84. PROFILE ON PRODUCTION OF CURTAINS & INTERIOR BLINDS 84-2 TABLE OF CONTENTS PAGE I. SUMMARY 84-3 II. PRODUCT DESCRIPTION & APPLICATION 84-3 III. MARKET STUDY AND PLANT CAPACITY 84-4 A. MARKET STUDY 84-4 B. PLANT CAPACITY & PRODUCTION PROGRAMME 84-6 IV. RAW MATERIALS AND INPUTS 84-7 A. RAW & AUXILIARY MATERIALS 84-7 B. UTILITIES 84-8 V. TECHNOLOGY & ENGINEERING 84-8 A. TECHNOLOGY 84-8 B. ENGINEERING 84-9 VI. MANPOWER & TRAINING REQUIREMENT 84-12 A. MANPOWER REQUIREMENT 84-12 B. TRAINING REQUIREMENT 84-13 VII. FINANCIAL ANALYSIS 84-13 A. TOTAL INITIAL INVESTMENT COST 84-13 B. PRODUCTION COST 84-14 C. FINANCIAL EVALUATION 84-15 D. ECONOMIC BENEFITS 84-16 84-3 I. SUMMARY This profile envisages the establishment of a plant for the production of curtain and interior blinds with a capacity of 150 tonnes per annum. The present demand for the proposed product is estimated at 85.2 tonnes per annum. The demand is expected to reach at 527.3 tonnes by the year 2017. The plant will create employment opportunities for 54 persons. The total investment requirement is estimated at about Birr 3 million, out of which Birr 233,550 is required for plant and machinery. The project is financially viable with an internal rate of return (IRR) of 17 % and a net present value (NPV) of Birr 901,000 discounted at 8.5%. II. PRODUCT DESCRIPTION AND APPLICATION A curtain is a piece of cloth intended to block or obscure light. Curtains are often hung on the inside of a building’s window to block the travel of light, for instance at night to aid sleeping, or to stop light from escaping outside the building (stopping people outside from being able to see inside, often for privacy reasons). In this application they are also known as “draperies.” Curtain come in a variety of shapes, materials, sizes, colors and patterns, and they often have their own sections with in department stores, while some shops are completely dedicated to selling curtains. An adaptation of the curtain may be a blind or, in warmer countries, wooden shutters that are fixed to the outside of the building to provide privacy and still keep the building cool inside. Curtains are a form of window treatment, and complete the overall appearance of the house. Window treatment helps control the ambience and flow of natural light into the 84-4 room. The effect of drapery or curtains, is best in daylight, and with proper indoor light positioning, it can look attractive even at night. The project is resource based. Moreover, currently the demand for the products is met through both local production and import therefore, the project is also aimed at substituting import. The products under consideration have a substantial export potential. III. MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY 1. Past Supply and Present Demand A curtain is a piece of cloth hung on the inside of building’s windows to block or obscure light. They also provide visual separation in halls or rooms. Curtain supply is both from the domestic producers as well as import. Imported supply of curtains and interior blinds annual average in the years 1997-2006 was 127 tons. However import figures recorded for 1999 and 2004 were much higher for consideration. Excluding 1999 and 2004 imports the average for 1997-98, 2000-2003 and 2005-2006 respectively were 48, 46 and 57 tons, indicating a stabilized supply. The average supply of imported curtains and interior blinds of the eight years was 50 tons with an average annual growth rate of 20%. Even though the domestic supply of curtains is not officially recorded, most households use domestic curtains. According to retailers in the field the domestic supply covers about 30% of the total supply of curtains. The current effective demand based on the eight years annual average import and growth rate is estimated at 85.2 tons. 84-5 Table 3.1 IMPORTED CURTAINS AND INTERIOR BLINDS Year Tons 1997 42.4 1998 52.8 1999 200.4 2000 38.9 2001 81.8 2002 38.1 2003 24.6 2004 682.9 2005 44.4 2006 69.3 Source: Customs Authority 2. Demand Projection The demand for curtains and interior blinds is derived form buildings and household mirror windows. High rising buildings are inclined to imported variety of curtains and interior blinds. Residential houses on the other hand use domestic products. Increasing housing demand and the construction of buildings particularly for residential purposes will create a growing demand for curtains. Assuming 20% annual growth rate attained on the imported supply of curtains the demand projection is made for the next ten years. Projected demand for curtains and interior blinds is presented in Table 3.2. 84-6 Table 3.2 PROJECTED DEMAND FOR CURTAINS AND INTERIOR BLINDS Year Tons 2008 102.2 2009 122.7 2010 147.2 2011 176.6 2012 211.9 2013 254.3 2014 305.2 2015 366.2 2016 439.4 2017 527.3 3. Pricing and Distribution According to Customs authority records the cheapest curtain material with rail of size 2.1 X 2.77 m2 was Birr 30. For the same size of curtain a factory get price of Birr 22 is recommended for the new project. The product will find its outlet through existing retail channels. B. PLANT CAPACITY AND PRODUCTION PROGRAMME 1. Plant Capacity The envisaged curtains and interior blinds making plant will have a production capacity of 150 tones per year working 300 days, single shift of eight hours a day. 84-7 2. Production Programme The plant is assumed to start production at 75% of its capacity in the first year, 85% in the second year, and at 100% in the third year and thereafter. IV. MATERIALS AND INPUT A. RAW AND AUXILIARY MATERIALS The main raw materials of curtains and interior blinds making plant are synthetic or cotton fabric, blind curtain material (vane),mandrel, chain etc. The fabrics are locally availabil while blind curtain material (vane),mandrel, chain etc have to be imported. The annual raw and auxiliary materials required and the corresponding cost at full capacity production are presented in Table 4.1. TABLE 4.1 RAW MATERIALS REQUIREMENT AT FULL CAPACITY OPERATIONS Ser. Qty. Unit cost Total cost ('000 Birr) Description No. (tones) ('000 Birr) FC LC Total 1 Fabrics 100 35 - 3,500 3,500 Vane (Curtain material) 2 including “U” shape mandrel, 50 400 2,000 - 2,000 chain, and other accessories 3 Miscellaneous LS - - - 155,000 TOTAL 2,000.00 3,500.00 5,500.00 84-8 B. UTILITIES The major utilities required by the plant are electricity and water. The estimated annual requirement of utilities of the plant at 100% capacity utilization rate and their estimated costs are given in Table 4.2. Table 4.2 UTILITIES REQUIREMENT Cost ‘000 Birr Description Qty F.C L.C Total Electricity , kwh 75,000 35.52 35.52 3 Water, m 1,000 10.00 10.00 Total 45.52 45.52 V. TECHNOLOGY AND ENGINEERING A. TECHNOLOGY 1. Production Process The production process of curtains and interior blinds making plant involves the following major manufacturing operations: The major curtains production involves designing, cutting, and sewing, eyeleting, stitching and finishing process. The process for manufacturing interior blinds, the method yielding a blind which has curtain material located between the vanes, so that when the blind is deployed across an opening, the vanes may be arranged perpendicularly with respect to the curtain material to allow light into the room or the vanes may be aligned so that they are parallel and 84-9 overlapping one another, in which case a privacy product results. The method includes preparing discrete pieces of a three component strip having a center portion. Adhesive is applied to one or both of the vane portions and the discrete pieces are placed on a U- shaped mandrel, inverted so that the opening of the “U” faces downwardly. The curtain material portion lies over the round top of the mandrel and the vane portion lies against the sides of the mandrel. The mandrel is indexed, another mandrel replaces it and the process is repeated. 2. Source of Technology The technology for curtains and interior blinds making plant can be obtained from the following companies. THE ARTISTIC BLIND COMPANY 115 Staple Hill Road, Fishponds, Bristol BS16 5AD, ENGLAND Tel: (UK+44) 0117 9109888 Fax: (UK+44) 0117 9109890 B. ENGINEERING 1. Machinery and Equipment Plant machinery and equipment required for curtains and interior blinds making plant is presented in table 5.1. The total investment cost of plant machinery and equipment is estimated at Birr 233,550.00. All machinery and equipment have to be imported. 84-10 Table 5.1 LIST OF MACHINERY AND EQUIPMENT FOR CURTAINS AND INTERIOR BLINDS MAKING PLANT Sr. Qty. Cost (Birr) Description No. (Pcs) LC FC Total 1 Sewing Machine 35 30,625 122,500 153,025 2 Cutting Machine 5 1,875 7,500 9,375 3 Riveting Machine 15 2,610 10,440 13,050 4 Pressing Machine 6 9,600 38,400 48,000 5 Assembly Tools - 10,000 10,000 TOTAL 188,840 188,840.00 INSURANCE, CUSTOMS DUTY, INLAND 44,710- - 44,710.00 TRANSPORT, BANK CHARGE, ETC. GRAND TOTAL 44,710- 188,840 233,550.00 2. Land, Building and Civil Works The envisaged plant will require a total land area of 1,000m2. The total land lease value for 80 years at the rate of Birr 0.4967 per m2 is therefore Birr 39,736. The floor space required for the building of and other facilities will be about 750m2. The total estimated cost of building and civil works at the rate of Birr 1,500 per m2 is about Birr 1,125,000. Therefore, the total cost of land, building and civil works is estimated at Birr 1,164,736.- 3. Proposed Location Factors that influence the location of manufacturing industry in general include availability or raw material, availability of Infrastructure, easy access to market and availability and cost of labour. 84-11 The weight given for a particular factor differs form industry to industry. In the case of curtains and interior blinds manufacturing plant the major raw material which is cotton fabric have to be obtained from Kombolcha or Bahir Dar textile Factories and the target markets are the urban centers of the country which are the predominant consumers of the product. Moreover, the product have a significant export potential. Therefore, as the envisaged plant have to acquire the major raw material required from Kombolcha or Bahir Dar and distribute its product to urban centers of the country road connection becomes a critical factor in the selection of possible locations. Moreover, availability of other infrastructures is also important. Accordingly on the basis of the above discussions. Three woredas, namely Lemo, Sodo Zuria and Dale have been identified as a possible locations. Moreover, after analysing the comparative advantages and disadvantages of the selected woredas as a location for the envisaged plant the capital of Dall woreda i.e. Yirgalem town is selected as the best location. VI. MANPOWER & TRAINING REQUIREMENT A. MANPOWER REQUIREMENT The curtains and interior blinds making plant will require manpower both for administration and production activities. The total number of manpower is 88, of which 14 are administration staff and 74 are involved in production activities. The total number of labor cost is Birr 858,750.-. The detail manpower requirement and estimated annual salaries are presented in Table 6.1. 84-12 Table 6.1 MANPOWER REQUIREMENT AND ANNUAL LABOR COST Monthly Annual Sr. Job Title No. Salary Salary No. (Birr) (Birr) A. Administration 1 General Manager 1 1,500 18,000 2 Secretary 1 650 7,800 3 Finance and Administration Head 1 1,200 14,400 4 Accountant 1 1,000 12,000 5 Store Man 1 500 6,000 6 Clerk 1 500 6,000 7 General Service 3 350 12,600 SUB-TOTAL 9 76,800 B. Production 8 Production Head 1 1,000 12,000 9 Supervisor 2 800 19,200 10 Quality Control Staff 2 700 16,800 13 Skilled Workers 25 650 195,000 14 Assistant Skilled Workers 15 450 81,000 SUB TOTAL 45 324,000 WORKER'S BENEFIT (25%) - 100,200 GRAND TOTAL 54 501,000 B. TRAINING REQUIREMENT The production supervisor and skilled workers need to be given two months training on production activities, repairing and maintenance activities. The training cost is estimated to Birr 30,000.-. 84-13 VII. FINANCIAL ANALYSIS The financial analysis of the curtain and interior blind project is based on the data presented in the previous chapters and the following assumptions:- Construction period 1 year Source of finance 30 % equity 70 % loan Tax holidays 3 years Bank interest 8% Discount cash flow 8.5% Accounts receivable 30 days Raw material local 30 days Work in progress 1 days Finished products 30 days Cash in hand 5 days Accounts payable 30 days A. TOTAL INITIAL INVESTMENT COST The total investment cost of the project including working capital is estimated at Birr 3 million, of which 26 per cent will be required in foreign currency. The major breakdown of the total initial investment cost is shown in Table 7.1. 84-14 Table 7.1 INITIAL INVESTMENT COST Sr. Total Cost No. Cost Items (‘000 Birr) 1 Land lease value 39.7 2 Building and Civil Work 1,125.0 3 Plant Machinery and Equipment 233.6 4 Office Furniture and Equipment 125.0 5 Vehicle 200.0 6 Pre-production Expenditure* 267.5 7 Working Capital 1,015.7 Total Investment cost 3,006.5 Foreign Share 26 * N.B Pre-production expenditure includes interest during construction ( Birr 117.51 thousand ) training (Birr 30 thousand ) and Birr 120 thousand costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc. B. PRODUCTION COST The annual production cost at full operation capacity is estimated at Birr 6.21 million (see Table 7.2). The material and utility cost accounts for 89.30 per cent, while repair and maintenance take 0.32 per cent of the production cost. 84-15 Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR) Items Cost % Raw Material and Inputs 5,500.00 88.56 Utilities 45.52 0.73 Maintenance and repair 20 0.32 Labour direct 194.4 3.13 Factory overheads 64.8 1.04 Administration Costs 129.6 2.09 Total Operating Costs 5,954.32 95.88 Depreciation 162.11 2.61 Cost of Finance 93.75 1.51 Total Production Cost 6,210.18 100 C. FINANCIAL EVALUATION 1. Profitability According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project. The income statement and the other indicators of profitability show that the project is viable. 84-16 2. Break-even Analysis The break-even point of the project including cost of finance when it starts to operate at full capacity ( year 3) is estimated by using income statement projection. BE = Fixed Cost = 32 % Sales – Variable Cost 3. Pay Back Period The investment cost and income statement projection are used to project the pay-back period. The project’s initial investment will be fully recovered within 6 years. 4. Internal Rate of Return and Net Present Value Based on the cash flow statement, the calculated IRR of the project is 17 % and the net present value at 8.5% discount rate is Birr 901,000. D. ECONOMIC BENEFITS The project can create employment for 54 persons. In addition to supply of the domestic needs, the project will generate Birr 1.02 million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports. The project have a considerable export potential.
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