smeda pet bottles manufacturing unit

Pre-Feasibility Study

PET BOTTLES MANUFACTURING UNIT

Small and Medium Enterprise Development Authority

Government of Pakistan www.smeda.org.pk

HEAD OFFICE 6th Floor ,LDA Plaza , Egerton Road , Lahore 54000, Pkaistan

Tel: (042) 111-111-456, Fax: (042) 6304926-7 [email protected]

www.smeda.org.pk

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor ,LDA Plaza , Egerton

Road , Lahore 54000,

Tel: (042) 111-111-456, Fax: (0426304926-7

[email protected]

5TH Floor, Bahria Complex II, M.T. Khan Road,

Karachi. Tel: (021) 111-111-456

Fax: (021) 5610572 [email protected]

Ground Floor State Life Building

The Mall, Peshawar. Tel: (091) 9213046-47


Bungalow No. 15-A Chaman Housing Scheme

Airport Road, Quetta. Tel: (081) 831623, 831702


May, 2010

Pre-Feasibility Study PET Bottles Manufacturing Unit

DISCLAIMER The purpose and scope of this information memorandum is to introduce the subject matter

and provide a general idea and information on the said area. All the material included in

this document is based on data/information gathered from various sources and is based on

certain assumptions. Although, due care and diligence has been taken to compile this

document, the contained information may vary due to any change in any of the concerned

factors, and the actual results may differ substantially from the presented information.

SMEDA does not assume any liability for any financial or other loss resulting from this

memorandum in consequence of undertaking this activity. Therefore, the content of this

memorandum should not be relied upon for making any decision, investment or otherwise.

The prospective user of this memorandum is encouraged to carry out his/her own due

diligence and gather any information he/she considers necessary for making an informed

decision.

The content of the information memorandum does not bind SMEDA in any legal or other

form.

DOCUMENT CONTROL Document No. PREF-37

Revision 2

Prepared by SMEDA-Punjab

Approved by GM Punjab

Issue Date May, 2010

Issued by Library Officer

PREF-37/May, 2010/2


TTAABBLLEE OOFF CCOONNTTEENNTTSS Table of Contents .................................................................................................................3 1 Executive summary..................................................................................................1 2 Introduction..............................................................................................................2

2.1 Project Brief ...........................................................................................................2 2.2 Project Rationale ....................................................................................................2 2.3 Proposed Capacity..................................................................................................3 2.4 Total Project Cost...................................................................................................3

3 Current Industry Structure ....................................................................................3 4 Products Offered ......................................................................................................4

4.1 Production Mix ......................................................................................................4 5 Production Process...................................................................................................5

5.1 Manufacturing Stages.............................................................................................6 5.1.1 One-Step Process ...........................................................................................6 5.1.2 Two-Step Process...........................................................................................6

6 Machinery Requirement..........................................................................................7 6.1 Injection molding machines ...................................................................................8 6.2 Compressor ............................................................................................................8 6.3 Cooling tower, Chiller unit ....................................................................................8 6.4 Workshop Machines ..............................................................................................8

7 Production.................................................................................................................8 7.1 Injection Molding...................................................................................................8

7.1.1 Injection Molding Capacity Details ...............................................................8 7.1.2 Injection Molding Process Details .................................................................9

7.2 Stretch Blow Process............................................................................................10 7.3 Production Capacity of the Project ......................................................................10 7.4 Starting Production Capacity ...............................................................................11

8 Human RESOURCE Requirement ......................................................................11 9 Land & building .....................................................................................................11 10 Project Economics..................................................................................................12 11 financial analysis ....................................................................................................13

11.1 Projected Income Statement.................................................................................13 11.2 Projected Balance Sheet.......................................................................................14 11.3 Projected Cash Flow Statement ...........................................................................15

12 Key Assumptions....................................................................................................16 13 ANNEXTURE ........................................................................................................18

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11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

The PET Bottles Manufacturing unit is a project of Plastic Sector, in which, the most convenience-size bottles are made from Polyethylene Terephthalate. PET has become the material of choice for bottled beverages because it is lightweight and shatter resistant, and PET has been extensively tested for safety. PET resin has superior properties i.e. attractive, pure, safe, good barrier, no leakage, design flexibility, recyclable, etc. Bottles made with PET are widely used for everything from water and fruit juice to soft drinks etc.

Every day, million of consumers rely on the safety and ease of plastic bottles to help to preserve the quality and freshness of what we drink and serve our families. Plastic make possible an array of opportunities for transporting, storing and serving our favorite beverages, and todays convenience-size bottles are an increasingly popular choice for busy people everywhere.

A PET Bottles Manufacturing Unit with a capacity of 5.27 million bottles per year needs a capital investment estimated at Rs. 10.97 million for construction and purchasing machinery & equipment. In addition to this, an estimated sum of Rs. 2.72 million is required as working capital. The total project cost is estimated at Rs. 13.69 million. Projected IRR, Net Present Value (NPV) and Payback of this project are 38%, Rs. 16,221,149 and 4.32 years respectively.

In this pre-feasibility study, all the calculations have been based on 5.27 million bottles of three different sizes 0.5, 1.5 & 5 litter bottles. Due to high demand of 1.5 litter bottles its percentage in the product mix is high 65.57% as compared to 0.5 and 5.0 litter bottles which are 32.79% and 1.64% respectively.

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1


22 IINNTTRROODDUUCCTTIIOONN

22..11 PPrroojjeecctt BBrriieeff PET bottles are a packaging medium, made up of Polyethylene Terephthalate (PET). These are widely used in food grade packaging and are the preferred packaging medium in this segment, due to their several advantages over other resins like PE, HDPE and PVE.1

The objective of this pre-feasibility study is to provide information for setting up a PET bottles manufacturing unit. Proposed location for this project is Lahore.

22..22 PPrroojjeecctt RRaattiioonnaallee PET bottles are used as packaging in a variety of products. The demand of PET bottles is on a rise as most of the food manufactures from different businesses are converting to PET bottles for the packaging of their products. The PET bottles/containers are commonly used for the packaging of the following:

Mineral Water Carbonated Beverages Edible Oil Household Food Containers Detergents Paints Lubricating Oils Feeding Bottles for Babies

As PET bottles provide better packaging, and have a lower cost than the bottles made from glass and other materials, different businesses in beverage, food and non-food industry are shifting towards PET bottles.

The PET resin has superior properties, which are as follows:

Attractive: Products look good, pure and healthy because of attractiveness of PET bottles.

Pure: Products taste good as PET complies with international food contact regulations. Safe: PET bottles are tough and virtually unbreakable. If they do fail, they split, not

shatter. Their high impact and tensile strength makes them ideal for carbonated products.

Good barrier: The low permeability of PET to oxygen, carbon dioxide and water means that it protects and maintains the integrity of products giving a good shelf life. PET also has good chemical resistance.

Lightweight: One tenth the weight of an equivalent glass pack, PET bottles reduce shipping costs, and because the material in the wall is thinner, shelf utilization is

2

1 PE stands for Polyethylene, HDPE stands for High Density Polyethylene, PVE stands for Poly Vinyl Ethylene

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improved by 25% on volume compared to glass. High strength, low weight PET bottles can be stacked as high as glass.

No leakage: Absolute closure integrity is possible because of the injection molded neck finish. The absence of a weld line in the base means that PET bottles have no leakage.

Design flexibility: PET bottles are suitable for containers of all shapes, sizes, neck finish designs and colors.

Recyclable: Used PET bottles can be washed, granulated into flakes and reshaped as PET bottles or employed as material for strapping, carpeting, fiber filling, etc. Specially designed thick-wall bottles can be washed, refilled and reused. PET is made from the same three elements (carbon, oxygen, and hydrogen) as paper, and contains no toxic substances. When burned, it produces carbon dioxide gas and water, leaving no toxic residues. Being recyclable is the most important factor of success of business of PET bottles. It consumes less energy and produces less pollution than glass or metal packaging. PET is completely recyclable material, and in many European and Latin American countries, PET bottles are designed to be refilled and used over and over again. In the US, more than 600,000,000 pounds of PET bottles are recycled annually.

22..33 PPrrooppoosseedd CCaappaacciittyy The production capacity of the proposed project is estimated at 5.27 million bottles per year.

22..44 TToottaall PPrroojjeecctt CCoosstt The cost of the project is estimated at Rs 13.69 million having a Capital Investment of Rs. 10.97 million and Working Capital provision of Rs. 2.72 million.

33 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE Majority of the businesses in Pakistan are converting from the bottle containers of traditional material to plastic substitutes for packaging of their products. The domestic manufacturing of plastic products is growing at 10-15 percent annually. Businesses from different fields are shifting from conventional packaging to PET bottles. Carbonated beverage, edible oil and mineral water industries are good examples for the increasing demand of PET bottles, as majority of the players in these industries have shifted to PET bottles. Within five years, the share of PET bottles has grown from 2-3 percent to 18-20 percent in the carbonated beverage market.

With every passing day, new industries are shifting to PET bottling because of lower cost and better preservation of their product.

3

Because of the high demand of PET bottles, there has been an increase in small manufacturing units of PET bottles in the main cities of Pakistan. The major players of the industry are Gatron and Five Star Industries. There are around 35 small and medium units working in Lahore including Mega Plast, Plas Pack, S.K. Plast (Pvt.) Ltd, Uni Plast International, Al Quresh Bottles etc. These units manufacture variety of products, ranging from bottles for mineral water to packaging for pesticides.

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44 PPRROODDUUCCTTSS OOFFFFEERREEDD The proposed project will be capable of making PET bottles of different sizes. Commonly manufactured sizes shall be 0.5, 1.5 and 5 liter. The size of bottles will depend on customer specifications.

TTaabbllee 44--11 DDeettaaiillss ooff PPrroodduucctt MMiixx Product Offered 0.5 Liters PET Bottles 1.5 Liters PET Bottles 5 Liters PET Bottles

The target customers of Pet bottle are Mineral Water, Beverages and Edible oil industries. The production of 1.5-liter bottles is the highest, as they are used in the beverage and mineral water industries which are the two largest consumers of PET bottles. Along with this, the production of 0.5 liter bottles is also increasing because of the increase of usage in mineral water bottles. The production of 5 liter is lower then the other two because they are mostly used in edible oil packaging.

44..11 PPrroodduuccttiioonn MMiixx Keeping in view the demand of the product mix the proposed production is divided into the below proportion.

TTaabbllee 44--22 PPrroodduuccttiioonn MMiixx Description Production Ratio2

0.5 Liter bottle 32.79 %1.5 Liter bottle 65.57%5 Liter bottle 1.64% 100%

4

2 Production ratios have been calculated from the capacities of the machinery and are explained in the following pages.

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55 PPRROODDUUCCTTIIOONN PPRROOCCEESSSS FFiigguurree 55--11 PPrroocceessss FFllooww DDiiaaggrraamm ooff PPEETT BBoottttlleess MMaannuuffaaccttuurriinngg

Drying the PET

Plasticizing the PET

Injection molding thePreform

PET absorbs moisture from the atmosphere.This must be removed before processing

using a dehumidifying drier.

Dried PET Pellets are compressed andmelted by a rotating injection Screw.

Molten PET is injected into aninjection cavity and cooled rapidly to

form a "Preform".(The Original test-tube-like form, from which

bottles are blown is know as a Preform).

Opitimizing thePreform

Temperature

The temperature of the preform isadjusted to the correct profile for

blowing.

Stretch blow moldingthe container.

The hot Preform is simultaneously stretchedand blown (thereby, orienting the crystals of

and strengthening the PET) into a shapedblow mold to form a tough, lightweight

container.

Containerejection

The finished containeris ejected.

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PET bottles manufacturing process involves two basic stages of Pre-form manufacturing and Bottle Stretch Blow Molding. 1. Pre-form manufacturing process consists of following steps:

a. Resin drying and dehumidification b. Melting of resin and injection into mold c. Injection blow molding d. Primary cooling e. Secondary cooling f. Ejection and storage

2. Bottle Stretch Blow Molding, process involves: a. Pre-form feeding b. Pre-form heating c. Transfer of heated pre-forms to blow wheel d. Bottle stretch blow molding e. Bottle ejection

55..11 MMaannuuffaaccttuurriinngg SSttaaggeess Bottles can be made through two types of processes.

1. One-step process 2. Two-step process

55..11..11 OOnnee--SStteepp PPrroocceessss In a one-step process, the PET bottles are made directly from the resin. Both the pre-form manufacturing and stretch blow molding is performed on a single line.

Main features of the one step process are as follows:

1. Lesser Power consumption. 2. Lower initial investment. 3. Same number of injection cavities and blow molds as on conventional machine. 4. Better thermal efficiency because the residual heat in the pre-forms from the

injection molding process is used for blowing. 5. Bottles free from scruff marks, as performs are not re-gripped before blowing. 6. Highly oval or rectangular cross-sectioned containers. 7. Different pre-form designs, as pre-form wall is thicker to retain heat where

stretching is required.

55..11..22 TTwwoo--SStteepp PPrroocceessss In a two-step process, PET bottles are made in two discrete steps. The first step involves making the pre-form, and the next, the production of bottle. The pre-forms are produced earlier and stored, and stretch blow molding is done as and when required.

Main features of two-step production process are as follows: 1. Higher operating efficiency because of separate injection and blow molding

function. 2. Higher initial investment. Buying pre-forms instead of making them can save

money.

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3. Different cycle times of the two separate machines, so the outputs are matched by increasing the number of injection cavities.

4. More suitable for high volume production of less technically demanding containers such as carbonated soft drink bottles.

5. Thermal efficiency lower since the pre-forms are first cooled to the room temperature for storage purposes and then re-heated to suitable blowing temperature.

6. Better adaptability to fluctuation in demand, as pre-forms can be stockpiled. Care must be taken in controlling storage conditions to ensure consistent aging and moisture absorption of different pre-form batches.

7. Centralized pre-form production facility can be created to supply several blow molders.

8. Higher flexibility, as bottle makers can make or buy pre-forms. 9. Higher inventory of pre-forms, as they are frequently scuffed before blowing. 10. Degree of ovality restricted owing to the difficult of temperature profiling of the

pre-forms. 11. Thinner pre-form walls, so that it heats up faster where stretching is required.

66 MMAACCHHIINNEERRYY RREEQQUUIIRREEMMEENNTT TTaabbllee 66--11 MMaacchhiinneerryy RReeqquuiirreemmeenntt Unit Cost Total Cost (Rs.)Injection Molding Machine I 1 500,000 500,000Injection Molding Machine II 1 450,000 450,000Blow Molding Machine I 1 595,000 595,000Blow Molding Machine II 1 595,000 595,000Compressor 1 250,000 250,000Cooling Tower 1 170,000 170,000Chiller Unit 1 100,000 100,000Lathe 8 ft, refurbished 1 350,000 350,000Lathe 5.5 ft, 1 200,000 200,000Pillar Drill 26 inches, with pump

1 100,000 100,000

Facer 1 192,000 192,000Shaper 26 inch 1 168,000 168,000Die Molds 250,000 250,000Production Shells 150,000 150,000Generator (50 KWH) Made in China3

1 295,000 295,000

Total Cost 4,365,000

7

3 As per prevailing policy, industrial grids provide consistent electric supply to industrial units. In case if unit doesn't place in industrial grid area then generator is required

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66..11 IInnjjeeccttiioonn mmoollddiinngg mmaacchhiinneess Injection molding machines of two different sizes are required as the proposed production mix depends upon different sizes.

The refurbished injection molding machines of the following brands are available in the market:

Kawaguchi, JSW, Meiki, Nessei, Net Star, Toshiba, Hayabusa, Senki.

Usually, there is a guarantee of 6 months from the date of installation for the machinery, but not for its electrical parts and components. The machinery delivery time is 15-20 days if it is available off-the-shelf, but if not, then it has to be imported, which can take up to 4 months, depending upon the availability. The stretch blow molding machines are also being manufactured locally.

66..22 CCoommpprreessssoorr The compressor will be used with the stretch blow machine. It will supply compressed air to the blow-molding machine.

66..33 CCoooolliinngg ttoowweerr,, CChhiilllleerr uunniitt The cooling tower is required to generate cooling water for cooling the compressors.

66..44 WWoorrkksshhoopp MMaacchhiinneess Lathe machines, pillar drill, facer and shaper are required for the workshop. All the machines required for the workshop are manufactured locally.

77 PPRROODDUUCCTTIIOONN For the purpose of this project, the injection molding machine with total barrel capacity of 111 grams will be used for the production of pre-forms of 0.5 liter bottles only. The other injection-molding machine will be used for the production of pre-forms of 1.5 liters and 5 liter bottles in the ratio of 80:20. This machine with high barrel capacity will enable the business to make 19 liter bottles at a later stage.

77..11 IInnjjeeccttiioonn MMoollddiinngg

77..11..11 IInnjjeeccttiioonn MMoollddiinngg CCaappaacciittyy DDeettaaiillss A JSW Series 70-ton machine is available in the injection capacities of 111 grams, 145 grams or 192 grams. For the purpose of this pre-feasibility study, the machine with injection capacity of 111 grams has been used. For PET, it is recommended that a factor of 70% be used to determine the shot size as a percentage of total barrel capacity.

This means that for the 111 grams machine, it will be able to make a shot size of 78 grams (111 grams X 70%)

0.5 liter bottle weighs roughly 15 grams, so the 111 gram machine will be able to make maximum of 4 pre-forms.

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Second machine will be used for the production of 1.5 and 5-liter PET bottles (Kawaguchi Series). 175 ton machine comes in Shot Weights of 302 grams or 373 grams or 537 grams. For the purpose of this study, the machine of 537 grams has been used. Using the 70% recommended factor, this machine will be able to make a shot size of 376 grams (537 grams X 70%)

A 1.5-liter Bottle weighs roughly 33 grams. Hence the 537-gram machine will be able to make a maximum of 10 pre-forms in one stroke.

A 5-liter Bottle weighs roughly 340 grams. Hence the 537-gram machine will be able to make a maximum of 1 pre-form in one stroke.

Both injection-molding machines take 18-20 seconds to complete one stroke.

77..11..22 IInnjjeeccttiioonn MMoollddiinngg PPrroocceessss DDeettaaiillss The primary role of the injection-molding machine is to develop performs.

The raw material (PET bottles grade resin) is placed in the hopper of an injection-molding machine where it is fed into a chamber for melting. Melting is done by conducting heat into the material in a "Plunger" machine, while the material is primarily heated by shearing or mechanically working the material in a "Screw" machine. Several shots of material are heated and held in the injection unit.

Once melted, the material is forced, under pressure, into the mold where it conforms to the shape of the cavity. The mold is temperature controlled, usually by circulating temperature-controlled water through it. Once the part is cooled, the mold is opened and the part removed. The mold is then closed and ready for the next shot. The mold is clamped shut while the material is being injected in to the cavity since the cavity pressure may be as high as 5,000 psi4. The clamp is sized by the "Tonnage" it holds.

An injection-molding machine usually takes 18-20 seconds, depending upon the make and the model, to complete one stroke. The number of pre-forms made depends upon the mold/die and the number of cavities. The higher the number of cavities in a mold, the higher will be the clamping force required.

The injection molding machine making pre-forms for 5-liter bottle is the same as the one making pre-form for 1.5 liter bottle, but the production of the 5 liter bottles will be less. The details of production capacity for the injection molding machines are given in below table:

9

4 pounds per square inch

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TTaabbllee 77--11 PPrroodduuccttiioonn CCaappaacciittyy ooff IInnjjeeccttiioonn MMoollddiinngg MMaacchhiinnee

Production Per Stroke Production

Stroke per

minute

Installed cap/day

Share in Production

Product Mix Cap./Day

Annual Production

0.5 Liters PET bottle 4 3 5,760 100% 5,760 1,728,000

1.5 Liters PET bottle 10 3 14,400 80% 11,520 3,456,000

5 Liters PET bottles 1 3 1,440 20% 288 86,400

Total 17,568 5,270,400

77..22 SSttrreettcchh BBllooww PPrroocceessss The stretch blow-molding machine has a capacity of handling about 360 pre-forms in an hour using one shell. The pre-forms are to be manually fed into the stretch blow-molding machine by an operator.

The stretch blow-molding machine has a conveyor, which feeds pre-heated pre-forms into the stretch blow-molding machine. The stretch blow-molding machine blows a bottle of 1.5-liter capacity in about 14 seconds. By incorporating the operator handling time, the time of stretch blow molding along with ejection is about 17 seconds.

TTaabbllee 77--22 PPrroodduuccttiioonn CCaappaacciittyy SSttrreettcchh BBllooww MMoollddiinngg MMaacchhiinnee Time Required

(Sec)/Stroke5Hourly

Production Installed

Capacity/Day 0.5 Liter 11 2,252 18,018 1.5 Liter 17 1,447 11,574 5 Liter 59 409 3,269

77..33 PPrroodduuccttiioonn CCaappaacciittyy ooff tthhee PPrroojjeecctt Since every bottle has to pass through both the processes of injection molding and stretch molding, so the total production capacity of the unit will be determined by the bottleneck of the process. This means that the lower of the capacities of the two processes will be the total capacity of the unit.

As the maximum capacity of injection molding machine for 0.5 liter bottles is 5,760 and the capacity of stretch blow molding machine for 0.5 liters bottles is 18,018, so the maximum production of 0.5 liters bottles that can be obtained from the unit is 5,760 bottles. Similarly, the total production capacities of the 1.5 liter and 5 liter bottles can be worked out. Table 7-5 summarizes the production capacities of the three sizes of PET bottles being recommended in this pre-feasibility study.

10

5 Stretch Blow machine blows 4 bottles in one stroke.

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TTaabbllee 77--33 MMaaxxiimmuumm PPrroodduuccttiioonn CCaappaacciittyy ooff UUnniitt

Product Injection Molding

Production

Stretch Blow

Molding Capacity

Maximum Production of

the unit per day

Annual Installed Capacity

Percentage Share in

Production

0.5 Liter 5,760 18,018 5,760 1,728,000 32.79%1.5 Liter 12,672 11,574 11,574 3,456,000 65.57%5 Liter 288 3,269 288 86,400 1.64%Total 5,270,400 100%

77..44 SSttaarrttiinngg PPrroodduuccttiioonn CCaappaacciittyy Starting capacity utilization of this unit is 40%. The maximum capacity level that can be achieved is 90%.

88 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT TTaabbllee 88--11 HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt Number of

Personnel Monthly Salary

(Rs) Annual Salary

in (Rs)CEO 1 50,000 600,000Production Manager 1 30,000 360,000Accountant 1 14,000 168,000Injection Machine Operators 2 12,000 288,000Blow Machine Operators 2 12,000 288,000Pre-form Handler 1 8,000 96,000Helpers 4 7,000 336,000Guards 2 7,000 168,000Total 14 192,000 2,304,000

99 LLAANNDD && BBUUIILLDDIINNGG For the proposed project, an area of about 5,000 sq. ft. is required. It is recommended that the land should be bought. The details of the area required for different activities are given below:

TTaabbllee 99--11 BBuuiillddiinngg CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

11

Description Area (sq. ft) Cost per Sq. ft. Total in (Rs)Management building 100 1300 130,000Production Area 1,728 800 1,382,400Raw Material Store 252 700 176,400Finished goods store 510 700 357,000Loading area 696 700 487,200Workshop Area 855 700 598,500Cooling Tower/Chiller 684 600 410,400Total Construction Cost 4,950 3,541,900

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1100 PPRROOJJEECCTT EECCOONNOOMMIICCSS

Capital Investment Rs. In actualsLand 2,358,889 Building/Infrastructure 3,541,900 Machinery & equipment 4,365,000 Furniture & fixtures 81,250 Office equipment 112,000 Pre-operating costs 508,000 Total Capital Costs 10,967,039

Working Capital Rs. In actualsRaw material inventory 2,312,572

als

ect38%4.32

Cash 410,710 Total Working Capital 2,723,282

Total Investment 13,690,320

Initial Financing Rs. In actuDebt 50% 6,845,160 Equity 50% 6,845,160

Initial Financing Equity ProjIRR 48%Payback Period (yrs) 4.25 Net Present Value (Rs.) 17,945,535 16,221,149


1111 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1111..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt Statement Summaries SMEDAIncome Statement

Rs. In actualsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 16,257,024 22,353,408 29,506,499 37,866,673 47,603,818 58,909,724 64,800,697 71,280,766 78,408,843 86,249,727 Cost of goods sold 12,347,210 16,470,549 20,664,692 25,304,121 30,431,003 36,091,566 38,341,738 40,748,705 43,324,710 46,083,045 Gross Profit 3,909,814 5,882,859 8,841,806 12,562,553 17,172,815 22,818,158 26,458,959 30,532,061 35,084,133 40,166,682

General administration & selling expensesAdministration expense 1,272,000 1,027,130 1,127,133 1,236,872 1,357,296 1,489,444 1,634,459 1,793,592 1,968,219 2,159,847 Rental expense - - - - - - - - - - Utilities expense 143,119 157,431 173,174 190,492 209,541 230,495 253,544 278,899 306,789 337,468 Office expenses (stationary, etc.) 12,720 10,271 11,271 12,369 13,573 14,894 16,345 17,936 19,682 21,598 Promotional expense 325,140 447,068 590,130 757,333 952,076 1,178,194 1,296,014 1,425,615 1,568,177 1,724,995 Insurance expense - - - - - - - - - - Professional fees (legal, audit, etc.) 81,285 111,767 147,532 189,333 238,019 294,549 324,003 356,404 392,044 431,249 Depreciation expense 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 Amortization expense 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800

Subtotal 2,517,985 2,437,388 2,732,961 3,070,120 3,454,225 3,891,297 4,208,085 4,556,166 4,938,631 5,358,876 Operating Income 1,391,829 3,445,471 6,108,845 9,492,433 13,718,589 18,926,861 22,250,874 25,975,896 30,145,502 34,807,806

Other income 21,471 27,017 44,007 113,337 247,239 494,816 871,180 1,340,227 1,894,188 2,739,840 Earnings Before Interest & Taxes 1,413,300 3,472,488 6,152,852 9,605,770 13,965,829 19,421,677 23,122,054 27,316,122 32,039,690 37,547,646

Interest expense - 1,014,823 820,366 592,410 325,184 48,291 - - - - Earnings Before Tax 1,413,300 2,457,666 5,332,486 9,013,360 13,640,645 19,373,386 23,122,054 27,316,122 32,039,690 37,547,646

Taxable earnings for the year 1,413,300 2,457,666 5,332,486 9,013,360 13,640,645 19,373,386 23,122,054 27,316,122 32,039,690 37,547,646 Tax 494,655 860,183 1,866,370 3,154,676 4,774,226 6,780,685 8,092,719 9,560,643 11,213,891 13,141,676 NET PROFIT/(LOSS) AFTER TAX 918,645 1,597,483 3,466,116 5,858,684 8,866,419 12,592,701 15,029,335 17,755,480 20,825,798 24,405,970

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1111..22 PPrroojjeecctteedd BBaallaannccee SShheeeett Statement Summaries SMEDABalance Sheet

Rs. In actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

AssetsCurrent assets

Cash & Bank 410,710 1,020,712 780,453 2,153,334 5,402,478 11,080,153 21,907,564 36,171,111 53,177,352 73,101,830 109,554,201 Accounts receivable - 812,851 1,930,522 2,592,995 3,368,659 4,273,525 5,325,677 6,185,521 6,804,073 7,484,480 8,232,929 Finished goods inventory - 102,893 137,255 172,206 210,868 253,592 300,763 319,514 339,573 361,039 384,025 Equipment spare part inventory - - - - - - - - - - - Raw material inventory 2,312,572 3,187,013 4,216,419 5,423,369 6,833,445 8,475,607 9,344,356 10,302,153 11,358,124 12,522,331 -

Total Current Assets 2,723,282 5,123,470 7,064,648 10,341,904 15,815,449 24,082,876 36,878,361 52,978,300 71,679,121 93,469,681 118,171,155

Fixed assetsLand 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 Building/Infrastructure 3,541,900 3,364,805 3,187,710 3,010,615 2,833,520 2,656,425 2,479,330 2,302,235 2,125,140 1,948,045 1,770,950 Machinery & equipment 4,365,000 3,928,500 3,492,000 3,055,500 2,619,000 2,182,500 1,746,000 1,309,500 873,000 436,500 - Furniture & fixtures 81,250 73,125 65,000 56,875 48,750 40,625 32,500 24,375 16,250 8,125 - Office equipment 112,000 100,800 89,600 78,400 67,200 56,000 44,800 33,600 22,400 11,200 -

Total Fixed Assets 10,459,039 9,826,119 9,193,199 8,560,279 7,927,359 7,294,439 6,661,519 6,028,599 5,395,679 4,762,759 4,129,839

Intangible assetsPre-operation costs 508,000 457,200 406,400 355,600 304,800 254,000 203,200 152,400 101,600 50,800 -

Total Intangible Assets 508,000 457,200 406,400 355,600 304,800 254,000 203,200 152,400 101,600 50,800 - TOTAL ASSETS 13,690,320 15,406,789 16,664,247 19,257,783 24,047,607 31,631,315 43,743,080 59,159,298 77,176,400 98,283,240 122,300,993

Liabilities & Shareholders' EquityCurrent liabilities

Accounts payable - 797,824 1,586,584 2,037,245 2,519,583 3,055,295 3,597,872 3,984,755 4,246,377 4,527,419 4,139,202 Total Current Liabilities - 797,824 1,586,584 2,037,245 2,519,583 3,055,295 3,597,872 3,984,755 4,246,377 4,527,419 4,139,202

Other liabilitiesLong term debt 6,845,160 6,845,160 5,716,375 4,393,134 2,841,936 1,023,513 - - - - -

Total Long Term Liabilities 6,845,160 6,845,160 5,716,375 4,393,134 2,841,936 1,023,513 - - - - -

Shareholders' equityPaid-up capital 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 Retained earnings - 918,645 2,516,128 5,982,244 11,840,928 20,707,347 33,300,048 48,329,383 66,084,863 86,910,661 111,316,631

Total Equity 6,845,160 7,763,805 9,361,288 12,827,404 18,686,088 27,552,507 40,145,208 55,174,543 72,930,023 93,755,821 118,161,791 TOTAL CAPITAL AND LIABILITIES 13,690,320 15,406,789 16,664,247 19,257,783 24,047,607 31,631,315 43,743,080 59,159,298 77,176,400 98,283,240 122,300,993

PREF-37/May, 2010/2

14

Pre-Fea

PREF-37/May

sibility Study PET Bottles Manufacturing Unit

, 2010/2

15

Statement Summaries SMEDACash Flow Statement

Rs. In actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activitiesNet profit - 918,645 1,597,483 3,466,116 5,858,684 8,866,419 12,592,701 15,029,335 17,755,480 20,825,798 24,405,970 Add: depreciation expense - 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 amortization expense - 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 Deferred income tax - - - - - - - - - - - Accounts receivable - (812,851) (1,117,670) (662,474) (775,663) (904,866) (1,052,153) (859,844) (618,552) (680,407) (748,448) Finished good inventory - (102,893) (34,361) (34,951) (38,662) (42,724) (47,171) (18,751) (20,058) (21,467) (22,986) Equipment inventory - - - - - - - - - - - Raw material inventory (2,312,572) (874,441) (1,029,405) (1,206,950) (1,410,076) (1,642,162) (868,750) (957,797) (1,055,971) (1,164,208) 12,522,331 Accounts payable - 797,824 788,760 450,661 482,338 535,712 542,576 386,884 261,622 281,042 (388,217)

Cash provided by operations (2,312,572) 610,003 888,526 2,696,122 4,800,341 7,496,099 11,850,924 14,263,547 17,006,241 19,924,478 36,452,370

Financing activitiesChange in long term debt 6,845,160 - (1,128,785) (1,323,242) (1,551,197) (1,818,424) (1,023,513) - - - - Issuance of shares 6,845,160 - - - - - - - - - -

Cash provided by / (used for) financing activ 13,690,320 - (1,128,785) (1,323,242) (1,551,197) (1,818,424) (1,023,513) - - - -

Investing activitiesCapital expenditure (10,967,039) - - - - - - - - - -

Cash (used for) / provided by investing activ (10,967,039) - - - - - - - - - -

NET CASH 410,710 610,003 (240,259) 1,372,881 3,249,143 5,677,676 10,827,411 14,263,547 17,006,241 19,924,478 36,452,370

1111..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt


1122 KKEEYY AASSSSUUMMPPTTIIOONNSS TTaabbllee 1122--11:: OOppeerraattiinngg AAssssuummppttiioonnss Hours operational per day 8Days operational per month 25Days operational per year 300

TTaabbllee 1122--22:: PPrroodduuccttiioonn AAssssuummppttiioonnss Annual production capacity (Bottles) 5,270,400Capacity utilization (1st Year) 40%Capacity growth rate (yearly) 10%Maximum Capacity utilization 90%First Year utilized production (Bottles) 2,108,160

TTaabbllee 1122--33:: EEccoonnoommiicc AAssssuummppttiioonnss Electricity growth rate 10%Wages growth rate 10%Machine maintenance growth rate 5%

TTaabbllee 1122--44:: CCaasshh FFllooww AAssssuummppttiioonnss Accounts Receivable cycle (in days) 30Accounts Payable cycle (in days) 30Raw material inventory (in days) 30Finished Goods inventory (in days) 3

TTaabbllee 1122--55:: RRaaww MMaatteerriiaall AAssssuummppttiioonnss Initial Cost /Kg (Rs) 110Sales Tax 16% 17.60Freight Cost per Truck 26,000 Weight per Truck (kg) 9,000 Freight Cost per kg 2.89Total Raw material Cost (Rs/kg) 130Raw material growth rate 5%Raw Material Inventory in store (Months) 3

PREF-37/May, 2010/2

16


TTaabbllee 1122--66:: EExxppeennssee AAssssuummppttiioonnss Professional fees (audit, legal etc.) 0.5% of Revenue Office Expenses (stationery, entertainment, etc.) 1% of total administrative costs Promotional Expenses 1% of revenue

TTaabbllee 1122--77:: DDeepprreecciiaattiioonn RRaatteess Depreciation Method Straight Line Building & infrastructure 5%Machinery & Equipment 10%Furniture & Fixtures 10%

TTaabbllee 1122--88:: FFiinnaanncciiaall AAssssuummppttiioonnss Project life (Years) 10Debt: Equity 50:50Interest rate on long term debt 16%Discount rate for calculation of NPV 20%

TTaabbllee 1122--99:: RRaaww MMaatteerriiaall CCoonnssuummppttiioonn PPeerr BBoottttllee Size Weight (grams) Rate Total Cost (Rs.)0.5 Liter 15.75 130 2.061.5 Liter 34.65 130 4.525 Liter 350.20 130 45.70Weighted average cost of Raw material per bottle (Rs.) 4.39

TTaabbllee 1122--1100:: PPrroodduucctt AAvveerraaggee SSaallee PPrriiccee Size Price (Rs)0.5 Liter 3.601.5 Liter 7.925 Liter 81.60Weighted Average Price (Rs) 7.71

PREF-37/May, 2010/2

17

Pre-Feasibility Study PET Bottles Manufacturing Unit 1133 AANNNNEEXXTTUURREE

Raw Material Supplier:

Company Name Gatron Industries Liminted. Address 8th Floor, Textile Plaza, M.A. Jinnah / Dunnolly Road, P.O. Box

5801,Karachi-74000, Pakistan Phone: 0092-21- 111-71-71-71 Fax 0092-21- 2416532 Email [email protected] www.gatronova.com

Machinery Suppliers & Consultant:

Company Name KNC International Address Suit No.1, 5th Floor Sharja Centre 62-Shadman Market Lahore

Pakistan Phone: 0092-42-7532157-58 Fax 0092-42-7532159 Email [email protected] www.knc.com.pk

Company Name Universal Resources & Traders Address 387 A, Geo Plaza near Picking Hotel, Model Town, Gujranwala Phone: 0092-55-3840241 Fax 0092-55-3840241 Email [email protected]

PREF-37/May, 2010/2

18

PET BOTTLES MANUFACTURING UNITTEXECUTIVE SUMMARYINTRODUCTIONProject BriefProject RationaleProposed CapacityTotal Project Cost

CURRENT INDUSTRY STRUCTUREPRODUCTS OFFEREDProduction Mix

PRODUCTION PROCESSManufacturing StagesOne-Step ProcessTwo-Step Process

MACHINERY REQUIREMENTInjection molding machinesCompressorCooling tower, Chiller unitWorkshop Machines

PRODUCTIONInjection MoldingInjection Molding Capacity DetailsInjection Molding Process Details

Stretch Blow ProcessProduction Capacity of the ProjectStarting Production Capacity

HUMAN RESOURCE REQUIREMENTLAND & BUILDINGPROJECT ECONOMICSFINANCIAL ANALYSISProjected Income StatementProjected Balance SheetProjected Cash Flow Statement

KEY ASSUMPTIONSANNEXTURE

smeda pet bottles manufacturing unit

Documents

information memorandum

information heshe

presented information

contained information

head office

egerton road

document control document

pkaistan tel