Professional Documents
Culture Documents
CHIPBOARD PLANT
April, 2006
Pre-feasibility Study Chipboard Plant
Table of Content
1. PURPOSE OF THE DOCUMENT ........................................................ 5
5. MARKET INFORMATION................................................................. 12
5.1 Market potential................................................................................................... 12
5.2 Competitive Environment .................................................................................... 12
5.3 Allied and Associated Industries .......................................................................... 13
5.4 Demand and Supply Gap ..................................................................................... 13
5.5 Target Customers................................................................................................. 13
5.5.1 Exporters .................................................................................................. 13
5.5.2 Local Users.................................................................................................. 13
5.6 Trade Statistics ........................................................................................................ 14
2
Pre-feasibility Study Chipboard Plant
KEY ASSUMPTIONS.................................................................................. 27
3
Pre-feasibility Study Chipboard Plant
DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter
and provide a general idea and information on the said area. All the material included in this
document is based on data/information gathered from various sources and is based on certain
assumptions. Although, due care and diligence has been taken to compile this document, the
contained information may vary due to any change in any of the concerned factors, and the
actual results may differ substantially from the presented information. SMEDA does not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of undertaking this activity. The prospective user of this memorandum is
encouraged to carry out additional diligence and gather any information he/she feels
necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Prepared by SMEDA-Punjab
4
Pre-feasibility Study Chipboard Plant
2. PROJECT PROFILE
1.1 Opportunity Rational
Due to increase in population and need of constructing new houses it is expected that demand
for chipboard will rise ultimately. Chipboard industry is a growing industry of Pakistan,
which can contribute positively in the GDP. This industry has reasonable potential to attract
new markets abroad by providing high quality board.
Banking policies for housing loans are also playing an important roll in the boost of the
housing sector. The construction style has absolutely changed and demand of chipboard and
laminated board has significantly increased. Afghanistan Development Program after the war
has also contributed in opportunities to enhance considerable export by taking part in the
development of Afghanistan. Construction business is a demanding area. Trade has open for
all the world economies from 2005 and it is visualized that demand will increase more in
future.
One of the most common uses of chipboard is that it is the back piece, which provides
stiffness on a scratch pad. Chipboard is the major input for the furniture industry and also
used for kitchen tops and work surface.
5
Pre-feasibility Study Chipboard Plant
Pakistan has faced formidable housing problems from its very birth in August 1947 as an
independent nation in the wake of the mass influx of millions who migrated to the country.
The situation is changing now and many macro and micro construction works are underway
to overcome the backlog of 6.0* million houses in the country, which should be considered a
healthy sign for many industries including chipboard industry1.
2.10.1 Marketing
The marketing of the project will be based on the following strong grounds:
It is assumed that by using all above mentioned methods, project will be able to fetch
considerable market share.
2.10.2 Pricing
Chipboard is available with or without lamination. Different rates are charged for both
products. Product will be provided to wholesaler at market prevailing rates, which could be
different on the base of product quality.
2.10.3 Distribu tion
The final product chipboard will directly supplied to wholesaler eliminating role of agencies.
Distribution network of product is illustrated below:
Manufacture
Wholesaler
Retailer
End user
1
Source: Economic Survey of Pakistan 2004-2005
7
Pre-feasibility Study Chipboard Plant
According to 1998 Population and Housing Census of Pakistan, there were over 19.3 million
housing units in the country as compared to 12.6 million enumerated in 1980, showing an
increase of 53.2 percent. The details are tabulated in the table appended herewith.
Housing Units
(Census 1998) (Houses in Million)3
Table3-2
2
(Source: Economic Survey of Pakistan 2004- 2005)
3
Note: The figures in parenthesis are percent share
(Source: Population & Housing Census 1998)
8
Pre-feasibility Study Chipboard Plant
On the basis of World Bank’s recommended occupancy rate of 6 persons per house, the total
number of housing units in the country roughly required was 26 million up to the end of
2005, based on the population of 156 million at present. Every year, 0.3 million new houses
should be added to the existing stock by the public & private sectors. On the other hand, 10
percent houses of the total supply are depleted/destroyed/demolished every year, resulting
into decline in available housing units to 20.0 million housing units leaving a back log of 6.0
million housing units.
4
* Source: www.pakboi.gov.pk
9
Pre-feasibility Study Chipboard Plant
Chipboard and plywood are the major inputs for the furniture industry, which is the biggest
user of chipboard, accounts for approx. 60% of the total demand for the product. The wood
used in furniture making generally comprises Shesham, Chirh, Pine, Oak, Burmah, Teak,
Plywood, Kikar and Bamboos. Recently, chipboard is also extensively used for this purpose,
which is considered a healthy sign for the chipboard industry. Although the quality of
chipboard so far produced in the country has not improved up to the world standard, yet with
the passage of time for product’s diversified uses, easy to handle, economical and many other
factors, the use of chipboard is likely to increase.
By keeping in view increasing population growth rate, expanding demand and supply gap and
shortfall of 6 million housing units, it is expected that chipboard usage will increase to meet
the shortfall of 6 million housing units.
4.5 Others
These include Interior decoration firms, Railways and other Government Agencies.
Chipboard is demanded by these agencies for a variety of purposes. Small quantities of
chipboard are also in demand for miscellaneous purposes. For instance, bus body makers,
packing firms, film studios, PWD, WAPDA, Municipal Committees and improvement Trusts
etc use it.
5
Source: Bakhshi Enterprises
10
Pre-feasibility Study Chipboard Plant
Table3-3
According to the above table, Actual Capacity Utilized is only 47% resulting 53% idle
capacity. Capacity Utilization can be enhanced up to 70% by producing 171,500 Sheets per
month with the existing units and the upcoming units will add approximately 3500 sheets per
month. So, this production can be enhanced up to 175,000 Sheets/Month easily. In spite of
under utilization of working units it is expected that under fair competition with new units,
quality of product will improve and help in reducing imports and enhancing exports of
chipboard.
Availability of raw material is a major cause for under utilization of capacity installed.
However, keeping in view, the growing demand of chipboard, imported raw material could
be used for maximum utilization of the installed capacity. Imported fine raw material will
help in the quality improvement, which may increase export rate. In the open trade era,
production of high quality product could help in achieving the export targets and the sector
will grow accordingly.
In order to boost the Pakistan’s economy, Construction Sector is being given special
incentives in the shape of reduction in withholding tax from 6% to 1%, which will ultimately
improve the business activities of the down stream industries like furniture, Chipboard, and
Construction material industries as well.
11
Pre-feasibility Study Chipboard Plant
5. MARKET INFORMATION
5.1 Market potential
Pakistan is facing housing problem since its birth because of the migration of millions of
people from India to Pakistan. However situation is changing now. Many macro and micro
construction works are underway to meet the shortfall of 6.0 million houses both by the
private and public sector, which is a healthy sign for many industries including chipboard
industry.
On the basis of all the factors relating to the growth rate of population, housing industry and
export potential, we can anticipate a reasonable growth rate in demand of the chipboard and
laminated board in coming future. On the basis of the population growth and housing
industry, 6% growth in demand till 2010 is anticipated. The following table is showing the
calculations.
DEMAND PROJECTIONS
Table 5-1
Year Demand (Million Sheets)
2004-2005 6.993
2005-2006 7.413
2006-2007 7.857
2007-2008 8.328
2008-2009 8.828
2009-2010 9.355
Note: - Estimated rate of increase 6% per annum.
12
Pre-feasibility Study Chipboard Plant
5.5.1 Exporters
The Pakistan government has been taking a number of steps to give a fillip to export. But
these efforts are mainly restricted to increase the traditional exports of agriculture products
and items being manufactured by big industrial units. These exports are subject to
“dordrumism” as a result of developing countries like Pakistan. The eleventh September
mishap is a concrete example.
Under such atmosphere, it is necessary that Pakistan should, along with taking steps for
safeguarding our traditional exports from the adverse effects of globalization etc, seek other
avenues to raise its exports. One of these avenues may be the development of our woodwork
and wood based industry, which has started to adopt a scientific approach for its
development.
As a result various items of wooden furniture in new design are in appreciable demand, both
domestically and internationally. Presently, we are exporting to Sri Lanka, Middle East,
Saudi Arabia, Afghanistan and some Gulf States various items of wooden furniture.
6
Source: * Chipboard Industry falls in an unorganized sector and no proper data is available.
Domestic production is based on information projected by few industrial units and estimation
for the capacity attained. )
13
Pre-feasibility Study Chipboard Plant
(2000-2002)
Year Domestic Imports Exports Total Demand
2000-2001
Sheets 6,157,875* 4,200 4,325 6,159,350
Kg. 246,315,000 167,460 172,470 246,320,010
2001-2002
Sheets 6,400,075* 5,460 4,800 6,400,875
Kg. 256,002,000 218,400 192,000 256,028,400
14
Pre-feasibility Study Chipboard Plant
Currently 35 units are manufacturing chipboard in Pakistan but almost all are under utilized.
Underutilizations of capacities are due to various reasons including lack of proper technical
knowledge, availability of raw material and stiff competition etc.
15
Pre-feasibility Study Chipboard Plant
6. PRODUCTION PROCESS
6.1 General
The chipboard plant is usually designed to operate continuously round the clock. Therefore, it
is assumed that the proposed system will operate in 3 shifts per day, with 300 working days
per year.
The press is a multi–opening press with 10 levels in a frame construction and equipped with
thermo oil heating, high- pressure hydraulics and system for automatic pressing without
distance bars. The loading device with its tablet feeding system will ensure proper loading
16
Pre-feasibility Study Chipboard Plant
and unloading of the main press during same operation. The main press is heated with hot oil
by a separate boiler.
The boards are taken out of the unloading devices onto a belt conveyer with scale and
through an automatic thickness meter with measure tolerance of 0.1 mm.
The board weight and thickness will be registered before the board is fed to the cooling
wheel.
6.7 Controls
The raw material in feed system, Knife-Ring Flakers, Dyers and Sifters are all controlled
from a separate indoors control panel. The automatic control of the production line is based
on PLC system. To guarantee maximum performance of the plant it is divided into functional
sections, which are controlled by separate PLC units. The main process parameters are
monitored on a terminal in the main control room in front of the main press.
Storage Tanks
Screen Section
Storage Tanks
Glue Section
Forming Section
17
Pre-feasibility Study Chipboard Plant
Some items required for chipboard manufacturing unit are locally available and some will be
imported.
18
Pre-feasibility Study Chipboard Plant
7. POJECT PROFILE
7.4.1 Water
This project will require 6,000 liters water per day. As ground water is of required quality,
therefore, water will be arranged from tube wells on site.
7.4.2 Power
Power will be arranged through WAPDA. The requirement of power is estimated at 1,500
KW at the proposed and expansion requirement of the project.
7.5 Oil/Lubricants
Furnace oil for dryers and lubricants for the smooth functioning of the machines can be
procured locally.
This project will be located in central Punjab. There is forestry over 0.771 million hectares in
public sector. The resources include the following:
19
Pre-feasibility Study Chipboard Plant
In addition to the public sector, forestry resources exist in farmlands both in the form of
woodlots and linear avenues along the field boundaries and Watercourses. According to a
base line survey by Punjab Economic Research Institute (PERI) 1999 there are 20-23 trees
per acre and more than 50 trees per hectare in the cultivated area of the Punjab Province.
There is, however 4-5 times more potential of having trees in the farmlands. It is believed that
90% of fuel wood and 55 % of timber is coming from the farmlands.
The installation of this project will create incentives for farmers of surrounding areas for
forestry. The company could launch a development program in these areas to guide the
farmers and to promote forestry on commercial basis. This will also provide an ongoing
solution for availability of raw material
Infrastructure facilities
Availability of labor force
Water resources
21
Pre-feasibility Study Chipboard Plant
Total No of Employees 46
22
Pre-feasibility Study Chipboard Plant
CEO
Project Incharge
Production Incharge
Marketing Sampling Finance &
Accounts Dept
Production Production
Planning Dealing with Local Obtaining
Authorities Certificate of
23
9. FINANCIAL PROJECTION
PROFIT & LOSS ACCOUNT
B ALAN C E S H EE T
C urren t Liabilities
Short Term Bank Finance 53,900,000 61,300,000 64,200,000 72,600,000 76,300,000
C reditors And O ther Liabilities 11,592,000 13,186,000 13,845,000 15,656,000 16,438,000
W orkers' Profit Participation Funds 97,454 253,468 372,973 582,480 700,801
D ividend Payable - - - - -
T ax payble 1,946,006 2,213,582 2,324,261 2,628,202 1,299,080
Total C u rrent Liabilitie s 67,535,460 76,953,049 80,742,233 91,466,682 94,737,882
Total C ap ital And Liab ilities 236,169,664 232,411,486 227,574,905 237,540,431 245,996,371
AS S E TS Year 1 2 3 4 5
C urren t As sets
T rade Debtors 31,989,000 36,400,000 38,200,000 43,200,000 45,400,000
Stock In Trade 45,053,000 51,144,000 53,556,000 60,535,000 63,537,000
Advances, P repaym ents And O thers 755,000 859,000 902,000 1,020,000 1,071,000
C ash A nd Bank Balances 40,740,714 39,449,951 42,217,377 50,868,764 63,898,766
Total C u rrent Assets 118,537,714 127,852,951 134,875,377 155,623,764 173,906,766
Total Assets 236,169,664 232,411,486 227,574,905 237,540,431 245,996,371
- - - - -
25
Pre-feasibility Study Chipboard Plant
26
KEY ASSUMPTIONS
Financial Projections:
Ratio
Laminated Sheets
19mm 50.0%
13mm 30.0%
Non-Laminated Sheets
19mm 5.0%
13mm 30.0%
Laminated Sheets
19mm – (per sheet) Rs. 939
13mm – (per sheet) Rs. 861
Non-Laminated Sheets
19mm – (per sheet) Rs. 470
13mm – (per sheet) Rs. 391
Sale Price Growth Rate of Sheet 5%
Operating Assumptions:
No of Shifts/day 1
Cost of Goods Sold Assumptions:
Depreciation Assumptions:
28