smeda chipboard plant

Pre-Feasibility Study

CHIPBOARD PLANT

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th & 8th Floor LDA Plaza, Egerton Road, Lahore.Tel: (042) 111-111-456Fax: (042) 6304926-7

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor LDA Plaza, Egerton Road, Lahore.Tel: (042) 111-111-456Fax: (042) [email protected]

5TH Floor, BahriaComplex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) [email protected]

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702


April, 2006

Pre-feasibility Study Chipboard Plant

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Table of Content

1. PURPOSE OF THE DOCUMENT ........................................................5

2. PROJECT PROFILE ................................................................................51.1 Opportunity Rational ............................................................................................. 51.2 Project Brief .......................................................................................................... 51.3 Market Entry Timings............................................................................................ 51.4 Business Legal Status ............................................................................................ 51.5 Project Capacity & Rational................................................................................... 51.6 Project Investment ................................................................................................. 61.7 Proposed Product Mix ........................................................................................... 61.8 Proposed Location ................................................................................................. 61.9 Key Success Factors .............................................................................................. 6

22..99..11 AAlltteerrnnaattiivvee MMaatteerriiaall....................................................................................... 622..99..22 RReegguullaarr MMaarrkkeett SSuurrvveeyyss ................................................................................. 622..99..33 PPrrooppeerr SSttoorraaggee............................................................................................... 722..99..44 FFuuttuurree TTrreennddss ................................................................................................ 7

1.10 Strategic Recommendations................................................................................... 722..1100..11 MMaarrkkeettiinngg ...................................................................................................... 722..1100..22 PPrriicciinngg.............................................................................................................. 722..1100..33 DDiissttrriibbuuttiioonn ...................................................................................................... 7

3. MACROECONOMIC INDICATORS OF PAKISTAN .....................83.1 Demography of Pakistan........................................................................................ 83.2 Population Growth................................................................................................. 83.3 Housing Sector ...................................................................................................... 8

4. SECTOR & INDUSTRY ANALYSIS....................................................94.1 Sector Characteristics ............................................................................................ 94.2 Chipboard Demand................................................................................................ 94.3 Furniture Manufacturer.......................................................................................... 94.4 Construction Agencies ......................................................................................... 104.5 Others .................................................................................................................. 104.6 Sub sector Information......................................................................................... 104.7 Sub Sector Performance....................................................................................... 104.8 Government Policies............................................................................................ 11

5. MARKET INFORMATION.................................................................125.1 Market potential................................................................................................... 125.2 Competitive Environment .................................................................................... 125.3 Allied and Associated Industries .......................................................................... 135.4 Demand and Supply Gap ..................................................................................... 135.5 Target Customers................................................................................................. 13

5.5.1 Exporters .................................................................................................. 135.5.2 Local Users.................................................................................................. 13

5.6 Trade Statistics ........................................................................................................ 14


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6. PRODUCTION PROCESS ..................................................................166.1 General ................................................................................................................ 166.2 Chip & Flake Manufacturing ............................................................................... 166.3 Flake Drying & Drying Screening........................................................................ 166.4 Gluing Of Screened Flake.................................................................................... 166.5 Forming & Press.................................................................................................. 166.6 Trimming Saws and Sanding Lines...................................................................... 176.7 Controls............................................................................................................... 176.8 Plant & Machinery .................................................................................................. 18

6.8.1 Detail of Machinery required for Chipboard Unit .............................................. 186.9 Project Standards and Compliance Issue .................................................................. 18

7. POJECT PROFILE .................................................................................197.1 Land Requirement .................................................................................................. 197.2 Covered Area Requirement...................................................................................... 197.3 Recommendation mode ........................................................................................... 197.4 Utilities Requirements ............................................................................................. 19

7.4.1 Water................................................................................................................ 197.4.2 Power ............................................................................................................... 19

7.5 Oil/Lubricants ......................................................................................................... 197.6 Raw Material........................................................................................................... 197.7 Time Schedule......................................................................................................... 207.8 Technical Know-How.............................................................................................. 207.9 Suitable Location..................................................................................................... 20

8. HUMAN RESOURCE REQUIREMENT ...........................................228.1 Availability & Management of Human Resource..................................................... 228.2 Organizational Structure.......................................................................................... 23

9. FINANCIAL PROJECTION ................................................................24

KEY ASSUMPTIONS..................................................................................27


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DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject matter

and provide a general idea and information on the said area. All the material included in this

document is based on data/information gathered from various sources and is based on certain

assumptions. Although, due care and diligence has been taken to compile this document, the

contained information may vary due to any change in any of the concerned factors, and the

actual results may differ substantially from the presented information. SMEDA does not

assume any liability for any financial or other loss resulting from this memorandum in

consequence of undertaking this activity. The prospective user of this memorandum is

encouraged to carry out additional diligence and gather any information he/she feels

necessary for making an informed decision.

For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk

DOCUMENT CONTROL

Document No. PREF-91

Prepared by SMEDA-Punjab

Issue Date April 2006

Issued by Library Officer


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1. PURPOSE OF THE DOCUMENT

The objective of this Pre Feasibility study is to provide information for setting up a chipboard manufacturing unit and to evaluate its viability under present circumstances.

2. PROJECT PROFILE

1.1 Opportunity Rational

Due to increase in population and need of constructing new houses it is expected that demand for chipboard will rise ultimately. Chipboard industry is a growing industry of Pakistan, which can contribute positively in the GDP. This industry has reasonable potential to attract new markets abroad by providing high quality board. Banking policies for housing loans are also playing an important roll in the boost of the housing sector. The construction style has absolutely changed and demand of chipboard and laminated board has significantly increased. Afghanistan Development Program after the war has also contributed in opportunities to enhance considerable export by taking part in the development of Afghanistan. Construction business is a demanding area. Trade has open for all the world economies from 2005 and it is visualized that demand will increase more in future.

1.2 Project Brief

Gluing together wood particles with an adhesive, under heat and pressure makes chipboard. This creates a rigid board with a relatively smooth surface. Chipboard is available in different densities i.e. 25mm, 19mm, 8mm, 5mm and 3mm.

One of the most common uses of chipboard is that it is the back piece, which provides stiffness on a scratch pad. Chipboard is the major input for the furniture industry and also used for kitchen tops and work surface.

1.3 Market Entry Timings

Pakistan is its way to progress and a numbers of commercial activities are in process. Housing & construction sectors are declared as industry. With these developments these sectors are growing drastically. The growth of allied industries is normal practice therefore demand for chipboard has increased. Local industry is not able to cater the local demand and every year a considerable quantity of chipboard is imported from different parts of the world to meet the demand. Therefore it is right time enter into this industrial sector but for high quality board definitely.

1.4 Business Legal Status

The status of the business should be a corporate entity and it could be either a partnership or a limited company. However, a private limited company will be the best option.

1.5 Project Capacity & Rational

Total production capacity of plant is 200 m3 per day.


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1.6 Project Investment

Cost of the project will consist of the following.

Table 2-1

(Rs. Million)Fixed Cost 13,2.00Initial Working Capital 3,400 Total 166

1.7 Proposed Product Mix

Chipboard in finished form will be available in different sizes i.e. 19mm and 13mm. However the major demand is for 19mm/SP.Percentage of Product mix for laminated sheets is:

Table 2-2

19mm 50%8mm 30%

For Non Laminated Sheets product mix is

Table 2-3

19mm 15%8mm 5%

1.8 Proposed Location

Lower Punjab is best location for a chipboard manufacturing unit due to easy availability of raw material, cheap labor force and excessive water availability. In chipboard industry mango and poplar wood are the main raw materials. This industry needs excessive water in the manufacturing process. It is important to select the site where raw material and water availability is easy. However the investor may consider other factors like easy access to roads, availability of labor, transportation cost and infrastructure facilities etc. before selecting the site.

1.9 Key Success Factors

Following factors are the key in making this project profitable:

22..99..11 AAlltteerrnnaattiivvee MMaatteerriiaall

Chipboard industry in Pakistan is encountering a major problem of availability of mango & poplar wood. Keeping in view the shortage of wood, bagasse is best alternative method, which can be used for chipboard manufacturing. However bagasse is also difficult to obtain due to utilization as fuel in sugar industries. Imported chips/ wood gram’s can also be used for fine quality chipboard.

22..99..22 RReegguullaarr MMaarrkkeett SSuurrvveeyyss

Regular surveys of the Timber Market should be conducted to have a fair idea about the availability of the raw materials and proper forecasting of problems. These types of researches can help to find out the timely solutions for non interrupted production cycle.


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22..99..33 PPrrooppeerr SSttoorraaggee

Proper forecasting for the future needs and planning for the storage of raw material will be treated as key demand of the project.

22..99..44 FFuuttuurree TTrreennddss

Pakistan has faced formidable housing problems from its very birth in August 1947 as an independent nation in the wake of the mass influx of millions who migrated to the country. The situation is changing now and many macro and micro construction works are underway to overcome the backlog of 6.0* million houses in the country, which should be considered a healthy sign for many industries including chipboard industry1.

1.10 Strategic Recommendations

22..1100..11 MMaarrkkeettiinngg

The marketing of the project will be based on the following strong grounds:

Contacts with end users and Contractor Advertisement Promotion schemes Point of purchase displays

It is assumed that by using all above mentioned methods, project will be able to fetch considerable market share.

22..1100..22 PPrriicciinngg

Chipboard is available with or without lamination. Different rates are charged for both products. Product will be provided to wholesaler at market prevailing rates, which could be different on the base of product quality.

22..1100..33 DDiissttrriibbuuttiioonn

The final product chipboard will directly supplied to wholesaler eliminating role of agencies. Distribution network of product is illustrated below:

1 Source: Economic Survey of Pakistan 2004-2005

Manufacture

Wholesaler

Retailer

End user


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3. MACROECONOMIC INDICATORS OF PAKISTAN

3.1 Demography of Pakistan

The population of Pakistan was 32.5 million in 1947. Over the last fifty-five years, it has increased by four folds reaching to a figure of 156 Million approximately. It is expected to 172 million marks in the year 2010. The demographic details of Pakistan’s population are given below:

Table 3-1

Population in 2005: 156 MillionPopulation Density: 185/sq. kmPopulation Growth (percentage): 2.10%Population Doubling Time: 32 YearsBirth Rate: 27.3 per 1000 population

3.2 Population Growth

At present, the annual population growth rate is around 2.10 percent. Pakistan’s population will be twice over in less than 32 years. Punjab is the most thickly populated area and Karachi is the most densely populated city. Keeping in view the growth rate of population of the country it is likely that housing requirements will enhance and automatically demand for the chipboard will increase.

3.3 Housing Sector

The housing and construction sector remained neglected in the past, which resulted in housing backlog of over 4.3 million units according to 1998 census, which is now projected to 6.0* million units. The annual additional requirement is estimated round 570,000* housing units whereas the annual production is estimated around 300,000* housing units, resulting in a recurring shortfall of 270,000* housing units annually. It is estimated that in order to address the backlog and to meet the housing shortfall in the next 20 years, the overall housing construction will have to be increased to 0.82 million housing units annually2.

According to 1998 Population and Housing Census of Pakistan, there were over 19.3 million housing units in the country as compared to 12.6 million enumerated in 1980, showing an increase of 53.2 percent. The details are tabulated in the table appended herewith.

Housing Units

(Census 1998) (Houses in Million)3

Table3-2

2 (Source: Economic Survey of Pakistan 2004- 2005)3

Note: The figures in parenthesis are percent share

(Source: Population & Housing Census 1998)


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On the basis of World Bank’s recommended occupancy rate of 6 persons per house, the total number of housing units in the country roughly required was 26 million up to the end of 2005, based on the population of 156 million at present. Every year, 0.3 million new houses should be added to the existing stock by the public & private sectors. On the other hand, 10 percent houses of the total supply are depleted/destroyed/demolished every year, resulting into decline in available housing units to 20.0 million housing units leaving a back log of 6.0 million housing units.

The present progress involves construction of approximately 4500 housing units/apartments in 4 major urban centers of Karachi, Lahore, Islamabad and Peshawar at an estimate cost of Rs. 5 billion. The execution of this program has been entrusted to the National Housing Authority. It is estimated that approximately 8,000-10,000 laborers and skilled workers are working on various projects including more than 5000 professional engineers and architects. In addition, this has also provided an incentive to the 40 downstream industries including furniture, cement, steel, electrical industries, piping etc.

4. SECTOR & INDUSTRY ANALYSIS

4.1 Sector Characteristics

Chipboard industry is basically agriculture based. Mango & Poplar wood is raw material used for its production. Presently, 35 chipboard manufacturing units are working in Pakistan and producing varying quality of chipboard. Chip board is not only used in country but also exported to Sri Lanka, Afghanistan, Saudi Arabia & to Gulf States in form of furniture. The contribution of chipboard industry to GDP in year 2003-04 was 6.4%* and this percentage increase up to 8.4%* in year 2004-054.

4.2 Chipboard Demand

The demand of chipboard in Pakistan can be categorized into three broad groups of end users, Furniture Manufacturers, Construction and Housing Industry. There could be a very small percentage of other users.

4.3 Furniture Manufacturer

The furniture industry in Pakistan can be classified into following categories.

4 * Source: www.pakboi.gov.pk

Tenure All Areas Rural Urban All Types 19.3 13.1 6.2

(100.0) (100.0) (100.0) Owned 15.6 11.4 4.2

(80.8) (87.1) (67.6)

Rented 1.7 0.3 1.4(9.0) (2.3) (23.2)

Rent Free 1.9 1.4 0.6(10.2) (10.6) (9.2)


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Manually Operated Units Semi-mechanized units Mechanized Units High-tech Manufacturing Units

Chipboard and plywood are the major inputs for the furniture industry, which is the biggest user of chipboard, accounts for approx. 60% of the total demand for the product. The wood used in furniture making generally comprises Shesham, Chirh, Pine, Oak, Burmah, Teak, Plywood, Kikar and Bamboos. Recently, chipboard is also extensively used for this purpose, which is considered a healthy sign for the chipboard industry. Although the quality of chipboard so far produced in the country has not improved up to the world standard, yet with the passage of time for product’s diversified uses, easy to handle, economical and many other factors, the use of chipboard is likely to increase.

4.4 Construction Agencies

The total world spending on the construction sector in a year is US $ 3.2 trillion against US $ 5.2 billion in Pakistan, according to a report compiled by the Lahore Chamber of Commerce and Industry (LCCI). The growth rate of construction sector in Pakistan which stood at 5.70 percent during the early 1990s, declined to (negative 4.92) percent in 1998-99, but then recovered to the mark of 5.15 percent in 1999-2000.As per the information mentioned above it can be envisaged that as the construction sector will improve it will ultimately improve the chipboard industry positively.

By keeping in view increasing population growth rate, expanding demand and supply gap and shortfall of 6 million housing units, it is expected that chipboard usage will increase to meet the shortfall of 6 million housing units.

4.5 Others

These include Interior decoration firms, Railways and other Government Agencies. Chipboard is demanded by these agencies for a variety of purposes. Small quantities of chipboard are also in demand for miscellaneous purposes. For instance, bus body makers, packing firms, film studios, PWD, WAPDA, Municipal Committees and improvement Trusts etc use it.

4.6 Sub sector Information

Focal points of Chipboard industry are Karachi, Peshawar, Lahore, Rawalpindi, and Hattar.

4.7 Sub Sector Performance

At Present only 10 units are in laminated chipboard manufacturing. Most of these units have average rated capacity of approximately 30,000 sheets per/month in 3 shifts. But this sector is also under utilized and could not attain its average capacity. Following table showing the current position of these units:5

5 Source: Bakhshi Enterprises


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Table3-3

Name of Units Rated Capacity

Capacity Attained

Gap

Sheets/Month

Sheets/ Month

Sheets/Month

1. Baluchistan Laminates 40,000 25,000 15,0002. Sind High Pressure Ltd 45,000 20,000 25,0003. Pakistan Formica 10,000 7,000 3,0004. Popular Board 10,000 5,000 5,0005. Wali Board 20,000 5,000 15,0006. Pakistan Chip Board 30,000 15,000 15,0007. Islamabad Board 20,000 10,000 10,0008. Premier Board 10,000 7,000 3,0009. Sonni Board 30,000 15,000 15,00010. Perfect Board 30,000 7,000 23,000TOTAL 245,000 116,000 129,000

According to the above table, Actual Capacity Utilized is only 47% resulting 53% idle capacity. Capacity Utilization can be enhanced up to 70% by producing 171,500 Sheets per month with the existing units and the upcoming units will add approximately 3500 sheets per month. So, this production can be enhanced up to 175,000 Sheets/Month easily. In spite of under utilization of working units it is expected that under fair competition with new units, quality of product will improve and help in reducing imports and enhancing exports of chipboard.

Availability of raw material is a major cause for under utilization of capacity installed. However, keeping in view, the growing demand of chipboard, imported raw material could be used for maximum utilization of the installed capacity. Imported fine raw material will help in the quality improvement, which may increase export rate. In the open trade era, production of high quality product could help in achieving the export targets and the sector will grow accordingly.

4.8 Government Policies

It is high time that government provides the necessary incentives so that this industry may play its due role in the industrial development of the country. Further, this industry, on attaining more dimensional growth, with government assistance, may be able to earn the badly needed foreign exchange through export of its products. A beginning in this regard has already been made with the export of our furniture to Saudi Arabia and Gulf States. Government has granted relief to certain industries involved in housing and construction projects.

In order to boost the Pakistan’s economy, Construction Sector is being given special incentives in the shape of reduction in withholding tax from 6% to 1%, which will ultimately improve the business activities of the down stream industries like furniture, Chipboard, and Construction material industries as well.


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5. MARKET INFORMATION

5.1 Market potential

Pakistan is facing housing problem since its birth because of the migration of millions of people from India to Pakistan. However situation is changing now. Many macro and micro construction works are underway to meet the shortfall of 6.0 million houses both by the private and public sector, which is a healthy sign for many industries including chipboard industry.

On the basis of all the factors relating to the growth rate of population, housing industry and export potential, we can anticipate a reasonable growth rate in demand of the chipboard and laminated board in coming future. On the basis of the population growth and housing industry, 6% growth in demand till 2010 is anticipated. The following table is showing the calculations.

DEMAND PROJECTIONS

Table 5-1

Year Demand (Million Sheets)

2004-2005 6.993

2005-2006 7.413

2006-2007 7.857

2007-2008 8.328

2008-2009 8.828

2009-2010 9.355

Note: - Estimated rate of increase 6% per annum.

5.2 Competitive Environment

For a newly established firm it is imperative to face a competitive environment in the market as competition enhances a company’s ability to strive for continuous improvement. In the field of manufacturing chipboard new entity will be competing with a number of competitors, some of which are listed below:

Hamza ChipboardGohar ChipboardSahar ChipboardHaidry ChipboardSun ChipboardSind ChipboardJehlum ChipboardNational Chipboard


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5.3 Allied and Associated Industries

The project could be very healthy for the allied industries like housing, furniture and automobile industries by giving them their products at internal transfer rates, which will ultimately reduce the cost of production of allied companies, and he nce there would be a positive impact on the consolidated profitability of the associated companies.

5.4 Demand and Supply Gap

Chipboard Industry in Pakistan is an unorganized sector, therefore, it is hard to get exact demand and supply gap figure. There is a meager gap between demand and supply of chipboard in Pakistan. This gap is being filled by importing chipboard from different countries of the world namely China, Germany, Indonesia, Italy and Maldives Islands.

5.5 Target Customers

5.5.1 Exporters

The Pakistan government has been taking a number of steps to give a fillip to export. But these efforts are mainly restricted to increase the traditional exports of agriculture products and items being manufactured by big industrial units. These exports are subject to “dordrumism” as a result of developing countries like Pakistan. The eleventh September mishap is a concrete example.

Under such atmosphere, it is necessary that Pakistan should, along with taking steps for safeguarding our traditional exports from the adverse effects of globalization etc, seek other avenues to raise its exports. One of these avenues may be the development of our woodwork and wood based industry, which has started to adopt a scientific approach for its development.As a result various items of wooden furniture in new design are in appreciable demand, both domestically and internationally. Presently, we are exporting to Sri Lanka, Middle East, Saudi Arabia, Afghanistan and some Gulf States various items of wooden furniture.

5.5.2 Local Users

Domestically chipboard is major input for furniture & housing sector. Other users include government agencies, WAPDA, PWD, Municipal Committees and improvement Trusts etc .It is used by bus body makers, packing firms, film studios as well.

Consumption and Production

Detail of local production and consumption is given below6.

6 Source: * Chipboard Industry falls in an unorganized sector and no proper data is available.

Domestic production is based on information projected by few industrial units and estimation

for the capacity attained. )


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Local Production & Consumption:

(2000-2002)Year Domestic

Imports Exports Total Demand

2000-2001Sheets 6,157,875* 4,200 4,325 6,159,350Kg. 246,315,000 167,460 172,470 246,320,010

2001-2002Sheets 6,400,075* 5,460 4,800 6,400,875Kg. 256,002,000 218,400 192,000 256,028,400

5.6 Trade Statistics

LOCAL PRODUCTION ON THE BASIS OF SURVEY

List Of Manufacturer Capacity Attained (m3/day)

1. Ayeslia Board (Pvt.) Ltd 80

2. Bombay Plywood Industries 120

3. Compact Particle Board 120

4. Chenab Particle Board 150

5. Plyfo Industries 100

6. Gulf Group Ind 100

7. Haidery Board Ind 80

8. Husnain Nordic Ltd 150

9. Islamabad Board Mills 150

10. Sadat Board 80

11. KDC Board 65

12. Kenwood Ind 80

13. Kalai Valley Particleboard 120

14. Gohar Board 80

15. Pakistan super wood Ind 100

16. Pak Chipboard 200


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17. Pakistan Panel 120

18. Paider Board Mills 80

19. Pakitex Boards 200

20. Peshawar Particle Board 250

21. Premium Peshawar particle 150

22. Ray Tax 80

23. Sind Particle Board 100

24. Sadiq Wood Ind 150

25. Decent Board 80

26. Smart wood Ind 100

27. Wood Boar Ind 200

28. Wood Word Plywood 300

29. Soni Board 450

30. National Board 80

31. Sethi Board 150

32. Zaki Sons 120

33. Best Board Mills 120

34. Niazi Board 120

35. Hamza Board Mills 150

Total at the end of 2005 4775

Currently 35 units are manufacturing chipboard in Pakistan but almost all are under utilized. Underutilizations of capacities are due to various reasons including lack of proper technical knowledge, availability of raw material and stiff competition etc.


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6. PRODUCTION PROCESS

6.1 General

The chipboard plant is usually designed to operate continuously round the clock. Therefore, it is assumed that the proposed system will operate in 3 shifts per day, with 300 working days per year.

6.2 Chip & Flake Manufacturing

Raw material blended for the production is a mixture of chips, shavings and saw dust. Chips, shaving and saw dust are taken from different heaps into the flaking line in certain pre- set proposition guarantees the mixing of different types of wood species. Chips and shavings are transported to Knife-Ring Flakers and the sawdust is taken to a wet chip silo.

6.3 Flake Drying & Drying Screening

The flakes are dried in the drying department, which consists of individual dryers. There are one Buttner dryer and one Bison dryer. All two dryers are equipped with burner for using both oil and dust as fuel. Using 100% of dust as fuel is possible.The dried material is screened in 3 Pcs sifters (1 screen for each dryer). All screens are equipped for 3 fractions (core, surface and dust). It is an option for a second screening in Air Classifier.

6.4 Gluing Of Screened Flake

The wooden practical flow is led from the particle silos, one for surface particles (the silos are not included in the delivery) via a horizontal Dozing Bin to a measuring unit in which the material flow is registered for the gluing system. The wooden particles are fed into a gluing drum, and further by belt conveyer to the forming stations.The screened and dried surface and core particles are separately glued in glue blending machines. There are two blending machines for core particles and one glue-blending machine for the surface particles.The Glue Preparation Department consists of mixing, dosing, metering tanks and pumps for supply of mixed glue to the Glue Blending machines. One mixture of glue for each layer can be prepared.

6.5 Forming & Press

The forming stations consist of two units for the surface layer and one unit for the core layer. Forming is made on a Forming Belt Conveyor, which is the first part of 3 individual belt conveyors in front of the main press. The formed mat will be pre-pressed in a Roller Press with Belt. A Permanent Magnet and a Metal Detector is located before the pre- press. A trimming saw cuts the formed mat.

The press is a multi–opening press with 10 levels in a frame construction and equipped with thermo oil heating, high- pressure hydraulics and system for automatic pressing without distance bars. The loading device with its tablet feeding system will ensure proper loading


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and unloading of the main press during same operation. The main press is heated with hot oil by a separate boiler.

The boards are taken out of the unloading devices onto a belt conveyer with scale and through an automatic thickness meter with measure tolerance of 0.1 mm. The board weight and thickness will be registered before the board is fed to the cooling wheel.

6.6 Trimming Saws and Sanding Lines

After the cooling wheel the boards are taken through a trimming saw for its longitudinal section before stacking on a Lifting Table. The stacked boards will be transported on a roller conveyer to the next Trimming Saw for the cross section of the board. The final size of the board is within the size of 2,400 – 2,500mm x 4,800 –5,200mm.This Trimming Saw and its feeding station with pusher is the first part of the Sanding Line.The sanding line is equipped with a conveyor system and the quality control station with turning wheel and stacking stations. The operator can classify boards into different grades and transport the boards into 5 different stacking stations.

6.7 Controls

The raw material in feed system, Knife-Ring Flakers, Dyers and Sifters are all controlled from a separate indoors control panel. The automatic control of the production line is based on PLC system. To guarantee maximum performance of the plant it is divided into functional sections, which are controlled by separate PLC units. The main process parameters are monitored on a terminal in the main control room in front of the main press.

Process Flow Diagram:

Dryer Section

Storage Tanks

Screen Section

Chipping Section

Press

Glue Section

Forming Section

Storage Tanks

Refines Section

Sanding SectionCutting SectionCooling Section


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6.8 Plant & Machinery

Normally in Pakistan used plant has installed. Second hand chipboard and veneering manufacturing plant will be imported from Germany.Apart from main plant, the company shall procure a chipper, a sanding machine and lamination machine from other renowned suppliers. Total cost of plant and machinery is estimated to be Rs. 120 m.

6.8.1 Detail of Machinery required for Chipboard UnitItems requires for chipboard manufacturing unit are

ChipperFlakerConveyersStorage tanksRotary valveDry dust fiberScreen BlowersRefinersDry chip tankCycloneGlue blenderGlue kitchenBlade grinderElectric MotorsCables + PanelInstallation

Some items required for chipboard manufacturing unit are locally available and some will be imported.

6.9 Project Standards and Compliance Issue

The proposed plant will be established on the slogan of sophistication, correctness and timely completion. The main aim of the project is to provide good quality chipboard at economical price with in the country with aim to target international market.


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7. POJECT PROFILE

7.1 Land Requirement

Minimum 8 acre land is required for the installation of the purposed plant. However an ideal location must have the easy availability of raw material, manpower, road connections and other infrastructure facilities. Plot of 8 acres will be sufficient for current and future requirements of the project.

7.2 Covered Area Requirement

The buildings will include production hall, warehouses for storage of raw materials and finished goods and admin block for offices of production and administration staff 50,000 sq/feet.

7.3 Recommendation mode

One recommendation is to acquire land and construct the building according to the project requirement. However, if seems difficult to invest in land & building rented place can be used. But in this type of arrangements dismantle and re-erection cost will be considerable expenses when & where arises.

7.4 Utilities Requirements

7.4.1 Water

This project will require 6,000 liters water per day. As ground water is of required quality, therefore, water will be arranged from tube wells on site.

7.4.2 Power

Power will be arranged through WAPDA. The requirement of power is estimated at 1,500 KW at the proposed and expansion requirement of the project.

7.5 Oil/Lubricants

Furnace oil for dryers and lubricants for the smooth functioning of the machines can be procured locally.

7.6 Raw Material

This project will requires about 225 tons (approx) of wood per day at 60% operating level apart from glue and lamination sheet. This wood will be procured from areas around theproject site and glue will also be available locally; whereas lamination sheet shall be imported.

This project will be located in central Punjab. There is forestry over 0.771 million hectares in public sector. The resources include the following:


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Coniferous Forests 28,000 ha

Scrub Forests 38,000 ha

Range Lands 2,648,036 ha

Irrigated Plantations 150,060 ha

Riverain Forests 58,440 km

Canal side Plantations 32,640 km

Roadside Plantations 11,680 km

Rail side Plantations 2,987 km

Miscellaneous Linear Plantations 16,369 km

In addition to the public sector, forestry resources exist in farmlands both in the form of woodlots and linear avenues along the field boundaries and Watercourses. According to a base line survey by Punjab Economic Research Institute (PERI) 1999 there are 20-23 trees per acre and more than 50 trees per hectare in the cultivated area of the Punjab Province. There is, however 4-5 times more potential of having trees in the farmlands. It is believed that 90% of fuel wood and 55 % of timber is coming from the farmlands.

The installation of this project will create incentives for farmers of surrounding areas for forestry. The company could launch a development program in these areas to guide the farmers and to promote forestry on commercial basis. This will also provide an ongoing solution for availability of raw material

7.7 Time Schedule

The estimated installation period is six months. The trial production could be expected during 7-8 months and commercial production will take place within three months after trial production.

7.8 Technical Know-How

A highly qualified professional team of technical staff will be employed. Training facility for fresh qualified persons will help to fulfill human capital needs.

7.9 Suitable Location

Punjab and Sind are suitable provinces for chipboard manufacturing units because of easy availability of raw material, Infrastructure facilities, and skilled labour. The project location is an important element for the viability of the project and must have the following silent features.

Considerable area availability Easy excess to roads Availability of raw material


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Infrastructure facilities Availability of labor force Water resources


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8. HUMAN RESOURCE REQUIREMENT

8.1 Availability & Management of Human Resource

The Chief Executive officer shall formulate the long-term policies and take strategic decisions. A team of professionals shall be engaged in order to manage the operational affairs of this project under the supervision of CEO. The management of this project will comprise of:

Factory ManagementSite EngineersCorporate Office ManagementMarketing Network

Human Resource Requirement

Table 8-1

Position Strength Salaries/Month

Executive Director 1 75000

Sales Manager 1 25000

Senior Managers 2 30000Officers 2 8000

Accounts Officer 1 10000

Accounts Assistants 2 5000

Mill Manager 1 30000

Shift In charge 2 15000Supervisors 3 12000

Purchaser 1 8000

Skilled Workers 10 5000

Semi skilled Workers 20 3000

Total No of Employees 46


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8.2 Organizational Structure

Organizational Set Up

CEO

Project Incharge

Sales & Marketing Dept.

Project Coordinator

Finance & Accounts Dept

Production InchargeMarketing Sampling

Coordinator Buyers Contract Evaluation

Dealing with Local Authorities

Obtaining Certificate of

Sampling Coordination

Import Documentation

Bookkeeping & Administration

Financial Management Banking

Accessories Purchases

Documentation

Production Planning

Production

Analyzing Quality Assurance

Packing Delivery

9. FINANCIAL PROJECTION

PROFIT & LOSS ACCOUNT

FOR THE YEAR 1 2 3 4 5

Sales 389,201,145 442,716,302 464,852,118 525,640,471 551,922,495 Less Cost Of Sales 355,331,711 400,974,915 419,595,707 471,907,683 494,452,401

Gross Profit / ( Loss ) 33,869,434 41,741,387 45,256,411 53,732,788 57,470,094 Operating Expenses

Administration & Selling Expenses 14,574,499 16,091,321 17,037,850 18,795,629 19,931,765 Financial Charges 15,396,770 15,511,347 13,299,654 11,637,962 9,506,269 Workers' Profit Participation Funds 97,454 253,468 372,973 582,480 700,801

30,068,724 31,856,136 30,710,477 31,016,070 30,138,836 Profit Before Taxation 3,800,710 9,885,251 14,545,933 22,716,718 27,331,257

Income tax 1,946,006 2,213,582 2,324,261 2,628,202 1,299,080

Net Profit After Tax 1,854,704 7,671,669 12,221,673 20,088,515 26,032,177 Balance brought forward - 1,854,704 9,526,374 21,748,046 41,836,562

1,854,704 9,526,374 21,748,046 41,836,562 67,868,739

Retained Earning 1,854,704 9,526,374 21,748,046 41,836,562 67,868,739


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BALANCE SHEET

CAPITAL AND LIABILITIES Year 1 2 3 4 5

Paid up Capital 83,389,750 83,389,750 83,389,750 83,389,750 83,389,750 Retained Earning 1,854,704 9,526,374 21,748,046 41,836,562 67,868,739

Total Equity 85,244,454 92,916,124 105,137,796 125,226,312 151,258,489

Long Term Loan 83,389,750 62,542,313 41,694,875 20,847,438 -

Current LiabilitiesShort Term Bank Finance 53,900,000 61,300,000 64,200,000 72,600,000 76,300,000 Creditors And Other Liabilities 11,592,000 13,186,000 13,845,000 15,656,000 16,438,000 W orkers' Profit Participation Funds 97,454 253,468 372,973 582,480 700,801 D ividend Payable - - - - - Tax payble 1,946,006 2,213,582 2,324,261 2,628,202 1,299,080 Total Current Liabilities 67,535,460 76,953,049 80,742,233 91,466,682 94,737,882 Total Capital And Liabilities 236,169,664 232,411,486 227,574,905 237,540,431 245,996,371

ASSETS Year 1 2 3 4 5

Fixed Assets 123,829,500 123,829,500 123,829,500 123,829,500 123,829,500 Less Depreciation 12,797,550 24,220,965 34,429,973 43,562,833 51,739,895

Net Fixed Assets 111,031,950 99,608,535 89,399,528 80,266,667 72,089,605

Pre-operating Expenses 6,600,000 4,950,000 3,300,000 1,650,000 -

Current AssetsTrade Debtors 31,989,000 36,400,000 38,200,000 43,200,000 45,400,000 Stock In Trade 45,053,000 51,144,000 53,556,000 60,535,000 63,537,000 Advances, Prepayments And Others 755,000 859,000 902,000 1,020,000 1,071,000 Cash And Bank Balances 40,740,714 39,449,951 42,217,377 50,868,764 63,898,766 Total Current Assets 118,537,714 127,852,951 134,875,377 155,623,764 173,906,766 Total Assets 236,169,664 232,411,486 227,574,905 237,540,431 245,996,371

- - - - -


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FUND FLOW STATEMENT

FOR THE YEAR 1 2 3 4 5

Net Profit Before Tax 3,800,710 9,885,251 14,545,933 22,716,718 27,331,257 Add Depreciation 12,797,550 11,423,415 10,209,008 9,132,861 8,177,062 Pre-operating Expenses 1,650,000 1,650,000 1,650,000 1,650,000 1,650,000

18,248,260 22,958,666 26,404,941 33,499,578 37,158,320 (Increase)/Decrease in current assetsTrade Debtors 11,000 (4,411,000) (1,800,000) (5,000,000) (2,200,000) Stock In Trade (53,000) (6,091,000) (2,412,000) (6,979,000) (3,002,000) Advances, Prepayments And Others (755,000) (104,000) (43,000) (118,000) (51,000) Increase/(Decrease) in current liabilitiesCreditors And Other Liabilities 89,454 1,750,014 778,505 2,020,507 900,322 Short term borrowing 19,900,000 7,400,000 2,900,000 8,400,000 3,700,000 Change in working capital 19,192,454 (1,455,986) (576,495) (1,676,493) (652,678)

Net Inflow/Outflow from Operating Activities 37,440,714 21,502,680 25,828,446 31,823,085 36,505,641

Cashflow from Financing ActivitiesRepayment of long term loans - (20,847,438) (20,847,438) (20,847,438) (20,847,438) Repayment of sponsors loan - - - - - Tax paid - (1,946,006) (2,213,582) (2,324,261) (2,628,202) Dividend Payment - - - - - Net Increase/(Decrease) in Cash 37,440,714 (1,290,764) 2,767,427 8,651,387 13,030,001 Cash in beginning of year 3,300,000 40,740,714 39,449,951 42,217,377 50,868,764 Cash balance at the end of year 40,740,714 39,449,951 42,217,377 50,868,764 63,898,766

KEY ASSUMPTIONS

Chipboard Plant Production Assumptions:

Maximum Production /Installed Capacity Plant (100%) Sheets m3 200Starting Capacity Utilization Chipboard Plant 60%Annual Growth Rate in Capacity Utilization 10%Maximum Capacity Utilization for the Project 70%Working hours per Shift 8

Financial Projections:

Project Life 10 YearsDebt 50%Equity 50%Interest on Long term Loan 14%Debt tenure (Years) 5 YearsNo. of installments per year 2Amortization (years) 5

Product Mix of Chipboard Plant:

RatioLaminated Sheets19mm 50.0%13mm 30.0%Non-Laminated Sheets19mm 5.0%13mm 30.0%

Sale Price Assumptions for Chipboard:

Laminated Sheets19mm – (per sheet) Rs. 93913mm – (per sheet) Rs. 861Non-Laminated Sheets19mm – (per sheet) Rs. 47013mm – (per sheet) Rs. 391Sale Price Growth Rate of Sheet 5%

Operating Assumptions:

Days Operational/Year 300Days Operational/Month 25


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No of Shifts/day 1Cost of Goods Sold Assumptions:

Average Cost per Sheet 480 Price growth rate 5%Electricity Cost for Plant 21,870,000Electricity Cost for Lighting 9750Growth Rate 5.0%Gas/Furnace Oil Rs.13,425,984 Growth Rate 5.0%Machine Maintenance (Asset Value) 1.5%Growth Rate 0.25%Oil and Lubricants Rs.2,500.0Growth Rate 5.0%Insurance (Asset Value) 5.00%

General Administration and Selling Expenses Assumptions:

Freight Cost Rs.7,422,000 Traveling Exp of the Sales Revenue Rs.500,000Wages and Salaries Rs.2,956,800Growth Rate 10.0%Postage & Couriers Rs.100,000 Growth Rate 10%

Cash Flow Related Assumptions:

Accounts Receivable Cycle (in Days) 30Finished Goods Inventory (in Days) 10Raw Material Inventory (in Days) 40Glue 40Lamination Paper 30Working Process 3

Depreciation Assumptions:

Depreciation Method WDVPlant & Machinery 10%Furniture and Fixture 10%Vehicle 20%Office equipment 30%

smeda chipboard plant

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