12 FINANCIAL ANALYSIS
Projected Income Statement Rs. (1000)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales
Corrugated Boxes 19,299 22,528 26,113 30,091 34,497 39,372 44,761 50,712 57,276 64,511
Waste 226 251 278 305 333 363 393 425 457 491
19,525 22,779 26,391 30,396 34,830 39,735 45,154 51,136 57,733 65,002
Cost of Sales 17,627 19,706 21,906 24,235 26,698 29,304 32,060 34,975 38,058 41,318
Gross Profit 1,898 3,073 4,485 6,161 8,132 10,431 13,094 16,161 19,675 23,684
Operating Expenses 2,446 2,662 2,900 3,163 3,452 3,585 3,936 4,323 4,748 5,216
Operating Profit (547) 411 1,585 2,998 4,680 6,846 9,158 11,839 14,927 18,467
Less:
Financial expenses 645 251 184 117 50
645 251 184 117 50 - - - - -
Profit Before Taxation (1,192) 160 1,401 2,881 4,630 6,846 9,158 11,839 14,927 18,467
Income Tax - 8 365 883 1,496 2,271 3,080 4,019 5,100 6,339
Net profit After Taxation (1,192) 152 1,035 1,998 3,135 4,575 6,078 7,820 9,828 12,129
Retained earnings - (1,192) (1,040) (4) 1,993 5,128 9,703 15,780 23,600 33,428
Profit transferred to balance sheet (1,192) (1,040) (4) 1,993 5,128 9,703 15,780 23,600 33,428 45,557
PREF-79 /Sep, 2004/Rev 1 22

Packages
CORRUGATED PACKAGES
Balance Sheet Rs. (1000)
Capital and Reserves Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Share Capital 3584 3584 3584 3584 3584 3584 3584 3584 3584 3584 3584
Reatined Earnings 0 (1,192) (1,040) (4) 1,993 5,128 9,703 15,780 23,600 33,428 45,557
3,584 2,392 2,544 3,580 5,578 8,712 13,287 19,365 27,185 37,012 49,141
Long Term Loan 2,390 1,434 956 478 -
Current Liabilities
Current portion of long term liabilitites 478 478 478 478 - - - - - -
Tax Payable - 8 365 883 1,496 2,271 3,080 4,019 5,100 6,339
Accounts Payable - 347 390 435 482 532 584 639 697 757 777
- 825 876 1,278 1,843 2,027 2,855 3,719 4,715 5,857 7,115
5,974 4,650 4,376 5,335 7,421 10,739 16,142 23,084 31,900 42,869 56,257
Fixed Assets
Fixed Assets 3,508 3,166 2,824 2,482 2,140 1,799 1,457 1,115 773 431 90
Pre-operating expenses 925 740 555 370 185
Current Assets
Advance rent 450 - - - - - - - - - -
Raw Material Inventory 739 830 926 1,027 1,134 1,246 1,363 1,487 1,616 1,752 -
A/C Receivable - 450 526 609 702 805 919 1,044 1,183 1,336 1,505
Cash/Bank 353 (536) (455) 847 3,260 6,890 12,403 19,438 28,327 39,349 54,662
1,541 745 997 2,483 5,096 8,941 14,685 21,969 31,127 42,438 56,167
5,974 4,650 4,376 5,335 7,421 10,739 16,142 23,084 31,900 42,869 56,257
- - - - - - - - - - -
PREF-79 /Sep, 2004/Rev 1 23

Packages
CORRUGATED PACKAGES
Cash Flow Statement Rs. (1000)
Operating activities Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Net profit - (1,192) 152 1,035 1,998 3,135 4,575 6,078 7,820 9,828 12,129
Amortization (Pre-operational Expenses) - 185 185 185 185 185
Depreciation - 342 342 342 342 342 342 342 342 342 342
Raw Material Inventory (739) (91) (96) (101) (106) (112) (118) (123) (130) (136) 1,752
Accounts receivable - (450) (75) (84) (93) (103) (114) (126) (139) (153) (169)
Accounts payable - 347 43 45 47 50 52 55 58 61 19
Tax Payable - 8 357 518 612 775 809 938 1,081 1,239
Building rent prepayments (450)
Prepaid Payments 450
Cash provided by operations (1,189) (410) 559 1,780 2,891 4,108 5,513 7,035 8,889 11,022 15,313
Financing activities
Long term debt principal repayment (478) (478) (478) (478) (478)
Addition to long term debt 2390
Owner's investment 3584
Cash provided by/ (used for) financing activities 5974 (478) (478) (478) (478) (478) - - - - -
Investing activities
Capital expenditure (4,433)
Cash (used for)/ provided by investing activities (4,433) - - - - - - - - - -
Net Cash 353 (888) 81 1,302 2,413 3,631 5,513 7,035 8,889 11,022 15,313
Cash balance brought forward - 353 (536) (455) 847 3,260 6,890 12,403 19,438 28,327 39,349
Cash carried forward 353 (536) (455) 847 3,260 6,890 12,403 19,438 28,327 39,349 54,662
PREF-79 /Sep, 2004/Rev 1 24

Packages
12.1 Raw Material Costs

C o n v er sio n F a c to rs
1 m 2 = 1 5 5 0 in ch 2
1 inc h = 2 5 .4 m m
D im en sio n s S ize in In ch e s S iz e in m illim eter s

L e ng th L L x 2 5 .4
W id th W W x 2 5 .4
H eig ht H H x 2 5 .4
W id th req u ired (W +H )+2 5 .4
L e ng th req uired(L +W )x 2 + (2 x 2 5 .4 )
A rea o f sh e et W id th req u ire d x L e n g th re q u ire d

W a ste M arg in 5%
K r a ft P a p er R e q u ir em e n t
W e ig ht o f K raft p a p er (K g s p e r sq u are m eter) 0 .1 2 5
N o . o f kraft p ap e r 2
W e ig ht o f k raft p a p er req u ire d (A re a o f sh ee t x w eig ht o f kraft p a p er x N o . o f k raft p a p er) x
(1 +W aste M a rgin )
P ric e p e r kg . kraft p ap er R s. 4 8
C o st o f kr a ft p a p er p r ice p er k g . x w eig h t o f k ra ft p a p er req u ire d
F lu tte r P a p e r R eq u ir em e n t
W e ig ht o f F lutte r P ap er (K gs p e r sq u are m e ter) 0 .1 2
T a ke up fa cto r fo r lin ed flu tte r p a p er 40%
N o . o f flu tter p ap e r (p la in) 2
W e ig ht o f p la in flutte r p ap er req u ired (A re a o f sh ee t x w eig ht o f flutte r p ap er x N o . o f flutte r p ap e r) x
(1 +W aste M a rgin )
N o . o f flu tter p ap e r (lin er) 3
w e igh t o f L ine d flutter p ap e r req u ired (A re a o f sh ee t x w eig ht o f flutte r p ap er(1 + tak e u p fac to r fo r lined
p ap e r) x N o . o f flutter p ap e r(L in er)) x (1 +W aste M a rg in )
T o ta l w e igh t o f flu tte r p a p er w e igh t o f p la in flutte r p ap er req u ired + w e igh t o f lin ed flu tter p a p er
req u ire d
P ric e p e r kg . F lutte r p ap e r R s. 1 2
C o st o f F lu tte r P a p er p r ice p er k g . x to ta l w e ig h t o f flu tter p a p er
T o ta l ra w m a te ria l c o st co st o f kr a ft p a p er + c o st o f flu tte r p a p e r
PREF-79 /Sep, 2004/Rev 1 25

13 KEY ASSUMPTIONS
Table 13-1 Operating Assumptions
Annual production capacity (boxes) 900,000
Operating Shift per day5 1
Operating hours per shift 8
Days operational per year 300
No. of Batches 4
Hours consumed for one batch 2
Table 13-2 Machinery Assumptions
Machine Type Manually operated
Number of Machines Installed 9
Installed capacity 100%
Initial year capacity 55%
Annual capacity growth rate 5%
Depreciation rate on machinery (Straight Line Method) 10%
Table 13-3 Revenue Assumptions

Sales prices Industry norms
Sales price growth rate 30%
Wastage sales 5%
Wastage sales growth rate 2%
Table 13-4 Financial Assumptions

Project life (Years) 10
Debt 40%
Equity 60%
Interest rate on long term debt 14%
Debt tenure (Years) 5
No. of installments in a year 2
Amortization (years) 5
5
The industry norm is one shift per day. However, it can vary with the demand
26
PREF-79 /Sep, 2004/Rev 1

Table 13-5 Cost of sales Assumptions

Raw Material cost growth rate 5%
Wage and salaries growth rate 10%
Gas Growth rates 5%
Electricity growth rate 10%
Depreciation (straight line method) 10%
Table 13-6 Contingency Expense Assumptions
Erection and Installation 5%
Furniture and Fixture 1%
Pre-operating Expenses 2%
Vehicles 5%
Table 13-7 Cash Flow Assumptions
Accounts Receivable in days 7
Accounts Payable in days 7
Raw Material Inventory (days) 15
Stores and Spares Inventory (days) 30
Minimum Cash Required Rs.194,000
27
PREF-79 /Sep, 2004/Rev 1

SMEDA Corrugated Packages

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Pre-Feasibility Study

Small and Medium Enterprise Development Authority

1 INTRODUCTION TO SMEDA ....................................................................................................5

2 PURPOSE OF THE DOCUMENT ...............................................................................................5

3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT.....................6

PREF-79 /Jan, 2007/Rev 2

9.3 UTILITIES REQUIREMENT ....................................................................................................... 19

12.3 PROJECTED BALANCE SHEET ............................................. ERROR! BOOKMARK NOT DEFINED.

PREF-79 /Jan, 2007/Rev 2

Issue Date September, 2004

Up-dation Date January, 2007

Issued by Library Officer

PREF-79 /Jan, 2007/Rev 2

2 PURPOSE OF THE DOCUMENT

PREF-79 /Jan, 2007/Rev 2

3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR

PREF-79 /Jan, 2007/Rev 2

4.2 Project Brief

4.3 Market Entry Timing

4.4 Project Capacity and Rationale

Table 4-1 Project Capacity

PREF-79 /Jan, 2007/Rev 2

4.5 Project Investment

Table 4-4-1 Project Costs

Table 4-4-2 Project returns

4.6 Proposed Location

Table 4-2 Suitable Locations

5 SECTOR & INDUSTRY ANALYSIS

PREF-79 /Jan, 2007/Rev 2

Trade Flow of Corrugated Packages (Pakistan)2

Year Import (US$) Export (US$)

Top Export Partner3

Partner Trade Value (US$)

PREF-79 /Jan, 2007/Rev 2

6.2 Target Customers

7.1 Primary Functions

7.1.1 Protective Function

7.1.2 Loading and Transport Function

7.2 Secondary Functions

7.2.1 Sales Function

7.2.2 Promotional Function

PREF-79 /Jan, 2007/Rev 2

7.3 Service Function

7.4 Production Process Flow

PREF-79 /Jan, 2007/Rev 2

Figure 7-1 7 Ply corrugated sheet

Figure 7-2 Process Flow

Corrugating Cutting Pasting

PREF-79 /Jan, 2007/Rev 2

7.5 Product Mix

Table 7-1 Product Range

Table 7-2 Product Mix

PREF-79 /Jan, 2007/Rev 2

Table 7-3 Raw Material Costing for 24”x24”x8”

PREF-79 /Jan, 2007/Rev 2

7.6.2 Waste Margin

7.6.3 Major Suppliers of Raw Material

7.7 Sales Price

8 TECHNOLOGY AND PROCESSES

PREF-79 /Jan, 2007/Rev 2

The locally manufactured machinery is comparable to the imported machinery in terms of

8.1 Machinery & Equipment Requirement

Table 8-1 Machinery Types

PREF-79 /Jan, 2007/Rev 2