PF Plastic Moulded Furniture-2
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Transcript of PF Plastic Moulded Furniture-2
1 INTRODUCTION TO SMEDA
Pre-Feasibility Study Plastic Molded Furniture
Pre-Feasibility Study
PLASTIC MOLDED FURNITURE
Small and Medium Enterprise Development Authority
Government of Pakistan
www.smeda.org.pkHEAD OFFICE
6th Floor LDA Plaza Egerton Road, Lahore
Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk
REGIONAL OFFICE PUNJABREGIONAL OFFICE SINDHREGIONAL OFFICE
NWFPREGIONAL OFFICE BALOCHISTAN
8th Floor LDA Plaza Egerton Road, Lahore
Tel 111 111 456, Fax: 6304926-7 Website [email protected] Floor, Bahria
Complex II, M.T. Khan Road, Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
June, 2008
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 CONTROLDocument No.PREF-108
Prepared bySMEDA-Punjab
Approved byProvincial Chief Punjab
Issue DateJun, 2008
Issued ByLibrary Officer
TABLE OF CONTENTS 61Purpose of the document
2Crucial Factors & Steps in Decision Making for Investment62.1Key Success Factors62.2Opportunities62.3Threats63Project Profile73.1Opportunity Rationale73.2Project Brief73.3Proposed Business Legal Status73.4Project Cost74Introduction to Molded Furniture84.1International Market Scenario95Viable Economic Size105.1Proposed Capacity105.2Project Location115.3Rebate Policy116MARKET ANALYSIS116.1Target Customers116.2Market Demand116.3Market Supply116.4Regulations117Regulation Licenses and insentives128Land & Building Requirement128.1Total Land Requirement128.2Building129Machinery Details139.1Machinery and Equipment Requirement139.2Other Capital Cost:1410Working Capital Requirement / Month1510.1Raw Materials Requirements:1510.2Utilities Requirement1510.3Human Resource Requirements1510.4Total Working Capital Cost1611Financial Analysis1711.1Total Project Cost:1711.2Turnover / Month1711.3Project Returns1712Financial Analysis1812.1Projected Income Statement1812.2Projected Balance Sheet1912.3Projected Cash Flow Statement20
1 Purpose of the document
The objective of the 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, and production, marketing, finance and business management. The document also provides sectoral information, brief on government policies, which have some bearing on the project itself.
Before studying the whole document one must consider following critical aspects, which forms the basis of any investment decision.
2 Crucial Factors & Steps in Decision Making for Investment
2.1 Key Success Factors
Following factors are the key in making this project profitable:
Availability of skilled workers and cheaper labour.
Cost efficiency
Best Suitable lawn furniture
Available at warranty.
Selection of latest plant and machinery is another key for carrying out the successful operations of the proposed project.
2.2 Opportunities
The proposed project would have a number of competitive advantages:
The project will provide cheaper products to its customers compared to the wood / iron products which are already on the higher side.
Increasing preference of plastic furniture due to expensive wooden and iron rates. All brands are facing late supplies problems as demands are high in the market. Sales / sales return policies of top brands are not likely healthy for their business and industry as well thus a new brand with competitive rates and customer friendly policies may get good healthy share in market in short period.
2.3 Threats
The proposed project will be facing the following threat:
Informal business practices such as discounts / special offers by top brands.
Threat of increase in the prices of raw materials.3 Project Profile
3.1 Opportunity Rationale
Due to the very low consumption as compared to developed countries and even in India, a large gap is to be filled by introducing new and cost effective products. Customers with low purchasing power dont have any option other than plastic furniture. Middle and lower classes in Pakistan is major buyer and these classes are 65% of total population. Also there are very few players in this business
3.2 Project Brief
The business of Molded Furniture has marked its place in the country through growth during the last ten years. This growth has opened up new opportunities. The prime reason for this is awareness about the product. Along with that, companies are offering conditional warranty of plastic chairs minimizing risk of customer.3.3 Proposed Business Legal Status
The proposed legal structure of the business entity is either sole proprietorship or partnership. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a Sole Proprietorship.
3.4 Project Cost
The cost of project has been estimated as Rs.106.726 million including land, civil works, plant & machinery, moulds and dies and office equipment. The plant & machinery mainly comprises of injection molding machines, cutter, crusher, mixer, hopper, chiller plant.
Table 3-5 Project Investment
DescriptionTotal Cost (Rs. in Millions)
Fixed Investment 94.173
Working Capital12.553
Total Investment 106.726
The proposed pre-feasibility is based on the assumption of 50% equity and 50% debt. The project seems to be viable with the following returns on investment.
Project Returns
IRR (Project)35%
Pay Back Period4.05
NPV 118,272,471
4 Introduction to Molded FurnitureMolded Furniture is basically produces in developed countries to be used as Lawn Furniture and outdoor restaurants. As trends are from developed countries, it was introduced in Pakistan around 1984-1985 by a Karachi based firm. Then a factory was installed in Gujranwala and then with the passage of time now there are some 7 units producing plastic chairs, tables, baby products, etc day and nights.
Due to low purchasing power people in Pakistan found this product cheap, associated with warranty covering the risk of consumers. Customer bank is increasing day by day with the penetration of companies, by introducing new and economical models, variety of colors, exports to Afghanistan, etc.
The capacity to produce is also a very important edge associated to boost the business to meet immediate demands, maintain high inventory levels, variety of models and colors, etc. Table 41 Pakistans Export 2006
Reporting CountriesTrade Value($)Trade Quantity (kgs)
World149,61335,406
Afghanistan143,31633,916
United Arab Emirates5,9921,418
Seychellies16840
Canada13632
Table 42 Pakistans Imports 2006
Reporting CountriesTrade Value($)Trade Quantity (kgs)
World219,41057,705
China163,34642,960
Italy20,2845,335
Turkey15,1213,977
United Arab Emirates11,3942,997
Rep. of Korea3,566938
Import/export of plastic furniture of Pakistan in 2007 is given below:-
Table 43 Pakistans Export 2007
Reporting CountriesTrade Value($)Trade Quantity (kgs)
World555,519127,838
Afghanistan372,49385,719
UAE109,35025,164
Mauritius65,88514,931
UK3,682847
Switzerland1,385319
Table 44 Pakistans Imports 2007
Reporting CountriesTrade Value($)Trade Quantity (kgs)
World253,11453,789
China182,53338,790
Other Asians15,7163,340
Italy14,7353,131
China, hong,kong8,9901,911
Turkey8,5091,808
4.1 International Market Scenario
In 2007 total imports of $ 1,457,716,789 has been taken place in which USA was the highest importer of plastic furniture followed by France and United Kingdom as 2nd and 3rd highest importers respectively. Details of the imports are given below:-
Table45 Top importers
Reporting CountriesTrade Value in $
USA463,465,731
France160,505,843
UK120,244,278
Germany100,412,000
Canada88,121,321
Others524,967,616
Total exports of $1,192,775,677 has been taken place in 2007.statistics shows that Italy stood first as an exporter with $306,761,748 exports followed by China and USA with $240,293,756 and $118,900,723 correspondingly.
Table 46 Top Exporters
Reporting CountriesTrade Value in $
Italy306,761,748
China240,293,756
USA118,900,723
France86,341,505
Germany83,364,000
Others357,113,945
5 Viable Economic SizeConsidering the market trends and area coverage project would be able to attract and sell at-least 66,500 units monthly at 100 % capacity.5.1 Proposed Capacity
The Plant & Machinery that has been considered for preparing this pre-feasibility Study is of Taiwan, Britain and Pakistan origin. This Plant and Machinery is relatively more efficient and effective of the all types of machineries available in the market. The chosen Plant & Machinery is capable of producing 66,500 units per month. 60% starting capacity is proposed. However capacity for tables and some other products is low due to assembling and packing process.Table 51 product mixPlastic FurnitureQuantity Produced per MonthProduct Mix
All Model Chairs48,00072%
All Model Tables4,0006%
Baby Chair8,00012%
Shell Products2,0003%
Stools4,5007%
Total 66,500 100%
5.2 Project Location
The proposed locations for the Molded Furniture is Gujranwala (preferably) and Lahore. The said project may be established in industrial estate area or any other area of above said city.
5.3 Rebate PolicyThe Government of Pakistan has offering Rs.3.5 per kg rebate on exports. However Government has offered D.T.R.E. (duties and taxes remission exemption) for the materials to be imported for export purpose only.
6 MARKET ANALYSISThe Armed forces, educational institutions, different private and public sector firms now form considerable sales share in annual turnover of the companies.6.1 Target CustomersThe target customers for the proposed project would be the middle upper, middle middle, middle lower, lower upper income groups 6.2 Market DemandDue to the increasing prices of wood / iron furniture, the trend of molded furniture has been on a rise. However, there exist a large number of people who were reluctant to buy plastic furniture. Penetration in the markets, availability in small towns and cheaper models by all brands has led to enhancing the confidence in the minds of the general public and now, more people are inclined towards purchasing molded furniture.
6.3 Market SupplyTotal numbers of molded furniture units in Pakistan are 7, which are quite low to meet the growing demand. Apart from these 7 companies, few are being considering to start this business 6.4 Regulations
There has been a tremendous growth in the Molded Furniture sector over the yeas. The total numbers of units sold during the year 2006 are estimated 750,000. The growth in terms of percentage is given in the following table:
Table 4-4 Growth Percentage of Factories in PakistanYear 20032007%age Increase
No. of Factories4775%
The above growth rates present an opportunity for the new entrants to earn profits by setting up factories to meet the growing demand7 Regulation Licenses and insentivesAs such there is no pre-requisite of license, certificate & NOCs for setting up the Molded Furniture. However, NTN, Sales Tax registration, membership of Chamber of Commerce & Industry is necessary which costs maximum. Rs.10, 000/-8 Land & Building Requirement
8.1 Total Land Requirement
A minimum of forty thousand five hundred (40,500) square feet of land is required for the project. An amount of Rs. 22.50 million allocated for the acquisition of land.
Table 81: Land Cost
DescriptionNo. of KanalRate per Kanal (Rs.)Total Cost (Rs.)
Total Land92,500,000 22,500,000
8.2 Building
There are certain civil works required to be carried out at the proposed location. The civil works would be carried out on an area of 36,450 square feet. Civil work includes following:
Management Block
Offices for staff
Generator Room
Shed for Production Hall
Underground Water Piping and Power Cables
Mosque
Guest Rooms
Security Guard Room
Kitchen
Toilet/washrooms
Flooring
The total cost of construction is estimated at Rs.24.840 million. Details for the said cost are as follows: Table 82 Construction CostDescriptionSq. FeetCost / Sq. feetTotal Cost (Rs.)
Management Block, Offices5,000 1,000 5,000,000
Shed on Production hall17,000 800 13,600,000
Mosque + Guest Room1,450 700 1,015,000
Flooring3,000 75 225,000
Godown10,000 500 5,000,000
Total covered area in sq. ft. 36,450
Total Infrastructure Cost 24,840,000
Table 83 Total Land and Building CostDescriptionTotal Cost (Rs. in Millions)
Land 22.50
Building24.84
Total Land & Building Cost 47.34
9 Machinery Details
9.1 Machinery and Equipment Requirement
The major cost involved in establishing a well-equipped Molded Furniture Unit is the cost involved in machinery, equipment and furnishing.
Table 91: Machinery and Equipment Requirement
DescriptionCapacityNoUnit Cost (Rs)Total Cost(Rs)
Injection Moulding1000 tons15,500,0005,500,000
Injection Moulding800 tons24,000,000 8,000,000
Injection Moulding650 tons12,000,000 2,000,000
Injection Moulding250 tons11,000,000 1,000,000
Crane10 tons11,000,000 1,000,000
Cutter & Crusher 18 Inches1150,000 150,000
Mixes6 Bags185,000 85,000
Mixes4 Bags165,000 65,000
Hopper18 Bags1100,000 100,000
Chiller Plant11,000,000 1,000,000
Electric Panel1300,000 300,000
Shrink Warp1150,000 150,000
Generator650 KVA13,000,000 3,000,000
Sub Total22,350,000
MOULDS
Chair (4 arm + 1 w/o arm+2 baby chair)6 12,800,000
Tables(2x3inch rect, 32 in, 39 in square)3 1,600,000
Chairs Inserts6125,000 750,000
Stool1500,000 500,000
Shell chairs3 1,000,000
Sub Total16,650,000
DIE SHOP
Mould Lifter1100,000 100,000
Laith Machine8 ft1300,000 300,000
Laith Machine5 ft1200,000 200,000
Grinder17000 7,000
Welding Plant125,000 25,000
Lifter230,000 60,000
Trolleys37,000 21,000
Loose Tools (Different Tools, Instruments)1400,000 400,000
Sub Total1,113,000
Total Machinery and Equipment 40,113,000
9.2 Other Capital Cost:
The cost associated with obtaining the utilities charges is including electricity, telephone, Gas and water connections. Other cost of furniture & fixture and office equipments are as follows:Table 92: Other Capital CostDescriptionQuantity / AreaCost / RateAmount / Other
Table & Chair for CEO12200022,000
Table & Chair for Managers41600064,000
Table & Chair for Officers & Supervisors1210000120,000
Visitor Chairs20460092,000
File Racks4800032,000
Small Cabinets710,00070,000
Stool12200024,000
Bench12300036,000
Miscellaneous14000040,000
Total Furniture & Fixtures 500,000
Table 93: Offices Equipment Cost
DescriptionQuantity / AreaCost / RateAmount / Other
Computer P41025000250,000
UPS10700070,000
Air Conditioners540000200,000
Printer23000060,000
Scanner11200012,000
Fax Machine11500015,000
Telephone Sets20150030,000
Photocopying Machine1100000100,000
Miscellaneous1263,000263,000
Total Office Equipment 1,000,000
Table 94: Total Capital Cost.
DescriptionTotal Cost
Land 22,500,000
Building/Infrastructure 24,840,000
Machinery & equipment 40,113,000
Furniture & fixtures 500,000
Office vehicles 757,500
Office equipment 1,000,000
Pre-operating costs 4,262,857
Training costs 200,000
Total Capital Costs 94,173,357
10 Working Capital Requirement / Month10.1 Raw Materials Requirements:Cost of raw materials including Battery, teeka, uvtax, titanium, masterbatch and steel frame for study & visitor sofas etc are Rs. 12,000,000.There are two main inputs recycled Co-PP and Homo-PP. There are also requirements of master batches/pigments for coloring the products with some chemical for brightening and cleaning. 10.2 Utilities Requirement
The assumed cost associated with utilities and overheads are as follows:
Table 101: Total Cost of Goods Sold / AnnumDescriptionTotal Cost (Rs.)
Raw Material Cost 100,660,570
Direct Labor (Production Staff) 4,356,000
Direct Electricity 4,140,000
Electricity from the Generator 4,914,000
10.3 Human Resource Requirements
Manpower requirement for the Molded Furniture includes the staff as follows and there salaries will also be given as under
Table 83: Human Resource RequirementDescriptionNo. of Emp.2 ShiftsSalary /Month(Rs.)Total Salary / month (Rs)
Production Staff
Manager Production135,000420,000
Shift In charge112,000144,000
Color Master110,000120,000
Crush man17,00084,000
Machine Operators127,0001,008,000
Helpers 206,0001,440,000
Dispatcher16,00072,000
Loaders46,000288,000
Die Shop In charge115,000180,000
Maintenance Supervisor115,000180,000
Fitter37,000252,000
Technical Store Keeper17,00084,000
Raw Material Store keeper17,00084,000
Total Production Fixed Costs484,356,000
Admin. Staff
CEO175,000900,000
Manager Sales & Mkt150,000600,000
Manager Sales135,000420,000
Sales Admin Officer119,000228,000
Sales Executives310,000360,000
Chief Accountant125,000300,000
Assistant Accountant210,000240,000
Cashier18,00096,000
Electrician212,000288,000
Security Supervisor28,000192,000
Receptionist 17,00084,000
Cook17,00084,000
Office Boy16,00072,000
Driver17,00084,000
Sweeper26,000144,000
Overtime 100,000 1,200,000
Incentives 100,000 1,200,000
Total Admin. Cost206,492,000
Total HR. Cost 10,848,000
10.4 Total Working Capital Cost
Total Working capital cost per month is as follows:
Table 84: Total Working CapitalDescriptionTotal (Rs. In million)
Raw materials12.00
Upfront insurance payment0.053
Cash0.50
Total12.553
11 Financial Analysis
11.1 Total Project Cost:Following is the breakdown of the total project cost for the proposed plastic furniture project. Table 111: Total Project Cost
Project CostsCosts (Rs in Million)
Total Capital Costs94.173
Total Working Capital12.553
Total Project Costs106.726
11.2 Turnover / MonthTable 112: Total Sales per month
ItemsQuantitySale Price / PieceTotal Sales
All Model Chairs48000350 16,800,000
All Model Tables40001000 4,000,000
Baby Chair8000125 1,000,000
Shell Products2000775 1,550,000
Stools4500140 630,000
Total 6,500 23,980,000
Table 93: Depreciation Rates
ItemsDepreciation Rate
Plant & Machinery10%
Building 5%
Furniture & Fixture10%
Vehicles10%
Office Equipments25%
11.3 Project Returns
Table 9113: Project ReturnsProjectEquity
IRR35%42%
NPV 118,272,471 64,454,609
Payback Period (Years) 4.05 4.19
12 Financial Analysis
12.1 Projected Income Statement
12.2 Projected Balance Sheet
12.3 Projected Cash Flow Statement
Universal Resources & Traders. H/No.. 1117, St. # 2, Islamia College Road, Near Crown Cinema, Garden Colony, Gujranwala
Contact Person: Mr. Aleem Shahid, Cell No: 0301-8745080, 0322-5568590
4PREF-108/June, 2008
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