Project Evaluation

CONFIDENTIAL

PROJECT REPORT

OF

M/S. MARGARINE (PVT.) LIMITED (PROPOSED)NOORIABAD INDUSTRIAL ESTATE, DISTT. DADU

PROJECT EVALUATION DEPARTMENTINDUSTRIAL DEVELOPMENT BANK

FEBRUARY, 1993M/S. MARGARINE (PVT.) LTD.

TABLE OF CONTENTS

CONTENTS: PAGE NUMBERSUMMARY OF PROJECT I-ii

I- INTRODUCTION:

II- THE BORROWERS AND MANAGEMENT: 1-3- The borrowers - Management

III DESCRIPTION OF THE PROJECT: 4-13- The projects - Raw Materials - Location and Land- Building - Plant & Machinery - Utilities - Personnel - Environmental Hazards- Construction Schedule

IV- COST OF PROJECTS AND FINANCIAL PLAN: 14-15

- Cost of Project- Financing Plan- Debt Equity ratio- Security

V - MARKET PROSPECTS: 16-23

- Introduction - Domestic Production and Capacity - Installed Capacities of End Users - Raw Material Requirements - Demand For Industrial Margarine/Shortening- Proposed Scheme & Product Mix - Conclusion

BSA MARGARINE PRODUCTS (PVT.) LTD.-: B :-

VI- FINANCIAL PROJECTIONS: 24-25

- Profitability - Debt Service Coverage- Break Even Analysis- Cash Flow- Inter Financial Rate of Return

VII- ECONOMIC EVALUATION: 26

- Contribution to G.N.P- Value added Per Worker - Employment Opportunities - Capital Employment Ratio- Internal Economic Rate of Return - Domestic Cost Per Dollar Saved

VIII- CONCLUSIONS AND RECOMMENDATION: 27-31

M/S. MARGARINE (PVT.) LTD.

LIST OF ANNEXES

ANNEX NUMBER D E S C P R I P T I O N

I DETAILS OF BUILDING

II LIST OF LOCAL MACHINERY

III CONSTRUCTION SCHEDULE

IV ESTIMATES OF WORKING CAPITAL

V APPRAISED COST OF PROJECTS

VI FORECAST OF EARNING

VII SALE ESTIMATE

VIII COST OF GOODS SOLD STATEMENT

IX GENERAL, ADMINISTRATIVE

X ESTIMATES OF FINANCIAL EXPENSES

X A COMPUTATION OF RESALE PRICE

XI INCOME TAX COMMUTATION

XII CASH FLOW FORECAST STATEMENT

XIII PROJECTED BALANCE SHEET

XIV BREAK EVEN ANALYSIS

XV INTERNAL FINANCIAL RATE OF RETURN

XVI INTERNAL ECONOMIC RATE OF RETURN

XVII DOMESTIC COST PER DOLLAR SAVED

XVIII SENSITIVITY ANALYSIS

XIX EFFECTIVE RATE OF PROTECTION

M/S. MARGARINE (PVT.) LTD.

SUMMARY OF PROJECT

1- Name of the project: M/s BSA margarine (Pvt.) Ltd.(Proposed)

2- Location Office: 1017, Uni Plaza I.I Chundrigar Road, Karachi.

Factory: 94 KM, Nooriabad Industrial Estate, District Dadu, Sindh

3- New/B&Mrep Expansion: New

4- Amount of Loan: L/C Assistance Rs.24.150million (LMM) L/C Assistance Rs.3.800million (BOR)

5- Rated Capacity of the 18,000 tons of industrial margarine/ Project shortening based on 3 shifts and 300 days/

annum. 1,800 tons of Liquid Soap 300tons of Chain Lubricant 150 tons of Carbon Dioxide Gas

6- Machinery to be a) Local MachineryPurchase under the Pre-Refine Machinery including Scheme: Neutralizer & Bleacher, Hydrogenation

Machinery, Post Refinery Machinery Including Post Refiner & Bleacher, Margarine Plant, Liquid Soap, Chain Lubricant plant, Boiler, Natural Gas Cracking Plant, Water Softening Plant, generator etc

. (Rs. IN MILLION)

7- Cost of proposed Scheme: Fixed Cost RS.39.066 Net Working Capital RS. 8.534 T o t a l : RS.47.600

-ii- CONTD. SUMMARY OF PROJECT BSA MARGARINE (PVT.) LTD.IDBP L/C Loan (LMM) RS.24.150IDBP L/C Loan (BOR) RS. 3.800Directors Loan RS. 0.650Paid Up Capital:

I- Sponsors RS. 19.000T o t a l : RS.47.600

8- Debt Equity Ratios : In Fixed Cost 73:27In Overall Cost 60:40

9- Annual Recurring Foreign : RS. 229.472 millionExchange (C&F) Require-ments of the projects at 100%

10- Percentage of C&F Value : 95%of Imported Raw Materials to Cost to total Raw Materials.

11- New Job Opportunities : 130 Persons.12- Projected Profit : Gross Profit RS.28.491 million

(4th Yr.) Operation Operating Profit RS.21.214 millionNet Profit Before Tex. RS.11.109 millionGross Profit to Sales. 9.35%Operating Profit toSales 6.96%Pre-tax Profit to 3.65%Sales.Return on Equity 26.81%Return on

13- Debt Service Coverage : 1.88 Times(4th Yr.) With Dep.

14- Break Even : 44%Capacity Utilization15- I.F.R.R. : 43%16- Contribution to G.N.P : Rs. 13.470 million

Fourth Year(Rs. In Million)

17- I.E.R.R. : 31.687%18- Bruno’s Ratio (Rs./US$) : 25.74

-ii- CONTD. SUMMARY OF PROJECTBSA MARGARINE (PVT.) LTD.

19- Effective Rate of

Protection. : 67%

20- Security

I- First charge on fixed assets of the projects estimated at Rs.39.066 million

(coverage : 1.37 times of Financial Assistance.)\

II- Outside collateral in shape of urban property to the extent of 25% of financial

assistance.

III- Personal Guarantee of all the Directors of the company.

21- Project Benefits:

The Projects being located in Nooriabad Industrial Estate, District Dadu, Sindh will enjoy tax

holiday for the first five years as a Government incentives given to the project to be in Rural

Area.

M/S. MARGARINE (PVT.) LTD.I- INTRODUCTION

The sponsors of the captioned concern have approached us for financial assistance for setting up of an industrial margarine / shortening and their by-product unit at SITE, Nooriabad Industrial Estate, Dadu, Sindh.

The Proposal of the sponsors has been processed for a local currency assistance of Rs. 24.150 mullion under SBP Scheme for LMM and local currency assistance of Rs. 3.800 million from Bank’s Own Resources.

The rated capacity of the projects would be 18,000 tonnes of industrial margarine/shortening liquid soap 1,800 tonnes, chain lubricant 300 tones and carbon di-oxide 150 tonnes based on 3 shifts 300 days per annum.

This is the first loan application of the company. However, the main sponsor Shaid Rasheed availed financial assistance in the name and style of M/s. imperial Rubber Industries Ltd. on 25-6-1965 which was later liquidated on 1-11-1983.

II- THE BORROWERS AND MANAGEMENT

THE BORROWERS:

M/s . BSA Margarine (Pvt.) Ltd., will be incorporated as a private limited company with a paid up and subscribed capital of at least Rs. 19.000 million. The control and management of the company would be entrusted with the Board of Directors consisting of the following :

S .NO NAME 1- Shahid Rasheed 2- Hussain Habib 3- Ashraf Kamal

-: 2 :- BSA MARGARINE.

Brief resume in respect of the sponsors of the captioned concern is as under:

SHAHID RASHEED: is the Chief Executive of the company. At present he is running a textile rubber cots and aprons manufacturing unit namely M/s. Bhitai Rubber Industries Located at Korangi, Karachi. He is the former member of National Assembly and was at that time member of Economic Committee/Bodies i.e. finance Committee, Budget Committee, Economic Deregulation Committee. Presently he is working as member of Deregulation, Disinvestments & Denationalization Committee.

HUSSAIN HABIB: He will be the Financial Director of the company. Has done B.B.A from Boston University and had worked in top management position at Hanover Manufactures Limited, Bank in London.

ASHRAF KAMAL: He is friend of Shahid Raeheed. He is looking after business in Punjab after graduation from American School.

PAST OPERATIONS OF SISTER CONCERN:The financial statement of the sister concern of the company are summarized below:

M/S. BHITTAI RUBBER INDUSTRIES LTD.BALANCE SHEET

AS AT 31 ST DECEMBER A S S E T S : 1991 1990Currents Assets 4,106 2,559Long Term Deposit 67 67Fixed Assets 27,484 28,619Unallocated Capital Expenditure 26,620 24,021Total Assets 58,187 55,266

LIABILITIES & OWNER’S EQUITY:Current Liabilities 3,662 1,993Long Term Liabilities 42,375 47,493Total Liabilities 46,037 49,486OWNER’S EQUIT:Paid up Capital 12,880 5,780Retained Earning/Loss (730) - - - Total Owners Equity 12,150 55,266

- 3 - BSA MARGARINE The company has started commercial production from July 1991. The profit & Loss Account depicts picture of half year operations.

M/SBHITTAI RUBBER INDUSTRIES LTD.

PROFIT & LOSS ACCOUNTFOR THE PERIOD JULY, 1991 OT 31 ST DECEMBER ,1991

(Rs.in’000)Sales 4,486Cost of Goods Sold 3,155

Gross Profit 1,331Operating Expenses 695Operating Profit 636Financial Expenses 1,403

Profit /Loss After Interest 767Other Income 36

Net Profit / Loss 731

CREDIT WORTHINESS:The credit worthiness of directors is being investigated and sanction letter will be issued after receipt of satisfactory credit report on the sponsors and the company.

-: 4 :- BSA MARGARINE

III – THE PROJECT

The scheme envisages establishment of a margarine/shortening and their by-product manufacturing unit with a rated capacity of 18,000 tonnes to rated capacity of the project is based on 15 tonnes of processing (deodorizing )per batch of approx. 8 hours Which gives annual production of 18,000 tonnes of main products viz maragine/shortening in 300 days from 2 deodorization per day . The product range, their rated capacities and proposed selling price would be as under:

S. NO ITEM RATED CAPACITY PROPOSED (TONNES) SELLING

(RS./TONNES)(MAIN PRODUCT)1. Industrial Margarine /Shortening 18,000 24,625

(BY PRODUCT)1- Liquid Soap 1,800 15,5002- Chain Lubricant 300 14,000

(for confectionary units etc.)3- Carbon Di-oxide 150 4,500On the basis of market demand, the proposed unit is expected to operate on the following capacity utilization:First Year 50%Second Year 55%

Third Year 60%Fourth 7 subsequent Year 65%

The fixed cost of the project has been estimated at Rs.39.066 million.

PRODUCT IDENTIFICATION:

Margarine and shortening are diversified dibble fats products and can be classified under less Cholestrol caloric contanied food products obtained from various types of vegetable fats of saturated, unsaturated and semi-saturated categories. (saturated fats of satured, unsaturated single bond carbon linkages whereas un-saturated fats contain one or more double bond linkages).


Margarine: are grainless greasy paste product containing above mentioned types of vegetable fats along with the additions of water (potable grade /disinfected), emulsifier, antioxidant, salts (in some cases), and vitamins A & D in certain quantity and specific ratio.

Shortening: are from same raw materials but without addition of water, and salt they are also grainless paste products but their uses are different.

Margarine /shortening, in fact, are essential ingredients of most types of bakery product classified by single fat or oil or a combination of several fats and oils. On processing shortening, certain physical changes are brought under control to achieve physical properties. Fats and oils are glycerol items of fatty acids predominantly they are triglyceroid having 3 fatty acids attached to the glycerol. While single pure triglyceride will have a definite melting point. As temperature increases the triglyceroide melt and fat softens. The process is basically “interest verification” i.e molecular rearrangement. As both margarine/shortening produce uniform, unbroken greasy film these are widely used in biscuits, confectionaries, ice cream, and chocolate/toffee. Etc.

By-products namely liquid soap and chain lubricants prepared fro lye obtained from soap stock (from bleacher) are widely used for cleaning of clothes and lubrication of conveyor chains of edible products respectively. Carbon di-oxide gas released from cracking plant is filled in cylinders (liquid form) and are used by bottlers and for multifarious applications. MANUFACTURING PROCESS:

Essentially production of margarine and shortening involves almost the same process of refining, bleaching and filtering, hydrogenation and deodorization like oil/ghee manufacturing unit. The basic difference, however is that in case of margarine/shortening ready oil after passing through the above mentioned process is mixed/blended with distill water in presence of emulsifier, antioxidant and vitamins in stainless steel tanks and then transferred to votator/cutter at constant flow and pressure. Here the blades scrap them to fine paste. The pasties then transferred to pinner/polisher to get a special shine commercially appreciated in the market. The steps involve in the process is briefly described hereunder. It is to be mentioned that every batch for hydrogenation will be maintained at different melting point based on the specific requirement of each customer:a) Refining (Neutralization)

Edible oil refining is done through etherification of free fatty acids, glycerol, mono and diglycerides by mixing alkaline solution of sodium hydroxide (caustic soda) at temperature ranging from 80 to 90 with proper agitation. The impurities mixed esterified products (Soap) is separated by settling/decanting process.

-: 6 :- BSA MARGARINEThe process involves the neutralization of free fatty acid contents of the oil with caustic soda. The edible oil, from storage tanks, in measured quantity, is obtained and pumped in to neutralization tank which is made of mild steel cylinder with a conical bottom. The oil is constantly stirred with the help of an electrically driven equipment. Steam is passed in to the tank and the temperature is raised to about 80 to 90 C.A measured solution of caustic soda and hot

water is then pumped into the neutralizing tank so as to neutralize the fatty acids which are present in edible oil.

The caustic soda and free fatty acids react with each other whereby the free fatty acids are neutralized resulting in a preciitate in the form of suspended particle, which is called “Foots” and is drained in to the soap stock tank. The oil free most of the free fatty acids is taken to the bleacher for further processing.

b) Bleaching And Filtering: In order to further remove traces of remaining esterified impurities (soap) and colour pigment of oil it is thoroughly washed with hot water and steam and then bleached with the help of fuller’s earth and activated carbon under vacuum wherein bleaching agents absorbs all the impurities of oil turn in to pale yellow colour. It is then passed through filter press for complete separation.

C) Hydrogenation It is the addition of hydrogen at double bonds in the fatty acid where mono-saturation acids are converted into polysaturated and semi-saturation to saturated. The process involves introduction of refined bleached oil in the “Autoclave” through heat exchangers to get saturated oil from un or semi-saturated oil by absorbing hydrogen in the presence of nickle catayst.

d) Post Neutralization:The hundrogenated oil is again refined in the post neutralizer but with different (low) concentration of caustic soda.

e) Post Bleaching: After post refining the oil is again bleached with fuller’s earth in the same vacuumed bleaching vessel and temperature conditions.

-: 7 :- BSA MARGARINEf) De-Odorization:

the refined/bleached (semi-un-saturated oils) and refined/bleached and hydrogenated (fully saturated oils) is charged in the deodrizer through heat exchangers wherein all volatile remaining free fatty aids and other impurities are sucked off by high level vacuum system at 220-250o C under “open steam” agitation.Up to this stage the process describe above is almost the same as empolyed in case of cooking oil/ghee units. After this stage process of margarine/shortening commence.

g) Blending: the blending of all above mentioned oils/vegetable fats will be done according to production planning. Unsaturated soyabean oil, 2-4 Di Nitro Benzy1 Toulene etc. are added in the

stainless steel blending tanks under agitation at 42-44o C. Normal blending ratio is given hereunder:

Products R.B.D.Un- + R.B.D. Semi+ R.B.H.D. + H20 + Emulsifier +Anti-Saturated Saturated Oil OxidantOil Oil (fully(Soyabean Oil SaturatedOil) Oil)

Ind. Margarine 10-12% 35-40% 35-40% 8-10% 0.01-0.1% 0.01%Shortening 8-10% 40-45% 45-50% ---------- 0.1%h) Votating/Cutting/Pasting: The blended products will introduced in the votator / cutter, which is three shell structure, where outer shell contains liquid foreon-22 and inner shell contains rows of high speed blades. due to the introduction of product from 42-44o C to 0 –25o C, the product will quickly solidity at the inner wall of the middle shell and simultaneously these high speed blades will scrap them in paste from. The same process will take place in Votator # 2 but at a higher tem temperature of –100C. here entire product will become grain less paste.

-: 8 :- BSA MARGARINEi) Polishing/Pinning: Polisher/Pinner is two shell and single shaft reactor. The outer shall contains liquied F-22 the inner wall of middle shell and rotating shaft contains special designed stainless steel pins. When product will enter from votator # 2, it will be hammered with high speed pins and consequently a portion of un-saturated vegetable fats will appear on the surface of the product giving a shining appearance to the product. The product is now ready for packing and deliver.j) Liquid Soap & Chain Lubricant Plant. Soap stock from nrutralizing tank is pumped in to evaporator having tube bundles and separating plates. The water contents of soap stock is evaporated. It is then fed to converter having water and steam jacket with agitation system. Here stock is formed in a fine paste for making liquid soap. Chemicals such as nonipol (2-4 Di Nitro Pheny1 Amino Propy1), potassium hydroxide and common salt is added in desired quantity according to required specification for liquid soap and chain lubricants. Soap stock having light yellow color containing oil emulsion and Beta Carotene when reacts with Potassium Hydro and alkaline group, it turns the appearance of soap stock in transparent shape. Products are identified on the concentration of water and PH value describe below.a) Liquid soap containing 70% water, PH 7.5-8.5 (Mild Alkaline)b) Detergents containing 50% water, PH 8-9 (Highly Alkaline)c) Chain Lubricant containing 30% water, PH 7-7.2 (Neutral) (Bio-Grease)

Usage:

Liquid soap is mainly consumed in dish washing plants of hotels, washing machines of laundries and by dyeing and bleaching factories etc. Chain lubricants which acts as a bio-grease is used in roller, bushes and ball bearing in conveyor system of all food processing industries like beverages, biscuits and toffees etc.

k) Carbon Di-oxide Gas (Liquid Form): Carbon di-oxide gas released from the cracking plant is compressed and filled in cylinders in liquid form.

-: 9 :- BSA MARGARINE1) Packing: Industrial Margarine/shortening need not to be chilled before packing/filling like cooking oil vegetable ghee. Industrial margarine/shortening would be packed in polythen bags in cartons of 16 Kg. Each . Liquid soap and chain lubricants would be packed in plastic drums of 50 kg. Each

Carbon dioxide gas, as such would be sold directly to the consumers with their own arrangement of filling system inclusive of compressors and cylinders.

Production process flow chart is given at next page.

Natural Gas & Steam Cracking/Reforming Process Description:At first stage, the natural gas (Methane), will in sulfur removal tower, where all the traces of sulfur will be removed in another twin towers containing activated carbon catalyst.

At second stage the dry steam and sulfur/iron free will be mixed to gether and will enter in the reformer through top mounted super heaters, which gains heat energy form flue gases of the reformer burners. The methane and steam mixture will start cracking at the temperature of 550oC, (in super heaters installed on top of reformer). At this stage 20-25%cracking process will be perfomed. The semi cracked mixture will completely cracked in the reformer and will start reforming in form of Co2 and H2 Gases (96-97% reforming will be completed at this stage) and small quantity of carbon mono-oxide and oxygen will be left untreated.

At third stage, the mixture of H2, CO2 and O2 will convertor will enter in low temperature shift convertor, where all carbon di-oxide and oxygen gases will be left as gases mixture.At fourth stage, the reacted gases mixture from H.T.S. convertor will enter in low temperature shift convertor, where all carbon mono-oxide and oxygen will be removed and remaining hydrogen carbon di-oxide gases will be lefts as gases mixture.

At fifth stage, the reacted gases mixture will enter in the mono ethylene amine tower (MEA TOWER), where the carbon dioxide gas of thh mixture will be absorbed in the MEA solution, (at ambient temperature)and hydrogen gas will be released for collection.

At sixth stage the MEA rich solution will enter in the re-boiler, where it will be boiled up to 105-110oC through steam heating. All carbon dioxide gas will evolve from stripper of MEA re-boiler, which will pass through heat exchangers and coolers and will be available for collection. The MEA solution will be sent to MEA tower througvarious heat exchangers/coolers for Co2 absorption again.

-: 10 :- BSA MARGARINELAND AND LOCATION

The sponsors reportedly own a factory building one plot No. A/327,SITE, Nooriabad, District Dadu. The area of plot as per drawing is 617x288sq. fts or 16,515 sq. meters approx. Eqt. to 4 acres. It is located at 94 KM on Karachi-Hyderabad Super Highway and very near to SITE Office, Nooriabad. Infra-structure facilities are available at the plot. However, presently electricity and water lines are disconnected.

The cost of land including its development is estimated at Rs.600.000/- on the basis of average purchase price @ Rs.150,000/- acre.

BUILDING & CIVIL WORKS:

Existing Factory Building:

Single storey building reported constructed during 1986-87 have an approx. covered area of 1424 sq.m. and a height of 14 feet as pr drawing from K/s. engineering Associates submitted by the sponsors. The construction of existing factory building is RCC having pre-fabricated roof slabs of approx. 225,000 and 45,000 liters respectively is constructed. Keeping in view the quality of construction and age of factory building its estimated cost been worked out at Rs 3.522 million as per details in Annes-I .

The factory building was constructed for M/s. Bhittai industries, a rubber cots and aprons manufacturing unit financed by NDEF in 1987 Later in 1989 they shifted entire machinery to Korangi in view the permission of NDFC and Sindh Government and presently under is lying vacant. The premises (including land and building), however, is reportedly under lien with NDFC and shall be cleared by the sponsors for creating with IDBP.

Proposed Modification / Expansion:

In order to use the present factory building for proposed margarine/shortening plant the factory was inspected on January 31,1993 and it was observed that machinery other than refinery can be accommodated in the existing premises. Hence it is proposed that a portion of the factory building having a covered area of 372 sq. meters would be modified and one more floor would be constructed to house refinery machinery. In this connection, it is proposed that roof slabs would be removed and two floor refinery section would be constructed at 22 feet and 40 feet level with the support of additional 4/5 new columns. Beside, a new ACC construction would be made to accommodate boiler. It is estimated that a cost of Rs.2.116 million would be incurred to undertake modification/ expansion as per details given at Annex-I


PLANT AND MACHINERY:

The machinery proposed to be fabricated/manuufactured locally shall mainly be comprised on the following:

a) Pre-Refining Machinery

Including storage tanks, vessels including neutralizer and bleacher, pumps filters, steam vacuum system, piping/values and fittings etc.

b) Hydrogenation Machinery:

Including hydrogenation autoclaves, tanks heat exchangers, filter press and catalyst mixing tanks etc.

c) Post Refining machinery:

Including post bleacher, post refiner tanks and pressure vessels, filter press and deodorization vessel etc.

d) Blending Section:

Including blending tanks, pumps and gauges etc.

e) Margarine Plant:

Including blending tanks, votator/mixer, pinner/polisher and chilling system etc.

f) Liquid Soap & Chain Lubrication Processing Machinery:

Including emulsion convertor, evaporators and vacuum system etc.

g) Utilities:

Including package type boiler, water softening plant, electrical equipment and installation, hydrogen gas generation system comprising on cracking plant, gas holders and gas compressors, etc.


h) Misc. Machinery Including Standby Generator And Workshop Equipment’s etc:

Almost all the machinery would be domestically fabricated/manufactured. The tanks and vessel are M.S welded construction with top and bottom dished ends with agitation system etc. Margarine Plants is stainless steel cylindrical construction with rotating cutter/pinner. The total cost of machinery / equipment on the basis of quotation from M/s. Tech Engg, and others is estimated at Rs.28.650 million.

Bank shall finance Rs. 24.150 million under LMM and Rs.3.800 Million under BOR. Item such as crude oil storage tanks, temperature indicators, gas analyzing kit, gas flow meters, hydrogen gas compressors and workshop equipment worth Rs.1.906 million are not eligible under LMM financing. Moreover item such as chilling system of margarine plant, boiler and air compressor containing under LMM. All these and other item including standby diesel generating sets shall be financed from BOR. The balance cost of machinery worth Rs.0.700 million shall be financed by sponsors from their own resource.

RAW MATERIAL:

The raw material required is edible oil. Other are processing chemicals and additives.

The proposed unit would sue soybean and R.B.D. Palm oil: the normal blending ration begin 32:68 Chemicals used during process are absorbent like caustic soda, fuller’s earth activated

carbon (for soybean oil) and antioxidant (to create activated oxygen free area) etc. Nickel catalyst is required to expedite the processing.

Additives namely citric acid (food grade), phosphoric acid (for soybean oil) and vitamin A&D etc. are used . filter cloth is used in filter press. Nonipol (2-4Di phenyl amino propyI) and potassium hydroxide are used for clarification of liquid syrup obtained from soap stock. Various types of catalyst are used in gas cracking plant.

Packing materials include polythene bags, corrugated cartons and plastic drums.Imported raw materials constitute 95% of total raw materials.

UTILITIESPOWER:

The project would require connected load of 1000 Kw. Maximum demand is estimated at 800 KW. Besides, standby electric generator of 320 KVA is proposed to be acquired for meeting power requirements for boiler, hydrogen checking plant and votator/mixer etc.

-: 13 :- BSA MARGARINE.

Furnace Oil/Gas:

Boiler is package type and natural gas fired. It is estimated that gas eqvt. To 2000 tonnes of oil is required annually.

Water:

To, meet water requirement for the project estimated to 50,000 litres per day at an estimated cost of Rs. 500.000/- annually. The sponsors shall get restored the water supply available at plot from SITE Authority, Nooriabad.

PERSONNEL:

On production side 100 personnel would be required in various categories including shift engineers, boiler attendant, plant operators and chemist etc. on administrative side 24 personnel including required whereas on sales side 6 personnel would be needed.

TRANSPORTATION:

Hired transport would be used for raw material as will finished product. However, Rs.1.500 million has been earmarked for purchase of one small tanker and othervehicles to be used for day to day business.

ENVIRONMENTAL POLLUTION HAZARDS:

Excess carbon di-oxide released from the plant would be observed in water pose bi environmental pollution hazard.

CONSTRUCTIO SCHEDULE:

The proposed project is expected to commence commercial production by February, 1994 as detailed in Annex-III

- 14 - BAS MARGARINE

IV- COST OF THE PROJECT & FINANCIAL PLAN

I. COST OF THE PROJECT

Total fixed cost of the proposed project has been estimated at Rs. 39.066 million as per detail given in Annex-IV. The initial working capital to be contributed by the sponsors has been estimated at Rs. 8.534 million (annex-V). The summary of the total cost is given below:

S. NO. PARTICULARS (Rs. In 000)

COST ALREADY MET

COST OF BE MET

TOTAL APPRAISED COST

1. Land2. Building 3. Machinery (Installed Cost) 4. Vehicles 5. Furniture / Fixture 6. Pre-Operating Expenses

603522 2116

302761500500552

6005638302761500500552

Total Fixed Cost:7. Net Initial Working Capital

4122 349448534

390668534

Total Cost 4211 43478 47600

II. FINANCING PLAN

The above cost has been proposed to be financed as under:

(Rs. In 000)

TotalCost

Debts:IDBP L/C Assistance (LMM) 24150IDBP L/C Assistance (BOR) 380Directors’ Loan 650

Paid Up CapitalSponsors Contribution 19000

Total 47600


III. DEBT EQUITY RATION:

The debt equity ratio in the fixed cost of the proposed scheme is estimated at 73:27 The debt equity ratio in the overall cost of the project will be 60:40 which is considered satisfactory. The sponsors stake in the total cost of the project in Rs. 19.650 million i.e. 41%.

IV. SECURITY

The proposed IDBP local currency loan of Rs. 27.950 million (Rs. 24.150 million under SBP Scheme for LMM and Rs. 3.800 million from Bank’s Own Resources) will be secured by a first charge on the fixed assets of the company value estimated at s. 39.066 million on completion of the project. Project assets will provide security coverage of 1.37 times. The sponsors will provide outside collateral in shape of urban property to the extent of 25% of financial assistance worth Rs. 6.990 million. The directors of the company will also provides their personal guarantees.

These security arrangements are considered satisfactory.


V- MARKET PROSPECTS

COST OF THE PROJECT

Margarine was developed by French Chemist H. Mege-Mouries in the late 1860’s.

In Pakistan margarine (Industrial and Table) was introduced by M/s. Lever Brothers in 1985 under the brand name of “Blue Band Margarine”.

Now, industrial margarine is also being manufactured by M/s. Agro Processor (Pvt.) LTd., Karachi. Another two new units in Karachi namely M/s. N.Y. Oil Mills (Pvt.) Ltd. and M/s. Saigal Ghee Mills (Pvt.) Ltd. would likely to commence production of margarine in mid of 1993.

Product Definition

Margarine and shortening are diversified edible fat products and can be classified under the category of less cholesterol caloric contained food products obtained from various types of vegetable fats of saturated categories.

Types

There are mainly two types of margarine i.e. Table Margarine and Industrial Margarine, whereas shortening is also a type of industrial margarine which is without water.

Uses of Margarine / Shortening

Table margarine is a partial substitution of butter used by house holds whereas industrial margarine / shortening is used a s fat in bakeries items (patties, cream roll, ties, baker khani pillar sticks etc.) and other industrial end-users like confectionaries, ice cream and biscuits manufactures.

RAW MATERIALS

The basic raw materials are BD palm oil and soya bean oil, besides, other additives namely citric acid (food grade), phosphoric acid (for soya bean oil) and vitamin A&D


The import of palm oil and soya bean oil during last five years are given in the following table:

Table – IImport of Oil

(Qty: Tons)

Year Palm Oil Soyabean Oil 1987-88 458256 5003131988-89 475007 3837441989-90 594131 632191990-91 687957 2716651991-92 886000 N.A.

Source : Foreign Trade Statistics

These edible oil are being imported mainly from Argentina, Malaysia and the USA

DOMESTIC PRODUCTION CAPACITY

At present four units in organized sector-three units in Sindh and one in Punjab (R.Y. Khan) are engaged in the production of margarine with a combined installed capacity of 22800 tons, details of which are given below:

S.No. Name Capacity (M.Ton)1. M/s. Lever Brothers Pakistan Ltd. Rahim

Yar Khan 7500

2. M/s. Agro Processors & Atmospheric Gases (Pvt). Ltd, Karachi

900(22800)

3. M/s. Nutri Pak Food Industries (Pvt) Ltd. Karachi

5400

4. M/s. H.M. Oil Mills Ltd, Karachi 9000 (under implementation)

5. M/s. Saigal Ghee Mills (Pvt) Ltd. 24000

Total Installed Capacity by 1992-93 46800

NOTE: * National Bank of Pakistan Sanctioned financial assistance to M/s. Saigol Ghee Mills (Pvt) Ltd. in 1990 for expansion of their existing ghee unit for making industrial margarine with an installed capacity of 24000 tons. The unit is expected to commence production in July, 1993.


As can be seen from above table that industrial margarine is being produced by ghee/cooking oil mills and there is no sales tax/excise duty on production of these items whereas production of margarine in subject of sales tax (12.5%). Therefore, they hide the production of margarine and market their product in the name of “Industrial Fat”

Thus authentic production figures of margarine are not available however, it was reliable learnt that M/s. Lever Bothers, Agro Processes and Nutri Pak are working at 80% capacity while the remaining unit namely H.M. Oil Mills has just started production and expected to utilize 50% of its installed capacity in 1992-393 on the basis of capacity utilization, the estimated production therefore was around 11040 tone during 1991-92

DEMAND FOR INDUSTRIAL MARGARINE

The demand for industrial margarine / shortening stems for bakeries, biscuit, confectionary and ice cream manufacturers and to the some extent from “Desi Sweet” producers like Ahmed Food Industries (Pvt) Ltd. and by hotels / restaurants for frying purposes.

The demand for industrial margarine / shortening can be worked out by considering the following factors of industrial end-users and bakeries:

i. Installed capacity, capacity utilization and percentage of use by end users (biscuit, confectionary and ice cream manufacturers);

ii. Total number of bakeries and their average annual consumption of industrial margarine

1. Installed Capacity of Biscuit, Confectionaryand Ice Cream Manufactures

The installed capacities of industrial end users of industrial margarine / shortening is given below:

Table – IIInstalled Capacities of Biscuit, Confectionary and

Ice Cream Manufacturers in Pakistan(Qty: in Tons)

Province Biscuit / Wafers Confectionary (Toffees etc.)

Ice Cream

SindhPunjabBalochistanNWFP/IslamabadMisc.

245721034448003328

196001951011801457

32523616448

1604Total 43066 53754 8920

Source: Market Enquiries


2. BAKERIES

In order to ascertain the demand for industrial margarine by bakeries a sample survey of bakeries located in five cities namely Lahore, Faisalabad, Rawalpindi/Islamabad and Peshawar was undertaken. The details of daily consumption pattern of industrial margarine used by bakeries are summarized below:

Table – III

Name of City Bakeries Surveyed

Bakeries Not Using Margarine

Ice Cream

LahoreFaisalabadRawalpindi/Islamabad PeshawarKarachi

2720321110

98312

33%40%9%9%20%

Total 100 23 23%

Table – IV

Daily Consumption

Lahore Faisalabad Pindi/ Islamabad

Peshawar Karachi Total

No. of Bakeries MargarineUsage Kgs/DailyAv: (Kgs. Day)

27

37313.82

20

1296.45

32

41012.81

11

13212.00

10

14214.2

100

118611.86

- Margarine consumption of a bakery per annum = 4.2 tons- No. of Operating days = 360

Number of Bakeries:

The total number of bakeries in Pakistan as informed by various bakery owners / association are around 17000 to 18000. It is pertinent to mention that total number of bakeries as listed by Federal Bureau of Statistics (FBS) were 6281 in 1983-84 in the country as per PSIC Survey in 1987. The survey conducted by Punjab Small Industries Corporation (PSIC) in 1987-88 have taken a growth rate of 6% to 25% for bakeries during the period 1983-88. Assuming a conservative growth of 10% per annum, the bakery units in the country would number between 17000 to 18000 and the same seems to be justified

ANNEX – VIII (Page-5)

M/S. MARGARINE (PVT) LTD.

B-Furnace Oil

Quantity / Ann 2000@ Rs. / Ton 2400Furnace Oil = Rs. 4800

C-WaterQuantity / Ann 5000@ Rs. 100Total Cost = Rs. 500

Power, Water, Fuel & Other (Year wise)

Year of Operation

Yr 1 Yr2 Yr 3 Yr4 Fixed Cost 1740 1740 1740 1740Variable Cost 5806 6387 6968 7548

7546 8127 8708 9288

(1) Depreciation (Rs. In 000)

Cost Rate % AmountMachinery 30276 0.1 3028Building 5638 0.05 282

3309

(2) Depreciation (Rs. In 000)

Cost Rate % AmountFurniture / Fixture 500 0.15 75Building 1500 0.2 300

375

ANNEX-IX


Estimate of General & Admin Expenses & Selling Expenses

Years of Operation General & Admin Expenses

Yr. 1 Yr. 2 Yr. 3 Yr. 4

Salaries – Office SalariesPrinting & StationeryPostage, Telephone, Telegram, ElectRent Rates, Taxes & InsuranceTraveling ExpenseLegal & EntertainmentDepreciationPre-Operating Expenses Written off

1557200300100500100375110

1635250350125600125375110

171330040015070015375110

1794350450175800175375110

Sub-Total (A) Total 3242 3570 3898 4230

Packing & Selling Expenses Yr. 1 Yr. 2 Yr. 3 Yr. 4Year of Operation Commission & Distribution 100%

22285470

25766146

28116709

30477276

(2) Office Sales Staff Salaries

(Aamir) Office Salaries) No. Salary Rs.Per Month

Salary Rs.Per Annum

General ManagerC. Accountant AccountantAccountant Asstt.Labour OfficerSecurity OfficerStore KeeperTypist / ClerksDriverPeonChowkidar

11221114344

150008000400030003000300025001500150010001000

18000096000960007200036000360003000072000540004800048000

Sub-Total (A) Total 768000

ANNEX – IX (Page-2)


2. (B) Sales Staff No. Salary Rs.Per Month

Salary Rs.Per Annum

Sales ManagerSales OfficerSales Assistant

123

800035002500

960008400090000

Sub-Total 2 (B) 270000TOTAL 2 (A+B) 1038

(Rs. In 000)

Year of Operation Yr. 1 Yr. 2 Yr. 3 Yr. 4Basic Salary 1038 1038 1090 142

Increment 5.00% 52 52 54Total Basic Salary 1038 1090 1142 1196

Fringe Benefits 50.00% 519 545 571 598

Total Office Salaries 1557 1635 1713 1794

ANNEX-X

M/S. BSA MARGARINE (PVT) LTD. (PROPOSED)

Financial Expenses

Year Yr. 1 Yr. 2 Yr. 3 Yr. 4IDBP L/C Assistance Cash Back Finance

10345649

20696302

20696879

20697151

Total Financial Expenses 6683 8371 8947 9520

ANNEX-X-A

M/S. BSA MARGARINE (PVT) LTD.

COMPUTATION OF RESALE PRICE

COMPUTATION OF RESALE PRICE

1. Bank Finance 24150 38002. Resale Date 1 Feb, 93 1 Feb, 932. Date of Com Production 1 March, 93 1 March, 934. Mode of Repayment (½ Year) 16 205. Date of Repayment of 1st 1 Sept, 94 1 Sept, 946. Rate of Markup % 8 18.57. Rate of Markup % 22 22

Calculation of Mark up During Construction and Grace PeriodL.M.M.

Date of Disbursement AmountDisbursed

Debt Balance

Pd of Mark-up

Mark-up @8 Ps 22 Ps

0.25 1 Mar, 930.60 1 Sept, 930.15 1 Feb, 94

6038144903623

6037.520527.524150

6519

2426843059

66418828412

3985 10958

Amount of Installment @ 8 Paisa Rs = 2322 3958Resale Price @ 8 Paisa Rs. = 37146 63322Profit of the Bank Rs. = 12996 39172

B.O.R.

Date of Disbursement AmountDisbursed

Debt Balance

Pd of Mark-up

Mark-up @8 Ps 22 Ps

0.25 1 Mar, 930.60 1 Sept, 930.15 1 Feb, 94

9502280570

95032303800

6519

882491113

105296

13241450 1724

Amount of Installment @ 16 Paisa Rs = 368Resale Price @ 16 Paisa Rs. = 7356Profit of the Bank Rs. = 3556

Amount of Installment @ 22 Paisa Rs = 404Resale Price @ 22 Paisa Rs. = 8084Profit of the Bank Rs. = 4284

ANNEX- XI

M/S. MARGARINE (PVT) LIMITEDTAX COMPUTATION

TAX HOLIDAY

ANNEX-XII

M/S BSA MARGARINE (PVT) LTD.

CASH FLOW FORECAST STATEMENT

Year End of Const. Pd

Yr 1 Yr 2 Yr 3 Yr 4

Sources of Funds:Operating ProfitAdd Depreciation & Amortization

155173795

175923795

191593795

212143795

Total Funds from Operation 0 19312 21387 22954 25009

Paid-up Capital :Sponsors

IDBP L/C Assistance (LMM&BOR)Director’s Loan (P.B)Increase in Short Tem Borrowings Increase in Creditors

1900027950

650

03095116629

35811663

31581663

31391663

47600 663921 26632 27775 29811Including Capital Expenditure 39066

Interest / Profit on:Shot Term Borrowings 5649 6302 6879 7451

Amortization of:IDBP L/C LoanDividendWorker’s Participation Inch. in Current Assets

278100

55356

55632850442

6854

55632850461

5690

55632850511

5661Total 39066 63785 22010 21442 22035

Cash Surplus During the YearCash at the Beginning of the YearCash at the End of the Year

8534

8534

31078534

11641

46221165116263

63331626322596

77762259630372

ANNEX –XIII


Forecast Balance Sheet

Year End of Const. Pd

Yr 1 Yr 2 Yr 3 Yr 4

Current Assets CashStocks:Stores & SparesDebtors

8534 1165444044

17211140

1626349074

25812878

2259653543

30114056

3037257984

34415233

Total 8534 66997 78472 90495 103932

Fixed Assets Net. 39066 35271 31476 27681 23886

Total Assets 47600 102268 109948 118176 127818

Current Liabilities Short Term Borrowing’s Worker’s Participation FundDividendIncome TaxCreditors

30951442

28500

16629

34532461

28500

18292

37690511

28500

19955

40829585

28500

21618Total 50872 56135 61006 65882

Long Term Liabilities IDBP L/C AssistanceLess: Markup on L/C AssistanceDirector’s Loan (NBP)

4450216552650

4172015517

650

3615813448

650

3059511380

650

250339311650

Total Liabilities 2860028600

2685377725

2335979495

1986680872

1637282254

Owner’s Equity Paid up Capital Sponsor’s Retained Earnings

190000

190005543

1900011453

1900018305

1900026564

Total Equity 19000 24543 30453 37305 45564

Total Liabilities & Equity 47600 102268 109948 118176 127818

ANNEX – XIV


BREAK EVEN ANALYSIS

Operational Total

Yr 4 Fixed

Variable

Raw MaterialFactory Wages & SalaryDepreciation & AmortizationWater, Power & FuelRepair & MaintenanceStores & SparesExcise DutyW.P.P. FundM. OverheadFinancial ExpensesSelling ExpensesG.& Admn Expenses

216181455337959288718573

38081585

4626952030473744

0227637954644359

000

023135712

01872

2161812276

04644359573

38081585

2313380830471872

Total 294712 20972 273740

Sales Value of Production = 304654Break Even Analysis = 206693Capacity Utilization Required = 44Margin Safety = 21

ANNEX – XV


Internal Financial Rate of Return

Year Capital Qutlay

Operation Income

Depreciation Amortization Expense

Worker’s Participation Funds

Income Tax

Net Cash Inflow

012345678910

47600

1500500

--11953

1551717592191592121420738207382073820738207383795

3795379537953795379537953795379537953795

442461511585560560560560560560

0000066006720681868976897

-476010188702092622443244242397222472168721715529029

Rate = 43(Enter Rate upto NPV=0) = -153Internal Financial Rate of Return = 43

Salvage ValueLend 600Building 2819Furniture / Fixture 0Vehicles 0W. Capital 8534

11953

ANNEX – XVI


Internal Economic Rate of

Year Capital Qutlay

Sales Board Price

Raw Material at Border Price

Labour Cost

Overhead Exp

Gen. Admn & Selling

Exp

Total Cash

012345678910

39066

1500500

-11953

144794167379182694197987198800198800198800198800198800198800

120209132230144251156272156272156272156272156272156272156272

4118432345374761499549954995499549954995

11760130191411215206152111521115211152111521115211

3428402645114997515951595159515951595159

-3906652791378115283167521716315663166631716317163

Rate = 31.68(Enter Rate upto WPV=0) = 121Internal Economical Rate of Return = 31.68

Salvage ValueLend 600Building 2819Furniture / Fixture 0Vehicles 0W. Capital 8534

11953

ANNEX-VIII (PAGE-3)


Factory Wages & Salaries

(a) Fixed (Rs. In 000)

Types of Staff No. Salary RPer Month

Salary Rs.Per Annum

Production ManagerShift ManagerBoiler supervisorPlant OperatorSkilled WorkerBoiler AttendantTechnician Chemist Lab. AssistantStore KeeperSecurity Men

1412750441422

120006000400025001500200020004000200020002000

14400028800048000810000900000960009600048000960004800048000

Sub Total (a) 2622000

Year of Operation Yr. 1 Yr. 2 Yr. 3 Yr. 4Basic Salary 2622 2622 2753 2894Increment of % 0.05 131 139 145Total Basic Salary 2622 2753 2891 3035

Fringe Benefits @ 0.5 1311 1377 1445 1518

Total factory Wages Salaries 3933 4130 4336 4553

ANNEX-VIII


Domestic Cost per Dollar Earned

(For the 4th Year of Operation 19961-1997 (Rs. In 000)

a) Charge on Domestic Capital i. Markup on IDBP local car assistant 2069ii. Markup on shot term borrowings 7451iii. Markup on long term Ptc’s 0iv. Differential Amount of interest onIDBP L/C Loan @ 5% 0

9520

b) Depreciation on Domestic Capital :i. Machinery & Equipment @ 10% p.a 2865ii. Building @ 5% p.a. 282iii. Furniture / Fixture @ 15% p.a. 75iv. Vehicles @ 20p.a 300v. Pre-Operating Expenses @ 20% p.a 110

3632

c) Current Domestic Cost: i. Raw Materials 156272ii. Water, Power & Fuel 9288iii. Repairs & Maintenance Overheads 718iv. Stores & Spares 573v. Other Manufacturing O/H 4626vi. Factory Wages & Salaries 4553vii. Admin and Selling Expenses 6791

182822Total Domestic Cost (A+B+C) 195974 195974

ANNEX-XVIII (Page – 2)


2. Foreign Exchange Cost

a. Charge on DBP Foreign Currency Loan @ 9% 0

b. Depreciation on Imported Machinery @ 10% 0

c. Stores & Spares d. Repatriation of Profit / Royalty / Equity 0

Total Foreign Cost (Aamir+B+C)

3. Foreign Exchange Saved / Earned 197987Manufacturing this product Mix

4. Net Foreign Exchange / Earned Manufacturing this product mix at home (3-2)

5. Net Foreign Exchange / Earned in terms of USA Dollar @ Rs. 26/US 7615

Foreign Exchange rate of the prod. 25.74

ANNEX-XVIII

M/S BSA MARGARINE (PVT) LTD.

SENSITIVITY ANALYSIS

As per Project

report (4th

Year

Cost of Raw

Materials Higher by

Cost of Project

Higher by

Cost of Project & raw

materials higher by

10% & 20%

Sales price lower by

10%

304651 304651 304651 304651 274186Cost of Sales:

Raw Material Excise DutyWater, Power & FuelLabour CostStores & SparesRepairs & Maint.Other Mfg Overheads Admin. & Selling Exp.(Less: Dep/Amt)Dep. & Amt. of Prela. Exp.Financial Exp.Stock Adjustment

216181380819288455357371846266791

37959520-1170

237799380819288455357371846266791

37959520-1170

216181380819288455357371846266791

455411424-1170

23779938019288455368886255526791

455411424-1170

216181380819288455357371846265336

37959520-1170

Total 292957 314575 296804 318422 291502Profit after Financial Exp. Workers Participation FundNet Profit B/TLess: Income Tax

11694585

111090

-9924-496-9428

0

78483927455

0

-13771-689

-130820

-17316-866

-164500

Net ProfitAdd: Depreciation

Financial Exp.Cash Generated from Operations

111093795952024424

-9428379595203887

745545541142423433

-130824554114242896

-1645037959520-3135

Applications:

Financial Exp.Liquidation of Longer Loan

95203494

95203494

114244193

114244193

95203494

Total Applications:Debt Servi Coverage (Times)

130141.88

130140.30

156171.50

156170.19

13014-0.24

ANNEX-XIX


EFFECTIVE ATE OF PROTECTION(4th YEAR)

(Rs. In 000)

A. VALUE ADDED (DOMESTIC PRICES):

i. Value of Production: ii. Less: Cost of Production

Raw Material Stores & SparesUtilitiesRepairs & Maintenance Other Overheads

Total (ii) :Value Added at Domestic Prices ;

209065573988714

4626

304266

22426680385

B. VALUE ADDED (WORLD PRICES) :

i. Value of Production: ii. Less: Cost of Production

Raw Material Stores & SparesUtilitiesRepairs & Maintenance Other Overheads

Total (ii) :Value Added at Domestic Prices ;

152715573

9288714

4626

197987

16761630071

ERP = Value Added at Domestic Prices – Value added at Would at World Prices Value Added at World Prices

ERP = 80385 – 30071 30071

ERP = 67%

EXPLANATORY REMARKS;

ERP has been worked out on the following basis: 1. Imported aw Material at C&F and Local Raw Material at 50%2. Sales at Border and Domestic Prices 3. Other Inputs at Project Cost


The survey of bakeries reveal that out of 100 bakeries (sample) 21 (233%) bakeries donot use margarine; eithr tehey own margarine by crude method or use butter. The bakeries using butter are fewer in number.

The summary of installed capacities of major end users, their percentage of capacity utilization and usage are of industrial margarine by each end user in summarized in below table:

TABLE –VSUMMARY OF INSTALLED CAPACITY OF END USER AND

USAGE RATE OF MARGARINE / SHORTENING

The installed capacities of major end users alongwith usage are of margarine / shortening is given below:

Sub-Group Installed Capacity (M.Ton)*

Capacity Utilization (Estimated

%)

Usage rate of Margarine/ shortening

by weight ******

A. BiscuitsManufacturing

B. Confectionery Manufacturing

C. Ice Cream Manufacturing

D. Bakery ProductsManufacturing (No.)

43044

53747

8920

17800**

38740 (90%

48372 (90%)

8028 (90%)

13700***

4.2 tons/yr/bakery.****

Source : Table II, III & IV.

* The details regarding break-up of capacities has already been worked out separately in Table IV.

** The estimated total number of bakeries in Pakistan based on survey / enquiries.

*** Bakeries using industrial margarine (i.e. 77% of 17800)

**** he usage ate of industrial margarine as revealed by the sample survey is 4.2 tons/bakery/annum (Page I)

***** Based on enquiries from manufacturers / end users


One the basis of the foregoing analysis and Table-V the projected demand has been worked out the following assumptions.

Assumptions:

i. No. of Bakeries using margarine :13700

ii. Conservative usage rate: 4.0 tons/bakery/annually on the basis of survey.

iii. Growth rate in demand has been taken conservatively at 55 per compatible with change in dietary habits 1% increase in disposable in come 1% and 3% increase in population.

TABLE-VIProjected Demand

Year Bakery Demand Industrial Demand Total Demand1992-931993-941994-951995-961996-97

5480057540604176343866610

76388020842188429284

6243865560688387228075894

Source: IDBP Estimates

Estimates of Supply:It is been assumed that during 1990-91 three units namely M/s. Lever Brothers, M/s. Agro Processor and M/s. Nutri Pak have utilized optimum level of efficiency at 80% of their installed capacity and supplied produced 11040 tons of industrial margarine.

TABLE-VIIFuture Supply Schedule

Year Total Supply (Tons)1991-92 110401992-93 11040 + 4500a + 3000b 185401993-94 11040 + 5400 + 12000c 320401994-95 11040 + 6300 + 14400 + 9000d + 9000 539401995-96 11040 + 4800 + 16800 + 10800 + 10800 614401996-97 11040 + 4800 + 19200 + 12600 + 12600 67440

Source: IDBP Estimates

Assumptions:Capacity Utilization at 50%, 60% 70% and 80%a. M/s. H.M. Oil Mills, Karachi (9000 tons)b. M/s. N.Y. Oil Mils, Karachi (6000 tons)c. M/s. Saigal Ghee Mills, Karachi (24000 tons)d. M/s. Pan Asia Food Products, Nooribad (19000 tons)e. M/S. MARGARINE (Pvt) Ltd. Nooriabad (19000 tons)


TABLE-VIIDemand / Supply Gap

(Tons)

Year Total Demand Total Supply Gap1992-931993-941994-951995-961996-97

6243865560688387228075894

1854032040539406144097440

43898*3352014898108408454

Source: Table VI & VII

* Presently the gap is being bridged by using margarine / fats made by crude method and / or slightly by butter.

THE PROPOSED SCHEME

The proposed scheme envisages to producing industrial margarine / shortening and by products.

THE PROPOSED PRODUCT MIX:

i. Main Products: Industrial Margarine/Shortening 18000 tons/annum

ii. By-Products: Liquid Soap 1800 tons/annumChain Lubricants 3500 “ “Carbon Di-Oxide 150 “ “

THE PROPOSED MARKETING MIX:

The intended marketing mix of M/S. MARGARINE would be as follows:

1. The Product:

The proposed product is industrial margarine/shortening which is used with different melting points by bakeries, confectioners, ice cream makers where as shortening is used by biscuit manufacturers. M/s. Lever Brothers are marketing their product in the brand name of “Uni Puff/Master Puff.” The brand name of Agro Processor’s product is “Taqat”, whereas “Maza Industrial Fat” is being marketed by M/s. M.H. Oil Mills.


2. PRICE:

The intended ex-factory price of 16 kgs. Carton would be Rs. 380/-

3. BY-PRODUCTS

1. Liquid Soap Rs. 12000/- ton2. Cain Lubricant Rs. 14000/- ton3. Carbon Di-oxide Rs. 45000/- ton

4. PROMOTION

The samples of products shall be provided to the bakeries to the bakeries and other industrial end-users for test / use.

5. PLACE

M/S. MARGARINE proposed to appoint distributors in main cities of Pakistan especially in Karachi and other parts of Sindh.

Manufacturer

Distributor

Direct Purchases Door to Door Delivery

CONCLUSION

From the foregoing analysis, the conclusion drawn that proposal of M/S. MARGARINE (*Pvt) Ltd., Nooriabad to setup an industrial margarine / shortening manufacturing unit would not face difficulty in marketing their product if they could produce good quality product and execute an efficient marketing / sales promotion strategy.


VI- FINANCIAL PROJECTIONS

1. PROFITABILITY

The projections of financial operation of he proposed project are given in Annex-VI. A summary is given below:

1 st Yr. 2 nd Yr. 3 rd Yr. 4 th Yr. Sales RevenueGross ProfitOperating ProfitNet Profit before TaxNet Profit after TaxRatios (%)Gross Profit to SalesOperating to SalesPre-Tax Profit to SalesReturn on Owners’ EquityReturn on Capitalization

222802209881551783938393

9.426.963.7738.5519.05

257553237381759287618761

9.226.863.4031.8620.58

281120258681915997019701

9.206.823.4528.6421.21

30456128491212141110911109

9.356.963.6526.8122.13

The ratios of gross profit to sales, operating profit to sales and pre-tax profit to sales expected to be achieved are considered satisfactory from profitability point of view.

2. DEBT SERVICE COVERAGE

The debt servicing capabilities o the project for the first four years would be as follows:

1 st Yr. 2 nd Yr. 3 rd Yr. 4 th Yr. SOURCES Net Profit after TaxAdd: Depreciation and Amortization Financial Charges

83933795

6683

87613795

8371

897013795

8947

111093795

9520Total 18870 20926 22443 24424

Liquidation of:IDBP L/C AssistanceFinancial Expenses

17476683

34948371

34948947

34949520

Total 8430 11865 12441 13014

Debt Service Coverage (Times)

2.24 1.76 1.80 1.88

Debt service coverage as indicated above reflects availability of a satisfactory safety margin.


3. BREAK EVEN ANALYSIS

The project will be break even at a sales value of Rs. 206.693 million requiring capacity utilization of 44 per cent (Annex-XIV). This can be achieved with the normal production efficiency.

4. CASH FLOW

Internally generated funds are expected to be sufficient enough to service IDBP’s loan and pay 15% dividend from the first year of operation to be share holders. The company would be maintaining satisfactory liquidity level after paying the above mentioned dividend (Annex-XII)

5. INTERNAL FINANCIAL RATE OF RETURN (IFRR)

The IFRR of the proposed project works out to be 43% (Please refer to Annex-XV). IFRR is high due to high turn over as compared to capital cost of the project.

6. SENSITIVITY ANALYSIS

Sensitivity analysis at Annex-XVIII of the project under different assumptions has been carried out. The project is highly sensitive to decrease in selling prices and increase in raw material cost. At present circumstances, the prices are not likely to decline. Increase in raw material prices is reflected in the end product’s price. The recent increase of Rs. 0.50 Kg and Rs. 1 kg in the prices of palm oil and soyabean oil has resulted in increase of margarine price from Rs. 21.50 kg to 24.60 kg.


VII- ECONOMIC EVALUATIONS

1. CONTRIBUTION TO GNP

The project after implementation would contribute to the GNP of the country as under

1 st Yr. 2 nd Yr. 3 rd Yr. 4 th Yr. Value of ProductionLess: Intermediate InputsRaw Material Stores and SparesWater, Power and Fuel Repairs & Maintenance Other Mfg. Overheads Rent, Rates, Taxes & Ins. Postage, Teleph, Telgm, ElecStationary & Printing Traveling & Conveyance Sales Tax / Excise DutyAdvertising & Selling Exp. Legal & Entertainment

222802

16629328775463593568100300200500

278302228100

257553

18292243081275393923125350250600

321942576125

281120

19955250187086284275150400300700

351402811150

304651

1261815732887184626175450350800

380813047175

Total Intermediate Inputs:Value Added

20933213470

23216125393

25331527804

27446530186

2. VALUE ADDED FOR WORKER: The value added per worker amounts to Rs. 130620 in the firs year, Rs. 195330 in the second year, Rs. 213884 in the third year, Rs. 232200 in the fourth year and subsequent years of operations.

3. EMPLOYMENT OPPORTUNITIES The project would create new employment opportunities for the 1230 persons in different fields and categories.

4. CAPITAL EMPLOYMENT RATIOThe fixed capital cost per person to be employed works out of Rs. 0.300 million.

5. INTERNAL ECONOMIC RATE OF RETURN (IERR)The IERR of the project works out to 31.68% as calculated in Annex-XVI. The IERR is quite satisfactory.

6. DOMESTIC SOT PER DOLLAR SAVED (BRUNO’S RATIO) Burno’s ratio comes to Rs. 25.74 US$ saved as calculate din Annex-XVII.

7. EFFECTIVE RATE OF PROTECTION The effective rate of protection for the project works out to 67% in the forth year of operation i.e. 1997 (Annex-XIX). The ERP is on higher side because government has recently enhanced regularity duty on edible oil whereas prices of these products in international market has slightly increased.


VIII- CONCUSSION AND RECOMMENDATION

Having appraised and evaluated, the project is considered technically, economically and financially viable and suitable for IDBP financing. It is, therefore, recommended that a local currency assistances of Rs. 27.950 million Rs. 24.150 million under SBP Scheme for locally manufactured machinery (LMM) and Rs. 3.800 million from Bank’s own recourses) may be sanctioned to M/S. MARGARINE (Pvt) Ltd., at resale price of Rs. 71.406 million (Net rebate Rs. 44.502 million) on the Bank’s standard terms and the following conditions:

1. SCHEDULE OF PAYMENTS OF RESALE PRICE Rs. 24.150 million under SBP Scheme for LMM

Resale price of Rs. 63.322 million to be paid by the customer in 16 equal half yearly installments of Rs. 6.958 million each (rebated installment of Rs. 2.322 million each will be accepted if paid within due date):

The resale price and schedule of payments are subject to change as may be determined by IDBP as soon as practicable or when purchase price has been paid by IDBP.

Rs. 3.800 million from bank’s Own Resources

Resale price of Rs. 8.804 million to be paid by the customer in 20 equal quarterly installments of Rs. 0.404 million each. In case if payment is made on or before due date the amount of installment shall stand reduced to Rs. 0.368 million.

The resale price and schedule of payments are subject to change as may be determined by IDBP as soon as practicable or when purchase price has been paid by IDBP.

2. BANK’S CHARGES

i. Commitment charges @ ¼ percent of the 1st quarter and @ ½ percent per quarter for the subsequent quarters on the undisguised portion of financial assistance.

ii. Charges for IDBP’s interim finance as per rates in fore, presently @ 22 paisas per rupee per annum (without rebate).

iii. Documentation charges @ ¼% of financial assistance. iv. Monitoring fee @ 0.125% per annum on the outstanding liability amount. v. Other charges as per rates inforce.


3. DISBURSEMENT SCHEDULE

Local currency assistance of Rs. 27.950 million (Rs. 24.150 million under SBP schema for LMM and Rs. 3.800 million form banks’ Own Resources) shall be disbursed in installment or in full to the local machinery supplier for purchase of locally manufactured machinery in accordance with the Bank’s procurement procedure for purchase of locally manufactured machinery. The disbursement will be made keeping in view security coverage of 1.5 times.

4. DURATION AND REPAYMENT For LMM scheme

a. Financial assistance under SBP scheme for LMM to be repaid in 10 years including a grace period of 2 years in 16 biannual installments. First installment of resale price shall be payable by the company on March 31 or September, 30 whichever date falls first after 2 years from the date of disbursement of 1st installment of IDBP’s financial assistance.

b. For Bank’s Own Resources Financial assistance from Bank’s Own Resources to be repaid in 7 years including a grace period of 2 years in 20 quarterly installments. First installment of resale price shall e payable installments. First installment of resale price shall be payable by the company on March 31, June, 30, September 30 and December 31 whichever date falls first after 2 years from the date of disbursement of 1st installment of IDBP’s financial assistance

5. SECURITY

Before signing the financing agreement / disbursement of letter of funds the company shall:

i. Transfer the title deeds of land measuring 4 acres located at Nooriabld Industrial Estate, District Dadu, Sindh in the name of the company and the same will be mortgaged with the Bank. The cost of land including development charges is estimated at Rs. 0.600 million.

ii. Execute an agreement to mortgage / hypothecate the existing and future fixed assets of the company value estimated as under:


At the time of Future Total onSigning of the Assts complete financingAgre ion ement (existing assets)

A. IMMOVEABLE ASSETS

i. Land 0.600 - 0.600ii. Building 3.522 2.116 5.6983iii. Machinery (installed cost)

B. MOVEABLE ASSETS (Hypothecation)

i. Furniture & Fixture - 0.500 0.500ii. Vehicles - 1.500 1.500

Total 4.122 34.392 38.514

(Valid mortgage / hypothecation on the above assets would be created on completion of the project).

iii. Personal guarantee of the sponsoring directors of the company covering the entire loan liability. (in case of local currency financial assistance “amount of financial assistance plus mark up thereon”) till its repayment in full:

iv. Provide outside collateral security comprising of urban property to the extend of 25% of financial assistance.

6. CAPITAL STRUCTUREBefore signing of financing agreement / disbursement of local currency assistance, the company shall:

i. incorporate a private limited company under the name ad style of M/S. MARGARINE (Pvt) Ltd., and submit certificate of incorporation for approval of the bank:

ii. Raise its paid up capital to Rs. 5.000 million and undertake to raise it to Rs. 19.000 million by completion of he project:

iii. Advance interest free director’s loan amounting to Rs. 0.650 million which will not be repaid ring the currency of IDBP assistance.

iv. Submit an undertaking from the directors of the company to the effect hat they shall provide any additional amount that may be required for implementation of the project in case of over run in expenditure in order to complete the project


7. SPECIAL CONDITION

The financial assistance shall further be governed as under:

1. Effectiveness of the sanction will subject to:

a. Satisfactory credit repot in respect of the sponsors of the captioned concern: b. Deposit of 10% sponsor’s equity. c. NC from NDFC for creation of IDBP first share on plot and existing building of the

project.

ii. The sponsors will submit an irrevocable stamped undertaking acceptable to IDBP to restrict to the production of designated items only. In case of default the Bank may withdraw the financial assistance / loan sanctioned to them by the Bank together with all dues / over dues under Section 38 of the IDBP Ordinance;

iii. The sponsors will enter into technical know-how agreement with machinery suppliers to the satisfaction of IDBP regarding margarine plant to ensure desired operating result:

iv. Financial assistance to be provided / sanctioned by the Bank under SBP Schemed for LMM shall automatically be reduced if the prices of machinery finally selected by the bank are found on lower side. Also funds under the scheme shall be provided only for the machinery / equipments eligible.

v. Disbursement of local currency assistance of Rs. 24.150 million under SBP Scheme for LMM will be made only after funds from Bank’s Own Resources to the turn of Rs. 3.800 million have been allocated by IDBP for this specific project;

vi. The financial assistance of local currency assistance to the extent of Rs. 27.950 million (Rs. 24.150 million under SBP Scheme for LMM and Rs. 3.800 million from Bank’s Own Resources) is subject to availability of funds with IDBP.

vii. The local currency assistance of Rs. 27.950 million )(Rs. 24.150 million under SBP scheme for LMM and Rs. 3.800 million from Banks’ Own Resources) will be subject to such additional terms and conditions which the SBP have specified or may specify from time to time in respect of their scheme.

The IDBP loan / financial assistance shall further be governed by the all other general terms and conditions of sanction.

ANNEX-I


DERAILS OF EXISTING & PROPOSED BUILDING

S.# Description Covered Area (Sq.mt) Rate/agm (Rs.) Appraised cost(Rs. In 000)

Existing Proposed Total Existing Proposed Existing Proposed Total

1. Refinery section (2 floor) including R.M. Godown & Operational Staff Room at 1st Floor

371 (G.F.)

371(F.F)

742 1800 2500 668 927 1595

2. Machinery Hall (Margarine lant & Filling Section)

297 - 297 1800 - 535 - 535

3. Liquid Soap & Chain Lubricant

148 - 148 1800 - 266 - 266

4. Gas Cracking & Chain Machinery

167 - 167 1800 - 301 - 301

5. Workshop / Laboratory 223 - 223 1800 - 140 - 1406. Finished Goods Godown 78 - 78 1800 - 401 - 4017. Boiler House 186 186 - 2000 - 372 3728. Labour Dornantry - 250 250 - 2200 - 550 5509. Sub-Station / H.T. Panel 48 - 48 1800 - 86 - 8610. Office Building 74 78 1800 133 13311. Pump Room 18 - 18 1800 32 3212. Under Ground Water

Tank225000 Rs. 3/Lt 675 675

13. Overhead Water Tank 45000 Rs. 3/Lt 135 13514. Misc. Civil work

including internal Road, Boundary Wall, Lime Water pond etc.

L/S L/S L/S 150 75 225

TotalContingencies @ 10%

3522 19241925

5446192

Grand Total : 3522 2116 5638

Note: 1. Construction of Existing building RCC with Pre-fabricated roof slabs of approx. 6 ft

open. 2. Covered area of Existing Building AS per Drawing. 3. Proposed refinery section to be constructed on Existing Ground Floor Section having

covered area of 371 sq. m. roof slabe to be removed and with the additional 4/5 new columns, two floors refinery section would be constructed to accommodate refinery machinery. Height of Ground floor would be 22 feet and first floor 40 feet.

4. Height of existing building as per drawing is 14 feet.5. Estimation of existing factory building reportedly constructed running 1996-97 has been

worked out keeping in view the type and quality of construction. 6. construction of boiler house would be asbestos sheets over steel trusses. 7. Ground Floor, First Floor

ANNEX-I


LIST OF LOCALLY MANUFACTURED MACHINERY

S.No. Description Capacity Qty. Unit Price

Total Cost

OIL STORAGE & HANDLING 1. Crude Oil Storage Tanks (26’D x

35’H), Wt. Approx. 24.5 T.500000 Lit 4 Nos. 350 1400

2. Decanting Tank (16’ x 6’ x 6’) rectangular with 3 chamber, Wt. 2.9 T

10800 Lit 1 No. 100 100

3. Crude oil pumps, Centrifugal type with 15 Hp Motor, starters etc.

30 ft 3/min 3 Nos. 100 300

PRE-REFEINING SECTION (PRE-NEUTRALIZATION & BLEACHING) 1. Neutralizing Vessel (8’Dx12’H)

wt. 8.95 TComplete with 10 Hp motor, M.S. Construction with top open & conial bottom, speed reducing gear box, agitation system, chemical spraying system etc.

15000 Lit 2 Nos. 300 600

2. Soap Lye Tank (5’Dx5’H) Wt. 0.5 T 200 Lt 1 No. 25 25

3. Soap ye Pumps(Centrifugal type with 2 Hp motors etc. )(

5 ft 3/min 1 No. 25 25

4. Bleaching *& Drying vessles (8’D x 12’H) Wt. 10.5 TComplete with 10 Hp motor,M.S. Cylinderical Construction with dished top and bottom ends, speed traducing gears, steam ejector vacuum system etc.

15000 Lit 1 No. 380 380

5. Preparation Vessel (chemical spraying system (5’Dx5’H).

2250 lit 1 N. 25 25

6. Filter Press Pumps with 15 Hp Motor

7 ft 3/min 2 Nos. 50 100

7. Filter (Press) (800mm x 800 mm x 32 plates)cast steel consecution of plates & M.S. Construction of frame with trays, cock, valves etc.

1 N. 150 150

8. Intermediate Oil Storage TanksSize: (8’ x 8’ x 8’ x 6 mm) Wt. 1 T(M.S. Welded Construction with steam coils & fittings)

12000 Lt 3 Nos. 50 150

9. Bleached Oil Pumps, Centrifugal, Complete with 7.5 Hp Motor, Starter etc.

20 fit 3/min 2 No.s 50 100

10. Lye Preparation Vessel Size: (8’x4’x4’), Wt. 0.5 T

3500 Lit 1 No. 25 25

11. Caustic Lye Pump, Compete with 2 Hp Motor, Starter etc.

5 ft 3 / min 1 No. 25 25

12. Measuring Vessel for caustic lye (5’Dx5’Hx6mm) WT. 450 Kg.

2500 Lit 1 No. 25 25

13. Measuring vessel for Hot Water 5’Dx5’Hx6mm) WT. 450 kg

2500 Lit 1 No. 25 25

14. Vacuum system ejector, M.S. welded concoction with nozzle, top dished end, bottom cone equipped with steam trap, pressure reducing valve and catch pot.

2.5 kg/sec. 1 No. 25 25

15. Vacuum Receiver Size: (325mmx400mmx3mm)

2 Nos. 12.50 25

16. Barometric CondenserSize : (325mmx1500mm)Tube bundle in shell with fittings etc.

2 Nos. 12.50 25

17. Automatic Air Compressor plant, 450 Psi piston type complete with 7.5 H motor and receiver etc. (to blow off spent fuller’s eath in filter press)

87.3 ft 3 per min

2 Nos. 100 200

18. Oil, Soap, Water separation Tank, Size: (13’x4’x4’x5mm) M.S. Construction with 3 chamber at different level to decant oil, soap

5500 Lit 1 No. 50 50

and water

19. Piping, valves and fittings 1 Lot 200Sub Total 2180

HYDROGENATION SECTION 1. Hydrogenation Autoclave

(6’-10”Dx16’-5”H), Wt. 9.5 T complete with 10 Hp motor M.S. Consecution with top and bottom dished ends having light and sight glasses etc. speed reducing gear box, hydrogen spraying system, pressure reducing system, heating and cooling coil and agitation system

15000 lit 2 350 700

2. Filter press pump complete with 15 Hp motor

7 ft 3/min 1 No. 50 50

3. Filter press (800mmx800mmx32 plates) cast steel construction of plates and M.S. construction of frame with trays, cock, valves etc.

1 No. 150 150

4. Oil cooler / heat exchanger Size: (30000x2250mm) with 10 Hp motor, gears etc. M.S. construction with top and bottom dished ends design based on 1:1 ratio equipped with 10 HP motor, gears etc.

1 No. 350 350

5. Hydro generated Oil pump compete with 120 Hp motor

70 ft 3/min 1 No. 50 50

6. Hydro generated oil storage tanks (M.S. tanks with steam coil and fittings).

12000 lit 2 Nos. 50 100

7. Catalyst Mixing Tanks Size : (1200Dx1100mmH) complete with 3 Hp motor M.S. Cylindrical construction top open with flat bottom, gears, steam coils, agitation system etc.

1500 Lit 2 Nos. 25 50

8. Pressure reducing system M.S. construction cylinder cal shape

2 Nos. 12.5 25

with for reducing valves and gauges (to be used in autoclave)

9. Steam ejector system M.S. welded construction cylindrical shape with nozzle, top dished end, bottom core equipped with steam trap, pressure reducing valve and catch pot

2 Nos. 25 50

10. Vacuum recover M.S. consecution with top and bottom dished end equipped with 4 half chamber inversely located.

2 No.s 25 50

11. Fatty acid separators Size (400Dx750mmH) M.S. Cylindrical Construction with plates and tubes arrangements.

2 Nos. 25 50

12. Hydrogen Gas drying towers (700Dx2500mmH) M.S. Cylindrical Construction with tubes bundles to remove moisture

2 Nos. 25 50

13. Return gas scrubbers (600x3500mm) M.S. Cylindrical construction with plates and retaining valves, fittings.

2 Nos. 20 40

Sub Total 1715

POST REFINING SECTION (POST NEUTRALIZATION AND BLEACHING

1. Post Neutralizer

15000 lit 1 No. 300 300

2. Post Bleacher 15000 lit 1 No. 380 380

3. Soap lye tank 2500 lit 1 No 25 25

4. Soap lye pump 5 ft 3/min 1 No 25 25

5. Preparation vessel 2250 lit 1 No. 25 25

6. Filter press 1 No 150 150

7. Filter press pump 7 ft 3/min 1 No 50 50

8. Intermediate storage tanks 12000 lit 1 No. 50 50

9. Measuring vessel for Lye 2500 lit 1 No 25 2

10. Measuring tank for hot water 2500 lit 2 Nos. 12.5 25

11. Vacuum receiver 1 No 12.5 12.5

12. Barometric condenser 1 No. 12.5 12.5

13. Vacuum steam ejector 2.5 kg/sec 1 No. 25 25

14. Deodorizer vessel Size: (3200mmx3200mm)

15 ft 3/min 2 Nos. 50 100

15. Deodorizer VesselSize: (3200mmx3200mm)

15000 lit 2 Nos. 400 800

16. Height vacuum equipment, high booseter/3 steam jet

760 mm Hg. 2 Nos. 200 400

17. Condensate receiver 50 ft 3/min 2 NOs. 50 100

18. Catch pot (1250mmDx1800mmH) M.S. cylindrical construction with top dished ends and conical bottom

2 Nos. 12.5 25

19. Oil Cooler / Heat Exchanger (10’Dx10’H)

1 No. 350 350

20. Filter press pump complete with motor etc

7 ft 1 No. 50 50

21. Filter press for polishing (final filter)

12000 lit 2 Nos. 100 100

22. Finished oil tanks Size : (8’x8’x8’)

12000 lit 2 Nos. 50 100

Sub Total 3130

BLENDING SECTION

1. Blending tank charging pump complete with 2 Hp motor etc.

2 Nos. 25 50

2. Blending tanks M.S. Cylindrical construction complete with agitation system

2 Nos. 12.5 25

3. Filling tanks M.S. Cylindrical construction

2 Nos. 50 100

4. Hot Water circulating pump (2”x1-1/2”)

1 No. 25 25

5. Temperature indicator (Blending/filling tanks)

1 No. 5 5

Sub Total 205

MARGARINE PLANT

1. Service tanks, clinderical construction with agitation system, steam coil. (All stainless steel material)

2000 lit 2 Nos. 150 300

2. Votator mixer, three shell combined structure with high speed blades driven by 5 Hp motor, valves, fittings and mountings etc. (al stainless steel material).

1200 kg/her 1 No. 1000 1000

3. Pinners / polisher two shell structure with shaft and pins. Driven by 5 Hp motor, valves, fittings and mountings etc. all stainless steel material

4. Chilling / cooling sysem R-22 system), complete with 30 HP motor, condenser filter, etc.

15 tons 1 No. 800 800

LIQUID SOAP AND CHAIN LUBRICANT SECTION

1. Evaoporaors, M.S. construction with top and bottom dished ends with tube bundles and separating plates.

2 Nos. 300 600

2. Emulsion converter reactor compete with 10 HP motor, agitator, steam coil, vacuum system etc. M.S. cylindrical construction, top dished ends and bottom cone.

10000 lit 2 Nos. 50 900

3. Vacuum system (main), three stage vacuum system. M.S. construction with vacuum venture

760 mm Hg/ 30’ Hg

2 Nos. 350 700

nozzle system, water drain column, catch pot etc.

4. Installation pipes, valves and fittings

1 Lot 300

Sub Total 2500

HYDROGEN GAS GENERATION SYSTEM

1. Natural gas cracking plant, comprised of 1 No. reformer / cracker & 2 shift convertor, mono ethanol amine (MEA) tower, re-boiler, pressure balancer etc. to crack and reform the methane and steam molecule to produce hydrogen and carbon dioxide gas as final product, M.S. construction is involved with electronic control process equipment, pumps pipelines fittings and gauges etc.

150m 3/hr800 kg. of CO2 as by-

product (98% pure

H2)

1 No. 4235 4235

2. Gas analyzing Kit 1 set 10 10

3. Hydrogen and Oxygen gas flow meter (imported).

1 set 40 40

4. Low pressure Hydrogen Gas holderOuter shell dia 18’Inner shell dia 15’ and height 12ftM.S. Construction with double shell structure.

5250 ft3 1 No. 200 200

5. High pressure hydrogen gas holderOuter shell dia 18’Inner shell dia 15’ andHeight 12 ft.Special steel alloyCylindrical structure with pressure control devices.

6. Hydrogen Gas compressors Two stage, three cylinder oil free, driven by 25 HP motor water cooled (imported)

5250 ft 3/hr 2 Nos. 150 150

Sub Total 5258

UTILITIES:

1. Pacakge type (dual fired)Boiler, HMC make, 250 Psi, fire tube, compete in all respect with necessary mounting and fitting.

12000 lbs/hr 1 No. 3500 3500

2. Feed water tank (1200mmxDx5000mmH)

2700 lit 1 No. 30 30

3. Condencate tankSize: (1100x2200x1800mm)

4000 lit 1 No. 25 25

4. Softening (water) plantSize: (2500Dx500mmH) and (350Dx1500mH) salt dissolving tank and ion exchange vessel etc.

800 lit and 150 lit twin towers tanks

1 No. 100 100

Sub Total 3655

ELECTRICAL EQUIPMENT

1. H.T. Switch Board 1000 KVA 1 No. 430 430

2. Electric taransfomer 1000 KVA 1 No. 640 640

3. L.T. Panel (10 circuits) 1 No. 450 450

4. Distribution Boards 15 Nos. 16 240

5. Cables and joints L.S. 16 175

WORKSHOP EQUIPMENTS

1. Lathe 6’-6” 1` No. 55 55

2. Drill machine (bench type) 1 N. 20 20

3. Bench grinder 1 No. 8 8

4. Welding transformer 450 A,mp. 1 No. 19 19

5. Gas Welding Set 1 set 14 14

6. Hard Grinder (Hitachi) 1 No. 23 23

7. Workshop Tools 1 Lot 12

Sub Total 151

ELECTRICAL GENERATOR

1. Stand by Diesel generating set with Auto Main failure panel, with necessary mounting and fittings,

320 KVA 1 No. 1594 1594

Sub Total 1594Grand Total 28650

BASIS

1. Quotation from M/s. Technegg., 345 – Bhayani Shopping CentreBlock M, Nazimabad, Karachi

2. Quotation from Johnson and Phillip for H.T. Switch Board and Electrical Transformer.

3. Quotation from Sindh Engineering for workshop equipment and L.T. Panel etc.

4. Cost of Diesel Generating set is IDBP’s Estimates

NOTE:Bank shall finance Rs. 24.150 million under LMM and 3.800 million under BOR. Items (Marked as*) such as crude oil storage tanks, temperature indicators, gas analyzing kit, gas flow meters, hydrogen gas compressors and workshop equipment wroth Rs. 1.906 million are not eligible under LMM financing. Moreover, items such as chilling system of margarine plant, boiler and air compressor containing imported components to the extent of Rs. 1.000 million shall not be considered under LMM. All these and other items including standby diesel generating sets shall be financed from BOR. The balance cost of machinery worth Rs. 0.700 million shall be financed by sponsors from their own resources.

ANNEX-III


CONSTRUCTION SCHEDULE

S.No. PARTICULARS MONTH AND YEAR

1. Land Already Existed

2. Placement of Plant /Machinery Order March, 1993

3. Modification / Expansion of Existing Factory Building Started

March, 1993

4. Modification / Expansion of Existing Factor Building Completed

June, 1993

5. Fabrication / Arrival of Complete Machinery at SITE September 1993

6. Machinery Installation Completed December 1993

7. Unforeseen Delays February 1994

8. Commercial Production Started March 1994

ANNEX-IV


APPRAISED COST OF THE PROJECT

S. No.

PARTICULARS COST ALREADY

METD

COST TO BE MET

TOTAL APPRAISED

COST

1. Land 600 36002. Building 522 2116 56383. Equipment & Machinery

i. Local Machinery ii. Freight / Transpiration iii. Installationiv. Auxiliary Equipment v. Contingencies Machinery Cost

28650287114650143

30276

28650287114640143

302764. Vehicles 1500 15005. Furniture / fixture 500 5006. Pre-operating Expenses 552 552

Total Fixed Cost 4122 34944 390667. Net initial working capital 8534 8534

Total Cost 4122 43478 47600

ANNEX-V


NET INITIAL WORKING CAPITAL

Current Assets Tied-up Period

Yr. 1 Yr. 2 Yr. 3 Yr. 4

Raw Material ImportedLocal Working in ProcessFinish GodsStores and SparesDebtorsCash

60 Days30 Days1 Day15 Days180 Days15 Days0

32164547710

10622172

11140759

35380602785

12306258

12878800

38597657855

13434301

14056825

41813712924

14535344

15233850

Total 56115 63009 68724 74410

Current Liabilities Commercial Bank Borrow Estimated 70.00% 30951 34532 37690 40829Creditors 30 days 16629 18292 19955 21618Total Current Liabilities 47580 52824 57646 62447Net Initial N. Capital 8534 10185 11079 11963

ANNEX-VI


FORECAST INCOME STATEMENT

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4

Sales Cost of Goods Sold

Gross profitAdmin. General and Selling Exp.

Operating ProfitFinancial expenses

Profit B/F worker’s fund Worker’s participation Funds @ 5.00%

Net Profit B/F TaxIncome Tax

Net Profit A/F TaxDividend % input Dividend Retained Earnings

222802201814

209885470

155176683

8834

442

83930

939315.00%

28505543

257553233815

237386146

175928371

9222

461

87610

876115.00%

28505911

281120255252

258686709

191598947

10212

511

97010

970115.00%

28506851

30465127616

2861617276

212149520

11694

585

111090

110915.00%

28508259

Profitability Ratios (%)Gross Profit to SalesOperating to SalesPre-Tax Profit to SalesReturn on Owners EquityReturn on capitalizationNet Profit to SalesReturn on Equity B/T

9.426.693.7738.5519.053.7738.55

9.226.833.4031.8620.593.4031.86

9.206.823.4528.6421.213.4528.64

9.356.963.6526.8122.133.6526.81

ANNEX-VIIM/S. BSA MARGARINE (PVT) LTD.

SALES ESTIMATE

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4Capicty Utilization Add Opening Stock of Working Process 1 DayTotal work in ProcessLess: Closing stock of Work in Process 1 Day

50.00%

1012534

5.00%34

1113837

60.00%37

1215041

65.00%41

1316344

Total Production During 10091 11134 12147 13159

The year Add Opening Stock of Finish Goods 15 DaysLess: Closing stock ofFinish Goods 15 Days 505

505

557

557

607

607

658

Quantity Available for Sale 9587 11082 12096 13109

9587 11082 12096 13109LocalNet Sales:LocalTotal Net Sale

222802222802

257553257553

281120281120

304651304651

Assumptions and Explanation Remarks

Operating Efficiency

Op. Eff: 50.00% 50.00% 60.00% 65.00%50.00% 50.00% 60.00% 65.00%50.00% 50.00% 60.00% 65.00%50.00% 50.00% 60.00% 65.00%

Margarine Liq. Soap Ch. Lub. CO2 GasOperation time (shifts/ days) Production period (days / annum) Rated capacity (meters)Net Production (Kgs)Work in Process (Days)Finish GoodsLocalSelling price (Rs. / Tones) Border Price (Rs / Tonne) Sales at Boarder Price (Year 1 to 5)

3300

1800018000

1151

2462516000144794

3300

1800018000

1151

125008000

167379

33003003001151

1400010000182694

33001501501151

4500300

197987

ANNEX-VIII


COST OF GOODS SOLD

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4

Capacity utilizationRaw material consumedFactory wages & salariesSales Tax

50.00%166293393327850

55.00%182922413032194

60.00%199552433635140

65.00%216181455338081

Factory Overheads:Water, Power and FuelSprees and Stores Repair and Maintenance DepreciationOther manufacturing O/H

754628735933093568

812743053933093923

870850162833094275

928857371833094626

Total Factor Overheads Total Work in Process

15070213146

16328235574

17422256449

18515277331

Add Open. Stock of W.I.P.1 Day 710 785 855Less Close. Stock of W.I.P.1 DayCost of Goods Manufactured

710212436

785235499

855256380

924277261

Add Open, stock of Finish Goods 15 Days 10622 12036 13434Total finish goods available for sale 212436 246121 268686 290695Less close. Stock of finish goods 15 days Cost of Goods Sold

10622201814

12306233815

1343425252

14535276161

ANNEX-VIII (Page-4)M/S. BSA MARGARINE (PVT) LTD.

Spares & Stores

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4% C&F + local Amount

0.01287

Repairs & Maintenance

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4% Machinery Installed Cost& Building

0.01359

0.015539

0.0175628

0.02718

Other Manufacturing O/H

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4@ of 0.02 3568 3923 4275 4626

Excise Duty

Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4Sales Tax 0.125Total Sales Tax

2785027850

3219432194

3514035140

3808138081

Utilities

Power, Water Fuel & Others

A-Power

Connected Load (KW) = 1000Maximum Demand (KW) = 800

a. Fixed Charges @ Rs. /KW/Month 145Fixed Charges = Rs. 1740

b. Variable Charges @ Rs. /KWH/ 1.37Hours 24Variable Charges = Rs. 6313

ANNEX-VIII (Page-2)M/S. BSA MARGARINE (PVT) LTD.

RAW MATERIAL REQUIREMENT AT 100% CAPACITY LOCAL RAW MATERIAL

Items Ann Requirements Tonne

United CostRs/Ton

Total Cost(Rs)

Caustic SodaFuller EarthActivated CarbonCitric Acid (Food Grade)Corrugated Carton (16Kg)Polythene BagFilter Cloth (Meter)Plastic Drum (50 Kg) NoPotassium Hydroxide Misc. Chemicals / Additive

18906

0.3711250001125000

1000040000

101

22150257002700090000

3.50.51575

3900050

399231316233

3938563150

30003900.05

10947 RAW MATERIAL IMPORTED Custom Surcharge Sales Tax Other (Ex-Factory)

Duty paid charges price cost at Ex-Factory

Items Qty. C&F C&F Input Input Input InputSoyabean Oil 2940 13600 80784 3740 0 0 952 18292 108654RBD Palm Oil 12726 11500 146349 4255 0 0 805 16560 210743Nicle Catalyst 45 46000 20700 0 0 0 2300 48300 2174Amnti-Oxidant 0.1 550000 55 0 0 0 27500 277500 58Vitamin A&D 0.1 550000 55 00 0 0 27500 27555 3

0.05 500000 25 0 0 0 25000 25025 10.34 135000 46 0 0 0 6750 6796 2

2 27000 54 0 0 0 1350 14040 30.37 91000 34 0 0 0 4550 4584 2

Raw Material Yr. 1 Yr. 2 Yr. 3 Yr. 4

Local Raw Material 5474 5021 6568 7116Imported Raw Material 160820 176902 192983 209065

Total Raw Material 166293 182922 199552 216181

Project Evaluation

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