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 helpdesk@smeda.org.pk www.smeda.org.pk

REGIONAL OFFICE PUNJAB 8th Floor ,LDA Plaza , Egerton Road , Lahore 54000, Tel: (042) 111-111-456, Fax: (0426304926-7 helpdesk.punjab@smeda.org.pk

REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk

REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk

REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

May, 2010

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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. Revision Prepared by Approved by Issue Date Issued by PREF-37 2 SMEDA-Punjab GM Punjab May, 2010 Library Officer

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TABLE OF CONTENTS
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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EXECUTIVE SUMMARY

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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INTRODUCTION

2.1 Project Brief 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. 2.2 Project Rationale 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

PE stands for Polyethylene, HDPE stands for High Density Polyethylene, PVE stands for Poly Vinyl Ethylene 2

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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. 2.3 Proposed Capacity The production capacity of the proposed project is estimated at 5.27 million bottles per year. 2.4 Total Project Cost 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.

CURRENT INDUSTRY STRUCTURE

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. 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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PRODUCTS OFFERED

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. Table 4-1 Details of Product Mix 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. 4.1 Production Mix Keeping in view the demand of the product mix the proposed production is divided into the below proportion. Table 4-2 Production Mix Description 0.5 Liter bottle 1.5 Liter bottle 5 Liter bottle Production Ratio2 32.79 % 65.57% 1.64% 100%

Production ratios have been calculated from the capacities of the machinery and are explained in the following pages. 4 PREF-37/May, 2010/2

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PRODUCTION PROCESS
Process Flow Diagram of PET Bottles Manufacturing
Drying the PET
PET absorbs moisture from the atmosphere. This must be removed before processing using a dehumidifying drier.

Figure 5-1

Plasticizing the PET

Dried PET Pellets are compressed and melted by a rotating injection Screw.

Injection molding the Preform

Molten PET is injected into an injection 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 the Preform Temperature

The temperature of the preform is adjusted to the correct profile for blowing.

Stretch blow molding the container.

The hot Preform is simultaneously stretched and blown (thereby, orienting the crystals of and strengthening the PET) into a shaped blow mold to form a tough, lightweight container.

Container ejection
The finished container is 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 5.1 Manufacturing Stages Bottles can be made through two types of processes. 1. One-step process 2. Two-step process 5.1.1 One-Step Process 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. 2. 3. 4. Lesser Power consumption. Lower initial investment. Same number of injection cavities and blow molds as on conventional machine. 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. 5.1.2 Two-Step Process 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.

MACHINERY REQUIREMENT
Cost 500,000 450,000 595,000 595,000 250,000 170,000 100,000 350,000 200,000 100,000 192,000 168,000 250,000 150,000 295,000 Total Cost (Rs.) 500,000 450,000 595,000 595,000 250,000 170,000 100,000 350,000 200,000 100,000 192,000 168,000 250,000 150,000 295,000 4,365,000

Machinery Requirement Unit Injection Molding Machine I 1 Injection Molding Machine II 1 Blow Molding Machine I 1 Blow Molding Machine II 1 Compressor 1 Cooling Tower 1 Chiller Unit 1 Lathe 8 ft, refurbished 1 Lathe 5.5 ft, 1 Pillar Drill 26 inches, with 1 pump Facer 1 Shaper 26 inch 1 Die Molds Production Shells Generator (50 KWH) Made in 1 3 China Total Cost

Table 6-1

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 7 PREF-37/May, 2010/2

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6.1 Injection molding machines 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. 6.2 Compressor The compressor will be used with the stretch blow machine. It will supply compressed air to the blow-molding machine. 6.3 Cooling tower, Chiller unit The cooling tower is required to generate cooling water for cooling the compressors. 6.4 Workshop Machines Lathe machines, pillar drill, facer and shaper are required for the workshop. All the machines required for the workshop are manufactured locally.

PRODUCTION

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. 7.1 Injection Molding 7.1.1 Injection Molding Capacity Details 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. 7.1.2 Injection Molding Process Details 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:

pounds per square inch 9

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Table 7-1 Production 0.5 Liters PET bottle 1.5 Liters PET bottle 5 Liters PET bottles Total

Production Capacity of Injection Molding Machine Per Stroke Production 4 10 1 Stroke per minute 3 3 3 Produ Installed Share in ct Mix cap/day Production Cap./ Day 5,760 14,400 1,440 100% 80% 20% 5,760 11,520 288 17,568 Annual Production 1,728,000 3,456,000 86,400 5,270,400

7.2 Stretch Blow Process 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. Table 7-2 Production Capacity Stretch Blow Molding Machine Time Required Hourly Installed (Sec)/Stroke5 Production Capacity/Day 11 2,252 18,018 17 1,447 11,574 59 409 3,269

0.5 Liter 1.5 Liter 5 Liter

7.3 Production Capacity of the Project 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.

Stretch Blow machine blows 4 bottles in one stroke. 10

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Table 7-3 Product 0.5 Liter 1.5 Liter 5 Liter Total

Maximum Production Capacity of Unit Stretch Maximum Injection Blow Production of Molding Molding the unit per Production Capacity day 5,760 18,018 5,760 12,672 11,574 11,574 288 3,269 288

Annual Installed Capacity 1,728,000 3,456,000 86,400 5,270,400

Percentage Share in Production 32.79% 65.57% 1.64% 100%

7.4 Starting Production Capacity Starting capacity utilization of this unit is 40%. The maximum capacity level that can be achieved is 90%.

HUMAN RESOURCE REQUIREMENT

Monthly Salary (Rs) 50,000 30,000 14,000 12,000 12,000 8,000 7,000 7,000 192,000 Annual Salary in (Rs) 600,000 360,000 168,000 288,000 288,000 96,000 336,000 168,000 2,304,000

Human Resource Requirement Number of Personnel CEO 1 Production Manager 1 Accountant 1 Injection Machine Operators 2 Blow Machine Operators 2 Pre-form Handler 1 Helpers 4 Guards 2 Total 14

Table 8-1

LAND & BUILDING

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: Table 9-1 Building Covered Area Requirement Description Area (sq. ft) Cost per Sq. ft. Management building 100 1300 Production Area 1,728 800 Raw Material Store 252 700 Finished goods store 510 700 Loading area 696 700 Workshop Area 855 700 Cooling Tower/Chiller 684 600 Total Construction Cost 4,950
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Total in (Rs) 130,000 1,382,400 176,400 357,000 487,200 598,500 410,400 3,541,900

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10 PROJECT ECONOMICS
Capital Investment Land Building/Infrastructure Machinery & equipment Furniture & fixtures Office equipment Pre-operating costs Total Capital Costs Working Capital Raw material inventory Cash Total Working Capital Total Investment Initial Financing Debt Equity Initial Financing IRR Payback Period (yrs) Net Present Value (Rs.) Rs. In actuals 2,358,889 3,541,900 4,365,000 81,250 112,000 508,000 10,967,039 Rs. In actuals 2,312,572 410,710 2,723,282 13,690,320 Rs. In actuals 6,845,160 6,845,160 Equity 48% 4.25 17,945,535 Project 38% 4.32 16,221,149

50% 50%

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11 FINANCIAL ANALYSIS
11.1 Projected Income Statement
SMEDA
Rs. In actuals Year 10 86,249,727 46,083,045 40,166,682

Statement Summaries
Income Statement
Year 1 Revenue Cost of goods sold Gross Profit General administration & selling expenses Administration expense Rental expense Utilities expense Office expenses (stationary, etc.) Promotional expense Insurance expense Professional fees (legal, audit, etc.) Depreciation expense Amortization expense Subtotal Operating Income Other income Earnings Before Interest & Taxes Interest expense Earnings Before Tax Taxable earnings for the year Tax NET PROFIT/(LOSS) AFTER TAX 16,257,024 12,347,210 3,909,814 Year 2 22,353,408 16,470,549 5,882,859 Year 3 29,506,499 20,664,692 8,841,806 Year 4 37,866,673 25,304,121 12,562,553 Year 5 47,603,818 30,431,003 17,172,815 Year 6 58,909,724 36,091,566 22,818,158 Year 7 64,800,697 38,341,738 26,458,959 Year 8 71,280,766 40,748,705 30,532,061 Year 9 78,408,843 43,324,710 35,084,133

1,272,000 143,119 12,720 325,140 81,285 632,920 50,800 2,517,985 1,391,829 21,471 1,413,300 1,413,300 1,413,300 494,655 918,645

1,027,130 157,431 10,271 447,068 111,767 632,920 50,800 2,437,388 3,445,471 27,017 3,472,488 1,014,823 2,457,666 2,457,666 860,183 1,597,483

1,127,133 173,174 11,271 590,130 147,532 632,920 50,800 2,732,961 6,108,845 44,007 6,152,852 820,366 5,332,486 5,332,486 1,866,370 3,466,116

1,236,872 190,492 12,369 757,333 189,333 632,920 50,800 3,070,120 9,492,433 113,337 9,605,770 592,410 9,013,360 9,013,360 3,154,676 5,858,684

1,357,296 209,541 13,573 952,076 238,019 632,920 50,800 3,454,225 13,718,589 247,239 13,965,829 325,184 13,640,645 13,640,645 4,774,226 8,866,419

1,489,444 230,495 14,894 1,178,194 294,549 632,920 50,800 3,891,297 18,926,861 494,816 19,421,677 48,291 19,373,386 19,373,386 6,780,685 12,592,701

1,634,459 253,544 16,345 1,296,014 324,003 632,920 50,800 4,208,085 22,250,874 871,180 23,122,054 23,122,054 23,122,054 8,092,719 15,029,335

1,793,592 278,899 17,936 1,425,615 356,404 632,920 50,800 4,556,166 25,975,896 1,340,227 27,316,122 27,316,122 27,316,122 9,560,643 17,755,480

1,968,219 306,789 19,682 1,568,177 392,044 632,920 50,800 4,938,631 30,145,502 1,894,188 32,039,690 32,039,690 32,039,690 11,213,891 20,825,798

2,159,847 337,468 21,598 1,724,995 431,249 632,920 50,800 5,358,876 34,807,806 2,739,840 37,547,646 37,547,646 37,547,646 13,141,676 24,405,970

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11.2

Projected Balance Sheet

SMEDA
Rs. In actuals Year 10

Statement Summaries
Balance Sheet
Year 0 Assets Current assets Cash & Bank Accounts receivable Finished goods inventory Equipment spare part inventory Raw material inventory Total Current Assets Fixed assets Land Building/Infrastructure Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets Intangible assets Pre-operation costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities Long term debt Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIES Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

410,710 2,312,572 2,723,282

1,020,712 812,851 102,893 3,187,013 5,123,470

780,453 1,930,522 137,255 4,216,419 7,064,648

2,153,334 2,592,995 172,206 5,423,369 10,341,904

5,402,478 3,368,659 210,868 6,833,445 15,815,449

11,080,153 4,273,525 253,592 8,475,607 24,082,876

21,907,564 5,325,677 300,763 9,344,356 36,878,361

36,171,111 6,185,521 319,514 10,302,153 52,978,300

53,177,352 6,804,073 339,573 11,358,124 71,679,121

73,101,830 7,484,480 361,039 12,522,331 93,469,681

109,554,201 8,232,929 384,025 118,171,155

2,358,889 3,541,900 4,365,000 81,250 112,000 10,459,039

2,358,889 3,364,805 3,928,500 73,125 100,800 9,826,119

2,358,889 3,187,710 3,492,000 65,000 89,600 9,193,199

2,358,889 3,010,615 3,055,500 56,875 78,400 8,560,279

2,358,889 2,833,520 2,619,000 48,750 67,200 7,927,359

2,358,889 2,656,425 2,182,500 40,625 56,000 7,294,439

2,358,889 2,479,330 1,746,000 32,500 44,800 6,661,519

2,358,889 2,302,235 1,309,500 24,375 33,600 6,028,599

2,358,889 2,125,140 873,000 16,250 22,400 5,395,679

2,358,889 1,948,045 436,500 8,125 11,200 4,762,759

2,358,889 1,770,950 4,129,839

508,000 508,000 13,690,320

457,200 457,200 15,406,789

406,400 406,400 16,664,247

355,600 355,600 19,257,783

304,800 304,800 24,047,607

254,000 254,000 31,631,315

203,200 203,200 43,743,080

152,400 152,400 59,159,298

101,600 101,600 77,176,400

50,800 50,800 98,283,240

122,300,993

797,824 797,824

1,586,584 1,586,584

2,037,245 2,037,245

2,519,583 2,519,583

3,055,295 3,055,295

3,597,872 3,597,872

3,984,755 3,984,755

4,246,377 4,246,377

4,527,419 4,527,419

4,139,202 4,139,202

6,845,160 6,845,160

6,845,160 6,845,160

5,716,375 5,716,375

4,393,134 4,393,134

2,841,936 2,841,936

1,023,513 1,023,513

6,845,160 6,845,160 13,690,320

6,845,160 918,645 7,763,805 15,406,789

6,845,160 2,516,128 9,361,288 16,664,247

6,845,160 5,982,244 12,827,404 19,257,783

6,845,160 11,840,928 18,686,088 24,047,607

6,845,160 20,707,347 27,552,507 31,631,315

6,845,160 33,300,048 40,145,208 43,743,080

6,845,160 48,329,383 55,174,543 59,159,298

6,845,160 66,084,863 72,930,023 77,176,400

6,845,160 86,910,661 93,755,821 98,283,240

6,845,160 111,316,631 118,161,791 122,300,993

14 PREF-37/May, 2010/2

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PET Bottles Manufacturing Unit

11.3

Projected Cash Flow Statement

SMEDA
Rs. In actuals Year 10

Statement Summaries
Cash Flow Statement
Year 0 Operating activities Net profit Add: depreciation expense amortization expense Deferred income tax Accounts receivable Finished good inventory Equipment inventory Raw material inventory Accounts payable Cash provided by operations Financing activities Change in long term debt Issuance of shares Cash provided by / (used for) financing activ Investing activities Capital expenditure Cash (used for) / provided by investing activ NET CASH Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

(2,312,572) (2,312,572)

918,645 632,920 50,800 (812,851) (102,893) (874,441) 797,824 610,003

1,597,483 632,920 50,800 (1,117,670) (34,361) (1,029,405) 788,760 888,526

3,466,116 632,920 50,800 (662,474) (34,951) (1,206,950) 450,661 2,696,122

5,858,684 632,920 50,800 (775,663) (38,662) (1,410,076) 482,338 4,800,341

8,866,419 632,920 50,800 (904,866) (42,724) (1,642,162) 535,712 7,496,099

12,592,701 632,920 50,800 (1,052,153) (47,171) (868,750) 542,576 11,850,924

15,029,335 632,920 50,800 (859,844) (18,751) (957,797) 386,884 14,263,547

17,755,480 632,920 50,800 (618,552) (20,058) (1,055,971) 261,622 17,006,241

20,825,798 632,920 50,800 (680,407) (21,467) (1,164,208) 281,042 19,924,478

24,405,970 632,920 50,800 (748,448) (22,986) 12,522,331 (388,217) 36,452,370

6,845,160 6,845,160 13,690,320

(1,128,785) (1,128,785)

(1,323,242) (1,323,242)

(1,551,197) (1,551,197)

(1,818,424) (1,818,424)

(1,023,513) (1,023,513)

(10,967,039) (10,967,039) 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

15 PREF-37/May, 2010/2

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PET Bottles Manufacturing Unit

12 KEY ASSUMPTIONS
Table 12-1: Operating Assumptions Hours operational per day Days operational per month Days operational per year Table 12-2: Production Assumptions Annual production capacity (Bottles) Capacity utilization (1st Year) Capacity growth rate (yearly) Maximum Capacity utilization First Year utilized production (Bottles) Table 12-3: Economic Assumptions Electricity growth rate Wages growth rate Machine maintenance growth rate Table 12-4: Cash Flow Assumptions Accounts Receivable cycle (in days) Accounts Payable cycle (in days) Raw material inventory (in days) Finished Goods inventory (in days) Table 12-5: Raw Material Assumptions Initial Cost /Kg (Rs) Sales Tax Freight Cost per Truck Weight per Truck (kg) Freight Cost per kg Total Raw material Cost (Rs/kg) Raw material growth rate Raw Material Inventory in store (Months) 8 25 300

5,270,400 40% 10% 90% 2,108,160

10% 10% 5%

30 30 30 3

16% 26,000 9,000

110 17.60

2.89 130 5% 3

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PET Bottles Manufacturing Unit

Table 12-6: Expense Assumptions Professional fees (audit, legal etc.) Office Expenses (stationery, entertainment, etc.) Promotional Expenses Table 12-7: Depreciation Rates Depreciation Method Building & infrastructure Machinery & Equipment Furniture & Fixtures Table 12-8: Financial Assumptions Project life (Years) Debt: Equity Interest rate on long term debt Discount rate for calculation of NPV

0.5% of Revenue 1% of total administrative costs 1% of revenue

Straight Line 5% 10% 10%

10 50:50 16% 20%

Table 12-9: Raw Material Consumption Per Bottle Size Weight (grams) Rate 0.5 Liter 15.75 130 1.5 Liter 34.65 130 5 Liter 350.20 130 Weighted average cost of Raw material per bottle (Rs.) Table 12-10: Product Average Sale Price Size 0.5 Liter 1.5 Liter 5 Liter Weighted Average Price (Rs)

Total Cost (Rs.) 2.06 4.52 45.70 4.39

Price (Rs) 3.60 7.92 81.60 7.71

17 PREF-37/May, 2010/2

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PET Bottles Manufacturing Unit

13 ANNEXTURE
Raw Material Supplier: Company Name Address Phone: Fax Email Website Gatron Industries Liminted. 8th Floor, Textile Plaza, M.A. Jinnah / Dunnolly Road, P.O. Box 5801,Karachi-74000, Pakistan 0092-21- 111-71-71-71 0092-21- 2416532 headoffice@gatronova.com www.gatronova.com

Machinery Suppliers & Consultant: Company Name Address Phone: Fax Email Website KNC International Suit No.1, 5th Floor Sharja Centre 62-Shadman Market Lahore Pakistan 0092-42-7532157-58 0092-42-7532159 info@knc.com.pk www.knc.com.pk

Company Name Address Phone: Fax Email

Universal Resources & Traders 387 A, Geo Plaza near Picking Hotel, Model Town, Gujranwala 0092-55-3840241 0092-55-3840241 urt@brain.net.pk

18 PREF-37/May, 2010/2