JOB NO: 3/B1/D3/E1/L1/R1/2017

The National Project For The Continuous Industrial Development

Techno - Economic Feasibility Study to establish

Gelatin & Glue production plant

Prepared by: -
Industrial Research and Consultancy Centre
Consultancy Registration No. (252) @ Organization Council for Consultancy Firms

1
 Request

This study is prepared in accordance to a request received from Khartoum States

Ministry of Industry & Investment to prepare feasibility study to establish Animal
Gelatin and Glue production plant.

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N.B:-
All information in this study is confidential to the client
-All prices & costs referred to in this study are those prevailing at the time of
preparing this study

- Exchange rate (commercial banks- May 2017) One US$ = SDG 17.80

Summary

Summary
Project name: …… plant
Location of the plant: ……… state
Operational capacity of the plan ….. ton / annum
Product output: ……/ …..
Capital investment: SDG ….
US$ …….
Initial working capital: SDG ….
US$ …..
Rate of return on investment (ARO) : ……………%/annum

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Internal rate of return: ….. %
The payback period : … yea ….. month.

Introduction
This report is studying and appraising the techno-economic and financial viability
of ……. plant which, when operating at its full designed capacity, will be capable to
use approximately ……tons of …… to produce ….. tons of a production mix of …..
tons of ........ and ….. tons of …. with a normal process loss of 5% of the inputs.
However, to be on the conservative side, and due to certain practical
considerations, it has been assumed that the plant will be operated at 56% of its
designed capacity in the first year in operations, to be raised to 64% in the second
year and, furthermore, to 80% as from the third year and on words. The
methodology adopted in the preparation of the study took into consideration the
market requirements and characteristics together with the expected
developments in the economy in general, and in the agricultural crops production
sub-sector in particular, over the coming 10 years, in assessing the prospects of

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the project in terms of acquiring a market share and achieving profitability. As per
the objectives set for it, the project is an import substitute one aiming at serving
the food security on the one hand and saving foreign exchange on the other.

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Sudan is endowed with a very large livestock population. Animal herd of Sudan is
estimated at about 106.53 million heads, being the largest in Africa and Middle
East. It consists of about 30.38 million cattle, 40.21 million sheep 31.23 million
goats and 4.8 camels. (Source: ministry of animal wealth). So we can say that
Sudan has comparative advantage in the production of animal’s products.

The first modern tannery is back dated to 1945 which was established by the
Sudanese business man Osman Selah in Omdurman. Now the total number of
tanneries is 27 tanneries most of them are located in Khartoum state. The total
annual production of those tanneries about 25 million piece from light leather
(skins) and 1.4 million piece from heavy leather (hides). The leather industry
generates a huge quantity of untanned solid waste which is very suitable for the
production of gelatin and Glue. The abundance of raw material is one of the most
important factors for the successful of the project under study.

Project concept: -

Gelatin and glue is considered as one of the most important products extractions
from animal hides and skins and bones, but in spite of the abundance of leather
there is no any factory in Sudan which produces Gelatin and glue so all the local
demand covers by imports.

Gelatin is one of the essential inputs for many industries and use by many
industrial sectors such as food industry; meat industry, ice cream, jam and
confectionery industry, Pharmaceutical industries and cosmetics industry,

Animal glue has many uses that depend on its gelling or its surface properties. The
most common use of animal glue is as an adhesive solution where its gap filling
properties added to its great dry strength are its main advantages. The rapidly
developed tackiness of animal glue as it sets to a gel makes it useful in such

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application as sticking cloth to wood, bookbinding, in the manufacture of cartons
on high speed machines and manufacture of “gummed” tape.

Advantages of animals glue:-

Ease of preparation, flexible application, characteristics suitable for spreading
machines, low average costs, respect for the environment and unlimited shelf life
are just some of the main advantages of using animal glues.

The project objectives:-

Overall objective:-

To establish a Gelatin and glue manufacturing plant with a capacity of 150 tons /
annum form gelatin & 50 tons / annum from glue

Detailed objectives:-
The main objective behind the establishment of the project under study is to locally
produce and avail Gelatin and glue which is necessary input for many food and
chemical industries.

The project under study will achieved the following objectives:

1- Optimal utilization of valuable by – product of the tanneries

2- Processing of locally animal Gelatin and Glue this type of project save a lot of
hard currencies goes outside Sudan for the import of these commodities

3- To meet the local demand from Gelatin and Glue

4- Create job opportunities

5- Protect the environment from pollution

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6- Produce a halal Gelatin

Location:-
This study will be recommended Khartoum state – Khartoum North – in
Algaily area as the most suitable location for the project for the
following reasons:-
1- Khartoum state was chosen as a suitable location for Gelatin plant.
In the presence of Infra-structural facilities and future potentials for the
product of this factory the location is considered favorable
2- Khartoum state is capital of the Sudan and there are many factories
which used gelatin and Glue are located in Khartoum
3- Roads link Khartoum state with all Sudan’s states north states west
states south and east state which is considered as a good opportunity for
the project under study to handle raw materials and distribute their
product
4- Transportation of raw material, animals hides and skins within the
region and the whole Sudan can be carried through the availing
transportation facilities
5- Labor, manpower skill labor will be available this project create job
opportunities for manpower in Khartoum state
6- Electricity, Water and Fuel, continues electricity supply is essential
for Gelatin industry. This factory will locate in Khartoum state in the
industrial area enjoying all the public urban facilities. To avoid frequent
and long power cut, a stand by generator should be catered for.

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7- The project location will be credited with the advantage of having
easy access to the end users market throw all- the- weather road linking
Khartoum with all Sudan’s states

2-MARKET ASPECTS

Introduction
The project under study is an import substitute industrial project intended to
produce Gelatin and Glue which is an important project industrial input very much
needed by many industrial sectors,. The project under study is considered as one
the pillars of the government strategy aiming to settlement of the industry in
Sudan.

Product description:-

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The project under study produces the following products

1- 150 tons per annum from Gelatin

2- 50 tons per annum from Animal Glue

Introduction
The uses of Gelatin
food industries; meat industries, confectionery; such as sweet and ice-
cream, jam industries, gelatin also used in pharmaceutical, cosmetics
industry, textile industry and many other industries. Importation of
Gelatin.
Gelatin is used by different industrial sectors ,the major users of which
are:-
1- Food industries( meat industries sweets and ice- cream ….etc)
2- Pharmaceutical industries
3- Spinning and weaving industries
4- Chemical industries
5- Cosmetics industries
To investigate the possibility of investing in the production of gelatin
and glue it is important to study the market potential for these products

Market supply
Market supply of Gelatin:-

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The supply of Gelatin is composed of the quantity produced by the local
industries and the imports, however as there is no any factory in the
country produce Gelatin the only source of supply is imports.
Imports
The factories uses Gelatin were entirely dependent on imports to meet
their requirements of Gelatin.
The quantities imported of Gelatin and their costs for the period 2006-
2016 are shown in table (2-1)

Table (2-1)
Imported quantities of Gelatin/ tons and their costs/us$ for the
period 2012-2016
Year QTY /Ton Cost (US$)

2012 2,851 24,454

2013 4,724 14,761

2014 11,547 9,416

2015 13,310 82,127

2016 34,750 75,565

Source: - police& custom duties, department of statistics and information, march 2017

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From table (2-1) it’s observed that Quantities imported increased during
the past five years, which indicated that demand for gelatin is increased
annually.

Demand:-
The uses of gelatin in Sudan is very limited, the study survey revealed
that there is no used of gelatin in food industries so in regard to meat
industry the meat factories used Dried bread crumb instead of gelatin in
the meat processing such as Sausage, Mortadella, Frankfurter. Also
Gelatin not used in the manufacture of yogurt, ice cream and
confectionery industry such as jam industry, the local industries used
pectin extracted from husks of citrus fruits which is an alternatives to
gelatin derived from animals in the manufacture of confectionery

The demand for gelatin in Sudan is for gelatin desserts, and culinary
uses Gelatin may be used as a stabilizer thickener in food such as yogurt,
in some factory in Sudan.

Technical uses

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Capsules made of gelatin

As for the use of gelatin in Pharmaceutical industries, there is no use of

gelatin in this sector, Capsules made of gelatin is imported and it is not
manufacture in Sudan.

Dietary restrictions and gelatin substitutes

Islamic Halal, customs require gelatin from sources other than pigs, such
as cattle because their religious rules forbidden the consumption of pigs,
this is considered as a good opportunity for the project under study to
export the surplus to the Islamic countries.

Potential demand for Gelatin:-

The potential demand for Gelatin by the all the industrial sectors use
gelatin is based on the following assumptions:-
1- The consumption rate of growth is increase by10% per annum for the
existing industries
2- Year 2017 is reference year
The potential demand for Gelatin for the five next years is shown in
table (2-2)
Table (2-2)
The expected demand for Gelatin/ tons for the period 2017-2022
Year quantities (Tons)

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 2017 38,225

2018 41,700

2019 45,175

2020 48,650

2021 52,125

2022 55,600

The gap:-
The project under study being an import substitute may encourage the
establishment of other industries use Gelatin.
Being an import-substitution project the only competitors will be the
foreign source, and the project to gain a sizeable share in the market two
essential pre-conditions must be looked after – the quality of the end
product and the retail selling price, assuming that these two pre-
conditions are very well take care of, the expected production of Gelatin
will not be sufficient enough to match the estimated potential demand.
The demand – supply gap, calculated on the basis of the assumption that
the project with designed capacity of 150 tons of Gelatin per annum, will
commence commercial operations in three years time staring with an
operating capacity of 70 per cent in the first year to be raised to 85 per

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cent in the second year and to 100 per cent as from the third year and
onwards will be as shown in table (2-3).
Year 2018 is reference year when the factory commence its commercial
production

Table (2-3)
Potential Demand – Supply gap for the period 2018- 2022
Year Potential Expected The gap
Demand/ Ton production/ Ton Tons
2018 41,700 105 41,595
2019 45,175 125 45,050

2020 48,650 150 48,500

2021 52,125 150 51,975

2022 55,600 150 55,450

2023 59,075 150 58,925

The Word Production of gelatin

The worldwide production amount of gelatin is about 375,000 – 400,000
tons per year on a commercial scale
Western Europe produced about 39% of the world production of gelatin,
22% produced by North America, 17% produced by Latin America,

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22% produced by other countries, and 2% produced by North America.
As shown in Figure (1)
Figure (1)

Material used in Gelatin production:-

44% of materials used in Gelatin production from Pig skin, 28% from
Bovine Hides, 27% from Bones, and 1% from other materials.
As shown in figure (2)

Figure (2)

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.Market supply of animal Glue:-

Uses of animal glue:-

Animal glue made from bone and hide is used in:-
Adhesive
Wood fillers
Furniture

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Coating & sizing
Binding agent
Abrasives / polishing
Matches
Electrolytic metal refining and plating – copper
Paper manufacture / coating
Gummed tapes
Cleaning compounds / disinfectants
Cardboard / container boxes
Printing processes
Glass chipping
Book binding
Fireworks / Firearm propellant power
Decorative moldings / picture frames
Musical instruments
Luggage & Leather
Ballistics
Stationery
Microencapsulation
Paintballs

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Art canvas sizing
The supply of animal glue is composed of the quantity produced by the
local industries and the imports, however as there is no any factory in
the country produce animal glue the only source of supply is imports.
Imports
The users of animal glue were entirely dependent on imports to meet
their requirements from glue, this due there is no any factory produces
animal glue in the Sudan.
The quantities imported from glue appeared in police and customs
duties sheet consist of synthetic glue and animal glue. Animal glue
combined with synthetic glue. The quantities imported from glue and
their values in period 2006-2016 were shown in table (2-4)

Table (2-4)
Imported quantities of glue/ tons and their values/us$ for the period
2012-2016
Year quantities (Tons) Value (US$)

2012 2,751,122 7,362,860

2013 3,398,915 8,652,109

2014 2,904,271 7,083,082

2015 3,533,835 9,278,234

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 2016 3,506,548 8,968,506

Source: - police& custom duties, department of statistics and information, march 2017

From table (2-1) it’s observed that Quantities imported increased in year
2013 and deceased in year 2014 and increased again in year 2015 and
decreased in year 2016. The quantities imported depend on the
availability of foreign currency.

The potential demand of glue

The potential demand for glue by the all the industrial sectors use glue is
based on the following assumptions:-
1- The consumption rate of growth is increase by5 % per annum for the
existing industries
2- Year 2017 is reference year
3-Represents 5% of the total quantities imported from glue is animal
glue
The potential demand for animal glue for the five next years is shown in
table (2-5)

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Table (2-5)
The expected demand for Animal glue / tons for the period 2017-
2022
Year quantities (Tons)

2017 184,093

2018 192,859

2019 201,625

2020 210,391

2021 219,157

2022 227,923

Gap:-
The demand – supply gap, calculated on the basis of the assumption that
the project with designed capacity of 50 tons of Gelatin per annum, will

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commence commercial operations in three years time staring with an
operating capacity of 70 per cent in the first year to be raised to 85 per
cent in the second year and to 100 per cent as from the third year and
onwards will be as shown in table (2-3).
Year 2018 is reference year when the factory commence its commercial
production

Table (2-6)
Potential Demand – Supply gap for the period 2018- 2022
Year Potential Expected The gap
Demand/ Ton production/ Ton Tons
2018 184,093 35 41,595
2019 192,859 24.5 45,050

2020 201,625 50 48,500

2021 210,391 50 51,975

2022 219,157 50 55,450

2023 227,923 50 58,925

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 3-Technical spects

3-1 Manufacturing process

The manufacture of gelatin has evolved from the simple digestion of animal bones
in a steam heated pressure cooker to a well controlled technical process developed
in the early 1920s.As variety of products with desirable properties is available and
special processing is required in each case. The steps in manufacture involve
isolation and refinement of the insoluble soluble gelatin. The gelatin is further
processed by chemical adjustment, filtration for clarification and drying to yield a
product of some predetermined quality. Final specifications are usually arrived at
by the calculated blending of unit batches; these have been analyzed in the
laboratory for physical and chemical properties characteristics of gelatin for highly
specified uses in food and technical applications.

Inspection and cutting

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When the animal parts arrive at the food processing plant, they are inspected for
quality. Rotten parts are discarded. Then, the bones, tissues, and skins are loaded
into chopping machines that cut the parts into small pieces of about Sin (12.7cm)
in diameter.

Degreasing and roasting

The animal parts are passed under high-pressure water sprays to wash away debris.
They are then degreased by soaking them in hot water to reduce the fat content to
about 2%. A conveyer belt moves the degreased bones and skins to an industrial
dryer where they are roasted for approximately 30 minutes at about 200° F (100°
C).
Acid and alkaline treatment
The animal parts are soaked in vats of lime or some other type of acid or alkali for
approximately five days. This process removes most of the minerals and bacteria
and facilitates the release of collagen. The acid wash is typically a 4% hydrochloric
acid with a pH of less than 1.5. The alkaline wash is a potassium or sodium
carbonate with a pH above 7.

Boiling
The pieces of bone, tissue, and skin are loaded into large aluminum extractors and
boiled in distilled water. A tube running from the extractor allows workers to draw
off the liquid that now contains gelatin. The liquid is sterilized by flash-heating it
to about 375° F (140° C) for approximately four seconds.
Evaporating and grinding

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From the extractor, the liquid is piped through filters to separate out bits of bone,
tissue or skin that are still attached. From the filters, the liquid is piped into
evaporators, machines that separate the liquid from the solid gelatin. The liquid is
piped out and discarded. The gelatin is passed through machines that press it into
sheets. Depending on its final application, the gelatin sheets are passed through a
grinder that reduces them to a fine powder.
Flavoring and coloring
If the gelatin is to be used by the food industry, sweeteners, flavorings, and
colorings may be added at this point. Pre-set amounts of these additives are
thoroughly mixed into the powdered gelatin.
Packaging
The packaging process is automated, with preset amounts of gelatin poured into
overhead funnels through which the gelatin flows down into bags made of either
polypropylene or multiply paper. The bags are then vacuumed sealed.

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Quality control

Gelatin manufacturers must adhere to stringent national and international food

processing requirements. These regulations include but are not limited to
cleanliness of the plant, equipment and employees; and allowable percentages of
additives, flavorings, and colorings. Automated and computerized technologies
allow the processors to preset and monitor ingredient amounts, time and
temperature, acidity and alkalinity, and flow levels. Valves are installed along
pipelines to allow for continuous sampling of the product. Gelatin is processed to
varying "bloom" values that measure the gel strength or firmness. The desired
strength corresponds to the manner in which the gelatin will be used. The bloom
value is technically measured and monitored throughout the production process.

Physical and Chemical Properties

- Gelatin is nearly tasteless and odorless. It is a vitreous, brittle solid faintly yellow
in color.

- Gelatin is practically insoluble in cold water but shall swell -and soften when
immersed in it and it is soluble in aqueous solutions of polyhydric alcohols such as
glycerol and propylene glycol.

- Gelatin stored in air-tight containers at room temperature remains unchanged for

long periods of time. When dry gelatin is heated above 45° C in air at relatively
high humidity (above 60% RH) it gradually loses its ability to swell and dissolve.

The various amino acids obtainable from some gelatins by complete hydrolysis, in
grams per 100 grams of dry gelatin, are listed in Table ….

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Table …. Amino acid Composition of Gelatins

Bacteria and Preservatives

Gelatin is an excellent growth medium for bacteria. Therefore, strict sanitary
practices must be followed during manufacture in order to assure a clean,
wholesome product. Food grade gelatins typically contain less than 3,000 bacteria
per gram, with no pathogens present. Pharmaceutical gelatins are limited to aerobic
plate counts of 1000 per gram. The National Formulary and the Food Chemical
Codex monograph on gelatin both require that Salmonella species and Escherichia
coli be absent.

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 Edible Gelatins
Commercial gelatins vary from 50-300 Bloom grams and, except for specialty
items, are free of added colors, flavors, preservatives, and chemical additives.
Gelatin is a generally recognized as safe (GRAS) food ingredient. Typical
specifications for edible gelatins are:

Two of gelatin’s most desirable properties are its melt-in-the-mouth characteristics

and its ability to form thermoreversible gels. In addition, gelatin is relatively
unaffected by ionic strength and is stable over a broad pH range. Gelatin is
preferred in many applications for its clarity and bland flavor. Table ….. lists
several food categories which utilize gelatin, and recommended use levels and
Blooms.

Table ……. Gelatin as a Food Ingredient

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Confectionary
Confections are typically made from a base of sugar, corn syrup and water. To this
base is added flavor, color and texture modifiers. Gelatin is widely used in
confections because it foams, gels, or solidifies into a piece that dissolves slowly or
melts in the mouth.
Gelatin in Meats
Gelatin is used to gel aspics, head cheese, souse, chicken rolls, glazed and canned
hams, and jellied meat products of all kinds. The gelatin functions to absorb meat
juices and to give form and structure to products that would otherwise fall apart.

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Normal usage level ranges from 1 to 5% depending upon the type of meat, amount
of broth, gelatin Bloom, and texture desired in the final product.
Gelatin is compatible with a wide variety of foods and ingredients. In fact, it has
been used to help keep together ingredients that are incompatible. Some general
nutritional information on gelatin is presented in Table …..
Table ... Gelatin Nutritional Information

* These figures are typical values or ranges which will vary greatly depending upon the type of raw material and
methods of manufacture. They should not be used for label claims.

Table …. Functional Properties of Gelatin in Foods

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 Pharmaceutical Gelatins

The commonly recognized dosage forms using gelatin are two-piece hard capsules,
soft elastic gelatin capsules (Softgels), tableting, tablet coating, granulation,
encapsulation and micro-encapsulation. All gelatins used meet or exceed the
requirements of the current United States Pharmacopoeia and National Formulary.
The use of gelatin in the various dosage forms consumes approximately 17% of the
total gelatin consumption worldwide.

Photographic Gelatins

Gelatin for photographic use is primarily Type B alkaline processed gelatin,

especially for emulsion preparation. Type A gelatin has limited application for top
coating and subbing. Although cattle hides have been used, Type B photographic
gelatin is generally made from ossein derived from bone. Preparation and

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extraction of the raw materials are done under carefully controlled conditions to
produce gelatin with desired photographic properties, such as varying degrees of
sensitivity or inertness with minimal fogging properties.

3-2 plant capacity:

.The designed capacity of the plant is 100.kg. /hr

Plant operational capacity is estimated to be 150 tons / year

:according to the following

Working days =300 day / year

Shift / day = one shift

Hours /Shift = 8 hours

Working hours = 2400 hr/ year

:Gelatin products (70% of the operational capacity)

- Total = 99.75 tons /annum

-plastic -containers (25kg) =99.75 ton = 3,990 containers. ‫مراجعة‬

:Glue products(30% of the operational capacity)

Total = 42.75ton./annum -

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Plastic galloon (5kg.) =42.75 ton =8,550 galloons -

)losses are assumed 5%-(

Technical requirements 3-3

3-3-1 land

Plot of land is required to accommodate the following:

- production hall
- steam station
- electricity station
- storehouses(3)
- administration building
- water supply and treatment unit
- services building
Building and civil works 3-3-2
Building of the plant consists mainly of:

1- Steel structure ( 1000 sqm ) accommodates the Production and packing

activities.

2- Administration building

3- Store house

4- Potable water system

5-Guard &Reception offices

6-Steam station building

7-electricity station building

8-Cafeteria

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 9-Toilets

10-Mosque

11-Sewage system.

12-Fences

3-3-3 Machinery and equipment

To achieve the expected production capacity, the main components of the

production line are described in the table below:

Plant machinery and equipment &engineering utilities

 Dry bone crusher
 Rotary extractor with longitudinal steam coils
 Vapour condenser and water evaporator
 Other storage tanks
 Hammer mill
 Lime dissolver with stirrer CS
 Storage tanks for HCI
 Acidulating tanks rubber lined
 Washing tanks rubber lined
 Cooking tanks CS outlet shell SS 316
 Storage tank light liquor, SS 316
 Pressure filter
 Clear liquid storage tanks SS 316
 Triple effect evaporators with vacuum pump & condenser. All stainless
construction.
 Concentrated liquor storage tanks SS 316

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 Refrigerated chamber temp. 40C
 Grinder – for finished gelatin
 Air heater-with blower heater boxes maximum 1400C

 Exhaust
 Dryer
 Bone dryer
 Cage mill
 Boiler
 Calcium
 Material handling system
 Other misc. equipment like bins, racks trolleys tools, weighing machines etc.
 Pipe line systems water, steam acid naphtha, air etc.
 Pumps, compressor oil storage tanks etc.
 De -mineralizer plant.

 engineering utilities(standby elec.generators,tanks,….etc)

Cost of machinery and equipment also includes engineering

.utilities ,machinery and equipment are expected to be made of stainless steel

Vehicles and handling equipment 3-3-4

:The required vehicles are

Saloon cars for the head of the staff

.Mini –buses for the use of employee

Light- trucks to transport raw material and products

.Fork- lift for loading and off loading of raw material and products

3-3-5 Furniture and offices equipment

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 These are mainly office furniture like tables , chairs, cupboards, file cabinets,
safe custody ,water coolers and offices equipment like, phones, scanners fax m/c
computers& typewriters.

:production inputs:3-3-6
The international market of gelatin and glue is highly competitive and highly
organized, so the plant must be built on affirm base of home demand and must
has a reliable suppliers of the inputs .

: Raw materials -
:The raw materials required for product of gelatin and glue are mainly

.animal skin and bones -

.chemicals -

.additives -

The essential raw material required for production is livestock skins and hides
should be available, although others inputs like chemicals are necessary.

packaging materials -

.packaging materials are mainly plastic containers

Production program may be scheduled to produce gelatin and glue and to store
part of the inputs at the beginning of the season.

3-3-7 Public utilities

The necessary public utilities are:

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- Electricity power to operate the plant machinery and for domestic use

- Water is vital for the manufacturing process and domestic use

- Fuel & grease (gas oil -Benzene-grease-engine oils –gears oils, furnace for
boiler).

:Manpower 3-3-8

Manpower is required to manage the plant, operates the machinery, drive

vehicles, and handling equipment, carry out packing and perform the marketing
of the products. Manpower is classified mainly into direct labor and indirect labor
(skilled and un-skilled personnel).

4- FINANCIAL STUDY

ESTIMATED PROJECT COST, FINANCIAL PROJECTIONS

AND FINACIAL APPRAISAL

4-1 Estimated Project cost and tentative financial plan

4-1-1 The total project investment cost is estimated at SDG ………….out of which a
proportion of US$ 150,000 (the equivalent of SDG 2,670,000 representing …… %
of the total cost) will be required in foreign exchange for the finance of the import
of plant, equipment and other items and SDG …….. (represent …… % of the total)
will be required in local currency for the finance of the acquisition of land, the

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 cost of buildings, rolling stock and the local duties and charges. The total
investment cost is summarized as shown below.

Summary of the Investment Cost

Local Foreign exchange

Investment Item currency Total in local
(SDG) US$ Esq.(SDG) (SDG)

1- Land 4,500,000 4,500,000

2- Building 5,020,000 5,020,000
3- Machinery and equipment 1,246,000 150,000 2,670,000 3,916,000
4- Rolling stock 2780000 2780000
5- Furniture 34,250 34,250
fixed cost 2,670,000

6- Preliminary expenses
7- Initial working capital
Total investment cost

The exchange rate plus the incentive at the time of the preparation of the
study is SDG 17.8 to US$

4-1-2 The basic assumptions upon which the total investment cost is estimated
are as follows:-

4-1-2-1 Land Cost

The total estimated land area as proposed by civil engineers in the light of
the building requirements is 15000 Square meters at aljailly new industrial area
and concessional price of SDG 300, the land cost will be calculated at

15000 Square meters X SDG 300 = SDG 4,500,000

4-1-2-2 Buildings

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 Details of the total built area, type of buildings required and the estimated cost
per sq meter of each type are shown in table below giving a total cost of
SDG 5,020,000 as follows:

Building Description Unit cost (SDG) Total cost (SDG)

- Steel structure (production hall) 1000 2000 2,000,000

- administration building (Brick & 200 2500 500,000
concrete building )
Services building 24 2500 60,000
Boiler & generator room 32 1000 32,000
- stores 1000 2000 2,000,000
- control room 12 2500 30,000
- Fence 320 150 48,000
-well& Potable water system - job 200,000
- Sewage system - job 150,000
Total - 5,020,000

4-1-2-3 Plant machinery and equipment

The details of the plant machinery and equipment are shown in the
technical study in this report (chap.3). However, the total cost of erected plant
and machinery is shown in the table below to give a total cost ofSDG3, 916,000
out of which SDG 2,670,000 equivalent to US$ 150,000 in foreign exchange
represents the cost OF financing the purchase of the plant machinery and SDG
1,246,000 in local currency.

4-1-2-4 Vehicles & handling equipments

The details of the rolling stock cost which has been estimated at SDG
1400000 tacking into consideration the type vehicles and handling equipment are
shown in the table below.

38
 Items Qty Unit price Estimated cost
(SDG) (SDG)
Saloon cars 1 380,000 380,000
Pick-up(double cap) 1 650,000 650,000
Mini-bus 1 650,000 650,000
Light trucks(3.5 ton) 2 350,000 700,000
Forklift (3ton) 1 40000 400,000
Total 2,780,000

4-1-2-5 Furniture and equipment

The cost of the office furniture and equipment which has been estimated at
SDG 34250 taking in consideration the required office furniture which includes
office tables, cabinets, offices chairs, and office equipment which include
computers, photo copying machines is shown in the table below.

Office furniture 15250

Office equipment 19000

Total estimated cost 34,250

4-1-2-6 Preliminary expenses

These expenses are assumed to cover all of the expenses incurred prior to
the commencement of the commercial operations. Such expenses include the
feasibility study fees, the project registration fees,; the project formulation
expenses such as traveling expenses for negotiations and contract's concluding,
the technical assistance, the test runs and project commissioning expenses, and

39
any other unforeseen expenses .These are estimated at ….% of the capital cost of
the project. Part of which well be in foreign exchange to cover the foreign
component of the technical assistance.

4-1-2-7 Initial working capital

The initial working capital has been estimated to finance the cash
requirements which will need to be met before the receiving of the cash sales
revenue. The required initial working capital is calculated taking into
consideration the to major components which are the raw materials including
packing materials and the trade debtors as follows:-

Item cost (SDG 000)

Raw material
Spare parts
Public utilities
Direct labour cost
General expenses
Trade debtors
Total

4-2 Basic Assumptions for Financial Projections

The financial projections; projected income statements, balance sheet

statements and cash flow statement, for a planning horizon of ten years starting
from the date of commencement of commercial operations, are prepared using
CONFAR 3 program and attached to this study report as Annex (1), on the basis of
the following basic assumptions.

40
4-2-1 Basic Assumption for Projected Income Statements

4-2-1-1 Sales volume, mix, and selling price

Annual Sales volume

It has been assumed in paragraph 3-2 of chapter (3) in this report on the
technical aspects, that the designed plant capacity is … kg t…. products per hour
and on the assumption that the plant will be operated for ……working days per
annum, …… shifts per day and 8 hours per shifts the designed pant capacity will be
calculated as ….. kg hours x … days x … shits x 8 hours = …. tons/year. However, to
be on the conservative side we would like to assume that the operation plant
capacity would be ….% (…. tons per annum) of its deigned one and the
furthermore, we would like to assume that the project will be operating at 70% of
its operational, capacity in the first year in operation to be raised to 80% in the
second and further to its assumed operation capacity as from year 3in operations
and on words. The calculation of the annual production will have to take into
consideration a production normal loss of 5% of the inputs. Taking such an
assumption into consideration the annual (production) sales volume will be
calculated as follows.

Referred Year in operations gelatin glue

sales volume 99.75 42.75

Sales Mix:

As for the sales main mix in the referred year in operations it has been
assumed that 70% of the total production would be gelatin and 30% glue.
According to this assumption the main sales mix would be calculate as:

41
products gelatin glue
25 5 5 0.7
kgm.containers kgm.containers kgm.containers kgm.containers
sales 69,830kgm 29,920 12,825 29.925
volume
No. of 2,793 5,984 2,565 42,750
containers

Each of the two production mix will further be categorized according to packing
quantities to suit the marketing requirement. The tomato paste will be packed in
3 types of packing materials, 1 kg tins,420 gm. tins, and 70 gm seamed aluminum
foil tubes and in the ratio of 5%, 70% and 25% of the total respectively. On the
other hand the ketch up will be packed in 1 kg plastic galloon, 340 gm. glass
bottles, and 10 gm. seamed aluminum foil tubes and in the ratio of 5%, 80% and
15% respectively. In the light of these assumptions the annual sales mix will be
calculated as:

Sales price:

The sales prices for each type of sales mix has been estimated taking into
consideration the currently prevailing market prices and are applied to give the
sales revenue as shown in the profit and loss account statement as follows:

Sales price of halal gelatin =$ 2500 - 3000/ ton

Sales price of the products mix and the annual revenue:

sales mix Qty Sales Annual

prices/SDG revenue/SDG
Gelatin plastic- containers (25 kg) 5,586 1470 8211420
Gelatin plastic - containers 5 kgm) 11968 300 3590400
Glue plastic - containers 5 kgm) 5130 150 769500

42
 Glue plastic - containers 700gm) 85,500 25 2137500
total annual revenue 14708820

4-3-Cost of inputs:

According to these production requirements and taking into consideration

the assumed operational capacity and, hence, quantities to be produced, the
annual cost of inputs would be calculate as follows.
ANNUAL inputs REQUIREMENT & COST

No. Raw Material Cost/SDG/ton Qty Cost/SDG

1 Slaughterhouses by product (raw 1,000 2000 2000000

material)
2 Quick lime 2,670 260 694200
3 Hydrochloric acid 3,560 90 320400
4 Sodium carbonate 3,916 100 391600
5 Sweeteners, flavorings, and 25000 3 75000
colorings
Total 3,481,200

Packing material Cost:

As indicated by the sales volume assumption above the packing materials

would be plastic containers. Annual requirements and purchase prices to be
applied in relation to the annual sales quantities will be as shown in the table
below:

43
 packing material Qty. Price SDG Cost/SDG

For gelatin
plastic containers25 kg 5586 14 78204
plastic containers5kgm gm 11968 7 83776
For glue
Plastic galloons 5 kg 5130 7 35910
plastic containers700 gm 85500 1 85500
Total cost 283390

4 – 4 - Cost of public utilities :

The cost of the public utilities (electricity, water and petroleum products) is
estimated on the basis of the machinery horse power of the machines in respect
of the electricity for power and the car running requirements in respect of the
petroleum products applying the prevailing charges, rates and prices as follows:

No Description UOM Cost

1 Electricity KWh 165000

2 Water m3 60000
3 Furnace oil Lt. 130000
total 355,000
‫مراجعة العاله‬

4-5 Cost of Human Element:

The annual cost of the human element including in labour (management)

the production direct and indirect labour, based on the currently prevailing
salaries and wages with an allowance for the social insurance and the fringe
benefits would be estimated as follows:

44
 No. Description Req. Monthly Salary Annual
No. /SDG cost/SDG
1. General Manager 1 8000 96,000
2. Secretary 1 2500 30,000
3. Marketing Officer 1 4000 48,000
4. Senior Purchaser 1 3000 36,000
5. Senior Accountant 1 3000 36,000
6. Cashier 1 3000 36,000
7. Production manager 1 5000 60, 000
8. Quality Control Head 1 4000 48,000
9 Chemists 1 3000 36,000
10 Senior Mechanic 1 4000 48,000
11 Mechanic 2 3000 36,000
12 Senior Electrician and 1 4000 48,000
instrument technician
13 Electrician and 1 3000 36,000
instrument technician
14 Operators 6 2000 144,000
15 Un –skilled Laborers 10 1500 180,000
16 Drivers 2 2000 48,000
17 Guards 2 2000 48,000
Sub-total 38 1014000

Social insurance & 202800

fringe benefits (20%)
Grand Total 1216800
Total annual cost of human element 1216800

4--6 Annual general & administrative expenses:

Description Cost SDG

Insurance 96937
Stationery 5000
Communications charges 5000
Advertising & promotion charges 15000

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 Banking charges 2000
Petty office expenses 5000
Travels & trips 25000
Internal auditing 20,000
Total 173937

4--7 Annual repairs and maintenance cost:

Annual repairs and maintenance cost is estimated as a percentage of the

fixed assets cost as shown below:-

Assets Value (SD 000) % age Cost (SDG 000)

Rate
Building and civil work 5,020,000 2% 100,400
Machinery & equipments 3,916,000 3% 117,480
Rolling stock 2780000 5% 139000
Officer furniture & equipment 34,250 8% 2,740
Total estimated cost 359620

4--8 Annual insurance:

Annual insurance is estimated as percentage of the fixed assets cost as follows:-

Assets Value (SD 000) Rate Cost (SDG 000)

46
Building and civil work 5,020,000 0.1% 5,020
Machinery & equipments 3,916,000 0.2% 7,832
Rolling stock 2780000 3% 83400
Officer furniture & equipment 34,250 2% 685
Total estimated cost 96937

4--9 Annual depreciation charge :

Annual depreciation is calculated using the straight line method and

applying the depreciation rates normally applied in feasibility studies as follows:

Assets Cost (SDG 000) Rate

Building and civil work 5,020,000 2.5%
Machinery & equipments 3,916,000 10%
Rolling stock 2780000 20%
Office equipment 34,250 20%

5-FINANCIAL ANALYSIS

Basis Assumption: -

• The project life span is Assumed to be 20 years.

• The construction is assumed to be one year.

47
• The discounting rate is assumed to be 15 %.

• The project will commence operation with starting capacity of 70% in the
first year, 80 % in the second year and to 90 % from the third year and onward.

•Future cash flows are discounted on 15% discounting factor, and zero inflation
rates is assumed.

All prices are current and expressed in SDG.

Investment cost:

The project total investment cost is estimated at ……… SDG. which can be
classified to total fixed investment cost amounted to ……… SDG. (that composed
of the land, machinery & equipment, Rolling Stock and Furniture) and the pre-
production expenditures cost is ………. SDG & the increase in net working capital
is ………….. SDG.

The total investment cost can be summarized as follows:

Investment fixed cost

Items Cost ( SDG.)

Land
Building
Machinery &Equipment
Rolling stock
Furniture
Total Fixed Assets
Pre-investment
Increase in net working capital
Total investment cost

48
Working capital:

The working capital is required for maintain an inventory of material, packing

material, operating supplies and consuming goods in processes, utilities, energy,
spare parts, salaries and wages and other administrative expenses.

Working days: -

Working days per annum are assumed to be 300 days with two shifts.

production cost

The total production cost is computed to be about …………. in reference year.

year 2019 2020 2021

Total cost

Project Revenue:

The project is designed to generate revenue from the main product sales which is
computed to be about ………… in reference year.

49
year 2019 2020 2021

Total revenue

Financial Indicators:

Based on the above assumption, the result of the project operation as revealed by
the project income statement and cash flow statement could be analyses as follows:
-
Profitability
• Return on capital employed: -(net profit + interest rate to investment)
As considered in the projected income statement return on capital employed is
……. % throughout the project life time.

• Net present value (NPV) the net present value at the total capital invested at
15% discounted rates is about ………… SDG.

Profit margin
Net profit as a percentage of total sales as an average is about ……% throughout
the project life time.

Payback period:
The project will be able to pay back the total investment cost within approximately
…… years.

Internal rate of return (IRR)

The internal rate of return on total capital investment is computed as …… % which
indicate that the project has a good financial viability and can easily meets all its
financial obligation.

50
 Appendices

Estimates of Animals in (000) heads

Year Cattle Sheep Goat Camels

2011 29618 39296 30649 4715
2012 29840 39483 30837 4751
2013 30010 39568 30984 4771
2014 30191 39846 31029 4792
2015 30379 40210 31227 4809

Estimates of Hides & Skins Production . No. in (000) Pieces

Year Cattle Sheep Goats Total

2011 2714 11664 10612 24890

2012 2771 11764 10921 25456

2013 2787 11794 11203 25784

2014 2805 11879 11205 25889

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 2015 2818 11958 11272 26078

Proportion of reusable hide substance in waste

Waste % age Remarks

Material with hair 6-8 Calculated on 100%
weight of salted raw skin
Soluble protein in waste 6-8
water
Split offal for glue 6-8
Cutting for glue 8-10
Machine offal for glue 14-16
Tanned offal 4-6
Total 50
Substances reusable for 50
leather
N.B

Split offal & cuttings for glue --------- Gelatine, Susage skins, Protein powder,
medical &surgical film & fabric substances.

Machine offal for glue ---------Glue,fodder, fertilizers

Source :- Pocket book for leather technologist (BASF).

Gelatine Production in the different areas in 2005 in (000) Tons

material Europe NAFTA South Asia Oceania Total Share/%

America &Africa
Pig Skin 82 36 5 14 0 137 44.9

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Hides 15 10 47 06 7 085 27.9
Bones 29 15 0 39 0 083 27.2
Total 126 61 52 59 7 305 100

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