Prefabricated Construction Blocks

7/26/2019 Prefabricated Construction Blocks

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Pre-Feasibility Study

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Small and Medium Enterprise Development Authority


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S a a d ed u te p se eve op e t ut o ty

Pre-Feasibility Report Prefabricated Construction Blocks

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


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11..11 OOPPPPOORRTTUUNNIITTYYRRAATTIIOONNAALLEE

Construction sector has been registered with a growth rate of 7.9 percent1. Housing and

construction is one of the major drivers of growth in more than 40 allied industries anddirectly adds to the PREFABRICATED CONSTRUCTION BLOCKS industry. In

addition, for the building of roads, flyovers and bypasses there is a mass and consistentneed of prefabricated blocks across the country. Various construction and real estate

development projects are in progress and are continuously being commissioned whichwill have high demand of prefabricated construction material all over the country.

In order to make up the backlog and meet the shortfall in the next 20 years, overall

housing construction industry has to be raised to the level of 500,000 housing units perannum. This is the extent of the annual housing market in Pakistan which positively

predicts a permanent growth in construction sector which directly adds to the potential inprefabricated building blocks segment of the construction industry.

Massive construction in the public sector especially in Karachi also contributes to the

acceleration in construction sector and the quantum of work will continue at least for thenext two to three years at the same pace which surely predicts a great investment

opportunity in the proposed business.

The aforementioned statistics provide enough evidences and ensure a steep andcontinuous growth vis--vis investment opportunity in the PREFABRICATED

CONSTRUCTION BLOCKS business.

11..22 PPRROOJJEECCTT BBRRIIEEFF


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economic feasibility of the venture. Determination of level of demand for blocks in thearea (how many per month) and degree of competition from other block yards are

important factors having a significant bearing on the feasibility of the venture. Thencomes the cost estimation based on various methods of production and output. Factors

which influence unit cost include:

Purchase price or rental of site

Cost of site improvements: fencing, paved areas for production and stockpiles,pathways, roadways and buildings

Cost of equipment: concrete mixer, block making machine and miscellaneousequipment

Cost of services: water and electricity

Material costs

Wastage

Maintenance costs of site and equipment

Output: number of blocks per day dimensions of block, solid or hollow.

Labor costs

Cost of finance etc.

11..33 MMAARRKKEETTEENNTTRRYYTTIIMMIINNGG

Blocks making business depends on activity and movement in construction industry.Housing and construction plus government initiated development projects demand mass

availability of blocks all over the year. Therefore, a block manufacturing unit could beestablished at any time of the year.

11..44 PPRROOPPOOSSEEDDBBUUSSIINNEESSSSLLEEGGAALLSSTTAATTUUSS

The legal status of business tends to play an important role in any setup; the proposed

bl k d i d S l P i hi b i


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1. Solid Block

2. Hollow Block

3. Pavers

4. Kerb stone / Blocks

1.5.1 Raw Material Sourcing

Raw material to be used for the production of concrete based block is available in the

local market at reasonable price. Main production material components include: cementand sand/crushed stone. A number of suppliers are available for Sand and Crush in eachregion and area of Pakistan and could easily be contacted, whereas, cement could be

procured from any well known cement company. Cement suppliers could also be one ofthe sources for sand and crush supply reference. Low quality Chinese cement is also

available in the local market which has been declared substandard for consumption byPSQCA.

Volatility in cement prices is the biggest threat while working in construction industry.


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S.

No. Block Type

Size/

Dimension Standard

Production(as % of

Total)

ColorSelling

Price/ unit

(Rs.)

1 Masonry Block

Solid Block 4x8x12 600-800 psi* 10% Natural Grey 15

Solid Block 5x8x12 600-800 psi 20% Natural Grey 16


Hollow Block 5x8x16 600-800 psi 10% Natural Grey 23

Fair Face Blocks

Solid Block 90x190x390 mm 600-800 psi 15% Natural Grey 28

2 Pavers 300x300x40mm 4000 psi 5% Natural Grey 40

3 Kerb Stone/Block 6x12x12 5000 psi 30% Natural Grey 90

* per square inch

11..88 RREECCOOMMMMEENNDDEEDDPPRROOJJEECCTTPPAARRAAMMEETTEERRSS

Capacity Human Resource Technology/Machinery Location

50% Capacity Utilisation

(based on 8 working hrs. daily17 Both Local and Imported

Nooriabad,

Sindh

Financial Summary

Project Cost IRR NPV Payback Period

Cost of

Capital

(WACC)

Rs. 43.04 million 26%14,127,743

4 Years 17.50%

11..99 PPRROOPPOOSSEEDDLLOOCCAATTIIOONN

P d l ti f tti f b t ti bl k ki it l l d d


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developed cities and towns i.e. Karachi, Lahore, Multan, Faisalabad, Peshawar, Quettaetc.

11..1100 KKEEYYSSUUCCCCEESSSSFFAACCTTOORRSS//PPRRAACCTTIICCAALLTTIIPPSSFFOORRSSUUCCCCEESSSS

Prefab construction blocks business is dependent on the pricing and margins given tobuilders, suppliers and retail customers. It also depends on efficient supply of blocks to

the customer and communication facilities provided to the prospective clients, retailersand order booking agents.

1.10.1 Conventional Order Booking Arrangements Distribution

As we have discussed earlier, prefab construction blocks is one of the allied sectors ofconstruction industry. Therefore, all raw material suppliers to the construction industry

are considered to be the part of the distribution network for the prefab constructionblocks.

A block maker when setting up a block yard, institutes contacts with the constructionmaterial suppliers, retailers and signup a contract in order to appoint them as orderbooking agents. Generally, construction and building material supplier is the part of the

whole chain, and brings together the customers and suppliers. Sometimes the supplier hashis own delivery vehicles and in most of the cases, keeps arrangement with the

commercial vehicle operators, material manufacturers, and buyer, having a significanceof a pivoting point among them.

1.10.2 Ordering and Delivery Procedure:

Block maker appoints order booking agents (building material suppliers) with in the city

who entertain the customer Customers usually send someone or personally go to the


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orders using hired delivery vehicles. Bulk deliveries typically account for around 30% ofthe total annual sales.

In the Prefab construction blocks industry, the role of the middle man is played by

building material suppliers at a nominal margin of 1% to 2% of the order booked.

11..1111 PPRROODDUUCCTTMMAARRKKEETTIINNGG

In the manufacturing industry, marketing is considered to be of significant importance. In

the Prefab construction blocks industry, marketing parameters are very limited andlargely associated with the construction sectors performance. Some of the marketing

promotion activities which should duly be rendered are given below:

Developing contacts with the building material suppliers, well known builders andcontractors.

Keep up to date information on civil and construction works initiated by local,provincial and central government.

Draw linkages with material suppliers to the housing industry at town level.

Emphasis on image development and building acquaintances across individualcontractors who are serving private sector.

Establish contacts with local civil engineering firms, individuals and professionals.

22.. SSEECCTTOORR&&IINNDDUUSSTTRRYY AANNAALLYYSSIISS

22..11 SSEECCTTOORRCCHHAARRAACCTTEERRIISSTTIICCSSAANNDDOOVVEERRVVIIEEWW

Construction sector is one of the largest economic sectors of Pakistan in terms of3


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Prefab construction block have different categories from smallest size of a brick to a huge

sized pre-cast concrete bridges. However, for the purpose of this pre-feasibility, we havefocused on the manufacturing setups where various types of blocks are manufactured

with the help of automatic or semi-automatic plant and machinery. This sector is largelyunorganized and no statistics are available in terms of how many block manufacturing

units are working and their scale of operations. The prefab construction blocksmanufacturing sector can be divided into three categories:

Organized Sector Machine Blocks

Organized sector constitutes only three major players in Karachi: Envicrete Private

Limited, Hubcrete and Izhar Paver Blocks. Only Envicrete is working as a private limitedcompany; other two are operating as sole proprietorship companies. All companies use

imported plants and machinery due to their large scale of operations. Standard blocks aregenerally available in the sizes of 6x8x12, 5x8x12 and 4x8x12. Product quality

is defined in PSI (per squire inch pressure) which a block can survive. Generally itdepends on the use of block which varies from product to product. Housing construction

purpose block has a normal PSI of 400 and pavers are manufactured with 5000 PSIstrength. Except for Envicrete, other two manufacturers are concentrating only on pavers

and kerb stones.

Unorganized Sector Machine Blocks

This sector mainly includes block yards where hand operated mechanical machines areused to make concrete blocks which lay six and above blocks at a time. Therefore, their

operations are limited and usually work on the basis of area to area demand. Hundreds ofsuch setups could be seen in each area of the country where these setups are fulfilling the

local housing construction demand of blocks of three different sizes and strengths


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22..22 EENNVVIIRROONNMMEENNTTAALL&&PPRROOTTEECCTTIIOONNAASSPPEECCTTSS

Block making results in persistent exposure to the asbestos (due to dust emission), whichis a natural fiber found in the dust particles of cement and blocks. To avoid its harmful

effect on human health, it is suggested to follow guidelines provided by the provincialagency of environment protection. These procedures do not particularly apply on theblock manufacturing industry, rather, a standard material, product and process handling

guidelines applicable to construction and allied industries are available on the website:www.environment.gov.pk

33.. MMAARRKKEETTIINNFFOORRMMAATTIIOONN

33..11 MMAARRKKEETTPPOOTTEENNTTIIAALL

Prefab construction blocks making units across the country are working mostly as

unorganized sector (about 80%) and no reliable data is available, precisely, for the

installed capacity and the number of units working etc. However, since it is an alliedindustry of the construction sector, growth in construction sector may be considered as aclose proxy for the growth in prefab construction blocks sector which is 7.9% (Economic

Survey of Pakistan 2006).

33..22 EEXXPPOORRTTSSAANNDDIIMMPPOORRTTSSOOFFPPRREEFFAABBCCOONNSSTTRRUUCCTTIIOONNBBLLOOCCKKSS

Prefabricated construction blocks or other products are heavy; hence there are limited

opportunities for export due to high cost of transportation. The market scope for prefabconstruction blocks is found to be encouraging in local market with the increased demand

from construction industry. There is also a sufficient demand from Govt. Contractors forlying of roads and construction of industries.


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Ordering &

Stockpiling

Material

Batching

Mixing

Molding

Curing


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The following steps are commonly used to manufacture concrete blocks.

Mixing

The sand and gravel are stored outside in piles and are transferred into storage bins inthe plant by a conveyor belt as they are needed. The Portland cement is stored outside

in large vertical silos to protect it from moisture.

As a production run starts, the required amounts of sand, gravel, and cement aretransferred by gravity or by mechanical means to a weigh batcher, which measures

the proper amounts of each material.

The dry materials then flow into a stationary mixer where they are blended togetherfor several minutes. There are two types of mixers commonly used. One type, called aplanetary or pan mixer, resembles a shallow pan with a lid. Mixing blades are

attached to a vertical rotating shaft inside the mixer. The other type is called ahorizontal drum mixer. It resembles a coffee can turned on its side and has mixing

blades attached to a horizontal rotating shaft inside the mixer.

After the dry materials are blended, a small amount of water is added to the mixer. Ifthe plant is located in a climate subject to temperature extremes, the water may first

pass through a heater or chiller to regulate its temperature. Admixture chemicals andcoloring pigments may also be added at this time. The concrete is then mixed for six

to eight minutes.

Molding

Once the load of concrete is thoroughly mixed, it is dumped into an inclined bucketconveyor and transported to an elevated hopper. The mixing cycle begins again for

the next load.

From the hopper, the concrete is conveyed to another hopper on top of the blockmachine at a measured flow rate. In the block machine, the concrete is forced

downward into molds. The molds consist of an outer mold box containing severalmold liners The liners determine the outer shape of the block and the inner shape of


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Curing

The pallets of blocks are conveyed to an automated stacker or loader which placesthem in a curing rack. Each rack holds several hundred blocks. When a rack is full, it

is rolled onto a set of rails and moved into a curing kiln.

The kiln is an enclosed room with the capacity to hold several racks of blocks at atime. There are two basic types of curing kilns. The most common type is a low-

pressure steam kiln. In this type, the blocks are held in the kiln for one to three hoursat room temperature to allow them to harden slightly. Steam is then gradually

introduced to raise the temperature at a controlled rate of not more than 60F per hour

(16C per hour). Standard weight blocks are usually cured at a temperature of 150-165F (66-74C), while lightweight blocks are cured at 170-185F (77-85C). Whenthe curing temperature has been reached, the steam is shut off, and the blocks are

allowed to soak in the hot, moist air for 12-18 hours. After soaking, the blocks aredried by exhausting the moist air and further raising the temperature in the kiln. The

whole curing cycle takes about 24 hours.

Another type of kiln is the high-pressure steam kiln, sometimes called an autoclave.In this type, the temperature is raised to 300-375F (149-191C), and the pressure is

raised to 80-185 psi (5.5-12.8 bar). The blocks are allowed to soak for five to 10hours. The pressure is then rapidly vented, which causes the blocks to quickly release

their trapped moisture. The autoclave curing process requires more energy and a moreexpensive kiln, but it can produce blocks in less time.

Cubing

The racks of cured blocks are rolled out of the kiln, and the pallets of blocks are un-stacked and placed on a chain conveyor. The blocks are pushed off the steel pallets,

and the empty pallets are fed back into the block machine to receive a new set ofmolded blocks.

If the blocks are to be made into split-face blocks, they are first molded as two blocksj i d t th O th d bl bl k d th th h litt


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Strength

Quality of blocks should be controlled so that strengths are adequate (to avoid breakagesor rejection by customers) and mixes are as economical as possible. Ideally, blocksshould be regularly tested for strength and mixes and production processes modified ifnecessary. If testing is impracticable or unaffordable, block strength should becontinually assessed by noting whether corners and edges, or even whole blocks, tend tobreak in handling. Strength can also be assessed by knocking two mature bricks together.

Dimensions

The length and width of the units are determined by the mould and will not vary greatly.However, the height can vary and should be monitored using a simple gauge. Units ofinconsistent height will lead to difficulties in the construction of masonry and possiblerain penetration.

Shrinkage

Concrete masonry units shrink slightly after manufacture. In order to avoid thishappening in the wall, blocks should be allowed to dry out for at least seven days beforebeing used for construction.

44..22 RRAAWWMMAATTEERRIIAALL RREEQQUUIIRREEMMEENNTT

Crushed Hard Lime Stone, Sand, Cement and Water will be used as raw material formanufacturing prefab construction blocks. Crushed raw stone and sand could be

purchased directly from the excavator (quarry lease holder) or supplier, whereas, cementcould be sourced from manufacturers by signing a regular supply contract which wouldlead to a controlled cost. For the purpose of this pre-feasibility, it is proposed to hold a

l t t ith th th t f t i l li t id ibl th t i


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44..33 MMAACCHHIINNEERRYYRREEQQUUIIRREEMMEENNTT

Although small mixing and molding units are available in the local market, yet, completemechanized plants are not available and organized setups are using imported plant andmachinery for concrete block making. European and American plants are available which

give good quality output; however, these are very expensive and not generally preferredeven by the leading players due to high capital requirement. Therefore, Chinese or any

other machinery would be more appropriate for the proposed project which gives goodquality output and is relatively more economical.

Machinery with the following specification has been proposed for the project which will

cost around Rs. 30 million.

Detailed Plant Description

HCQ6-15III Concrete Block Machine:

With a solid and robust welded steel frame, this machine is operated using

an advanced control system. Has a compact size (6 x 3.5 x 2.95m), and overallweight of 9.6MT.

Compulsory Mixer with Skip Elevator:The mixer consists of a solid mixing trough and alloy steel rotary mixing

blade, 4 vertical supports with foot plates. The platform is adapted forservice and working. To mix light weight and high density concrete with

0.5cbm per batch.

Elevator:As the pallet and fresh block convey to the elevator, they are stacked to

a maximum height of 1metre which is equivalent to 2 2 ton


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Control Panel with Touch Screen:Heart of the control is a PLC with a touch screen color flat display. The

operator can select the functions and change the parameter directly via thescreen. The recipe can be stored and the statistics data can be downloaded.

There are many Chinese and other suppliers available on the internet and could becontacted and easily accessible. For the purpose of this pre-feasibility, we have exploredthe following machinery suppliers:

11.. Quanzhou City Licheng Huangshi Machinery Co., Ltd. (Web Address:http://huangshimachinery.en.alibaba.com/ )

2. Fujian Quanzhou Honcha Machine Make Co., Ltd.

3. Concrete Pumps

7 Ballance Road, Durban, 4001, South Africa

P. O. Box 262, Westville, 3630, South AfricaTel +27 - 31 - 303 1397 Fax +27 - 31 - 312 0294E-mail address: [email protected] address: www.concretepumps.co.za

44..44 VVEEHHIICCLLEESSFFOORRTTRRAANNSSPPOORRTTAATTIIOONN

The proposed setup would require three to four vehicles (new machinery has beenconsidered for the proposed project) to carryout transportation of raw material andfinished products. Besides, dumping and loading vehicles for the transportation of

fi i h d d t t th t ki i t ld b i it D t il f i d


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difference between rented and purchased machinery would be very close over a longperiod of time. Therefore it would be preferred to acquire own machinery rather than

obtaining these services on rent.

44..55 PPLLAANNTTAANNDDMMAACCHHIINNEERRYYMMAAIINNTTEENNAANNCCEE

Machinery is expected to be serviced on an annual basis. During the projected period,maintenance expenses are estimated to be around 3% of the total cost of machine.

55.. LLAANNDD&&BBUUIILLDDIINNGGRREEQQUUIIRREEMMEENNTT

55..11 SSIITTEEDDEEVVEELLOOPPMMEENNTT

The Prefab construction blocks project is estimated to require a total area of one acre,which will be used for stockpiling of raw material, production of blocks, cement storageand storage of finished product. Since heavy machinery and vehicles i.e. dumper, forklifters etc. would be used which require open space for the movement as well as there

will be frequent movement of heavy transportation and delivery vehicles; therefore, largeland requirement is being recommended. Moreover, the space would also be used formachinery installation, storage and vehicle parking and different services necessary forthe project.

55..22 LLAANNDD&&BBUUIILLDDIINNGGRREEQQUUIIRREEMMEENNTTSS

5.2.1 Selecting a site

In selecting a site, consider location, access, ground slope and size. Each of these isdiscussed below.


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Ground slope

Ideally, the site should be level or nearly so. Steep slopes make handling and productiondifficult. Terracing a steep slope is expensive.

Size

The site should be big enough for aggregate stockpiles, cement storage, production (slab

or stationary machine) block stacking, staff facilities, an office and on-site access. Withall provisions for the business, one acre would be sufficient for the project.

5.2.2 Establishing the site

The site should have provision for stockpiling aggregates and storing cement, a

production area, a stacking area, staff facilities, an office, and access between differentareas and facilities. Each of these is discussed below.

5.2.2.1 Aggregate stockpiles

Aggregates must be stockpiled in such a way that: they do not become contaminated by

soil, leaves, etc; different aggregates are kept separate; and rainwater can drain away.Ideally therefore, aggregates should be stockpiled on a concrete slab. If this is not done,

the layer of aggregates in contact with the soil should not be used for production.Aggregates must not be stockpiled under trees. Partitions should be erected between

different types of aggregate. Stockpiles should be on a slight slope so that rainwater doesnot collect in the aggregates.

5.2.2.2 Cement store


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The size of this area depends on the method of producing blocks. A stationary machine,which forms blocks on pallets, needs a relatively small area with space around it for

operators. A mobile egg-laying machine needs a fairly large slab on which blocks aremade. Details of such a slab are discussed below.

Construction of a production slab

Area

A flat concrete slab, big enough for at least one days production, is required. To

minimize breakages in cold weather, it is recommended to increase the cement content ofthe mix or the curing period before moving the blocks. As a guideline, an 80 x 80 ft. in

area is suitable for a production of 6000 blocks per day.

Slope

Normally block production is carried out in the open, and the concrete slab should have aminimum slope of 1 in 100 to ensure proper drainage.

Thickness

Large production machines require a minimum slab thickness of 150 mm.

Joints

To prevent uncontrolled cracking of the slab, it should be divided into panels which

should be square or as close to square as possible. The half round keyway preventsdifferential settlement of adjacent slabs. The maximum joint spacing depends on the

thickness of the slab and should not exceed 6 m for slab thicknesses of 150 and 200 mm.


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DetailsSize/Area

(Sq. Ft.)

Civil Works

/Construction

Cost/Sq. Ft.

Total

Construction

Cost

Production & Stacking Area 15,000 150 2,250,000

Cement Store 2500 300 750,000

Office & Staff facilities 400 300 120,000

Storage Area (Sand/Crush) Not limited - 0

Water Tank 4000 200 800,000

Other Services (water plant, tool shop etc.) 500 300 150,000

Total Covered Area 18,400 4,070,000

The factory would be located atNooriabad, Sindh. The reason for the selection is thatutilities, water, electricity and skilled manpower are conveniently available, whereas,

comparatively low cost of land, proximity to the target market, good transport andcommunication facilities, also account for its selection.

66.. HHUUMMAANNRREESSOOUURRCCEERREEQQUUIIRREEMMEENNTT

Construction and allied industry is a labor intensive industry; therefore, a total 18 personswill be required to handle the production operations of a prefab construction blocks

making unit. The business unit will work on one shift basis (8 hours daily). Technicalstaff with relevant experience will be required for operating production plant. The staff

will be provided training by the plant & machinery supplier.


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Total approximate manpower required for the business operations along with therespective salaries are given in the table below:

(Pak. Rs.)

Staff Title No of Persons Monthly

Salary

Annual

Salary

Owner (Business Unit Manager)

Production Staff (Quarry/Excavation Site)

2. Forklift Operator 1 8,000 96,000

3. Dumper/Truck Driver 1 8,000 96,000

4. Helper/Laborer 2 8,000 96,000

Production Staff (Crushing Factory)

5. Production Incharge / Plant Operator 1 10,000 120,000

6. Assistant Production Plant Operator 1 5,000 60,000

7. Production Laborers 8 32,000 384,000

Total Production Staff 14 71,000 852,000

General Administration/ Selling Staff

8. Office Assistant 1 5,000 60,000

9. Security Staff 2 10,000 120,000Total G A /S Staff 3 15,000 180,000

TOTAL 17 86,000 1,032,000

6.1 Experience Requirement for the Staff

One to two year of experience on mechanized block making plant would be necessary for

the person who will operate the prefab construction blocks plant. It is also suggested thatpreference should be given to literate persons so that they could understand the

significance of undertaking health and safety measures.


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77..22 OOVVEERRAALLLLFFAACCTTOORRYY&&OOFFFFIICCEERREENNOOVVAATTIIOONN

To renovate the factory / office premises in Year 5 and Year 10, certain expenses will be

incurred for which an amount equivalent to 5% of the total site/office construction cost isestimated.

77..33 FFAACCTTOORRYY//OOFFFFIICCEEFFUURRNNIITTUURREE

A lump sum provision of Rs. 60,000 for procurement of office/factory furniture isassumed. This would include table, desk, chairs, and office stationery. The breakup of

Factory Office Furniture & Fixtures is as follows:

Item Number Total Cost

Table & Chair for Owner 1 5,000

Tables & Chairs for Admin. Staff 1 3,000

Waiting Chairs 4 6,000Curtains & Interior Decoration for office - 5,000

Chairs for Workers/Labor 6 5000

Electrical Fittings & Lights - 30,000

Others - 6,000

Total 60,000

77..44 DDEEPPRREECCIIAATTIIOONNTTRREEAATTMMEENNTT

The treatment of depreciation would be on a diminishing balance method at the rate of


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will be used. The cost of the utilities including electricity, diesel/fuel, telephone, andwater is estimated to be around Rs. 2 million per annum. Approximate cost of utilities has

been given below:

Utility Total Monthly

Cost (Rs.)

Total Annual

Cost (Rs.)

Annual %age

Increase

1. Electricity 58,000 696,000 5%

2. Furnace Oil, Lubricants etc. 5,000 60,000 3%

3. Diesel for Vehicles and Machinery 28,500 342,000 5%

4. Water 70,200 842,400 5%

5. Telephone 5,000 60,000 5%

Total 166,700 2,000,400

77..66 WWOORRKKIINNGGCCAAPPIITTAALLRREEQQUUIIRREEMMEENNTTSS

It is estimated that an additional amount of one million rupees (approximately) will be

required as cash in hand to meet the working capital requirements. These provisions havebeen estimated based on the following assumptions for the proposed business.

Utilities - (Office & Factory) 87,140

1. Electricity - 01 Month 58,240

2. Oil, Lubricants & Other consumables - 01 Month 5,000

3. Water - 07 days 18,900

4. Telephone - 01 Month 5,000

Salaries - Three Months (Production Staff) 213,000

Raw Material Inventories (Cement & Sand/Crushed Stone) 238,380

Cement 01 Month 325,000


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77..88 VVEEHHIICCLLEEFFOORRSSUUPPPPOORRTTAANNDDMMAAIINNTTEENNAANNCCEESSEERRVVIICCEESS

An additional light loading vehicle would be required for providing services for themaintenance, communication of machinery spare parts, labor etc. For this purpose, atransportation vehicle has been proposed and an amount of Rs. 400,000 is assumed to berequired to purchase the vehicle.

77..99 PPRREELLIIMMIINNAARRYYEEXXPPEENNSSEESSAANNDDCCOONNTTIINNGGEENNCCYYPPRROOVVIISSIIOONN

A lump sum provision of Rs. 300,000 is assumed to cover all preliminary expenses whichwill be amortized over the 5 year period.

77..1100 SSEELLLLIINNGG&&DDIISSTTRRIIBBUUTTIIOONNEEXXPPEENNSSEESS((OORRDDEERRBBOOOOKKIINNGGAAGGEENNTTSS))

For the purpose of this pre-feasibility, it has been assumed that the block maker would

work in association with building material suppliers and will appoint 5 to 6 suppliers asbooking agents. These arrangements would raise the selling costs for the business for

which an amount equivalent to 2% of the annual sales has been assumed which alsocovers the distribution cost of bulk supplies, entertained directly by the owner.

77..1111 MMIISSCCEELLLLAANNEEOOUUSSEEXXPPEENNSSEESS

Miscellaneous expenses of running the business are assumed to be Rs. 5,000 per month.

These expenses include various items like office stationery, daily consumables, travelingallowances etc. and are assumed to increase at a nominal rate of 10% per annum.


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77..1133 RREEVVEENNUUEEPPRROOJJEECCTTIIOONNSS

For the revenue projections, prefab construction blocks are assumed to be produced asfollows:

S.No.

Block Type Size/

Dimension Standard

Production (as % of

Total)Color

SellingPrice/ unit

1 Masonry Block


Solid Block 5x8x12 600-800 psi 20% Natural Grey 16 Solid Block 6x8x12 600-800 psi 10% Natural Grey 17

Hollow Block 5x8x16 600-800 psi 10% Natural Grey 23

Fair Face Blocks

Solid Block 90x190x390 mm 600-800 psi 15% Natural Grey 28

2 Pavers 300x300x40mm 4000 psi 5% Natural Grey 40

3 Kerb Stone/Block 6x12x12 5000 psi 30% Natural Grey 90

Working with the proposed plant and machinery, the project will be capable of producing

4,000 sq.ft. of concrete blocks at 100% capacity utilization with single shift of 8 hours aday. It has been assumed that it will take some time for the business to reach the optimal

capacity utilization point for the projected period. Therefore, the first year production ofprefab construction blocks has been estimated with 70% capacity utilization. Annual

increase of 3% in capacity utilization is assumed over the projection period. Allprojections are based on 8 working hrs a day with 26 days a month.

Based on our discussions with the industry experts and entrepreneurs it is assumed that

the sales price will increase with a nominal rate of 5% on all product categories during

the projected period.


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77..1166 FFIINNAANNCCIIAALLCCHHAARRGGEESS

It is assumed that long-term financing for 5 years will be obtained in order to finance theproject investment cost. This leasing facility would be required at a rate of 15%(including 1% insurance premium) per annum with 60 monthly installments over a period

of five years.

77..1177 TTAAXXAATTIIOONN

The business is assumed to be run as a sole proprietorship; therefore, tax rates applicableon the income of an individual tax payer are used for income tax calculation of the

business.

77..1188 CCOOSSTTOOFFCCAAPPIITTAALL

The cost of capital is explained in the following table:

Particulars Rate

Required return on equity 20%Cost of finance 15%

Weighted Average Cost of Capital 17.5%

The weighted average cost of capital is based on the debt/equity ratio of 50:50.

77..1199 OOWWNNEERRSSWWIITTHHDDRRAAWWAALL

It is assumed that the owner will draw funds from the business once the desiredprofitability is reached from the start of operations. The amount would depend onbusiness sustainability and availability of funds for future growth.


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(in Pak. Rs.)

Sr.

No.PARTICULARS TOTAL COST/DETAILS

Land 2,000,000

Plant & machinery 35,300,000

Concrete Blocks Making Plant (Imported) 30,000,000

Transportation Machinery/Vehicles 5,200,000

Plant & machinery Installation & trial run expenses 100,000

Vehicle for support and maintenance services - One light vehicle 400,000

Site/Office Renovation & Contruction 4,070,000

Factory / Office Furniture 60,000

Preliminary Expenses 300,000

Total Fixed Capital 42,130,000

Utilities - (Office & Factory) 87,140

1. Electricity - 01 Month 58,240

2. Oil, Lubricants & Other consumables - 01 Month 5,000

4. Water - 07 days 18,900

Water Requirement (Quantity) 66,000

5. Telephone - 01 Month 5,000

Salaries - Three Months (Production Staff) 213,000

Raw Material Inventories (Cement & Sand/Crushed Stone) - 07 Days 238,380

Cement - 26 Days 325,000

Sand and Crushed Stone - 07 Days 31,500

Misc. Expenses - Three months (@ 5000 /month) 15,000

Total Working Capital 910,020

TOTAL PROJECT COST 43,040,020

Loan Finance 21,520,010

Equity Financing 21,520,010

Debt:Equity Ratio (50:50) 50.00%

IRR 26%

NPV 14,127,743

Payback Period (Years) 4 Years

Debt Equity Ratio 50:50'

Required return on equity20%

Cost of finance15%

Weighted Average Cost of c apital17.50%

1 Depreciation 10%

Summary of Key Assumptions

Fixed Capital

Working Capital

PROJECT RETURNS AND OTHER FINANCIAL

OTHER ASSUMPTIONS


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1. REVENUE CALCULATION

ProductionRated capacity of the Block Making Plant 500 sq.ft. of concrete / hr.

No. of Operating Hours - Single Shift Basis 8 Hrs / Day

Estimated Optimal Production 4,000 sq.ft. of concrete / day

Expected Capacity Utilization (At the beginning of the project) 50%

Annual Capacity Utilization Growth Rate 5%

Expected Concrete Production at the beginning of the project 2,000 sq.ft. of concrete / day

Expected Blocks Production at the beginning of the project Blocks/day

Sales prices of differe categories of construction blocks

No. of Blocks Produced (Approximately)

Size Masonry Block

4x8x12 Solid Block 450 15 Rs.5x8x12 Solid Block 840 16 Rs.

6x8x12

Solid Block 300 17 Rs.5x8x16 Hollow Block 225 23 Rs.

Fair Face Blocks

90x190x390 mm Solid Block 305 28 Rs.300x300x40mm Pavers 144 40 Rs.

6x12x12 Kerb Stone/Block 600 90 Rs.

Total Blocks Produced 2,864

Construction Block Category Production Assumptions

Masonry Block

Solid Block 15%

Solid Block 28%

Solid Block 10%

Hollow Block 10%

Fair Face Blocks

Solid Block 2%

Pavers 5%Kerb Stone/Block 30%

100%

C onst ruct ion Bl ock Category B locks Produced / D ayProduction in

RupeesMasonry Block

Solid Block 450 6,750 Rs.

Solid Block 840 13,440 Rs.

Solid Block 300 5,100 Rs. Hollow Block 225 5,175 Rs.Fair Face Blocks

Solid Block 305 8,533 Rs.Pavers 144 5,760 Rs.Kerb Stone/Block 600 54,000 Rs.

Total Value of Blocks Produced per Day 2864 98,758 Rs.

Total Value of Blocks Produced per Month 2,567,717 Rs.

Gross Annual Sales 30,812,600 Rs.

Provision for Finished Goods Inventory 7 Days

Estimated Finished Goods Inventory at the end of the Year 396,695 Rs

PREFABRICATED CONSTRUCTION BLOCKS MANUFACTURING

COST AND REVENUE SHEET


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PREF-X/Dec, 2006/Rev1

Projected Income Statement (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Net (Adjusted Sales) 30,233,409 33,930,278 37,408,136 41,242,476 45,469,835 50,130,499 55,268,883 60,933,951 67,179,689 74,065,617

Cost of Sales 17,801,280 19,617,481 21,619,315 23,825,772 26,257,785 28,938,432 31,893,150 35,149,982 38,739,840 42,696,800

Fue l & El ec tri cit y Consumed Duri ng Product ion 16, 829, 280 18,554,281 20,456,095 22,552,845 24,864,511 27,413,124 30,222,969 33,320,823 36,736,208 40,501,669

Labor (Production Staff) 852,000 937,200 1,030,920 1,134,012 1,247,413 1,372,155 1,509,370 1,660,307 1,826,338 2,008,971

Other Utilities 120,000 126,000 132,300 138,915 145,861 153,154 160,811 168,852 177,295 186,159

Gross Profit 12,432,129 14,312,797 15,788,821 17,416,704 19,212,050 21,192,067 23,375,732 25,783,969 28,439,849 31,368,817

Gross Profit Margin 41% 42% 42% 42% 42% 42% 42% 42% 42% 42%

General Administrative & Selling Expenses

Salaries 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431

L ease Charges of Land - Quarry / Excavation 31,500 32,445 33,418 34,421 35,454 36,517 37,613 38,741 39,903 41,100

Factory/Office Miscellaneous Expenses 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477Amortization of Preliminary Expenses 60,000 60,000 60,000 60,000 60,000 - - - - -

Depreciation Expense 3,983,000 3,584,700 3,226,230 2,903,607 2,613,246 2,372,272 2,135,045 1,921,540 1,729,386 1,556,447

Maintenance Expense 1,059,000 1,059,000 1,059,000 1,059,000 1,059,000 1,059,000 1,059,000 1,059,000 1,059,000 1,059,000

Selling & Distribution 604,668 678,606 748,163 824,850 909,397 1,002,610 1,105,378 1,218,679 1,343,594 1,481,312

Subtotal 5,978,168 5,678,751 5,417,211 5,201,317 5,028,481 4,856,921 4,762,209 4,705,652 4,686,344 4,703,768

Operating Income 6,453,961 8,634,046 10,371,610 12,215,386 14,183,569 16,335,146 18,613,523 21,078,316 23,753,505 26,665,049

Financial Charges (15% Per Annum) 3,018,969 2,516,684 1,933,654 1,256,900 471,355 - - - - -

Earnings Before Taxes 3,434,992 6,117,363 8,437,956 10,958,486 13,712,214 16,335,146 18,613,523 21,078,316 23,753,505 26,665,049

Tax 858,748 1,529,341 2,109,489 2,739,622 3,428,054 4,083,787 4,653,381 5,269,579 5,938,376 9,205,267

Net Profit 2,576,244 4,588,022 6,328,467 8,218,865 10,284,161 12,251,360 13,960,142 15,808,737 17,815,129 17,459,782

Monthly Profit After Tax 214,687 382,335 527,372 684,905 857,013 1,020,947 1,163,345 1,317,395 1,484,594 1,454,982



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Projected Balance Sheet (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Ass ets

Current Assets

Cash & Bank Balance 2,671,640 3,286,008 6,603,692 9,710,622 12,678,042 14,897,694 22,622,121 30,777,191 38,022,249 45,031,816 49,254,776

Fuel Inventoriy (Diesel) 238,380 701,220 773,095 852,337 939,702 1,036,021 1,142,213 1,259,290 1,388,368 1,530,675 1,687,570

Finished Goods Inventory 0 396,695 437,309 482,080 531,436 585,844 645,824 711,944 784,833 865,185 953,764

Accounts Receivable 0 1,520,795 1,696,514 1,870,407 2,062,124 2,273,492 2,506,525 2,763,444 3,046,698 3,358,984 3,703,281

Total Current Assets 2,910,020 5,904,719 9,510,610 12,915,447 16,211,304 18,793,052 26,916,683 35,511,870 43,242,147 50,786,662 55,599,391

Fixed Assets

Plant Machinery & Facility 35,300,000 31,770,000 28,593,000 25,733,700 23,160,330 20,844,297 18,759,867 16,883,881 15,195,493 13,675,943 12,308,349

Factory Construction 4,070,000 3,663,000 3,296,700 2,967,030 2,670,327 2,606,794 2,346,115 2,111,503 1,900,353 1,710,318 1,742,786

Furniture & Fixtures 60,000 54,000 48,600 43,740 39,366 35,429 31,886 28,698 25,828 23,245 20,921

Vehicle 400,000 360,000 324,000 291,600 262,440 236,196 212,576 191,319 172,187 154,968 139,471Total Fixed Assets 39,830,000 35,847,000 32,262,300 29,036,070 26,132,463 23,722,717 21,350,445 19,215,401 17,293,860 15,564,474 14,211,527

Intangible Assets

Preliminary Expenses 300,000 240,000 180,000 120,000 60,000 - - - - - -

Total Assets 43,040,020 41,991,719 41,952,910 42,071,517 42,403,767 42,515,768 48,267,128 54,727,270 60,536,007 66,351,136 69,810,918

Owner's Equity 21,520,010 23,596,254 27,184,276 31,512,743 36,731,608 42,515,768 48,267,128 54,727,270 60,536,007 66,351,136 69,810,918

Long Term Liability 21,520,010 18,395,464 14,768,634 10,558,773 5,672,159 0 0 0 0 0 0

Total Equity & Liabilities 43,040,020 41,991,719 41,952,910 42,071,517 42,403,767 42,515,768 48,267,128 54,727,270 60,536,007 66,351,136 69,810,918



31/31



Projected Statement of Cash Flows (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Cash Flow From Operating Activities

Net Profit 0 2,576,244 4,588,022 6,328,467 8,218,865 10,284,161 12,251,360 13,960,142 15,808,737 17,815,129 17,459,782

Add: Depreciation Expense 0 3,983,000 3,584,700 3,226,230 2,903,607 2,613,246 2,372,272 2,135,045 1,921,540 1,729,386 1,556,447

Amortization Expense 0 60,000 60,000 60,000 60,000 60,000 - - - - -

(Increase) / decrease in Receivables - (1,520,795) (175,719) (173,893) (191,717) (211,368) (233,033) (256,919) (283,253) (312,287) (344,296)

(Increase) / decrease in RM - (462,840) (71,875) (79,242) (87,365) (96,319) (106,192) (117,077) (129,077) (142,308) (156,894)

(Increase) / decrease in FG Inventory (396,695) (40,613) (44,772) (49,355) (54,409) (59,979) (66,120) (72,890) (80,352) (88,579)

Net Cash Flow From Operations 0 4,238,914 7,944,515 9,316,790 10,854,035 12,595,311 14,224,427 15,655,071 17,245,057 19,009,568 18,426,460

Cash Flow From Financing Activities

Receipt of Long Term Debt 21,520,010

Repayment of Long Term Debt (3,124,546) (3,626,831) (4,209,860) (4,886,614) (5,672,159) - - - - -

Owner's Equity 21,520,010 (500,000) (1,000,000) (2,000,000) (3,000,000) (4,500,000) (6,500,000) (7,500,000) (10,000,000) (12,000,000) (14,000,000)

Net Cash F lo w Fr om Fin an ci ng Ac ti vi ti es 43,040,020 (3,624,546) (4,626,831) (6,209,860) (7,886,614) (10,172,159) (6,500,000) (7,500,000) (10,000,000) (12,000,000) (14,000,000)

Cash Flow From Investing Activities

Capital Expenditure (39,770,000) (203,500) (203,500)

Factory/Office Furniture (60,000)

Preliminary Operating Expenses (300,000)

Raw Material Inventory (15 Days) (238,380)

Net Cash Flow From Investing Activities (40,368,380) 0 0 0 0 (203,500) 0 0 0 0 (203,500)

NET CASH FLOW 2,671,640 614,368 3,317,684 3,106,930 2,967,420 2,219,652 7,724,427 8,155,071 7,245,057 7,009,568 4,222,960

Cash at the Beginning of the Period 0 2,671,640 3,286,008 6,603,692 9,710,622 12,678,042 14,897,694 22,622,121 30,777,191 38,022,249 45,031,816Cash at the End of the Period 2,671,640 3,286,008 6,603,692 9,710,622 12,678,042 14,897,694 22,622,121 30,777,191 38,022,249 45,031,816 49,254,776


Documents

Prefabricated Construction Blocks