1

HOLLOW BLOCK MAKING

A Feasibility Study

Presented to the Faculty of the BSIT Department

Southern Leyte State University – San Juan

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Science in Industrial Technology

Nicko I. De Castro

Lloyd M. Licmoan

Rex O. Loquinte

Verly P. Vales

March 2015
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Table of Contents

1.0 Executive Summary

1.1 Introduction

1.2 Brief Description of the Project

1.3 Brief Statement of Comprehensive Study Plan Supporting the Project

1.4 Summary of the Findings and Conclusion Regarding the following aspects:

- Marketing Aspect

- Technical Aspect

- Management Aspect

- Financial Aspect

- Social Desirability of the Project

2.0 Marketing Aspect

3.0 Technical Aspect

4.0 Management Aspect

5.0 Financial Aspect

6.0 Social Desirability of the Project

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Introduction

According to BSP, the share of construction industry to total GDP has been

steadily increasing, a testament to the importance of this industry in sustaining growth in

the domestic economy from 2006 to 2010. Construction sector has been registered with

a growth rate of 7.9 percent according to NEDA Survey 2008. Housing and construction

is one of the major drivers of growth in more than 40 allied industries and directly adds

to the CONSTRUCTION HOLLW BLOCKS industry. In addition, for the building of

roads, flyovers and bypasses there is a mass and consistent need of prefabricated

blocks across the country. Various construction and real estate development projects

are in progress and are continuously being commissioned which will 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 per annum. This is the extent of

the annual housing market in the Philippines which positively predicts a permanent

growth in construction sector which directly adds to the potential in prefabricated

building blocks segment of the construction industry.

Brief Description of the Project

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The proposed project envisages the setup of a construction hollow blocks

manufacturing project. Construction blocks industry is an important industrial sector in

the country engaged in producing blocks used as prefabricated material for various

construction activities i.e. construction of road side pave ways, garage and parking

floorings, walls making, block paved driveways, and floor coverings of commercial

buildings, etc.

It is easy to make a concrete block. The successful block yard must however

make blocks of uniform quality and sell them at a price high enough to cover costs and

make a reasonable profit. Before to start a block yard, it is essential therefore to

investigate the economic feasibility of the venture. Determination of level of demand for

blocks in the area (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.

Then comes 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 miscellaneous

equipment

 Cost of services: water and

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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.

According to BSP, the share of construction industry to total GDP has been

steadily increasing, a testament to the importance of this industry in sustaining growth in

the domestic economy from 2006 to 2010. Construction sector has been registered with

a growth rate of 7.9 percent according to NEDA Survey 2008. Housing and construction

is one of the major drivers of growth in more than 40 allied industries and directly adds

to the CONSTRUCTION HOLLW BLOCKS industry. In addition, for the building of

roads, flyovers and bypasses there is a mass and consistent need of prefabricated

blocks across the country. Various construction and real estate development projects

are in progress and are continuously being commissioned which will 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 per annum. This is the extent of the annual housing market in the Philippines

which positively predicts a permanent growth in construction sector which directly adds

to the potential in prefabricated building blocks segment of the construction industry.

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In Tacloban City alone due to impending disaster needs because of Typhoon

Yolanda, there are 527,013 housing units are still need to be counted for concrete

development which majority uses hollow blocks (DPWH, 2014.

Brief Statement of Comprehensive Study Plan Supporting the Project

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 be established at any time of the year.

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

proposed block yard is assumed to operate on Partnership basis.

Production capacity of the plant for the proposed construction hollow blocks

making unit would be 2,000 blocks per day. It is estimated that Tacloban alone has a

daily demand of 1,680; construction hollow blocks. However, as there are a variety of

concrete based construction blocks i.e. hollow block, solid block, kerb block etc., cost

will largely depend on the selection of block type. Estimated countrywide requirement of

500,000 housing units per annum and development works in construction and civil

sector by the government; all these factors encourage a persistent high growth and

mass demand of prefab construction blocks.

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:

cement and sand/crushed stone. A number of suppliers are available for Sand and

Crush in each region and area of Leyte Islands and could easily be contacted, whereas,
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cement could be procured from any well known cement company. Cement suppliers

could also be one of the 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.

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

industry. This risk can be minimized by making long term supply contracts with the

cement manufacturers which is a common practice of large scale industrial consumers

of cement.

Php. 2 million is estimated to be the cost of the project. The working capital

requirement is estimated around 0.9 million and 1.1 million would be the fixed

investment.

1. Solid Block

2. Hollow Block

3. Pavers

Marketing Aspect
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In the manufacturing industry, marketing is considered to be of significant

importance. In the construction hollow blocks industry, marketing parameters are very

limited and largely associated with the construction sector’s 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 and

contractors.
 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 individual

contractors who are serving private sector.

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

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

employment3. It directly and indirectly affects more than 40 allied industries which also

includes prefab construction material industry. Block making has a significant position in

the construction process particularly in the housing sector where prefabricated blocks

are used extensively with more than 40% of the total structure of the building.

Traditional construction has been relying on hand made bricks rather than

concrete block which has been a high cost option while selecting material for the house

construction both in urban and rural areas of the country. Concrete based construction

is comparatively new phenomena and historically has been employed in the urban

areas where technology and machinery was introduced due to mass demand of building

material and comparatively high average income.

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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 have focused 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 largely unorganized and no statistics are available in terms of how many

block manufacturing units are working and their scale of operations. The prefab

construction blocks manufacturing sector can be divided into three categories:

Organized sector constitutes only three major players in Go Trading (Tacloban)

and Construction Supply, Arcillas Block (Carigara), Lunciana (Javier). Unorganized

sector mainly includes block yards where hand operated mechanical machines are used

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

of such 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 depending upon the individual requirements of the customer. Standard blocks

are generally available in the sizes of 6”x8”x12”, 5”x8”x12” and 4”x8”x12”. As far as PSI

is concerned, no defined standard could be found; however, 400 PSI is normal in this

sector.

Unorganized sector hand made blocks is gradually shrinking and now operating

on a very small scale in the low income areas where concrete based structure is scarce.

Single mold is used which lays only one block at a time. Such blocks are easily

breakable; therefore they are generally not preferred even by the customers who have
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very limited capital to invest in house construction. The current scenario of this sector

shows that most of such block yard operators are switching to machine made blocks

option due to customer preference and production limitations of the hand made blocks

making process.

Technical Aspect

Process Flow

Ordering &
Stockpiling
Material

Batching
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Mixing

Molding

Curing

Storage &
Distribution

The production of concrete blocks consists of four basic processes: mixing,

molding, curing, and cubing. Some manufacturing plants produce only concrete blocks,

while others may produce a wide variety of concrete hollow blocks, flat paver stones,

and decorative landscaping pieces such as lawn edging, etc.

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 in

the 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 are

transferred by gravity or by mechanical means to a weigh batcher, which measures the

proper amounts of each material.

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The dry materials then flow into a stationary mixer where they are blended together for

several minutes. There are two types of mixers commonly used. One type, called a

planetary 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 a horizontal 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. If the

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 and coloring

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 bucket

conveyor 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 block

machine at a measured flow rate. In the block machine, the concrete is forced
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downward into molds. The molds consist of an outer mold box containing several mold

liners. The liners determine the outer shape of the block and the inner shape of the

block cavities. As many as 15 blocks may be molded at one time.

When the molds are full, the concrete is compacted by the weight of the upper mold

head coming down on the mold cavities. This compaction may be supplemented by air

or hydraulic pressure cylinders acting on the mold head. Most block machines also use

a short burst of mechanical vibration to further aid compaction.

The compacted blocks are pushed down and out of the molds onto a flat steel pallet.

The pallet and blocks are pushed out of the machine and onto a chain conveyor. In

some operations, the blocks then pass under a rotating brush which removes loose

material from the top of the blocks.

Curing

The pallets of blocks are conveyed to an automated stacker or loader which places

them 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 a time.

There are two basic types of curing kilns. The most common type is a low-pressure
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steam kiln. In this type, the blocks are held in the kiln for one to three hours at 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 60°F per hour (16°C per hour).

Standard weight blocks are usually cured at a temperature of 150-165°F (66-74°C),

while lightweight blocks are cured at 170-185°F (77-85°C). When the 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 are dried 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 300-375°F (149-191°C), and the pressure is

raised to 80-185 psi (5.5-12.8 bar). The blocks are allowed to soak for five to 10 hours.

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 more

expensive 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 of

molded blocks.
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If the blocks are to be made into split-face blocks, they are first molded as two blocks

joined together. Once these double blocks are cured, they pass through a splitter, which

strikes them with a heavy blade along the section between the two halves. This causes

the double block to fracture and form a rough, stone-like texture on one face of each

piece.

The blocks pass through a cuber which aligns each block and then stacks them into a

cube three blocks across by six blocks deep by three or four blocks high. These cubes

are carried outside with a forklift and placed in storage.

Quality control

Three aspects should be monitored to ensure quality masonry units: strength,

dimensions and shrinkage.

Strength

Quality of blocks should be controlled so that strengths are adequate (to avoid

breakages or rejection by customers) and mixes are as economical as possible. Ideally,

blocks should be regularly tested for strength and mixes and production processes

modified if necessary. If testing is impracticable or unaffordable, block strength should

be continually assessed by noting whether corners and edges, or even whole blocks,

tend to break in handling. Strength can also be assessed by knocking two mature bricks

together.

Dimensions
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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 of

inconsistent height will lead to difficulties in the construction of masonry and possible

rain penetration.

Shrinkage

Concrete masonry units shrink slightly after manufacture. In order to avoid this

happening in the wall, blocks should be allowed to dry out for at least seven days before

being used for construction.

Materials Sourcing

Crushed Hard Lime Stone, Sand, Cement and Water will be used as raw material for

manufacturing prefab construction blocks. Crushed raw stone and sand could be

purchased directly from the excavator (quarry lease holder) or supplier, whereas,

cement could be sourced from manufacturers by signing a regular supply contract which

would lead to a controlled cost. For the purpose of this pre-feasibility, it is proposed to

hold a supply contract with the three types of material suppliers to avoid any possible

threat in procuring raw material as well as to keep the project economically stable.

Based on our discussions with the business operators, it has been estimated that 1 sq.

ft. of loose aggregate will yield 0.7 sq. ft. of concrete volume. For the proposed project,

a total of 5200 sq. ft. of aggregate would be required daily to produce 4000 sq. ft. of

concrete blocks. Sand-Cement ratio will largely depend on the type and desired
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strength of blocks, however, for this pre-feasibility study, assumed ratio is 100:1 (one

50kg bag of cement for each 100 blocks) by loose volumes. Daily cement requirement

for the said production would be around 50 bags of 50kg each.

Machinery Requirement

Although small mixing and molding units are available in the local market, yet, complete

mechanized plants are not available and organized setups are using imported plant and

machinery for concrete block making.

Machinery with the following specification has been proposed for the project

which will cost around Php 3 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 overall weight 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 for service 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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Traveling Material Bin Feeder:

Through the conveyor, the slightly moist concrete from the mixer is transported to

traveling material bin feeder for separating temporary storage. The material bin is

designed in a solid, rugged steel weldment and maintenance free track roller.

Face Mix Section:

Specially designed for production of blocks or pavers with two layers (coloring).

Equipped with loading hopper with adjustable feeding system. The section can elevate

automatically to allow the blocks or pavers to pass through.

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

the screen. The recipe can be stored and the statistics data can be

downloaded.

Vehicles for Transportation

The proposed setup would require three to four vehicles (new machinery has been

considered for the proposed project) to carryout transportation of raw material and

finished products. Besides, dumping and loading vehicles for the transportation of

finished product to the stacking points would be a pre-requisite. Details of required

vehicles have been provided in the following table:

S. Name of Purpose of the No. of Units Total

No Vehicle/Machine Cost
. Machine Required
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Material
1 Dumper/Truck 1 4,000,000
Transportation
Finished goods
2 Fork Lifter 2 1,000,000
transportation
Other Tools &
3 Equipment 200,000
Total 5,200,000

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.

LAND & BUILDING

Location

 This should be considered in relation to:

 Supply of raw materials Market for blocks
 Location of the labor force
 Security of the area
 Availability of services, i.e. roads, water, sewerage, electricity, etc.

Access

The site must be accessible to trucks delivering aggregates and cement and collecting

finished blocks.

Ground slope

Ideally, the site should be level or nearly so. Steep slopes make handling and

production difficult. Terracing a steep slope is expensive.

Size
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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.

With all provisions for the business, one acre would be sufficient for the project.

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 different

areas and facilities. Each of these is discussed below.

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

does not collect in the aggregates.

Cement store

The best way to store cement is in a silo. For small scale block yards, however, cement

will be delivered in bags. Cement in bags should preferably be stored in a weather-proof

room. Bags should be stacked on a plastic tarpaulin or on closely spaced wooden strips

so that they do not absorb damp from the floor. The storeroom should be big enough to

hold at least a week’s supply of cement. If it is not possible to provide a storeroom,

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cement in bags should be stored in stacks raised above the ground and completely

covered with tarpaulins.

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 are

made. Details of such a slab are discussed below.

Construction of a production slab

Area

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

minimize breakages in cold weather, it is recommended to increase the cement content

of the 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

a minimum slope of 1 in 100 to ensure proper drainage.

Thickness

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

Joints
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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 prevents

differential 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.

Stacking area

An area big enough to stack two weeks’ production is needed for curing and drying

blocks. It is normally not necessary to pave this area. To avoid muddy conditions, a

layer of concrete stone, about 100 mm thick, should be enough.

Office and Staff facilities

These include toilets, ablutions, and possibly change rooms. An office should be

provided for all but the smallest of yards.

Land and building requirements for the project would be as follows:

Civil Works Total

Size/Area
Details /Construction Construction
(Sq. Ft.)
Cost/Sq. Ft. Cost

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

Cement Store 2500 300 750,000
Office & Staff facilities 400 300 120,000
Not
Storage Area (Sand/Crush) limited - 0
Water Tank 4000 200 800,000
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Other Services (water plant, tool shop

etc.) 500 300 150,000
Total Covered Area 18,400 4,070,000

Management Aspect

Proposed Location

Proposed location for setting up construction hollow blocks making unit largely

depends on the availability of raw material and its transportation to the factory at low

cost; however, factors like availability of manpower, utilities and easy access to the

target markets should also be carefully examined. It shall be located in the nearby

Abuyog town near the crossing area.

Construction hollow blocks business is dependent on the pricing and margins

given to builders, suppliers and retail customers. It also depends on efficient supply of

blocks to the customer and communication facilities provided to the prospective clients,

retailers and order booking agents.

A block maker when setting up a block yard, institutes contacts with the

construction material suppliers, retailers and signup a contract in order to appoint them

as order booking agents. Generally, construction and building material supplier is the

part of the whole chain, and brings together the customers and suppliers. Sometimes

the supplier has his own delivery vehicles and in most of the cases, keeps arrangement

with the commercial vehicle operators, material manufacturers, and buyer, having a

significance of a pivoting point among them.

Ordering and Delivery Procedure:

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

the locality who entertain the customer. Customers usually send someone or personally

go to the booking office and place the order which includes details indicating quantity,

quality, size and time of delivery etc. Booking agent gets the payment in cash (mostly)

and issues an order / delivery slip to the customer, showing order details.

Buyer hires a truck or loading vehicle and goes to the block yard, where he

produces the order slip (kanvaser) to the person responsible for the physical delivery of

the blocks. That person renders the order as given on the slip. After loading the vehicle

he hands it over it to the order booker and here ends the role of the block maker.

Construction hollow blocks producers also book direct orders at site office for the

construction contractors, retail customers and builders on cellphone and supply directly

to the identified delivery points; however, these types of facilities are provided only for

bulk orders using hired delivery vehicles. Bulk deliveries typically account for around

30% of the total annual sales.

Construction hollow 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 allied

industry of the construction sector, growth in construction sector may be considered as

a close proxy for the growth in prefab construction blocks sector which is 7.9% (NEDA

2006).
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Construction and allied industry is a labor intensive industry; therefore, a total 18

persons will 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).

Technical staff with relevant experience will be required for operating production plant.

The staff will be provided training by the plant & machinery supplier.

Total approximate manpower required for the business operations along with the

respective salaries are given in the table below:

(PhP)
Monthl
No of y Annual
Staff Title Persons
Salary 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 10,000 120,000
Total G A /S Staff 3 15,000 180,000
1,032,00
TOTAL 17 86,000 0
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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 that preference should be given to literate persons so that they could

understand the significance of undertaking health and safety measures.

Financial Aspect

The project cost estimates for the proposed “Construction blocks business” have

been formulated on the basis of discussions with industry stakeholders and experts.

The projections cover the cost of land, machinery and equipment including office

equipment, fixtures etc. Assumptions regarding machinery have been provided,

however, the specific assumptions relating to individual cost components are given as

under.

Land & Building

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Land for setting up the proposed prefab construction blocks unit would be purchased

which will incur a cost of approximately Rs. 1.2 million. Construction and renovation of

site will cost around Rs. 4 million which has been assumed to depreciate at 10% per

annum using diminishing balance method.

Overall Factory & Office Renovation

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 is

estimated.

Fixtures

A lump sum provision of Php. 60,000 for procurement of office/factory furniture is

assumed. 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 6,000
Curtains & Interior Decoration for office - 5,000
Chairs for Workers/Labor 6 5000
Electrical Fittings & Lights - 30,000
Others - 6,000
Total 60,000

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

10% per annum on the following. The method is also expected to provide accurate tax

treatment.

1. Plant & machinery

2. Land & Building Construction and Renovation

3. Vehicles

4. Furniture and Fixtures etc.

UTILITIES

Construction hollow blocks plant will be operated using electricity for production

purposes. This would draw considerable amount of electricity. Likewise, heavy vehicles

i.e. Fork lifter, truck/dumper, etc would require huge quantity of fuel for which diesel

will be used. The cost of the utilities including electricity, diesel/fuel, telephone, and

water is estimated to be around Rs. 2 million per annum. Approximate cost of utilities

has been given below:

Annual
Total Total %age
Monthly Annual
Utility
Cost Cost Increase
(Php.) (Php.)
1. Electricity 58,000 696,000 5%

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

Diesel for Vehicles and

3. Machinery 28,500 342,000 5%

4. Water 70,200 842,400 5%

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5. Telephone 5,000 60,000 5%

Total 166,700 2,000,400

Working Capital Requirements

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

have been 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
Sand and Crushed Stone – 07 Days 31,500
Misc. Expenses - Three months (@ 5000 /month) 15,000

Total Working Capital 910,020

Plant & Machinery Installation

Plant and machinery installation and trial run expenses has been assumed to be

around Php. 100,000/-. It has been included in the plant and machinery cost.

Vehicle for Support and Maintenance Services

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An additional light loading vehicle would be required for providing services for the

maintenance, communication of machinery spare parts, labor etc. For this purpose, a

transportation vehicle has been proposed and an amount of Rs. 400,000 is assumed to

be required to purchase the vehicle.

Preliminary Expenses and Contingency Provision

A lump sum provision of Php. 300,000 is assumed to cover all preliminary expenses

which will be amortized over the 5 year period.

Selling & Distribution Expenses (Order Booking Agents)

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 as

booking 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 also

covers the distribution cost of bulk supplies, entertained directly by the owner.

Miscellaneous Expenses

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

month. These expenses include various items like office stationery, daily consumables,

traveling allowances etc. and are assumed to increase at a nominal rate of 10% per

annum.

Finished Goods Inventory

The proposed setup is assumed to maintain a Finished Goods Inventory of 7 days of

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the total annual production.

Revenue Projections

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

follows:

S. Production
N Size/ Selling
o Block Type Standard (as % of Color Price/
Dimension unit
. Total)
1 Masonry Block

600-800 Natural
Solid Block 4”x8”x12” psi 10% Grey 15

600-800 Natural
Solid Block 5”x8”x12” psi 20% Grey 16

600-800 Natural
Solid Block 6”x8”x12” psi 10% Grey 17

600-800 Natural
Hollow Block 5”x8”x16” psi 10% Grey 23

Fair Face Blocks

90x190x390 600-800 Natural

Solid Block mm psi 15% Grey 28

Pave 300x300x40m Natural

2 rs m 4000 psi 5% Grey 40
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Natural
3 Kerb Stone/Block 6”x12”x12” 5000 psi 30% 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 a day. 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 of prefab construction blocks has been estimated with 70% capacity

utilization. Annual increase of 3% in capacity utilization is assumed over the projection

period. All projections are based on 8 working hrs a day with 26 days a month.

Accounts Receivables

Considering the industry norm, particular to the construction sector and all of its allied

industries, it has been assumed that 70% of the sales will be on cash. Whereas,

remaining 30% sales will be on credit to the builders and construction contractors. A

collection period of 60 days is assumed for the credit sales.

All of the above assumptions are based on our findings during the discussions with the

industry experts and stakeholders. A provision for bad debts has been assumed

equivalent to 2% of the annual credit sales.

Financial Charges

It is assumed that long-term financing for 5 years will be obtained in order to finance the

project 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

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period of five years.

Taxation

The business is assumed to be run as a sole proprietorship; therefore, tax rates

applicable on the income of an individual tax payer are used for income tax calculation

of the business.

Cost of Capital

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.

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

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Preliminary Expenses 300,000

TUtilities - (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. Cellphone - 03 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 PROJECT COST 43,040,020

Loan Finance 21,520,010

Equity Financing 21,520,010

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Debt:Equity Ratio (50:50) 50.00%

PROJECT RETURNS AND OTHER FINANCIAL

IRR 26%

NPV 14,127,743

Payback Period (Years) 4 Years

Debt Equity Ratio 50:50'

Required return on equity 20%

Cost of finance 15%

Weighted Average Cost of capital 17.50%

OTHER ASSUMPTIONS

Depreciation 10%

Plant and Machinery Annual Repair & Maintenance (as %age of total cost of plant)
3.00%

Selling & Distribution Expenses 2.00%

INCREASE IN PRICE AND GROWTH

Increase in Raw Material Price (Cement & Sand/Crushed Stone) 5%

Increase in other consumables price 3%

Factory & Office Renovation (in Year 5 & 10) 5%

Capacity Utilization at the beginning of the period 50%

Increase in capacity utilization (Annual) 5%

Maximum Capacity Utilization

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Running on single shift basis but double shift

can be initiated if demand increases

Annual sales price increase 5%

Operational Hrs./day 8

Operational Days / Month 26

Operational Months 12

Annual Operational Days 312

Economy related assumptions

Electricity charges growth rate 5%

Increase in Salaries 10%

Oil/Diesel and other consumables price growth rates 10%

Increase in Misc. Expenses 10%

Cash Flow Assumptions

Sales on Credit - as %age of total 30%

Sales on Cash - as %age of total 70%

Accounts Receivable period (days) - only for 30% credit sales

Provision for bed debts (only on 30% credit sales) 2%

Inventory (Raw Material) 7

Finished Goods Inventory (Days) 7

COST AND REVENUE SHEET

REVENUE CALCULATION

Production
Rated 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%
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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

No. of Blocks Produced (Approximately)

Size Masonry Block
4”x8”x12” Solid Block 450
5”x8”x12” Solid Block 840
6”x8”x12” Solid Block 300
5”x8”x16” Hollow Block 225

Fair Face Blocks

90x190x390 mm Solid Block 305 28

300x300x40mm Pavers 144 40

6”x12”x12” Kerb Stone/Block 600 90

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%

Construction Blocks Produced / Day Production in

Block Category Pesos

Masonry Block
Solid Block 450 6,750
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Solid Block 840 13,440

Solid Block 300 5,100
Hollow Block 225 5,175
Fair Face Blocks
Solid Block 305 8,533
Pavers 144 5,760
Kerb Stone/Block 600 54,000

Total Value of Blocks Produced per Day 98,758

Total Value of Blocks Produced per Month 2,567,717
Gross Annual Sales 30,812,600
Provision for Finished Goods Inventory 7 Days

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

Sales on Credit 30% of the total
Sales on Cash 70% of the total
2. COST CALCULATION - for 4000 blocks

Raw Material

Raw Material Required/Block Quantity Cost

Water 16.5 66000 2700

Cement 0.6 50 bags 12500
Sand 1.18 4720 4500
Crushed stone 0.295 1180 3500
Total Raw Material Cost 23200 Php/day

Other Consumables

Forklift approximate Fuel Consumption 50Liter/hr.

Dumper/Truck approximate Fuel Consumption 75Liter/hr.
Electricity Charges (including all taxes) 1 K.W.H* 7.00Ph. / KWH
Block Making Plant approximate
Electricity Consumption 40KW / hr.

Approx. Number of operational hours for block making machinery/vehicles

Plant & Machinery 8 hr.

Vehicles - 6 hr.
Electricity Consumption 320 KW/day
Fuel & Other Consumables 750 Liter/day
Total Other Consumables 30,740 Php./day
Total Cost / day 53,940 Php. / day
Total Cost / Month 1,402,440 Php. / month
 39

TOTAL ANNUAL COST 16,829,280 Php. / annum

Total Annual Sales 23,812,600

Total Annual Cost of Raw Material

and other consumables 16,829,280

Difference 6,983,320

Return of Investment

23,812,600– 16,829,280
16,829,280

0.4146 x 100%

41.46%
 40

Social Desirability of the Project

Establishing a building materials production like hollow block making will facilitate

scaling up of the stabilized hollow block technology by providing social emphasis on:

(a) Enhance housing construction, rehabilitation and upgrading of settlements and

basic services for easier reintegration of internally displaced persons, ex-combatants

and returnees.

(b) Facilitate expansion of environmentally friendly commercial production, marketing

and application of affordable building materials.

(c) Support supply of hollow blocks of small-scale businesses and revolving funding

mechanisms for commercialization of stabilized soil block technology.

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Transfer of technology for local building material production can be achieved when there

is an adequate local capacity and the means to sustain the proposed technology