Pre-Feasibility Study: Chipboard Plant

Pre-Feasibility Study
CHIPBOARD PLANT
Small and Medium Enterprise Development Authority
Government of Pakistan
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PUNJAB
REGIONAL OFFICE
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April, 2006
Pre-feasibility Study Chipboard Plant
2
Table of Content
1. PURPOSE OF THE DOCUMENT........................................................5
2. PROJECT PROFILE................................................................................5
1.1 Opportunity Rational ............................................................................................. 5
1.2 Project Brief .......................................................................................................... 5
1.3 Market Entry Timings............................................................................................ 5
1.4 Business Legal Status............................................................................................ 5
1.5 Project Capacity & Rational................................................................................... 5
1.6 Project Investment................................................................................................. 6
1.7 Proposed Product Mix........................................................................................... 6
1.8 Proposed Location................................................................................................. 6
1.9 Key Success Factors.............................................................................................. 6
2 2. .9 9. .1 1 A Al lt te er rn na at ti iv ve e M Ma at te er ri ia al l....................................................................................... 6
2 2. .9 9. .2 2 R Re eg gu ul la ar r M Ma ar rk ke et t S Su ur rv ve ey ys s ................................................................................. 6
2 2. .9 9. .3 3 P Pr ro op pe er r S St to or ra ag ge e............................................................................................... 7
2 2. .9 9. .4 4 F Fu ut tu ur re e T Tr re en nd ds s ................................................................................................ 7
1.10 Strategic Recommendations................................................................................... 7
2 2. .1 10 0. .1 1 M Ma ar rk ke et ti in ng g ...................................................................................................... 7
2 2. .1 10 0. .2 2 P Pr ri ic ci in ng g.............................................................................................................. 7
2 2. .1 10 0. .3 3 D Di is st tr ri ib bu ut ti io on n ...................................................................................................... 7
3. MACROECONOMIC INDICATORS OF PAKISTAN.....................8
3.1 Demography of Pakistan........................................................................................ 8
3.2 Population Growth................................................................................................. 8
3.3 Housing Sector ...................................................................................................... 8
4. SECTOR & INDUSTRY ANALYSIS....................................................9
4.1 Sector Characteristics............................................................................................ 9
4.2 Chipboard Demand................................................................................................ 9
4.3 Furniture Manufacturer.......................................................................................... 9
4.4 Construction Agencies......................................................................................... 10
4.5 Others.................................................................................................................. 10
4.6 Sub sector Information......................................................................................... 10
4.7 Sub Sector Performance....................................................................................... 10
4.8 Government Policies............................................................................................ 11
5. MARKET INFORMATION.................................................................12
5.1 Market potential................................................................................................... 12
5.2 Competitive Environment.................................................................................... 12
5.3 Allied and Associated Industries.......................................................................... 13
5.4 Demand and Supply Gap..................................................................................... 13
5.5 Target Customers................................................................................................. 13
5.5.1 Exporters .................................................................................................. 13
5.5.2 Local Users.................................................................................................. 13
5.6 Trade Statistics........................................................................................................ 14
3
6. PRODUCTION PROCESS..................................................................16
6.1 General ................................................................................................................ 16
6.2 Chip & Flake Manufacturing............................................................................... 16
6.3 Flake Drying & Drying Screening........................................................................ 16
6.4 Gluing Of Screened Flake.................................................................................... 16
6.5 Forming & Press.................................................................................................. 16
6.6 Trimming Saws and Sanding Lines...................................................................... 17
6.7 Controls............................................................................................................... 17
6.8 Plant & Machinery.................................................................................................. 18
6.8.1 Detail of Machinery required for Chipboard Unit.............................................. 18
6.9 Project Standards and Compliance Issue.................................................................. 18
7. POJECT PROFILE.................................................................................19
7.1 Land Requirement.................................................................................................. 19
7.2 Covered Area Requirement...................................................................................... 19
7.3 Recommendation mode........................................................................................... 19
7.4 Utilities Requirements............................................................................................. 19
7.4.1 Water................................................................................................................ 19
7.4.2 Power............................................................................................................... 19
7.5 Oil/Lubricants......................................................................................................... 19
7.6 Raw Material ........................................................................................................... 19
7.7 Time Schedule......................................................................................................... 20
7.8 Technical Know-How.............................................................................................. 20
7.9 Suitable Location..................................................................................................... 20
8. HUMAN RESOURCE REQUIREMENT ...........................................22
8.1 Availability & Management of Human Resource..................................................... 22
8.2 Organizational Structure.......................................................................................... 23
9. FINANCIAL PROJECTION................................................................24
KEY ASSUMPTIONS..................................................................................27
4
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. The prospective user of this memorandum is
encouraged to carry out additional diligence and gather any information he/she feels
necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-91
Prepared by SMEDA-Punjab
Issue Date April 2006
Issued by Library Officer
5
1. PURPOSE OF THE DOCUMENT
The objective of this Pre Feasibility study is to provide information for setting up a chipboard
manufacturing unit and to evaluate its viability under present circumstances.
2. PROJECT PROFILE
1.1 Opportunity Rational
Due to increase in population and need of constructing new houses it is expected that demand
for chipboard will rise ultimately. Chipboard industry is a growing industry of Pakistan,
which can contribute positively in the GDP. This industry has reasonable potential to attract
new markets abroad by providing high quality board.
Banking policies for housing loans are also playing an important roll in the boost of the
housing sector. The construction style has absolutely changed and demand of chipboard and
laminated board has significantly increased. Afghanistan Development Program after the war
has also contributed in opportunities to enhance considerable export by taking part in the
development of Afghanistan. Construction business is a demanding area. Trade has open for
all the world economies from 2005 and it is visualized that demand will increase more in
future.
1.2 Project Brief
Gluing together wood particles with an adhesive, under heat and pressure makes chipboard.
This creates a rigid board with a relatively smooth surface. Chipboard is available in different
densities i.e. 25mm, 19mm, 8mm, 5mm and 3mm.
One of the most common uses of chipboard is that it is the back piece, which provides
stiffness on a scratch pad. Chipboard is the major input for the furniture industry and also
used for kitchen tops and work surface.
1.3 Market Entry Timings
Pakistan is its way to progress and a numbers of commercial activities are in process.
Housing & construction sectors are declared as industry. With these developments these
sectors are growing drastically. The growth of allied industries is normal practice therefore
demand for chipboard has increased. Local industry is not able to cater the local demand and
every year a considerable quantity of chipboard is imported from different parts of the world
to meet the demand. Therefore it is right time enter into this industrial sector but for high
quality board definitely.
1.4 Business Legal Status
The status of the business should be a corporate entity and it could be either a partnership or a
limited company. However, a private limited company will be the best option.
1.5 Project Capacity & Rational
Total production capacity of plant is 200 m3 per day.
6
1.6 Project Investment
Cost of the project will consist of the following.
Table 2-1
(Rs. Million)
Fixed Cost 13,2.00
Initial Working Capital 3,400
Total 166
1.7 Proposed Product Mix
Chipboard in finished form will be available in different sizes i.e. 19mm and 13mm.
However the major demand is for 19mm/SP.Percentage of Product mix for laminated sheets
is:
Table 2-2
19mm 50%
8mm 30%
For Non Laminated Sheets product mix is
Table 2-3
19mm 15%
8mm 5%
1.8 Proposed Location
Lower Punjab is best location for a chipboard manufacturing unit due to easy availability of
raw material, cheap labor force and excessive water availability. In chipboard industry mango
and poplar wood are the main raw materials. This industry needs excessive water in the
manufacturing process. It is important to select the site where raw material and water
availability is easy. However the investor may consider other factors like easy access to
roads, availability of labor, transportation cost and infrastructure facilities etc. before
selecting the site.
1.9 Key Success Factors
Following factors are the key in making this project profitable:
2 2. .9 9. .1 1 A Al lt te er rn na at ti iv ve e M Ma at te er ri ia al l
Chipboard industry in Pakistan is encountering a major problem of availability of mango &
poplar wood. Keeping in view the shortage of wood, bagasse is best alternative method,
which can be used for chipboard manufacturing. However bagasse is also difficult to obtain
due to utilization as fuel in sugar industries. Imported chips/ wood grams can also be used
for fine quality chipboard.
2 2. .9 9. .2 2 R Re eg gu ul la ar r M Ma ar rk ke et t S Su ur rv ve ey ys s
Regular surveys of the Timber Market should be conducted to have a fair idea about the
availability of the raw materials and proper forecasting of problems. These types of
researches can help to find out the timely solutions for non interrupted production cycle.
7
2 2. .9 9. .3 3 P Pr ro op pe er r S St to or ra ag ge e
Proper forecasting for the future needs and planning for the storage of raw material will be
treated as key demand of the project.
2 2. .9 9. .4 4 F Fu ut tu ur re e T Tr re en nd ds s
Pakistan has faced formidable housing problems from its very birth in August 1947 as an
independent nation in the wake of the mass influx of millions who migrated to the country.
The situation is changing now and many macro and micro construction works are underway
to overcome the backlog of 6.0* million houses in the country, which should be considered a
healthy sign for many industries including chipboard industry
1
.
1.10 Strategic Recommendations
2 2. .1 10 0. .1 1 M Ma ar rk ke et ti in ng g
The marketing of the project will be based on the following strong grounds:
Contacts with end users and Contractor
Advertisement
Promotion schemes
Point of purchase displays
It is assumed that by using all above mentioned methods, project will be able to fetch
considerable market share.
2 2. .1 10 0. .2 2 P Pr ri ic ci in ng g
Chipboard is available with or without lamination. Different rates are charged for both
products. Product will be provided to wholesaler at market prevailing rates, which could be
different on the base of product quality.
2 2. .1 10 0. .3 3 D Di is st tr ri ib bu ut ti io on n
The final product chipboard will directly supplied to wholesaler eliminating role of agencies.
Distribution network of product is illustrated below:

1
Source: Economic Survey of Pakistan 2004-2005
Manufacture
Wholesaler
Retailer
End user
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3. MACROECONOMIC INDICATORS OF PAKISTAN
3.1 Demography of Pakistan
The population of Pakistan was 32.5 million in 1947. Over the last fifty-five years, it has
increased by four folds reaching to a figure of 156 Million approximately. It is expected to
172 million marks in the year 2010. The demographic details of Pakistans population are
given below:
Table 3-1
Population in 2005: 156 Million
Population Density: 185/sq. km
Population Growth (percentage): 2.10%
Population Doubling Time: 32 Years
Birth Rate: 27.3 per 1000 population
3.2 Population Growth
At present, the annual population growth rate is around 2.10 percent. Pakistans population
will be twice over in less than 32 years. Punjab is the most thickly populated area and
Karachi is the most densely populated city. Keeping in view the growth rate of population of
the country it is likely that housing requirements will enhance and automatically demand for
the chipboard will increase.
3.3 Housing Sector
The housing and construction sector remained neglected in the past, which resulted in
housing backlog of over 4.3 million units according to 1998 census, which is now projected
to 6.0* million units. The annual additional requirement is estimated round 570,000* housing
units whereas the annual production is estimated around 300,000* housing units, resulting in
a recurring shortfall of 270,000* housing units annually. It is estimated that in order to
address the backlog and to meet the housing shortfall in the next 20 years, the overall housing
construction will have to be increased to 0.82 million housing units annually
2
.
According to 1998 Population and Housing Census of Pakistan, there were over 19.3 million
housing units in the country as compared to 12.6 million enumerated in 1980, showing an
increase of 53.2 percent. The details are tabulated in the table appended herewith.
Housing Units
(Census 1998) (Houses in Million)
3
Table3-2

2
(Source: Economic Survey of Pakistan 2004- 2005)
3
Note: The figures in parenthesis are percent share
(Source: Population & Housing Census 1998)
9
On the basis of World Banks recommended occupancy rate of 6 persons per house, the total
number of housing units in the country roughly required was 26 million up to the end of
2005, based on the population of 156 million at present. Every year, 0.3 million new houses
should be added to the existing stock by the public & private sectors. On the other hand, 10
percent houses of the total supply are depleted/destroyed/demolished every year, resulting
into decline in available housing units to 20.0 million housing units leaving a back log of 6.0
million housing units.
The present progress involves construction of approximately 4500 housing units/apartments
in 4 major urban centers of Karachi, Lahore, Islamabad and Peshawar at an estimate cost of
Rs. 5 billion. The execution of this program has been entrusted to the National Housing
Authority. It is estimated that approximately 8,000-10,000 laborers and skilled workers are
working on various projects including more than 5000 professional engineers and architects.
In addition, this has also provided an incentive to the 40 downstream industries including
furniture, cement, steel, electrical industries, piping etc.
4. SECTOR & INDUSTRY ANALYSIS
4.1 Sector Characteristics
Chipboard industry is basically agriculture based. Mango & Poplar wood is raw material used
for its production. Presently, 35 chipboard manufacturing units are working in Pakistan and
producing varying quality of chipboard. Chip board is not only used in country but also
exported to Sri Lanka, Afghanistan, Saudi Arabia & to Gulf States in form of furniture. The
contribution of chipboard industry to GDP in year 2003-04 was 6.4%* and this percentage
increase up to 8.4%* in year 2004-05
4
.
4.2 Chipboard Demand
The demand of chipboard in Pakistan can be categorized into three broad groups of end users,
Furniture Manufacturers, Construction and Housing Industry. There could be a very small
percentage of other users.
4.3 Furniture Manufacturer
The furniture industry in Pakistan can be classified into following categories.

4
* Source: www.pakboi.gov.pk
Tenure All Areas Rural Urban
All Types 19.3 13.1 6.2
(100.0) (100.0) (100.0)
Owned 15.6 11.4 4.2
(80.8) (87.1) (67.6)
Rented 1.7 0.3 1.4
(9.0) (2.3) (23.2)
Rent Free 1.9 1.4 0.6
(10.2) (10.6) (9.2)
10
Manually Operated Units
Semi-mechanized units
Mechanized Units
High-tech Manufacturing Units
Chipboard and plywood are the major inputs for the furniture industry, which is the biggest
user of chipboard, accounts for approx. 60% of the total demand for the product. The wood
used in furniture making generally comprises Shesham, Chirh, Pine, Oak, Burmah, Teak,
Plywood, Kikar and Bamboos. Recently, chipboard is also extensively used for this purpose,
which is considered a healthy sign for the chipboard industry. Although the quality of
chipboard so far produced in the country has not improved up to the world standard, yet with
the passage of time for products diversified uses, easy to handle, economical and many other
factors, the use of chipboard is likely to increase.
4.4 Construction Agencies
The total world spending on the construction sector in a year is US $ 3.2 trillion against US $
5.2 billion in Pakistan, according to a report compiled by the Lahore Chamber of Commerce
and Industry (LCCI). The growth rate of construction sector in Pakistan which stood at 5.70
percent during the early 1990s, declined to (negative 4.92) percent in 1998-99, but then
recovered to the mark of 5.15 percent in 1999-2000.As per the information mentioned above
it can be envisaged that as the construction sector will improve it will ultimately improve the
chipboard industry positively.
By keeping in view increasing population growth rate, expanding demand and supply gap and
shortfall of 6 million housing units, it is expected that chipboard usage will increase to meet
the shortfall of 6 million housing units.
4.5 Others
These include Interior decoration firms, Railways and other Government Agencies.
Chipboard is demanded by these agencies for a variety of purposes. Small quantities of
chipboard are also in demand for miscellaneous purposes. For instance, bus body makers,
packing firms, film studios, PWD, WAPDA, Municipal Committees and improvement Trusts
etc use it.
4.6 Sub sector Information
Focal points of Chipboard industry are Karachi, Peshawar, Lahore, Rawalpindi, and Hattar.
4.7 Sub Sector Performance
At Present only 10 units are in laminated chipboard manufacturing. Most of these units have
average rated capacity of approximately 30,000 sheets per/month in 3 shifts. But this sector is
also under utilized and could not attain its average capacity.
Following table showing the current position of these units:
5

5
Source: Bakhshi Enterprises
11
Table3-3
Name of Units Rated
Capacity
Capacity
Attained

Gap
Sheets/
Month
Sheets/
Month
Sheets/
Month
1. Baluchistan Laminates 40,000 25,000 15,000
2. Sind High Pressure Ltd 45,000 20,000 25,000
3. Pakistan Formica 10,000 7,000 3,000
4. Popular Board 10,000 5,000 5,000
5. Wali Board 20,000 5,000 15,000
6. Pakistan Chip Board 30,000 15,000 15,000
7. Islamabad Board 20,000 10,000 10,000
8. Premier Board 10,000 7,000 3,000
9. Sonni Board 30,000 15,000 15,000
10. Perfect Board 30,000 7,000 23,000
TOTAL 245,000 116,000 129,000
According to the above table, Actual Capacity Utilized is only 47% resulting 53% idle
capacity. Capacity Utilization can be enhanced up to 70% by producing 171,500 Sheets per
month with the existing units and the upcoming units will add approximately 3500 sheets per
month. So, this production can be enhanced up to 175,000 Sheets/Month easily. In spite of
under utilization of working units it is expected that under fair competition with new units,
quality of product will improve and help in reducing imports and enhancing exports of
chipboard.
Availability of raw material is a major cause for under utilization of capacity installed.
However, keeping in view, the growing demand of chipboard, imported raw material could
be used for maximum utilization of the installed capacity. Imported fine raw material will
help in the quality improvement, which may increase export rate. In the open trade era,
production of high quality product could help in achieving the export targets and the sector
will grow accordingly.
4.8 Government Policies
It is high time that government provides the necessary incentives so that this industry may
play its due role in the industrial development of the country. Further, this industry, on
attaining more dimensional growth, with government assistance, may be able to earn the
badly needed foreign exchange through export of its products. A beginning in this regard has
already been made with the export of our furniture to Saudi Arabia and Gulf States.
Government has granted relief to certain industries involved in housing and construction
projects.
In order to boost the Pakistans economy, Construction Sector is being given special
incentives in the shape of reduction in withholding tax from 6% to 1%, which will ultimately
improve the business activities of the down stream industries like furniture, Chipboard, and
Construction material industries as well.
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5. MARKET INFORMATION
5.1 Market potential
Pakistan is facing housing problem since its birth because of the migration of millions of
people from India to Pakistan. However situation is changing now. Many macro and micro
construction works are underway to meet the shortfall of 6.0 million houses both by the
private and public sector, which is a healthy sign for many industries including chipboard
industry.
On the basis of all the factors relating to the growth rate of population, housing industry and
export potential, we can anticipate a reasonable growth rate in demand of the chipboard and
laminated board in coming future. On the basis of the population growth and housing
industry, 6% growth in demand till 2010 is anticipated. The following table is showing the
calculations.
DEMAND PROJECTIONS
Table 5-1
Year Demand (Million Sheets)
2004-2005 6.993
2005-2006 7.413
2006-2007 7.857
2007-2008 8.328
2008-2009 8.828
2009-2010 9.355
Note: - Estimated rate of increase 6% per annum.
5.2 Competitive Environment
For a newly established firm it is imperative to face a competitive environment in the market
as competition enhances a companys ability to strive for continuous improvement. In the
field of manufacturing chipboard new entity will be competing with a number of competitors,
some of which are listed below:
Hamza Chipboard
Gohar Chipboard
Sahar Chipboard
Haidry Chipboard
Sun Chipboard
Sind Chipboard
J ehlum Chipboard
National Chipboard
13
5.3 Allied and Associated Industries
The project could be very healthy for the allied industries like housing, furniture and
automobile industries by giving them their products at internal transfer rates, which will
ultimately reduce the cost of production of allied companies, and he nce there would be
a positive impact on the consolidated profitability of the associated companies.
5.4 Demand and Supply Gap
Chipboard Industry in Pakistan is an unorganized sector, therefore, it is hard to get exact
demand and supply gap figure. There is a meager gap between demand and supply of
chipboard in Pakistan. This gap is being filled by importing chipboard from different
countries of the world namely China, Germany, Indonesia, Italy and Maldives Islands.
5.5 Target Customers
5.5.1 Exporters
The Pakistan government has been taking a number of steps to give a fillip to export. But
these efforts are mainly restricted to increase the traditional exports of agriculture products
and items being manufactured by big industrial units. These exports are subject to
dordrumism as a result of developing countries like Pakistan. The eleventh September
mishap is a concrete example.
Under such atmosphere, it is necessary that Pakistan should, along with taking steps for
safeguarding our traditional exports from the adverse effects of globalization etc, seek other
avenues to raise its exports. One of these avenues may be the development of our woodwork
and wood based industry, which has started to adopt a scientific approach for its
development.
As a result various items of wooden furniture in new design are in appreciable demand, both
domestically and internationally. Presently, we are exporting to Sri Lanka, Middle East,
Saudi Arabia, Afghanistan and some Gulf States various items of wooden furniture.
5.5.2 Local Users
Domestically chipboard is major input for furniture & housing sector. Other users include
government agencies, WAPDA, PWD, Municipal Committees and improvement Trusts etc .It
is used by bus body makers, packing firms, film studios as well.
Consumption and Production
Detail of local production and consumption is given below
6
.

6
Source: * Chipboard Industry falls in an unorganized sector and no proper data is available.
Domestic production is based on information projected by few industrial units and estimation
for the capacity attained. )
14
Local Production & Consumption:
(2000-2002)
Year Domestic

Imports Exports Total Demand
2000-2001
Sheets 6,157,875* 4,200 4,325 6,159,350
Kg. 246,315,000 167,460 172,470 246,320,010
2001-2002
Sheets 6,400,075* 5,460 4,800 6,400,875
Kg. 256,002,000 218,400 192,000 256,028,400
5.6 Trade Statistics
LOCAL PRODUCTION ON THE BASIS OF SURVEY
List Of Manufacturer Capacity Attained (m
3
/day)
1. Ayeslia Board (Pvt.) Ltd 80
2. Bombay Plywood Industries 120
3. Compact Particle Board 120
4. Chenab Particle Board 150
5. Plyfo Industries 100
6. Gulf Group Ind 100
7. Haidery Board Ind 80
8. Husnain Nordic Ltd 150
9. Islamabad Board Mills 150
10. Sadat Board 80
11. KDC Board 65
12. Kenwood Ind 80
13. Kalai Valley Particleboard 120
14. Gohar Board 80
15. Pakistan super wood Ind 100
16. Pak Chipboard 200
15
17. Pakistan Panel 120
18. Paider Board Mills 80
19. Pakitex Boards 200
20. Peshawar Particle Board 250
21. Premium Peshawar particle 150
22. Ray Tax 80
23. Sind Particle Board 100
24. Sadiq Wood Ind 150
25. Decent Board 80
26. Smart wood Ind 100
27. Wood Boar Ind 200
28. Wood Word Plywood 300
29. Soni Board 450
30. National Board 80
31. Sethi Board 150
32. Zaki Sons 120
33. Best Board Mills 120
34. Niazi Board 120
35. Hamza Board Mills 150
Total at the end of 2005 4775
Currently 35 units are manufacturing chipboard in Pakistan but almost all are under utilized.
Underutilizations of capacities are due to various reasons including lack of proper technical
knowledge, availability of raw material and stiff competition etc.
16
6. PRODUCTION PROCESS
6.1 General
The chipboard plant is usually designed to operate continuously round the clock. Therefore, it
is assumed that the proposed system will operate in 3 shifts per day, with 300 working days
per year.
6.2 Chip & Flake Manufacturing
Raw material blended for the production is a mixture of chips, shavings and saw dust. Chips,
shaving and saw dust are taken from different heaps into the flaking line in certain pre- set
proposition guarantees the mixing of different types of wood species. Chips and shavings are
transported to Knife-Ring Flakers and the sawdust is taken to a wet chip silo.
6.3 Flake Drying & Drying Screening
The flakes are dried in the drying department, which consists of individual dryers. There are
one Buttner dryer and one Bison dryer. All two dryers are equipped with burner for using
both oil and dust as fuel. Using 100% of dust as fuel is possible.
The dried material is screened in 3 Pcs sifters (1 screen for each dryer). All screens are
equipped for 3 fractions (core, surface and dust). It is an option for a second screening in Air
Classifier.
6.4 Gluing Of Screened Flake
The wooden practical flow is led from the particle silos, one for surface particles (the silos
are not included in the delivery) via a horizontal Dozing Bin to a measuring unit in which the
material flow is registered for the gluing system. The wooden particles are fed into a gluing
drum, and further by belt conveyer to the forming stations.
The screened and dried surface and core particles are separately glued in glue blending
machines. There are two blending machines for core particles and one glue-blending machine
for the surface particles.
The Glue Preparation Department consists of mixing, dosing, metering tanks and pumps for
supply of mixed glue to the Glue Blending machines. One mixture of glue for each layer can
be prepared.
6.5 Forming & Press
The forming stations consist of two units for the surface layer and one unit for the core layer.
Forming is made on a Forming Belt Conveyor, which is the first part of 3 individual belt
conveyors in front of the main press. The formed mat will be pre-pressed in a Roller Press
with Belt. A Permanent Magnet and a Metal Detector is located before the pre- press. A
trimming saw cuts the formed mat.
The press is a multiopening press with 10 levels in a frame construction and equipped with
thermo oil heating, high- pressure hydraulics and system for automatic pressing without
distance bars. The loading device with its tablet feeding system will ensure proper loading
17
and unloading of the main press during same operation. The main press is heated with hot oil
by a separate boiler.
The boards are taken out of the unloading devices onto a belt conveyer with scale and
through an automatic thickness meter with measure tolerance of 0.1 mm.
The board weight and thickness will be registered before the board is fed to the cooling
wheel.
6.6 Trimming Saws and Sanding Lines
After the cooling wheel the boards are taken through a trimming saw for its longitudinal
section before stacking on a Lifting Table. The stacked boards will be transported on a roller
conveyer to the next Trimming Saw for the cross section of the board. The final size of the
board is within the size of 2,400 2,500mm x 4,800 5,200mm.This Trimming Saw and its
feeding station with pusher is the first part of the Sanding Line.
The sanding line is equipped with a conveyor system and the quality control station with
turning wheel and stacking stations. The operator can classify boards into different grades
and transport the boards into 5 different stacking stations.
6.7 Controls
The raw material in feed system, Knife-Ring Flakers, Dyers and Sifters are all controlled
from a separate indoors control panel. The automatic control of the production line is based
on PLC system. To guarantee maximum performance of the plant it is divided into functional
sections, which are controlled by separate PLC units. The main process parameters are
monitored on a terminal in the main control room in front of the main press.
Process Flow Diagram:
Dryer Section
Storage Tanks
Screen Section
Chipping Section
Press
Glue Section
Forming Section
Storage Tanks
Refines Section
Sanding Section
Cutting Section Cooling Section
18
6.8 Plant & Machinery
Normally in Pakistan used plant has installed. Second hand chipboard and veneering
manufacturing plant will be imported from Germany.
Apart from main plant, the company shall procure a chipper, a sanding machine and
lamination machine from other renowned suppliers. Total cost of plant and machinery is
estimated to be Rs. 120 m.
6.8.1 Detail of Machinery required for Chipboard Unit
Items requires for chipboard manufacturing unit are
Chipper
Flaker
Conveyers
Storage tanks
Rotary valve
Dry dust fiber
Screen
Blowers
Refiners
Dry chip tank
Cyclone
Glue blender
Glue kitchen
Blade grinder
Electric Motors
Cables +Panel
Installation
Some items required for chipboard manufacturing unit are locally available and some will be
imported.
6.9 Project Standards and Compliance Issue
The proposed plant will be established on the slogan of sophistication, correctness and timely
completion. The main aim of the project is to provide good quality chipboard at economical
price with in the country with aim to target international market.
19
7. POJECT PROFILE
7.1 Land Requirement
Minimum 8 acre land is required for the installation of the purposed plant. However an ideal
location must have the easy availability of raw material, manpower, road connections and
other infrastructure facilities. Plot of 8 acres will be sufficient for current and future
requirements of the project.
7.2 Covered Area Requirement
The buildings will include production hall, warehouses for storage of raw materials and
finished goods and admin block for offices of production and administration staff 50,000
sq/feet.
7.3 Recommendation mode
One recommendation is to acquire land and construct the building according to the project
requirement. However, if seems difficult to invest in land & building rented place can be
used. But in this type of arrangements dismantle and re-erection cost will be considerable
expenses when & where arises.
7.4 Utilities Requirements
7.4.1 Water
This project will require 6,000 liters water per day. As ground water is of required quality,
therefore, water will be arranged from tube wells on site.
7.4.2 Power
Power will be arranged through WAPDA. The requirement of power is estimated at 1,500
KW at the proposed and expansion requirement of the project.
7.5 Oil/Lubricants
Furnace oil for dryers and lubricants for the smooth functioning of the machines can be
procured locally.
7.6 Raw Material
This project will requires about 225 tons (approx) of wood per day at 60% operating level
apart from glue and lamination sheet. This wood will be procured from areas around the
project site and glue will also be available locally; whereas lamination sheet shall be
imported.
This project will be located in central Punjab. There is forestry over 0.771 million hectares in
public sector. The resources include the following:
20
Coniferous Forests 28,000 ha
Scrub Forests 38,000 ha
Range Lands 2,648,036 ha
Irrigated Plantations 150,060 ha
Riverain Forests 58,440 km
Canal side Plantations 32,640 km
Roadside Plantations 11,680 km
Rail side Plantations 2,987 km
Miscellaneous Linear Plantations 16,369 km
In addition to the public sector, forestry resources exist in farmlands both in the form of
woodlots and linear avenues along the field boundaries and Watercourses. According to a
base line survey by Punjab Economic Research Institute (PERI) 1999 there are 20-23 trees
per acre and more than 50 trees per hectare in the cultivated area of the Punjab Province.
There is, however 4-5 times more potential of having trees in the farmlands. It is believed that
90% of fuel wood and 55 % of timber is coming from the farmlands.
The installation of this project will create incentives for farmers of surrounding areas for
forestry. The company could launch a development program in these areas to guide the
farmers and to promote forestry on commercial basis. This will also provide an ongoing
solution for availability of raw material
7.7 Time Schedule
The estimated installation period is six months. The trial production could be expected during
7-8 months and commercial production will take place within three months after trial
production.
7.8 Technical Know-How
A highly qualified professional team of technical staff will be employed. Training facility for
fresh qualified persons will help to fulfill human capital needs.
7.9 Suitable Location
Punjab and Sind are suitable provinces for chipboard manufacturing units because of easy
availability of raw material, Infrastructure facilities, and skilled labour. The project location
is an important element for the viability of the project and must have the following silent
features.
Considerable area availability
Easy excess to roads
Availability of raw material
21
Infrastructure facilities
Availability of labor force
Water resources
22
8. HUMAN RESOURCE REQUIREMENT
8.1 Availability & Management of Human Resource
The Chief Executive officer shall formulate the long-term policies and take strategic
decisions. A team of professionals shall be engaged in order to manage the operational
affairs of this project under the supervision of CEO. The management of this project will
comprise of:
Factory Management
Site Engineers
Corporate Office Management
Marketing Network
Human Resource Requirement
Table 8-1
Position Strength Salaries/Month
Executive Director 1
75000
Sales Manager 1 25000
Senior Managers 2 30000
Officers 2 8000
Accounts Officer 1 10000
Accounts Assistants 2 5000
Mill Manager 1 30000
Shift Incharge 2 15000
Supervisors 3 12000
Purchaser 1 8000
Skilled Workers 10 5000
Semi skilled Workers 20 3000
Total No of Employees 46
23
8.2 Organizational Structure
Organizational Set Up
CEO
Project Incharge
Sales &
Marketing Dept.
Project Coordinator
Finance &
Accounts Dept
Production Incharge
Marketing Sampling
Coordinator Buyers Contract
Evaluation
Dealing with Local
Authorities
Obtaining
Certificateof
Sampling
Coordination
Import
Documentation
Bookkeeping &
Administration
Financial Management
Banking
Accessories Purchases
Documentation
Production
Planning
Production
Analyzing Quality
Assurance
Packing Delivery
9. FINANCIAL PROJECTION
PROFIT & LOSS ACCOUNT
FOR THE YEAR 1 2 3 4 5
Sales 389,201,145 442,716,302 464,852,118 525,640,471 551,922,495
Less Cost Of Sales 355,331,711 400,974,915 419,595,707 471,907,683 494,452,401
Gross Profit / ( Loss ) 33,869,434 41,741,387 45,256,411 53,732,788 57,470,094
Operating Expenses
Administration & Selling Expenses 14,574,499 16,091,321 17,037,850 18,795,629 19,931,765
Financial Charges 15,396,770 15,511,347 13,299,654 11,637,962 9,506,269
Workers' Profit Participation Funds 97,454 253,468 372,973 582,480 700,801
30,068,724 31,856,136 30,710,477 31,016,070 30,138,836
Profit Before Taxation 3,800,710 9,885,251 14,545,933 22,716,718 27,331,257
Income tax 1,946,006 2,213,582 2,324,261 2,628,202 1,299,080
Net Profit After Tax 1,854,704 7,671,669 12,221,673 20,088,515 26,032,177
Balance brought forward - 1,854,704 9,526,374 21,748,046 41,836,562
1,854,704 9,526,374 21,748,046 41,836,562 67,868,739
Retained Earning 1,854,704 9,526,374 21,748,046 41,836,562 67,868,739
25
BALANCE SHEET
CAPITAL AND LIABILITIES Year 1 2 3 4 5
Paid up Capital 83,389,750 83,389,750 83,389,750 83,389,750 83,389,750
Retained Earning 1,854,704 9,526,374 21,748,046 41,836,562 67,868,739
Tot al Equ i t y 85,244,454 92,916,124 105,137,796 125,226,312 151,258,489
Long Term Loan 83,389,750 62,542,313 41,694,875 20,847,438 -
Cur ren t Li abi l i t i es
Short Term Bank Finance 53,900,000 61,300,000 64,200,000 72,600,000 76,300,000
Creditors And Other Liabilities 11,592,000 13,186,000 13,845,000 15,656,000 16,438,000
Workers' Profit Participation Funds 97,454 253,468 372,973 582,480 700,801
Dividend Payable - - - - -
Tax payble 1,946,006 2,213,582 2,324,261 2,628,202 1,299,080
Tot al Cu rr ent Li abi l i t i es 67,535,460 76,953,049 80,742,233 91,466,682 94,737,882
Tot al Cap i t al And Li ab i l i t i es 236,169,664 232,411,486 227,574,905 237,540,431 245,996,371
ASSETS Year 1 2 3 4 5
Fixed Assets 123,829,500 123,829,500 123,829,500 123,829,500 123,829,500
Less Depreciation 12,797,550 24,220,965 34,429,973 43,562,833 51,739,895
Net Fi xed Asset s 111,031,950 99,608,535 89,399,528 80,266,667 72,089,605
Pr e-o per at i ng Exp enses 6,600,000 4,950,000 3,300,000 1,650,000 -
Cur ren t As set s
Trade Debtors 31,989,000 36,400,000 38,200,000 43,200,000 45,400,000
Stock In Trade 45,053,000 51,144,000 53,556,000 60,535,000 63,537,000
Advances, P repayments And Others 755,000 859,000 902,000 1,020,000 1,071,000
Cash And Bank Balances 40,740,714 39,449,951 42,217,377 50,868,764 63,898,766
Tot al Cu rr ent Asset s 118,537,714 127,852,951 134,875,377 155,623,764 173,906,766
Tot al Asset s 236,169,664 232,411,486 227,574,905 237,540,431 245,996,371
- - - - -
26
FUND FLOW STATEMENT
FOR THE YEAR 1 2 3 4 5
Net Profit Before Tax 3,800,710 9,885,251 14,545,933 22,716,718 27,331,257
Add Depreciation 12,797,550 11,423,415 10,209,008 9,132,861 8,177,062
Pre-operating Expenses 1,650,000 1,650,000 1,650,000 1,650,000 1,650,000
18,248,260 22,958,666 26,404,941 33,499,578 37,158,320
(Increase)/Decrease in current assets
Trade Debtors 11,000 (4,411,000) (1,800,000) (5,000,000) (2,200,000)
Stock In Trade (53,000) (6,091,000) (2,412,000) (6,979,000) (3,002,000)
Advances, Prepayments And Others (755,000) (104,000) (43,000) (118,000) (51,000)
Increase/(Decrease) in current liabilities
Creditors And Other Liabilities 89,454 1,750,014 778,505 2,020,507 900,322
Short term borrowing 19,900,000 7,400,000 2,900,000 8,400,000 3,700,000
Change in working capital 19,192,454 (1,455,986) (576,495) (1,676,493) (652,678)
Net Inflow/Outflow from Operating
Activities 37,440,714 21,502,680 25,828,446 31,823,085 36,505,641
Cashflow from Financing Activities
Repayment of long term loans - (20,847,438) (20,847,438) (20,847,438) (20,847,438)
Repayment of sponsors loan - - - - -
Tax paid - (1,946,006) (2,213,582) (2,324,261) (2,628,202)
Dividend Payment - - - - -
Net Increase/(Decrease) in Cash 37,440,714 (1,290,764) 2,767,427 8,651,387 13,030,001
Cash in beginning of year 3,300,000 40,740,714 39,449,951 42,217,377 50,868,764
Cash balance at the end of year 40,740,714 39,449,951 42,217,377 50,868,764 63,898,766
KEY ASSUMPTIONS
Chipboard Plant Production Assumptions:
Maximum Production /Installed Capacity Plant (100%) Sheets m3 200
Starting Capacity Utilization Chipboard Plant 60%
Annual Growth Rate in Capacity Utilization 10%
Maximum Capacity Utilization for the Project 70%
Working hours per Shift 8
Financial Projections:
Project Life 10 Years
Debt 50%
Equity 50%
Interest on Long term Loan 14%
Debt tenure (Years) 5 Years
No. of installments per year 2
Amortization (years) 5
Product Mix of Chipboard Plant:
Ratio
Laminated Sheets
19mm 50.0%
13mm 30.0%
Non-Laminated Sheets
19mm 5.0%
13mm 30.0%
Sale Price Assumptions for Chipboard:
Laminated Sheets
19mm (per sheet) Rs. 939
Non-Laminated Sheets
Sale Price Growth Rate of Sheet 5%
Operating Assumptions:
Days Operational/Year 300
Days Operational/Month 25
28
No of Shifts/day 1
Cost of Goods Sold Assumptions:
Average Cost per Sheet 480
Price growth rate 5%
Electricity Cost for Plant 21,870,000
Electricity Cost for Lighting 9750
Growth Rate 5.0%
Gas/Furnace Oil Rs.13,425,984
Growth Rate 5.0%
Machine Maintenance (Asset Value) 1.5%
Growth Rate 0.25%
Oil and Lubricants Rs.2,500.0
Growth Rate 5.0%
Insurance (Asset Value) 5.00%
General Administration and Selling Expenses Assumptions:
Freight Cost Rs.7,422,000
Traveling Exp of the Sales Revenue Rs.500,000
Wages and Salaries Rs.2,956,800
Growth Rate 10.0%
Postage & Couriers Rs.100,000
Growth Rate 10%
Cash Flow Related Assumptions:
Accounts Receivable Cycle (in Days) 30
Finished Goods Inventory (in Days) 10
Raw Material Inventory (in Days) 40
Glue 40
Lamination Paper 30
Working Process 3
Depreciation Assumptions:
Depreciation Method WDV
Plant & Machinery 10%
Furniture and Fixture 10%
Vehicle 20%
Office equipment 30%

Pre-Feasibility Study: Chipboard Plant

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