Feasibility for Setting Up Concrete Block Making Industry

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					                                     Pre-Feasibility Study

                     Prefabricated Construction Blocks
                                    (SMEDA DOCUMENT)
                                    (SMEDA DOCUMENT)




           Small and Medium Enterprise Development Authority
                                           Government of Pakistan
                                                 www.smeda.org.pk
                                                 HEAD OFFICE
     Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore
                               Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756
                                             Helpdesk@smeda.org.pk

     REGIONAL OFFICE                REGIONAL OFFICE               REGIONAL OFFICE             REGIONAL OFFICE
         PUNJAB                          SINDH                         NWFP                     BALOCHISTAN
     Waheed Trade Complex,
 1st Floor, 36-Commercial Zone,        5TH Floor, Bahria                Ground Floor            Bungalow No. 15-A
       Phase III, Sector XX,      Complex II, M.T. Khan Road,        State Life Building     Chaman Housing Scheme
Khayaban-e-Iqbal, DHA Lahore.               Karachi.                The Mall, Peshawar.           Airport Road, Quetta.
       Tel: (042) 111-111-456       Tel: (021) 111-111-456         Tel: (091) 9213046-47     Tel: (081) 831623, 831702
 Fax: (042) 5896619, 5899756          Fax: (021) 5610572             Fax: (091) 286908           Fax: (081) 831922
      helpdesk@smeda.org.pk       Helpdesk-khi@smeda.org.pk     helpdesk-pew@smeda.org.pk   helpdesk-qta@smeda.org.pk


                                                    December, 2006
Pre-Feasibility Report                                 Prefabricated Construction Blocks




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. Therefore,
the content of this memorandum should not be relied upon for making any decision,
investment or otherwise. The prospective user of this memorandum is encouraged to
carry out his / her own due diligence and gather any information he/she considers
necessary for making an informed decision.


The content of the information memorandum does not bind SMEDA in any legal or other
form.


DOCUMENT CONTROL
 Document No.       PREF-13
 Revision           1
 Prepared by        SMEDA-Sindh
 Approved by        Provincial Chief - Sindh
 Issue Date         December, 2006
 Issued by          Library Officer




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PROJECT PROFILE
1. 1           OPPORTUNITY RATIONALE
Construction sector has been registered with a growth rate of 7.9 percent1. Housing and
construction is one of the major drivers of growth in more than 40 allied industries and
directly adds to the PREFABRICATED CONSTRUCTION BLOCKS industry. In
addition, for the building of roads, flyovers and bypasses there is a mass and consistent
need of prefabricated blocks across the country. Various construction and real estate
development projects are in progress and are continuously being commissioned which
will have high demand of prefabricated construction material all over the country.

In order to make up the backlog and meet the shortfall in the next 20 years, overall
housing construction industry has to be raised to the level of 500,000 housing units per
annum. This is the extent of the annual housing market in Pakistan which positively
predicts a permanent growth in construction sector which directly adds to the potential in
prefabricated building blocks segment of the construction industry.

Massive construction in the public sector especially in Karachi also contributes to the
acceleration in construction sector and the quantum of work will continue at least for the
next two to three years at the same pace which surely predicts a great investment
opportunity in the proposed business.

The aforementioned statistics provide enough evidences and ensure a steep and
continuous growth vis-à-vis investment opportunity in the PREFABRICATED
CONSTRUCTION BLOCKS business.

1. 2           PROJECT BRIEF
The proposed project envisages the setup of a prefabricated construction blocks
manufacturing project. Construction blocks industry is an important industrial sector in
the country engaged in producing blocks used as prefabricated material for various
construction activities i.e. construction of road side pave ways, garage and parking
floorings, walls making, block paved driveways, and floor coverings of commercial
buildings, etc.

It is easy to make a concrete block. The successful block yard must however make blocks
of uniform quality and sell them at a price high enough to cover costs and make a
reasonable profit. Before to start a block yard, it is essential therefore to investigate the


1
    Economic Survey of Pakistan 2006




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economic feasibility of the venture. Determination of level of demand for blocks in the
area (how many per month) and degree of competition from other block yards are
important factors having a significant bearing on the feasibility of the venture. Then
comes the cost estimation based on various methods of production and output. Factors
which influence unit cost include:

 Purchase price or rental of site
 Cost of site improvements: fencing, paved areas for production and stockpiles,
  pathways, roadways and buildings
 Cost of equipment: concrete mixer, block making machine and miscellaneous
  equipment
 Cost of services: water and electricity
 Material costs
 Wastage
 Maintenance costs of site and equipment
 Output: number of blocks per day – dimensions of block, solid or hollow.
 Labor costs
 Cost of finance etc.

1. 3             MARKET ENTRY TIMING
Blocks making business depends on activity and movement in construction industry.
Housing and construction plus government initiated development projects demand mass
availability of blocks all over the year. Therefore, a block manufacturing unit could be
established at any time of the year.
1. 4             PROPOSED BUSINESS LEGAL STATUS

The legal status of business tends to play an important role in any setup; the proposed
block yard is assumed to operate on Sole Proprietorship basis.
1. 5             PROJECT CAPACITY AND RATIONALE

Production capacity of the plant for the proposed prefab construction blocks making unit
would be 4,000 blocks per day. It is estimated that Karachi alone has a daily demand of
0.5 million2 prefabricated construction blocks. However, as there are a variety of concrete
based prefab construction blocks i.e. hollow block, solid block, kerb block etc., cost will
largely depend on the selection of block type. Estimated countrywide requirement of
500,000 housing units per annum and development works in construction and civil sector
by the government; all these factors encourage a persistent high growth and mass demand
of prefab construction blocks.

2
    Based on discussions with the existing business operators in the formal sector of Pakistan




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       1. Solid Block



       2. Hollow Block


       3. Pavers


       4. Kerb stone / Blocks


1.5.1     Raw Material Sourcing
Raw material to be used for the production of concrete based block is available in the
local market at reasonable price. Main production material components include: cement
and sand/crushed stone. A number of suppliers are available for Sand and Crush in each
region and area of Pakistan and could easily be contacted, whereas, cement could be
procured from any well known cement company. Cement suppliers could also be one of
the sources for sand and crush supply reference. Low quality Chinese cement is also
available in the local market which has been declared substandard for consumption by
PSQCA.

Volatility in cement prices is the biggest threat while working in construction industry.
This risk can be minimized by making long term supply contracts with the cement
manufacturers which is a common practice of large scale industrial consumers of cement.

1. 6        PROJECT INVESTMENT
A total of Rs. 43.04 million is estimated to be the cost of the project. The working capital
requirement is estimated around 0.9 million and Rs. 42.13 million would be the fixed
investment.

1. 7        PROPOSED PRODUCT MIX
For the purpose of this pre- feasibility, following products are assumed to be
manufactured:




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                                                                      Production                      Selling
S.                                     Size/
               Block Type                              Standard        (as % of          Color       Price/ unit
No.                                  Dimension
                                                                        Total)                          (Rs.)
1       Masonry Block
                  Solid Block       4”x8”x12”        600-800 psi*       10%          Natural Grey        15
                  Solid Block       5”x8”x12”        600-800 psi        20%          Natural Grey        16
                  Solid Block       6”x8”x12”        600-800 psi        10%          Natural Grey        17
                  Hollow Block      5”x8”x16”        600-800 psi        10%          Natural Grey        23
        Fair Face Blocks
                  Solid Block    90x190x390 mm       600-800 psi        15%          Natural Grey        28
2       Pavers                    300x300x40mm          4000 psi          5%          Natural Grey        40
3       Kerb Stone/Block             6”x12”x12”         5000 psi         30%          Natural Grey        90
    * per square inch

    1. 8          RECOMMENDED PROJECT PARAMETERS

              Capacity                  Human Resource         Technology/Machinery          Location
      50% Capacity Utilisation                                                               Nooriabad,
                                                 17            Both Local and Imported
    (based on 8 working hrs. daily                                                             Sindh
                                             Financial Summary
                                                                                               Cost of
              Project Cost             IRR            NPV            Payback Period            Capital
                                                                                              (WACC)
            Rs. 43.04 million          26%        14,127,743            4 Years                17.50%


    1. 9          PROPOSED LOCATION
    Proposed location for setting up a prefab construction blocks making unit largely depends
    on the availability of raw material and its transportation to the factory at low cost;
    however, factors like availability of manpower, utilities and easy access to the target
    markets should also be carefully examined. For this pre-feasibility, we propose a location
    around Karachi somewhere in Hub, Superhighway, Manghopir, Jhampir or Nooriabad
    where all aforementioned resources are available at reasonable price, besides, generous
    investment for land would also be required which would be difficult to manage in the
    areas i.e. Korangi or SITE industrial areas where land prices are very high as compared to
    the other proposed areas. Moreover, construction and allied industries produce
    environmental pollution which may cause bronchial diseases to the people and hence are
    preferred to be setup at a distance, in dedicated industrial zones.

    The prefab construction blocks making units are being operated countrywide. The reason
    is the demand which is spread all over the country, though is concentrated around




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developed cities and towns i.e. Karachi, Lahore, Multan, Faisalabad, Peshawar, Quetta
etc.


1. 10     KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS
Prefab construction blocks business is dependent on the pricing and margins given to
builders, suppliers and retail customers. It also depends on efficient supply of blocks to
the customer and communication facilities provided to the prospective clients, retailers
and order booking agents.


1.10.1 Conventional Order Booking Arrangements – Distribution

As we have discussed earlier, prefab construction blocks is one of the allied sectors of
construction industry. Therefore, all raw material suppliers to the construction industry
are considered to be the part of the distribution network for the prefab construction
blocks.

A block maker when setting up a block yard, institutes contacts with the construction
material suppliers, retailers and signup a contract in order to appoint them as order
booking agents. Generally, construction and building material supplier is the part of the
whole chain, and brings together the customers and suppliers. Sometimes the supplier has
his own delivery vehicles and in most of the cases, keeps arrangement with the
commercial vehicle operators, material manufacturers, and buyer, having a significance
of a pivoting point among them.

1.10.2 Ordering and Delivery Procedure:

Block maker appoints order booking agents (building material suppliers) with in the city
who entertain the customer. Customers usually send someone or personally go to the
booking office and place the order which includes details indicating quantity, quality, size
and time of delivery etc. Booking agent gets the payment in cash (mostly) and issues an
order / delivery slip to the customer, showing order details.

Buyer hires a truck or loading vehicle and goes to the block yard, where he produces the
order slip (in local term called perchi) to the person responsible for the physical delivery
of the blocks. That person renders the order as given on the slip. After loading the vehicle
he hands it over it to the order booker and here ends the role of the block maker.

Prefab construction blocks producers also book direct orders at site office for the
construction contractors, retail customers and builders on phone and supply directly to
the identified delivery points; however, these types of facilities are provided only for bulk




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orders using hired delivery vehicles. Bulk deliveries typically account for around 30% of
the total annual sales.

In the Prefab construction blocks industry, the role of the middle man is played by
building material suppliers at a nominal margin of 1% to 2% of the order booked.

1. 11       PRODUCT MARKETING

In the manufacturing industry, marketing is considered to be of significant importance. In
the Prefab construction blocks industry, marketing parameters are very limited and
largely associated with the construction sector’s performance. Some of the marketing
promotion activities which should duly be rendered are given below:

      Developing contacts with the building material suppliers, well known builders and
       contractors.
      Keep up to date information on civil and construction works initiated by local,
       provincial and central government.
      Draw linkages with material suppliers to the housing industry at town level.
      Emphasis on image development and building acquaintances across individual
       contractors who are serving private sector.
      Establish contacts with local civil engineering firms, individuals and professionals.

2.          SECTOR & INDUSTRY ANALYSIS
2. 1        SECTOR CHARACTERISTICS AND OVERVIEW

Construction sector is one of the largest economic sectors of Pakistan in terms of
employment3. It directly and indirectly affects more than 40 allied industries which also
includes prefab construction material industry. Block making has a significant position in
the construction process particularly in the housing sector where prefabricated blocks are
used extensively with more than 40% of the total structure of the building.

Traditional construction has been relying on hand made bricks rather than concrete block
which has been a high cost option while selecting material for the house construction
both in urban and rural areas of the country. Concrete based construction is
comparatively new phenomena and historically has been employed in the urban areas
where technology and machinery was introduced due to mass demand of building
material and comparatively high average income.

3
    Economic Survey of Pakistan 2006




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Prefab construction block have different categories from smallest size of a brick to a huge
sized pre-cast concrete bridges. However, for the purpose of this pre-feasibility, we have
focused on the manufacturing setups where various types of blocks are manufactured
with the help of automatic or semi-automatic plant and machinery. This sector is largely
unorganized and no statistics are available in terms of how many block manufacturing
units are working and their scale of operations. The prefab construction blocks
manufacturing sector can be divided into three categories:

Organized Sector – Machine Blocks

Organized sector constitutes only three major players in Karachi: Envicrete Private
Limited, Hubcrete and Izhar Paver Blocks. Only Envicrete is working as a private limited
company; other two are operating as sole proprietorship companies. All companies use
imported plants and machinery due to their large scale of operations. Standard blocks are
generally available in the sizes of 6”x8”x12”, 5”x8”x12” and 4”x8”x12”. Product quality
is defined in PSI (per squire inch pressure) which a block can survive. Generally it
depends on the use of block which varies from product to product. Housing construction
purpose block has a normal PSI of 400 and pavers are manufactured with 5000 PSI
strength. Except for Envicrete, other two manufacturers are concentrating only on pavers
and kerb stones.

Unorganized Sector – Machine Blocks

This sector mainly includes block yards where hand operated mechanical machines are
used to make concrete blocks which lay six and above blocks at a time. Therefore, their
operations are limited and usually work on the basis of area to area demand. Hundreds of
such setups could be seen in each area of the country where these setups are fulfilling the
local housing construction demand of blocks of three different sizes and strengths
depending upon the individual requirements of the customer. Standard blocks are
generally available in the sizes of 6”x8”x12”, 5”x8”x12” and 4”x8”x12”. As far as PSI is
concerned, no defined standard could be found; however, 400 PSI is normal in this
sector.

Unorganized Sector – Hand Made Blocks

This sector is gradually shrinking and now operating on a very small scale in the low
income areas where concrete based structure is scarce. Single mold is used which lays
only one block at a time. Such blocks are easily breakable; therefore they are generally
not preferred even by the customers who have very limited capital to invest in house
construction. The current scenario of this sector shows that most of such block yard
operators are switching to machine made blocks option due to customer preference and
production limitations of the hand made blocks making process.



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2. 2      ENVIRONMENTAL & PROTECTION ASPECTS

Block making results in persistent exposure to the asbestos (due to dust emission), which
is a natural fiber found in the dust particles of cement and blocks. To avoid its harmful
effect on human health, it is suggested to follow guidelines provided by the provincial
agency of environment protection. These procedures do not particularly apply on the
block manufacturing industry, rather, a standard material, product and process handling
guidelines applicable to construction and allied industries are available on the website:
www.environment.gov.pk



3.        MARKET INFORMATION
3. 1      MARKET POTENTIAL
Prefab construction blocks making units across the country are working mostly as
unorganized sector (about 80%) and no reliable data is available, precisely, for the
installed capacity and the number of units working etc. However, since it is an allied
industry of the construction sector, growth in construction sector may be considered as a
close proxy for the growth in prefab construction blocks sector which is 7.9% (Economic
Survey of Pakistan 2006).

3. 2      EXPORTS AND IMPORTS OF PREFAB CONSTRUCTION BLOCKS

Prefabricated construction blocks or other products are heavy; hence there are limited
opportunities for export due to high cost of transportation. The market scope for prefab
construction blocks is found to be encouraging in local market with the increased demand
from construction industry. There is also a sufficient demand from Govt. Contractors for
lying of roads and construction of industries.

3. 3      PROBLEM/THREATS TO THE PREFAB CONSTRUCTION BLOCKS SECTOR
      Local customs and traditions, non-availability of infrastructure facilities like roads
       and electricity are the major hurdles in the development of the sector.
      Absence of developed domestic market.
      Non-availability of modern machinery in local market at cheaper rates.
      Lack of investment friendly environment created by the relevant government
       agencies.




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4.      PRODUCTION PROCESS
4. 1    PREFAB CONSTRUCTION BLOCKS - PRODUCTION PROCESS FLOW

                             Prefab construction blocks
                                   Process Flow

                                                 Ordering &
                                                 Stockpiling
                                                  Material



                                                   Batching



                                                    Mixing



                                                   Molding



                                                    Curing



                                                  Storage &
                                                 Distribution


4.1.1   The Manufacturing Process

The production of concrete blocks consists of four basic processes: mixing, molding,
curing, and cubing. Some manufacturing plants produce only concrete blocks, while
others may produce a wide variety of prefabricated concrete products including blocks,
flat paver stones, and decorative landscaping pieces such as lawn edging, etc.




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The following steps are commonly used to manufacture concrete blocks.
Mixing
 The sand and gravel are stored outside in piles and are transferred into storage bins in
  the plant by a conveyor belt as they are needed. The Portland cement is stored outside
  in large vertical silos to protect it from moisture.
 As a production run starts, the required amounts of sand, gravel, and cement are
  transferred by gravity or by mechanical means to a weigh batcher, which measures
  the proper amounts of each material.
 The dry materials then flow into a stationary mixer where they are blended together
  for several minutes. There are two types of mixers commonly used. One type, called a
  planetary or pan mixer, resembles a shallow pan with a lid. Mixing blades are
  attached to a vertical rotating shaft inside the mixer. The other type is called a
  horizontal drum mixer. It resembles a coffee can turned on its side and has mixing
  blades attached to a horizontal rotating shaft inside the mixer.
 After the dry materials are blended, a small amount of water is added to the mixer. If
  the plant is located in a climate subject to temperature extremes, the water may first
  pass through a heater or chiller to regulate its temperature. Admixture chemicals and
  coloring pigments may also be added at this time. The concrete is then mixed for six
  to eight minutes.
Molding
 Once the load of concrete is thoroughly mixed, it is dumped into an inclined bucket
  conveyor and transported to an elevated hopper. The mixing cycle begins again for
  the next load.
 From the hopper, the concrete is conveyed to another hopper on top of the block
  machine at a measured flow rate. In the block machine, the concrete is forced
  downward into molds. The molds consist of an outer mold box containing several
  mold liners. The liners determine the outer shape of the block and the inner shape of
  the block cavities. As many as 15 blocks may be molded at one time.
 When the molds are full, the concrete is compacted by the weight of the upper mold
  head coming down on the mold cavities. This compaction may be supplemented by
  air or hydraulic pressure cylinders acting on the mold head. Most block machines also
  use a short burst of mechanical vibration to further aid compaction.
 The compacted blocks are pushed down and out of the molds onto a flat steel pallet.
  The pallet and blocks are pushed out of the machine and onto a chain conveyor. In
  some operations, the blocks then pass under a rotating brush which removes loose
  material from the top of the blocks.




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Curing
 The pallets of blocks are conveyed to an automated stacker or loader which places
  them in a curing rack. Each rack holds several hundred blocks. When a rack is full, it
  is rolled onto a set of rails and moved into a curing kiln.
 The kiln is an enclosed room with the capacity to hold several racks of blocks at a
  time. There are two basic types of curing kilns. The most common type is a low-
  pressure steam kiln. In this type, the blocks are held in the kiln for one to three hours
  at room temperature to allow them to harden slightly. Steam is then gradually
  introduced to raise the temperature at a controlled rate of not more than 60°F per hour
  (16°C per hour). Standard weight blocks are usually cured at a temperature of 150-
  165°F (66-74°C), while lightweight blocks are cured at 170-185°F (77-85°C). When
  the curing temperature has been reached, the steam is shut off, and the blocks are
  allowed to soak in the hot, moist air for 12-18 hours. After soaking, the blocks are
  dried by exhausting the moist air and further raising the temperature in the kiln. The
  whole curing cycle takes about 24 hours.
 Another type of kiln is the high-pressure steam kiln, sometimes called an autoclave.
  In this type, the temperature is raised to 300-375°F (149-191°C), and the pressure is
  raised to 80-185 psi (5.5-12.8 bar). The blocks are allowed to soak for five to 10
  hours. The pressure is then rapidly vented, which causes the blocks to quickly release
  their trapped moisture. The autoclave curing process requires more energy and a more
  expensive kiln, but it can produce blocks in less time.
Cubing
 The racks of cured blocks are rolled out of the kiln, and the pallets of blocks are un-
  stacked and placed on a chain conveyor. The blocks are pushed off the steel pallets,
  and the empty pallets are fed back into the block machine to receive a new set of
  molded blocks.
 If the blocks are to be made into split-face blocks, they are first molded as two blocks
  joined together. Once these double blocks are cured, they pass through a splitter,
  which strikes them with a heavy blade along the section between the two halves. This
  causes the double block to fracture and form a rough, stone-like texture on one face of
  each piece.
 The blocks pass through a cuber which aligns each block and then stacks them into a
  cube three blocks across by six blocks deep by three or four blocks high. These cubes
  are carried outside with a forklift and placed in storage.

Quality control

Three aspects should be monitored to ensure quality masonry units: strength, dimensions
and shrinkage.




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Strength

Quality of blocks should be controlled so that strengths are adequate (to avoid breakages
or rejection by customers) and mixes are as economical as possible. Ideally, blocks
should be regularly tested for strength and mixes and production processes modified if
necessary. If testing is impracticable or unaffordable, block strength should be
continually assessed by noting whether corners and edges, or even whole blocks, tend to
break in handling. Strength can also be assessed by knocking two mature bricks together.

Dimensions

The length and width of the units are determined by the mould and will not vary greatly.
However, the height can vary and should be monitored using a simple gauge. Units of
inconsistent height will lead to difficulties in the construction of masonry and possible
rain penetration.

Shrinkage

Concrete masonry units shrink slightly after manufacture. In order to avoid this
happening in the wall, blocks should be allowed to dry out for at least seven days before
being used for construction.

4. 2   RAW MATERIAL REQUIREMENT
Crushed Hard Lime Stone, Sand, Cement and Water will be used as raw material for
manufacturing prefab construction blocks. Crushed raw stone and sand could be
purchased directly from the excavator (quarry lease holder) or supplier, whereas, cement
could be sourced from manufacturers by signing a regular supply contract which would
lead to a controlled cost. For the purpose of this pre-feasibility, it is proposed to hold a
supply contract with the three types of material suppliers to avoid any possible threat in
procuring raw material as well as to keep the project economically stable.
Based on our discussions with the business operators, it has been estimated that 1 sq. ft.
of loose aggregate will yield 0.7 sq. ft. of concrete volume. For the proposed project, a
total of 5200 sq. ft. of aggregate would be required daily to produce 4000 sq. ft. of
concrete blocks. Sand-Cement ratio will largely depend on the type and desired strength
of blocks, however, for this pre-feasibility study, assumed ratio is 100:1 (one 50kg bag of
cement for each 100 blocks) by loose volumes. Daily cement requirement for the said
production would be around 50 bags of 50kg each.




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4. 3   MACHINERY REQUIREMENT
Although small mixing and molding units are available in the local market, yet, complete
mechanized plants are not available and organized setups are using imported plant and
machinery for concrete block making. European and American plants are available which
give good quality output; however, these are very expensive and not generally preferred
even by the leading players due to high capital requirement. Therefore, Chinese or any
other machinery would be more appropriate for the proposed project which gives good
quality output and is relatively more economical.

Machinery with the following specification has been proposed for the project which will
cost around Rs. 30 million.

Detailed Plant Description

HCQ6-15III Concrete Block Machine:
With a solid and robust welded steel frame, this machine is operated using
an advanced control system. Has a compact size (6 x 3.5 x 2.95m), and overall
weight of 9.6MT.

Compulsory Mixer with Skip Elevator:
The mixer consists of a solid mixing trough and alloy steel rotary mixing
blade, 4 vertical supports with foot plates. The platform is adapted for
service and working. To mix light weight and high density concrete with
0.5cbm per batch.

Elevator:
As the pallet and fresh block convey to the elevator, they are stacked to
a maximum height of 1metre which is equivalent to 2.2 ton.

Traveling Material Bin Feeder:
Through the conveyor, the slightly moist concrete from the mixer is
transported to traveling material bin feeder for separating temporary storage.
The material bin is designed in a solid, rugged steel weldment and
maintenance free track roller.

Face Mix Section:
Specially designed for production of blocks or pavers with two layers
(coloring). Equipped with loading hopper with adjustable feeding system. The
section can elevate automatically to allow the blocks or pavers to pass
through.




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Control Panel with Touch Screen:
Heart of the control is a PLC with a touch screen color flat display. The
operator can select the functions and change the parameter directly via the
screen. The recipe can be stored and the statistics data can be downloaded.

There are many Chinese and other suppliers available on the internet and could be
contacted and easily accessible. For the purpose of this pre-feasibility, we have explored
the following machinery suppliers:

   1. Quanzhou City Licheng Huangshi Machinery Co., Ltd. (Web Address:
      http://huangshimachinery.en.alibaba.com/)

   2.      Fujian Quanzhou Honcha Machine Make Co., Ltd.

   3. Concrete Pumps
      7 Ballance Road, Durban, 4001, South Africa
      P. O. Box 262, Westville, 3630, South Africa
      Tel +27 - 31 - 303 1397      Fax +27 - 31 - 312 0294
      E-mail address: sem@concretepumps.co.za
      Website address: www.concretepumps.co.za


4. 4       VEHICLES FOR TRANSPORTATION

The proposed setup would require three to four vehicles (new machinery has been
considered for the proposed project) to carryout transportation of raw material and
finished products. Besides, dumping and loading vehicles for the transportation of
finished product to the stacking points would be a pre-requisite. Details of required
vehicles have been provided in the following table:

   S.                                             Purpose of the      No. of Units
            Name of Vehicle/Machine                                                    Total Cost
   No.                                               Machine           Required
                                               Material
       1    Dumper/Truck                                                   1            4,000,000
                                               Transportation
                                               Finished goods
       2    Fork Lifter                                                    2            1,000,000
                                               transportation
       3    Other Tools & Equipment                                                       200,000
                                                                               Total    5,200,000
   *Machinery cost depends on model and may vary


During the discussions with the market experts and entrepreneurs, it was observed that,
though the above machinery/vehicle could also be hired on rent, yet, the incremental cost



PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                   Prefabricated Construction Blocks


difference between rented and purchased machinery would be very close over a long
period of time. Therefore it would be preferred to acquire own machinery rather than
obtaining these services on rent.

4. 5    PLANT AND MACHINERY MAINTENANCE

Machinery is expected to be serviced on an annual basis. During the projected period,
maintenance expenses are estimated to be around 3% of the total cost of machine.

5.      LAND & BUILDING REQUIREMENT
5. 1    SITE DEVELOPMENT

The Prefab construction blocks project is estimated to require a total area of one acre,
which will be used for stockpiling of raw material, production of blocks, cement storage
and storage of finished product. Since heavy machinery and vehicles i.e. dumper, fork
lifters etc. would be used which require open space for the movement as well as there
will be frequent movement of heavy transportation and delivery vehicles; therefore, large
land requirement is being recommended. Moreover, the space would also be used for
machinery installation, storage and vehicle parking and different services necessary for
the project.

5. 2    LAND & BUILDING REQUIREMENTS
5.2.1   Selecting a site

In selecting a site, consider location, access, ground slope and size. Each of these is
discussed below.

Location

This should be considered in relation to:
    Supply of raw materials
    Market for blocks
    Location of the labour force
    Security of the area
    Availability of services, i.e. roads, water, sewerage, electricity, etc.
Access

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




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Pre-Feasibility Report                                  Prefabricated Construction Blocks


Ground slope

Ideally, the site should be level or nearly so. Steep slopes make handling and production
difficult. Terracing a steep slope is expensive.

Size

The site should be big enough for aggregate stockpiles, cement storage, production (slab
or stationary machine) block stacking, staff facilities, an office and on-site access. With
all provisions for the business, one acre would be sufficient for the project.

5.2.2   Establishing the site

The site should have provision for stockpiling aggregates and storing cement, a
production area, a stacking area, staff facilities, an office, and access between different
areas and facilities. Each of these is discussed below.

5.2.2.1 Aggregate stockpiles

Aggregates must be stockpiled in such a way that: they do not become contaminated by
soil, leaves, etc; different aggregates are kept separate; and rainwater can drain away.
Ideally therefore, aggregates should be stockpiled on a concrete slab. If this is not done,
the layer of aggregates in contact with the soil should not be used for production.
Aggregates must not be stockpiled under trees. Partitions should be erected between
different types of aggregate. Stockpiles should be on a slight slope so that rainwater does
not collect in the aggregates.

5.2.2.2 Cement store

The best way to store cement is in a silo. For small scale block yards, however, cement
will be delivered in bags. Cement in bags should preferably be stored in a weather-proof
room. Bags should be stacked on a plastic tarpaulin or on closely spaced wooden strips so
that they do not absorb damp from the floor. The storeroom should be big enough to hold
at least a week’s supply of cement. If it is not possible to provide a storeroom, cement in
bags should be stored in stacks raised above the ground and completely covered with
tarpaulins.




5.2.2.3 Production area




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Pre-Feasibility Report                                  Prefabricated Construction Blocks


The size of this area depends on the method of producing blocks. A stationary machine,
which forms blocks on pallets, needs a relatively small area with space around it for
operators. A mobile “egg-laying” machine needs a fairly large slab on which blocks are
made. Details of such a slab are discussed below.

Construction of a production slab

Area

A flat concrete slab, big enough for at least one day’s production, is required. To
minimize breakages in cold weather, it is recommended to increase the cement content of
the mix or the curing period before moving the blocks. As a guideline, an 80 x 80 ft. in
area is suitable for a production of 6000 blocks per day.

Slope

Normally block production is carried out in the open, and the concrete slab should have a
minimum slope of 1 in 100 to ensure proper drainage.

Thickness

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

Joints

To prevent uncontrolled cracking of the slab, it should be divided into panels which
should be square or as close to square as possible. The half round keyway prevents
differential settlement of adjacent slabs. The maximum joint spacing depends on the
thickness of the slab and should not exceed 6 m for slab thicknesses of 150 and 200 mm.

Stacking area

An area big enough to stack two weeks’ production is needed for curing and drying
blocks. It is normally not necessary to pave this area. To avoid muddy conditions, a layer
of concrete stone, about 100 mm thick, should be enough.

Office and Staff facilities

These include toilets, ablutions, and possibly change rooms. An office should be
provided for all but the smallest of yards.

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




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                    Prefabricated Construction Blocks


                                                               Civil Works       Total
                                                 Size/Area
 Details                                                      /Construction   Construction
                                                  (Sq. Ft.)
                                                               Cost/Sq. Ft.      Cost

 Production & Stacking Area                      15,000           150          2,250,000
 Cement Store                                     2500            300           750,000
 Office & Staff facilities                         400            300           120,000
 Storage Area (Sand/Crush)                      Not limited        -               0
 Water Tank                                       4000            200           800,000
 Other Services (water plant, tool shop etc.)      500            300           150,000
 Total Covered Area                              18,400                        4,070,000

The factory would be located at Nooriabad, Sindh. The reason for the selection is that
utilities, water, electricity and skilled manpower are conveniently available, whereas,
comparatively low cost of land, proximity to the target market, good transport and
communication facilities, also account for its selection.

6.         HUMAN RESOURCE REQUIREMENT
Construction and allied industry is a labor intensive industry; therefore, a total 18 persons
will be required to handle the production operations of a prefab construction blocks
making unit. The business unit will work on one shift basis (8 hours daily). Technical
staff with relevant experience will be required for operating production plant. The staff
will be provided training by the plant & machinery supplier.




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Pre-Feasibility Report                                  Prefabricated Construction Blocks


Total approximate manpower required for the business operations along with the
respective salaries are given in the table below:
                                                                               (Pak. Rs.)
                                                                     Monthly        Annual
                      Staff Title                  No of Persons
                                                                     Salary         Salary
 Owner (Business Unit Manager)
 Production Staff (Quarry/Excavation Site)
   2. Forklift Operator                                  1            8,000          96,000
   3. Dumper/Truck Driver                                1            8,000          96,000
   4. Helper/Laborer                                     2            8,000          96,000

 Production Staff (Crushing Factory)
   5. Production Incharge / Plant Operator              1            10,000         120,000
   6. Assistant Production Plant Operator               1            5,000          60,000
   7. Production Laborers                               8            32,000         384,000
 Total Production Staff                                 14           71,000         852,000
 General Administration/ Selling Staff
   8. Office Assistant                                  1            5,000          60,000
   9. Security Staff                                    2            10,000         120,000
 Total G A /S Staff                                     3            15,000         180,000
                        TOTAL                           17           86,000        1,032,000


6.1     Experience Requirement for the Staff

One to two year of experience on mechanized block making plant would be necessary for
the person who will operate the prefab construction blocks plant. It is also suggested that
preference should be given to literate persons so that they could understand the
significance of undertaking health and safety measures.

7.      FINANCIAL ANALYSIS & KEY ASSUMPTIONS
The project cost estimates for the proposed “Prefab construction blocks Business” have
been formulated on the basis of discussions with industry stakeholders and experts. The
projections cover the cost of land, machinery and equipment including office equipment,
fixtures etc. Assumptions regarding machinery have been provided, however, the specific
assumptions relating to individual cost components are given as under.

7. 1    LAND & BUILDING

Land for setting up the proposed prefab construction blocks unit would be purchased
which will incur a cost of approximately Rs. 1.2 million. Construction and renovation of
site will cost around Rs. 4 million which has been assumed to depreciate at 10% per
annum using diminishing balance method.




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Pre-Feasibility Report                                    Prefabricated Construction Blocks




7. 2        OVERALL FACTORY & OFFICE RENOVATION

To renovate the factory / office premises in Year 5 and Year 10, certain expenses will be
incurred for which an amount equivalent to 5% of the total site/office construction cost is
estimated.

7. 3        FACTORY / OFFICE FURNITURE

A lump sum provision of Rs. 60,000 for procurement of office/factory furniture is
assumed. This would include table, desk, chairs, and office stationery. The breakup of
Factory Office Furniture & Fixtures is as follows:

                                   Item                   Number Total Cost
              Table & Chair for Owner                       1      5,000
              Tables & Chairs for Admin. Staff              1      3,000
              Waiting Chairs                                4      6,000
              Curtains & Interior Decoration for office     -      5,000
              Chairs for Workers/Labor                      6      5000
              Electrical Fittings & Lights                  -     30,000
              Others                                        -      6,000
              Total                                               60,000

7. 4        DEPRECIATION TREATMENT

The treatment of depreciation would be on a diminishing balance method at the rate of
10% per annum on the following. The method is also expected to provide accurate tax
treatment.

       1.   Plant & machinery
       2.   Land & Building Construction and Renovation
       3.   Vehicles
       4.   Furniture and Fixtures etc.

7. 5        UTILITIES

Prefab construction blocks plant will be operated using electricity for production
purposes. This would draw considerable amount of electricity. Likewise, heavy vehicles
i.e. Fork lifter, truck/dumper, etc would require huge quantity of fuel for which diesel



PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                             Prefabricated Construction Blocks


will be used. The cost of the utilities including electricity, diesel/fuel, telephone, and
water is estimated to be around Rs. 2 million per annum. Approximate cost of utilities has
been given below:

                                               Total Monthly         Total Annual     Annual %age
                        Utility                                                         Increase
                                                 Cost (Rs.)           Cost (Rs.)
 1.     Electricity                                       58,000           696,000        5%
 2.     Furnace Oil, Lubricants etc.                       5,000            60,000        3%
 3.     Diesel for Vehicles and Machinery                 28,500           342,000        5%
 4.     Water                                             70,200           842,400        5%
 5.     Telephone                                          5,000            60,000        5%
                                       Total             166,700          2,000,400


7. 6      WORKING CAPITAL REQUIREMENTS

It is estimated that an additional amount of one million rupees (approximately) will be
required as cash in hand to meet the working capital requirements. These provisions have
been estimated based on the following assumptions for the proposed business.

  Utilities - (Office & Factory)                                                            87,140
  1.    Electricity - 01 Month                                                              58,240
  2.    Oil, Lubricants & Other consumables - 01 Month                                       5,000
  3.    Water - 07 days                                                                     18,900
  4.    Telephone - 01 Month                                                                 5,000
  Salaries - Three Months (Production Staff)                                               213,000
  Raw Material Inventories (Cement & Sand/Crushed Stone)                                   238,380
       Cement – 01 Month                                                                   325,000
       Sand and Crushed Stone – 07 Days                                                     31,500
  Misc. Expenses - Three months (@ 5000 /month)                                             15,000
  Total Working Capital                                                                    910,020


7. 7      PLANT & MACHINERY INSTALLATION

Plant and machinery installation and trial run expenses has been assumed to be around
Rs. 100,000/-. It has been included in the plant and machinery cost.




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                 Prefabricated Construction Blocks


7. 8    VEHICLE FOR SUPPORT AND MAINTENANCE SERVICES

An additional light loading vehicle would be required for providing services for the
maintenance, communication of machinery spare parts, labor etc. For this purpose, a
transportation vehicle has been proposed and an amount of Rs. 400,000 is assumed to be
required to purchase the vehicle.

7. 9    PRELIMINARY EXPENSES AND CONTINGENCY PROVISION

A lump sum provision of Rs. 300,000 is assumed to cover all preliminary expenses which
will be amortized over the 5 year period.

7. 10   SELLING & DISTRIBUTION EXPENSES (ORDER BOOKING AGENTS)

For the purpose of this pre-feasibility, it has been assumed that the block maker would
work in association with building material suppliers and will appoint 5 to 6 suppliers as
booking agents. These arrangements would raise the selling costs for the business for
which an amount equivalent to 2% of the annual sales has been assumed which also
covers the distribution cost of bulk supplies, entertained directly by the owner.

7. 11   MISCELLANEOUS EXPENSES

Miscellaneous expenses of running the business are assumed to be Rs. 5,000 per month.
These expenses include various items like office stationery, daily consumables, traveling
allowances etc. and are assumed to increase at a nominal rate of 10% per annum.

7. 12   FINISHED GOODS INVENTORY

The proposed setup is assumed to maintain a Finished Goods Inventory of 7 days of the
total annual production.




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                           Prefabricated Construction Blocks


7. 13     REVENUE PROJECTIONS

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

 S.                                                             Productio
                                      Size/                                                  Selling
 No              Block Type                       Standard      n (as % of      Color
                                    Dimension                                               Price/ unit
  .                                                               Total)
 1      Masonry Block
                  Solid Block      4”x8”x12”     600-800 psi     10%        Natural Grey       15
                  Solid Block      5”x8”x12”     600-800 psi     20%        Natural Grey       16
                  Solid Block      6”x8”x12”     600-800 psi     10%        Natural Grey       17
                  Hollow Block     5”x8”x16”     600-800 psi     10%        Natural Grey       23
        Fair Face Blocks
                  Solid Block    90x190x390 mm   600-800 psi     15%        Natural Grey       28
 2      Pavers                    300x300x40mm     4000 psi        5%        Natural Grey       40
 3      Kerb Stone/Block           6”x12”x12”      5000 psi       30%        Natural Grey       90


Working with the proposed plant and machinery, the project will be capable of producing
4,000 sq.ft. of concrete blocks at 100% capacity utilization with single shift of 8 hours a
day. It has been assumed that it will take some time for the business to reach the optimal
capacity utilization point for the projected period. Therefore, the first year production of
prefab construction blocks has been estimated with 70% capacity utilization. Annual
increase of 3% in capacity utilization is assumed over the projection period. All
projections are based on 8 working hrs a day with 26 days a month.
Based on our discussions with the industry experts and entrepreneurs it is assumed that
the sales price will increase with a nominal rate of 5% on all product categories during
the projected period.

7. 15     ACCOUNTS RECEIVABLES
Considering the industry norm, particular to the construction sector and all of its allied
industries, it has been assumed that 70% of the sales will be on cash. Whereas, remaining
30% sales will be on credit to the builders and construction contractors. A collection
period of 60 days is assumed for the credit sales.

All of the above assumptions are based on our findings during the discussions with the
industry experts and stakeholders. A provision for bad debts has been assumed equivalent
to 2% of the annual credit sales.




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                     Prefabricated Construction Blocks


7. 16      FINANCIAL CHARGES

It is assumed that long-term financing for 5 years will be obtained in order to finance the
project investment cost. This leasing facility would be required at a rate of 15%
(including 1% insurance premium) per annum with 60 monthly installments over a period
of five years.

7. 17      TAXATION

The business is assumed to be run as a sole proprietorship; therefore, tax rates applicable
on the income of an individual tax payer are used for income tax calculation of the
business.

7. 18      COST OF CAPITAL

The cost of capital is explained in the following table:

                      Particulars                                 Rate
                      Required return on equity                   20%
                      Cost of finance                             15%
                      Weighted Average Cost of Capital           17.5%

The weighted average cost of capital is based on the debt/equity ratio of 50:50.

7. 19      OWNER’S WITHDRAWAL

It is assumed that the owner will draw funds from the business once the desired
profitability is reached from the start of operations. The amount would depend on
business sustainability and availability of funds for future growth.


7. 20           ANNEXURES

7. 20. 1        SUMMARY OF KEY ASSUMPTIONS
7. 20. 2        COST AND REVENUE SHEET
7. 20. 3        PROJECTED INCOME STATEMENT
7. 20. 4        PROJECTED BALANCE SHEET
7. 20. 5        PROJECTED CASH FLOW STATEMENT




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                                                           Prefabricated Construction Blocks


                                                      Summary of Key Assumptions
                                                                                                                                 (in Pak. Rs.)
 Sr.
                                                   PARTICULARS                                         TOTAL COST/DETAILS
 No.
       Fixed Capital
       Land                                                                                                                        2,000,000
       Plant & machinery                                                                                                          35,300,000
              Concrete Blocks Making Plant (Imported)                                                                             30,000,000
              Transportation Machinery/Vehicles                                                                                    5,200,000
              Plant & machinery Installation & trial run expenses                                                                    100,000
       Vehicle for support and maintenance services - One light vehicle                                                              400,000
       Site/Office Renovation & Contruction                                                                                        4,070,000
       Factory / Office Furniture                                                                                                     60,000
       Preliminary Expenses                                                                                                          300,000


       Total Fixed Capital                                                                                                        42,130,000

       Working Capital
       Utilities - (Office & Factory)                                                                                                 87,140
       1.     Electricity - 01 Month                                                                                                  58,240
       2.     Oil, Lubricants & Other consumables - 01 Month                                                                           5,000
       4.     Water - 07 days                                                                                                         18,900

                  Water Requirement (Quantity)                                                                                        66,000

       5.     Telephone - 01 Month                                                                                                     5,000
       Salaries - Three Months (Production Staff)                                                                                    213,000
       Raw Material Inventories (Cement & Sand/Crushed Stone) - 07 Days                                                              238,380
            Cement - 26 Days                                                                                                         325,000
            Sand and Crushed Stone - 07 Days                                                                                          31,500
       Misc. Expenses - Three months (@ 5000 /month)                                                                                  15,000

       Total Working Capital                                                                                                         910,020
       TOTAL PROJECT COST                                                                                                        43,040,020

       Loan Finance                                                                                                               21,520,010
       Equity Financing                                                                                                           21,520,010
       Debt:Equity Ratio (50:50)                                                                                                      50.00%


       PROJECT RETURNS AND OTHER FINANCIAL
       IRR                                                                                                        26%
       NPV                                                                                                                        14,127,743

       Payback Period (Years)                                                                                   4 Years
       Debt Equity Ratio                                                                                         50:50'
                                                                                                                  20%
       Required return on equity
                                                                                                                  15%
       Cost of finance
                                                                                                                17.50%
       Weighted Average Cost of capital

       OTHER ASSUMPTIONS
  1    Depreciation                                                                                                                      10%
  5    Plant and Machinery Annual Repair & Maintenance (as %age of total cost of plant)                                                 3.00%
       Selling & Distribution Expenses                                                                                                  2.00%
INCREASE IN PRICE AND GROWTH
  6    Increase in Raw Material Price (Cement & Sand/Crushed Stone)                                                                        5%
  7    Increase in other consumables price                                                                                                 3%
  8    Factory & Office Renovation (in Year 5 & 10)                                                                                        5%


       Production Operations and Capacity Utilisation Assumptions
       Capacity Utilisation at the beginning of the period                                                                               50%
       Increase in capacity utilisation (Annual)                                                                                           5%
                                                                                          Running on single shift basis but double shift can
       Maximum Capacity Utilisation
                                                                                          be initiated if demand increases
       Annual sales price increase                                                                                                         5%
       Operational Hrs./day                                                                                                                    8
       Operational Days / Month                                                                                                            26
       Operational Months                                                                                                                  12
       Annual Operational Days                                                                                                            312

       Economy related assumptions
       Electricity charges growth rate                                                                                                     5%
       Increase in Salaries                                                                                                              10%
       Oil/Diesel and other consumables price growth rates                                                                               10%
       Increase in Misc. Expenses                                                                                                        10%

       Cash Flow Assumptions
       Sales on Credit - as %age of total                                                                                                30%
       Sales on Cash - as %age of total                                                                                                  70%
       Accounts Receivable period (days) - only for 30% credit sales                                                                           2
       Provision for bed debts (only on 30% credit sales)                                                                                  2%
       Inventory (Raw Material)                                                                                                                7
    Finished Goods 2006/Rev1
PREF-X/Dec, Inventory (Days)                                                                                                                   7
Pre-Feasibility Report                                                                                             Prefabricated Construction Blocks


                  PREFABRICATED CONSTRUCTION BLOCKS MANUFACTURING
                               COST AND REVENUE SHEET
1. REVENUE CALCULATION
   Production
    Rated capacity of the Block Making Plant                                                                        500 sq.ft. of concrete / hr.
    No. of Operating Hours - Single Shift Basis                                                                        8 Hrs / Day
    Estimated Optimal Production                                                                                  4,000 sq.ft. of concrete / day
    Expected Capacity Utilization (At the beginning of the project)                                                 50%
    Annual Capacity Utilization Growth Rate                                                                          5%

    Expected Concrete Production at the beginning of the project                                                  2,000 sq.ft. of concrete / day
    Expected Blocks Production at the beginning of the project                                                          Blocks/day

    Sales prices of differe categories of construction blocks

                                                             No. of Blocks Produced (Approximately)
          Size             Masonry Block
         4”x8”x12”              Solid Block                                                  450                     15   Rs.
         5”x8”x12”              Solid Block                                                  840                     16   Rs.
         6”x8”x12”              Solid Block                                                  300                     17   Rs.
         5”x8”x16”              Hollow Block                                                 225                     23   Rs.
                           Fair Face Blocks
      90x190x390 mm             Solid Block                                                305                       28 Rs.
      300x300x40mm         Pavers                                                           144                       40 Rs.
        6”x12”x12”         Kerb Stone/Block                                                 600                       90 Rs.
                           Total Blocks Produced                                          2,864

                           Construction Block Category                                              Production Assumptions

                           Masonry Block
                                Solid Block                                                              15%
                                Solid Block                                                              28%
                                Solid Block                                                              10%
                                Hollow Block                                                             10%
                           Fair Face Blocks
                                Solid Block                                                               2%
                           Pavers                                                                          5%
                           Kerb Stone/Block                                                               30%
                                                                                                          100%
                                                                                                      Production in
                               Construction Block Category            Blocks Produced / Day
                                                                                                         Rupees
                           Masonry Block
                                Solid Block                                  450                                 6,750    Rs.
                                Solid Block                                  840                                13,440    Rs.
                                Solid Block                                  300                                 5,100    Rs.
                                Hollow Block                                 225                                 5,175    Rs.
                           Fair Face Blocks
                                Solid Block                                  305                                 8,533 Rs.
                           Pavers                                             144                                 5,760 Rs.
                           Kerb Stone/Block                                   600                                54,000 Rs.

    Total Value of Blocks Produced per Day                                    2864                               98,758 Rs.

    Total Value of Blocks Produced per Month                                                                2,567,717 Rs.

    Gross Annual Sales                                                                                   30,812,600 Rs.


    Provision for Finished Goods Inventory                                                                             7 Days
    Estimated Finished Goods Inventory at the end of the Year                                                   396,695 Rs

Total Realised Gross Annual Sales                                                                       30,812,600 Rs.
Sales on Credit      30% of the total
Sales on Cash        70% of the total

2. COST CALCULATION - for 4000 blocks
         RAW MATERIAL
                                                                                                                  5,900    sq.ft.
        Description           Raw Material Required/Block                   Quantity                               Cost
        Water                                        16.5                    66000                                 2700    Rs.
        Cement                                        0.6                   50 bags                               12500    Rs.
        Sand (Bajri)                                 1.18                     4720                                 4500    Rs.
        Crushed stone                               0.295                     1180                                 3500    Rs.
        Total Raw Material Cost                                                                                   23200                    Rs./day

 OTHER CONSUMABLES

          Forklift approximate Fuel Consumption                                                                      50    Liter/hr.
          Dumper/Truck approximate Fuel Consumption                                                                  75    Liter/hr.
          Electricity Charges (including all taxex)                         1 K.W.H*                               7.00    Rs. / KWH
          Block Making Plant approximate Electricity Comsumption                                                     40    KW / hr.

          APPROX. NUMBER OF OPERATIONAL HOURS FOR BLOCK MAKING MACHINERY/VEHICLES
            Plant & Machinery                                                                                         8 hr.
            Vehicles                                                   -                                              6 hr.


        Electricity Consumption                                                                                   320      KW/day
        Fuel & Other Consumables                                                                                  750      Liter/day
        Total Other Consumables                                                                                30,740      Rs./day
                         Total Cost / day                                                                      53,940      Rs. / day
                         Total Cost / Month                                                                 1,402,440      Rs. / month
TOTAL ANNUAL COST                                                                                       16,829,280 Rs. / annum

Total Annual Sales                                                                                        30,812,600                      Difference
PREF-X/Dec, 2006/Rev1
Total Annual Cost of Raw Material and other consumables                                                   16,829,280                                   13,983,320
Pre-Feasibility Report                                                    Prefabricated Construction Blocks




                                                         PREFABRICATED CONSTRUCTION BLOCKS MANUFACTURING

Projected Income Statement (Rs.)                Year 1       Year 2       Year 3       Year 4       Year 5       Year 6       Year 7       Year 8       Year 9       Year 10


Net (Adjusted Sales)                            30,233,409   33,930,278   37,408,136   41,242,476   45,469,835   50,130,499   55,268,883   60,933,951   67,179,689    74,065,617

Cost of Sales                                   17,801,280   19,617,481   21,619,315   23,825,772   26,257,785   28,938,432   31,893,150   35,149,982   38,739,840    42,696,800

Fuel & Electricity Consumed During Production   16,829,280   18,554,281   20,456,095   22,552,845   24,864,511   27,413,124   30,222,969   33,320,823   36,736,208    40,501,669
Labor (Production Staff)                           852,000      937,200    1,030,920    1,134,012    1,247,413    1,372,155    1,509,370    1,660,307    1,826,338     2,008,971
Other Utilities                                    120,000      126,000      132,300      138,915      145,861      153,154      160,811      168,852      177,295       186,159

Gross Profit                                    12,432,129   14,312,797   15,788,821   17,416,704   19,212,050   21,192,067   23,375,732   25,783,969   28,439,849    31,368,817
Gross Profit Margin                                    41%          42%          42%          42%          42%          42%          42%          42%          42%           42%

General Administrative & Selling Expenses
 Salaries                                          180,000      198,000      217,800      239,580      263,538      289,892      318,881      350,769      385,846       424,431
 Lease Charges of Land - Quarry / Excavation        31,500       32,445       33,418       34,421       35,454       36,517       37,613       38,741       39,903        41,100
 Factory/Office Miscellaneous Expenses              60,000       66,000       72,600       79,860       87,846       96,631      106,294      116,923      128,615       141,477
Amortization of Preliminary Expenses                60,000       60,000       60,000       60,000       60,000          -            -            -            -             -
Depreciation Expense                             3,983,000    3,584,700    3,226,230    2,903,607    2,613,246    2,372,272    2,135,045    1,921,540    1,729,386     1,556,447
Maintenance Expense                              1,059,000    1,059,000    1,059,000    1,059,000    1,059,000    1,059,000    1,059,000    1,059,000    1,059,000     1,059,000
Selling & Distribution                             604,668      678,606      748,163      824,850      909,397    1,002,610    1,105,378    1,218,679    1,343,594     1,481,312

Subtotal                                         5,978,168    5,678,751    5,417,211    5,201,317    5,028,481    4,856,921    4,762,209    4,705,652    4,686,344     4,703,768
Operating Income                                 6,453,961    8,634,046   10,371,610   12,215,386   14,183,569   16,335,146   18,613,523   21,078,316   23,753,505    26,665,049

Financial Charges (15% Per Annum)                3,018,969    2,516,684    1,933,654    1,256,900     471,355             -            -            -            -             -

Earnings Before Taxes                            3,434,992    6,117,363    8,437,956   10,958,486   13,712,214   16,335,146   18,613,523   21,078,316   23,753,505    26,665,049
Tax                                                858,748    1,529,341    2,109,489    2,739,622    3,428,054    4,083,787    4,653,381    5,269,579    5,938,376     9,205,267
Net Profit                                       2,576,244    4,588,022    6,328,467    8,218,865   10,284,161   12,251,360   13,960,142   15,808,737   17,815,129    17,459,782

Monthly Profit After Tax                          214,687       382,335     527,372      684,905      857,013     1,020,947    1,163,345    1,317,395    1,484,594     1,454,982




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                                      Prefabricated Construction Blocks




                                                 PREFABRICATED CONSTRUCTION BLOCKS MANUFACTURING

Projected Balance Sheet (Rs.)         Year 0        Year 1       Year 2         Year 3       Year 4       Year 5         Year 6         Year 7         Year 8         Year 9        Year 10

Assets
   Current Assets
         Cash & Bank Balance        2,671,640     3,286,008    6,603,692      9,710,622    12,678,042   14,897,694     22,622,121     30,777,191     38,022,249     45,031,816     49,254,776
         Fuel Inventoriy (Diesel)    238,380       701,220      773,095        852,337       939,702    1,036,021       1,142,213      1,259,290      1,388,368      1,530,675      1,687,570
         Finished Goods Inventory       0          396,695      437,309        482,080       531,436     585,844         645,824        711,944        784,833        865,185        953,764
         Accounts Receivable            0         1,520,795    1,696,514      1,870,407     2,062,124   2,273,492       2,506,525      2,763,444      3,046,698      3,358,984      3,703,281

   Total Current Assets             2,910,020     5,904,719    9,510,610      12,915,447   16,211,304   18,793,052     26,916,683     35,511,870     43,242,147     50,786,662     55,599,391

   Fixed Assets
      Plant Machinery & Facility    35,300,000    31,770,000   28,593,000     25,733,700   23,160,330   20,844,297     18,759,867     16,883,881     15,195,493     13,675,943     12,308,349
      Factory Construction          4,070,000      3,663,000   3,296,700       2,967,030    2,670,327   2,606,794       2,346,115      2,111,503      1,900,353      1,710,318      1,742,786

      Furniture & Fixtures            60,000        54,000       48,600         43,740       39,366       35,429         31,886         28,698         25,828         23,245         20,921
      Vehicle                        400,000       360,000      324,000        291,600      262,440      236,196        212,576        191,319        172,187        154,968        139,471
   Total Fixed Assets               39,830,000    35,847,000   32,262,300     29,036,070   26,132,463   23,722,717     21,350,445     19,215,401     17,293,860     15,564,474     14,211,527

   Intangible Assets
       Preliminary Expenses          300,000       240,000      180,000        120,000      60,000                 -              -              -              -              -           -

Total Assets                        43,040,020    41,991,719   41,952,910     42,071,517   42,403,767   42,515,768     48,267,128     54,727,270     60,536,007     66,351,136     69,810,918

Owner's Equity                      21,520,010    23,596,254   27,184,276     31,512,743   36,731,608   42,515,768     48,267,128     54,727,270     60,536,007     66,351,136     69,810,918


Long Term Liability                 21,520,010    18,395,464   14,768,634     10,558,773   5,672,159        0              0              0              0              0              0

Total Equity & Liabilities          43,040,020    41,991,719   41,952,910     42,071,517   42,403,767   42,515,768     48,267,128     54,727,270     60,536,007     66,351,136     69,810,918




PREF-X/Dec, 2006/Rev1
Pre-Feasibility Report                                                         Prefabricated Construction Blocks



                                                       PREFABRICATED CONSTRUCTION BLOCKS MANUFACTURING

Projected Statement of Cash Flows (Rs.)         Year 0         Year 1        Year 2        Year 3        Year 4        Year 5         Year 6        Year 7        Year 8         Year 9         Year 10

Cash Flow From Operating Activities

   Net Profit                                      0          2,576,244    4,588,022     6,328,467      8,218,865    10,284,161     12,251,360    13,960,142    15,808,737     17,815,129     17,459,782
   Add: Depreciation Expense                       0          3,983,000    3,584,700     3,226,230      2,903,607     2,613,246      2,372,272     2,135,045     1,921,540      1,729,386      1,556,447
       Amortization Expense                        0           60,000        60,000        60,000         60,000        60,000            -             -             -              -              -
      (Increase) / decrease in Receivables         -         (1,520,795)   (175,719)     (173,893)      (191,717)     (211,368)      (233,033)     (256,919)     (283,253)      (312,287)      (344,296)
      (Increase) / decrease in RM                  -          (462,840)     (71,875)      (79,242)       (87,365)      (96,319)      (106,192)     (117,077)     (129,077)      (142,308)      (156,894)
      (Increase) / decrease in FG Inventory                   (396,695)     (40,613)      (44,772)       (49,355)      (54,409)       (59,979)      (66,120)      (72,890)       (80,352)       (88,579)
Net Cash Flow From Operations                      0         4,238,914     7,944,515     9,316,790     10,854,035    12,595,311     14,224,427    15,655,071    17,245,057     19,009,568     18,426,460

Cash Flow From Financing Activities

Receipt of Long Term Debt                     21,520,010
Repayment of Long Term Debt                                  (3,124,546)   (3,626,831)   (4,209,860)   (4,886,614)   (5,672,159)         -             -              -              -              -
Owner's Equity                                21,520,010      (500,000)    (1,000,000)   (2,000,000)   (3,000,000)   (4,500,000)    (6,500,000)   (7,500,000)   (10,000,000)   (12,000,000)   (14,000,000)

Net Cash Flow From Financing Activities       43,040,020     (3,624,546)   (4,626,831)   (6,209,860)   (7,886,614)   (10,172,159)   (6,500,000)   (7,500,000)   (10,000,000)   (12,000,000)   (14,000,000)

Cash Flow From Investing Activities

Capital Expenditure                           (39,770,000)                                                            (203,500)                                                                (203,500)
Factory/Office Furniture                         (60,000)
Preliminary Operating Expenses                  (300,000)
Raw Material Inventory (15 Days)                (238,380)


Net Cash Flow From Investing Activities       (40,368,380)       0             0             0             0          (203,500)         0             0              0              0          (203,500)

NET CASH FLOW                                 2,671,640       614,368      3,317,684     3,106,930     2,967,420     2,219,652      7,724,427     8,155,071     7,245,057      7,009,568      4,222,960



Cash at the Beginning of the Period               0          2,671,640     3,286,008     6,603,692      9,710,622    12,678,042     14,897,694    22,622,121    30,777,191     38,022,249     45,031,816
Cash at the End of the Period                 2,671,640      3,286,008     6,603,692     9,710,622     12,678,042    14,897,694     22,622,121    30,777,191    38,022,249     45,031,816     49,254,776




PREF-X/Dec, 2006/Rev1

				
DOCUMENT INFO
Description: Feasibility for Setting Up Concrete Block Making Industry document sample