Professional Documents
Culture Documents
REGIONAL OFFICE
REGIONAL OFFICE
REGIONAL OFFICE
PUNJAB
SINDH
KHYBER PAKTUNKHWA
BALOCHISTAN
Ground Floor
State Life Building The Mall,
Peshawar.
Tel: (091)111 111 456, 9213046-7
Fax: (091) 286908
helpdesk.NWFP@smeda.org.pk
May, 2010
Pre-Feasibility Study
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. Therefore, the content of this
memorandum should not be relied upon for making any decision, investment or otherwise.
The prospective user of this memorandum is encouraged to carry out his/her own due
diligence and gather any information he/she considers necessary for making an informed
decision.
The content of the information memorandum does not bind SMEDA in any legal or other
form.
DOCUMENT CONTROL
Document No.
PREF-112
Prepared by
SMEDA-Punjab
Issue Date
May, 2010
Issued by
Library Officer
PREF-112/May, 2010
Pre-Feasibility Study
Table of Contents
Executive summary........................................................................................................2
Introduction....................................................................................................................3
2.1
Project Brief ...........................................................................................................3
2.2
Project Rationale ....................................................................................................3
2.3
Proposed Capacity..................................................................................................4
2.4
Total Project Cost...................................................................................................4
3
Market/Industry Analysis...............................................................................................4
3.1
Market Size ............................................................................................................4
4
Current Industry Structure .............................................................................................4
5
Products Offered ............................................................................................................5
6
Production Process .........................................................................................................5
6.1
Manufacturing Process...........................................................................................6
7
Machinery Requirement.................................................................................................6
8
Production ......................................................................................................................7
8.1
Production Capacity of the Project ........................................................................7
8.2
Starting Production Capacity .................................................................................7
9
Human RESOURCE Requirement ................................................................................8
10
Other office equirement .............................................................................................8
11
Land & building .........................................................................................................9
12
Project Economics....................................................................................................10
13
financial analysis......................................................................................................11
13.1 Projected Income Statement.................................................................................11
13.2 Projected Balance Sheet.......................................................................................12
14
Key Assumptions .....................................................................................................14
15
ANNEXTURE .........................................................................................................16
Machinery Suppliers ............................................................................................................16
15.1 Qingdao Royal Machinery Co.,Ltd......................................................................16
15.2 Suzhou Caivi Plastic Technology Co., Ltd. .........................................................16
15.3 Zhangjiaganag Golden Far East Machinery Co. Ltd. ..........................................16
Raw Material Supplier .........................................................................................................16
15.4 Ijaz Brothers .........................................................................................................16
1
2
1
PREF-112/May, 2010
Pre-Feasibility Study
EXECUTIVE SUMMARY
The Poly Propylene Random Copolymer (PPRC) Pipes Manufacturing Unit is a project of
plastic sector. PPRC pipe production line is mainly used in the residential water supply
systems, industrial water transportation and other extensive application of various
diameters. PPRC pipe is the latest product in the overall history of pipe manufacturing. It is
economical, non-corrosive, high temperature resistant, lower flow resistance, ease of
installation, reduced breakage and leakage, stain free nature and so on. PPRC pipes are
prevailing rapidly because of their multiple usages and advantages. Hot & cold water
facilities served for civil buildings, such as: houses, air ports, hospitals, hotels, offices,
schools, etc. Due to its smooth rust less inner surface no foreign particle can stay in it &
the quality and quantity of the water supplied remains the same. The high molecular
weight of PPRC makes it highly resistant and an excellent energy saver as compared to
metallic pipes.
The exceptional heat stability and its corrosion resistance coupled with the ease of
installation makes PPRC pipes the most reliable plumbing system for the hot and cold
water applications with a long life service. Another more competitive advantage of PPRC
plumbing system is its joints, which are fused together by a sophisticated fusion machine
without any additional jointing aid. In this pre-feasibility study, all the calculations have
been based on a pipe size of 25mm, 32mm and 40 mm.
A PPRC Pipe manufacturing unit with a proposed capacity of around 230 ton needs a
capital investment estimated at Rs. 15.691 million for Construction of Facility and
Purchasing machinery & equipment. In addition to this, an estimated sum of Rs. 2.485
million is required as Working Capital. The total project cost is estimated at Rs. 18.176
million. Projected IRR, Net Present Value and Payback of this project are 47%, Rs. 35.65
million and 3.56 years respectively.
2
PREF-112/May, 2010
Pre-Feasibility Study
INTRODUCTION
Pre-Feasibility Study
Long durability due to the high resistance to aggressive elements, which gives the
system extremely long service life.
Easy connectivity over a complex network
No perforation caused by electrical currents
Safe environment with recyclable ability
Heat preservation and energy saving abilities. The heat conductivity of PPRC pipes
are much lesser than metals and hence offer significantly high levels of heat
preservation for transported fluids
Easy to handle products - Light weight compared to the metallic piping systems
MARKET/INDUSTRY ANALYSIS
Because of the high demand of PPRC Pipes, there has been an increase in small
manufacturing units of PPRC pipes exist in the main cities of the country i.e. Lahore,
Gujranwala, Faisalabad, Multan & Karachi. The PPRC pipe manufacturing industry of
Pakistan is a small-scale industry. It comprises mainly of small units and there are only a
few units, which have a significant market presence. These market leaders are producing
PPRC pipes under trademarks of Dadex, Minhas, Paklite Advance PPRC Pipes & Fittings
and Chattaan etc.
Presently, PPRC pipes imported from China, Iran and Turkey dominate the sales in the
local markets, whereas the local PPRC Pipes have a small share in the local market, the
reason being the unavailability of good quality PPRC pipes.
It is worth noticing that the market leaders have monopoly in major market. The new
entrants have tried to break this monopoly and provided a good variety of quality products
in the local market, which have been well received. Some of the new entrants that produce
high quality products have taken share of the market, but still there is a need for more
4
PREF-112/May, 2010
Pre-Feasibility Study
industrial units to come into the field and produce high quality products in order to fulfill
the local market demand as well as to increase the exports.
PRODUCTS OFFERED
The proposed project will be capable of making PPRC Pipes with manufactured sizes of 25
mm, 32mm and 40mm pipes.
PRODUCTION PROCESS
Figure 6-1
Raw
Material
Extrusion
Haul Off
Cooling
Cutting
Inspection
Packing/Storing
Shipping
Market
5
PREF-112/May, 2010
Pre-Feasibility Study
MACHINERY REQUIREMENT
Following list of machinery would be required for the PPRC manufacturing unit:
Table 7-1
Machinery Requirement
Extruder
Mould (Pipe)
Vacuum tank
Hauling off
Cutter
Stacker
Freight Charges
Misc. Charges (Erection &
Installation)
Generator (165 KVA Made in
China)
Total
Unit
1 unit
1 set
1 set
1 set
1 set
1 unit
Cost (Rs.)
1,020,000
340,000
425,000
323,200
246,500
42,500
119,000
503,200
1 Set
800,000
800,000
3,819,200
6
PREF-112/May, 2010
Pre-Feasibility Study
PRODUCTION
For the purpose of this project, the extruder machine with total capacity of 100 kg/hour
will be used for the production of PPRC Pipes. PPRC pipe production/extrusion line/PPRC
pipe making machinery is used to produce PPR pipes for cold and hot water supply. It's
composed of vacuum feeding machine, hopper dryer, single screw extruder, mould, make
line co-extruder, vacuum calibration and cooling tank, extended spraying cooling tank,
haul off machine, cutter and stacker. PPRC cool and hot water pipe extrusion line is used
by single screw extruder for extruding the pipes with various tube diameters and the wall
thickness.
8.1 Production Capacity of the Project
As the maximum capacity of PPRC Pipes (without wastage) is 230 tons per year and the
percentage share of 25mm, 32mm and 40mm pipes in total production capacity are 60%,
25% & 15% accordingly. Table 8-1 summarizes the sizes of the three sizes of PPRC pipes
being recommended in this pre-feasibility study.
Table 8-1
Size Chart of PPRC Pipe
Size
25 mm
32 mm
40 mm
Wall Thickness
4.2 mm
5.4 mm
6.7 mm
Length
13 ft
13 ft
13 ft
Production
Percentages
25 mm
32 mm
40 mm
Total Production
60%
25%
15%
100%
Daily
Production
(Pipes)
457
119
43
619
Annual
Production (Pipes)
137,143
35,714
12,699
185,556
The starting capacity utilization is 50%. The maximum capacity level that can be achieved
is 95%.
7
PREF-112/May, 2010
Pre-Feasibility Study
Production Manager
Accountant
Extruder Operators
Store In charge
Helpers
Guards
Marketing & Purchase Officer
Total
Number
of
Personnel
1
1
1
1
5
2
1
Monthly Salary
(Rs)
25,000
15,000
10,000
8,000
7,500
8,000
15,000
126,500
Annual Salary in
(Rs)
300,000
180,000
120,000
96,000
450,000
192,000
180,000
1,518,000
Office Equipment
Unit
2
1
2
2
1
Computer
Printer
UPS
Telephone Set
Fax Machine
Total
Table 10-2
Cost / Unit
25,000
14,000
8,500
1,000
12,000
Office Table
Chairs
Computer Table
Computer Chairs
Sofa Set
Office Cabinet
Electrical Wiring & Lighting
Air Conditioner
Total
Unit
3
6
2
2
1
1
Cost / Unit
12,000
3,500
10,000
2,500
10,000
25,000
35,000
8
PREF-112/May, 2010
Pre-Feasibility Study
Land Cost
Description
Land (2.04 Kanals)
Table 11-2
Description
Management building
Production Area
Raw Material Store
Finished goods store
Loading area
Total Construction Cost
1,300
850
700
700
700
9
PREF-112/May, 2010
Total in (Rs)
520,000
5,100,000
630,000
840,000
490,000
7,580,000
Pre-Feasibility Study
12 PROJECT ECONOMICS
Capital Investment
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office equipment
Pre-operating costs
Total Capital Costs
Rs. In actuals
3,680,000
7,580,000
3,819,200
212,000
95,000
305,000
15,691,200
Working Capital
Equipment spare part inventory
Raw material inventory
Cash
Total Working Capital
Rs. In actuals
1,939,950
545,293
2,485,244
Total Investment
18,176,443
Initial Financing
Debt
Equity
Equity
61%
3.28
36,938,863
IRR
Payback Period (yrs)
Net Present Value
10
PREF-112/May, 2010
Rs. In actuals
9,088,222
9,088,222
50%
50%
Project
47%
3.56
35,650,548
Pre-Feasibility Study
13 FINANCIAL ANALYSIS
13.1 Projected Income Statement
Statement Summaries
SMEDA
Income Statement
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Rs. In actuals
Year 10
30,857,143
25,964,796
4,892,346
40,731,429
32,869,509
7,861,920
52,272,000
40,462,524
11,809,476
65,713,371
48,803,053
16,910,318
81,320,297
57,955,405
23,364,892
94,421,901
64,589,984
29,831,917
103,864,091
68,211,000
35,653,091
114,250,500
72,052,036
42,198,463
125,675,550
76,127,973
49,547,577
138,243,105
80,454,820
57,788,284
552,000
401,695
55,200
617,143
30,857
791,620
61,000
2,509,515
2,382,832
605,744
441,864
60,574
814,629
40,731
791,620
61,000
2,816,162
5,045,758
664,720
486,051
66,472
1,045,440
52,272
791,620
61,000
3,167,574
8,641,901
729,438
534,656
72,944
1,314,267
65,713
791,620
61,000
3,569,638
13,340,680
800,457
588,121
80,046
1,626,406
81,320
791,620
61,000
4,028,970
19,335,922
878,390
646,933
87,839
1,888,438
94,422
791,620
4,387,643
25,444,274
963,912
711,627
96,391
2,077,282
103,864
791,620
4,744,695
30,908,395
1,057,759
782,790
105,776
2,285,010
114,250
791,620
5,137,205
37,061,258
1,160,744
861,068
116,074
2,513,511
125,676
791,620
5,568,694
43,978,883
1,273,756
947,175
127,376
2,764,862
138,243
791,620
6,043,032
51,745,252
Other income
Earnings Before Interest & Taxes
99,302
2,482,133
196,080
5,241,838
363,755
9,005,657
749,783
14,090,463
1,430,199
20,766,121
2,522,236
27,966,510
4,087,468
34,995,863
6,098,925
43,160,183
8,563,492
52,542,375
11,879,037
63,624,289
Interest expense
Earnings Before Tax
2,482,133
1,347,366
3,894,472
1,089,188
7,916,468
786,534
13,303,929
431,742
20,334,379
64,115
27,902,395
34,995,863
43,160,183
52,542,375
63,624,289
2,482,133
620,533
1,861,600
3,894,472
973,618
2,920,854
7,916,468
1,979,117
5,937,351
13,303,929
3,325,982
9,977,947
20,334,379
5,083,595
15,250,784
27,902,395
6,975,599
20,926,796
34,995,863
8,748,966
26,246,898
43,160,183
10,790,046
32,370,137
52,542,375
13,135,594
39,406,782
63,624,289
15,906,072
47,718,217
Revenue
Cost of goods sold
Gross Profit
11
PREF-112/May, 2010
Pre-Feasibility Study
SMEDA
Balance Sheet
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Rs. In actuals
Year 10
Assets
Current assets
Cash & Bank
Accounts receivable
Finished goods inventory
Raw material inventory
Total Current Assets
545,293
1,939,950
2,485,244
2,291,898
1,542,857
216,373
2,566,554
6,617,683
3,310,397
3,579,429
273,913
3,301,231
10,464,969
7,082,608
4,650,171
337,188
4,159,551
16,229,518
14,339,764
5,899,269
406,692
5,159,143
25,804,867
26,523,073
7,351,683
482,962
6,003,952
40,361,670
45,540,813
8,787,110
538,250
6,619,357
61,485,530
71,243,992
9,914,300
568,425
7,297,841
89,024,558
103,011,016
10,905,730
600,434
8,045,870
122,563,049
141,660,198
11,996,302
634,400
8,870,572
163,161,472
197,740,854
13,195,933
670,457
211,607,244
Fixed assets
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office equipment
Total Fixed Assets
3,680,000
7,580,000
3,819,200
212,000
95,000
15,386,200
3,680,000
7,201,000
3,437,280
190,800
85,500
14,594,580
3,680,000
6,822,000
3,055,360
169,600
76,000
13,802,960
3,680,000
6,443,000
2,673,440
148,400
66,500
13,011,340
3,680,000
6,064,000
2,291,520
127,200
57,000
12,219,720
3,680,000
5,685,000
1,909,600
106,000
47,500
11,428,100
3,680,000
5,306,000
1,527,680
84,800
38,000
10,636,480
3,680,000
4,927,000
1,145,760
63,600
28,500
9,844,860
3,680,000
4,548,000
763,840
42,400
19,000
9,053,240
3,680,000
4,169,000
381,920
21,200
9,500
8,261,620
3,680,000
3,790,000
7,470,000
Intangible assets
Pre-operation costs
Total Intangible Assets
TOTAL ASSETS
305,000
305,000
18,176,443
244,000
244,000
21,456,263
183,000
183,000
24,450,929
122,000
122,000
29,362,857
61,000
61,000
38,085,586
51,789,769
72,122,009
98,869,417
131,616,288
171,423,091
219,077,244
1,418,219
1,418,219
2,990,703
2,990,703
3,722,129
3,722,129
4,526,414
4,526,414
5,394,108
5,394,108
6,158,455
6,158,455
6,658,965
6,658,965
7,035,699
7,035,699
7,435,721
7,435,721
7,371,656
7,371,656
9,088,222
9,088,222
9,088,222
9,088,222
7,589,550
7,589,550
5,832,701
5,832,701
3,773,198
3,773,198
1,358,903
1,358,903
9,088,222
9,088,222
18,176,443
9,088,222
1,861,600
10,949,822
21,456,263
9,088,222
4,782,454
13,870,676
24,450,929
9,088,222
10,719,806
19,808,027
29,362,857
9,088,222
20,697,752
29,785,974
38,085,586
9,088,222
35,948,536
45,036,758
51,789,769
12
PREF-112/May, 2010
9,088,222
56,875,333
65,963,554
72,122,009
9,088,222
83,122,230
92,210,452
98,869,417
9,088,222
115,492,368
124,580,589
131,616,288
9,088,222
154,899,149
163,987,371
171,423,091
9,088,222
202,617,366
211,705,588
219,077,244
Pre-Feasibility Study
SMEDA
Year 1
Operating activities
Net profit
Add: depreciation expense
amortization expense
Deferred income tax
Accounts receivable
Finished good inventory
Raw material inventory
Accounts payable
Cash provided by operations
(1,939,950)
(1,939,950)
Financing activities
Change in long term debt
Issuance of shares
Cash provided by / (used for) financing activitie
9,088,222
9,088,222
18,176,443
Investing activities
Capital expenditure
Cash (used for) / provided by investing activitie
(15,691,200)
(15,691,200)
NET CASH
545,293
1,861,600
791,620
61,000
(1,542,857)
(216,373)
(626,604)
1,418,219
1,746,605
1,746,605
Year 2
Year 3
Year 5
Year 6
2,920,854
791,620
61,000
(2,036,571)
(57,539)
(734,676)
1,572,483
2,517,171
5,937,351
791,620
61,000
(1,070,743)
(63,275)
(858,320)
731,426
5,529,060
9,977,947
791,620
61,000
(1,249,097)
(69,504)
(999,592)
804,285
9,316,658
15,250,784
791,620
61,000
(1,452,415)
(76,270)
(844,810)
867,694
14,597,604
20,926,796
791,620
(1,435,426)
(55,288)
(615,405)
764,347
20,376,644
(1,498,672)
(1,498,672)
(1,756,849)
(1,756,849)
(2,059,503)
(2,059,503)
(2,414,295)
(2,414,295)
(1,358,903)
(1,358,903)
1,018,499
3,772,211
13
PREF-112/May, 2010
Year 4
7,257,155
12,183,309
19,017,740
Year 7
26,246,898
791,620
(1,127,190)
(30,175)
(678,484)
500,510
25,703,179
Year 8
32,370,137
791,620
(991,430)
(32,009)
(748,029)
376,734
31,767,024
Year 9
39,406,782
791,620
(1,090,573)
(33,966)
(824,702)
400,021
38,649,182
Rs. In actuals
Year 10
47,718,217
791,620
(1,199,630)
(36,057)
8,870,572
(64,065)
56,080,657
25,703,179
31,767,024
38,649,182
56,080,657
Pre-Feasibility Study
14 KEY ASSUMPTIONS
Table 144-1 Operating Assumptions
Hours operational per day
Days operational per month
Days operational per year
8
25
300
230,400
50%
10%
95%
5%
10%
10%
5%
5%
30
30
30
3
0.1% of Revenue
10% of Administration Expense
2% of revenue
Straight Line
5%
10%
10%
14
PREF-112/May, 2010
Pre-Feasibility Study
10
50:50
16%
20%
Weight (Kg)
1.05
1.68
2.84
Rate
194
194
194
Price (Rs)
270
432
729
332.59
15
PREF-112/May, 2010
Pre-Feasibility Study
15 ANNEXTURE
MACHINERY SUPPLIERS
15.1 Qingdao Royal Machinery Co.,Ltd
Tel/fax 0086-532-87258022
http://www.87257222.com
E-mail: royalplastmach1@87257222.com
15.2 Suzhou Caivi Plastic Technology Co., Ltd.
Zone A, No. 3, Zhenxing Road, Economic Developmet Zone,
Zhangiiangang, China
Tel/fax 0086-512-58156669
http://www.caivi.com.cn/
15.3 Zhangjiaganag Golden Far East Machinery Co. Ltd.
Chengfeng industrial Park, Zhaofong Town, Zhongjagang, Jiangsu, China.
Tel/fax 0086-512-58603308
http://www.jydjx.com/
16
PREF-112/May, 2010