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Pre-Feasibility Study

PET BOTTLES MANUFACTURING UNIT

Small and Medium Enterprise Development Authority


Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor ,LDA Plaza , Egerton Road , Lahore 54000, Pkaistan
Tel: (042) 111-111-456, Fax: (042) 6304926-7
helpdesk@smeda.org.pk
www.smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE


PUNJAB SINDH NWFP BALOCHISTAN

8th Floor ,LDA Plaza , Egerton 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Road , Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Lahore 54000, 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: (0426304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
helpdesk.punjab@smeda.org.pk helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk

May, 2010
Pre-Feasibility Study PET Bottles Manufacturing Unit

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-37
Revision 2
Prepared by SMEDA-Punjab
Approved by GM Punjab
Issue Date May, 2010
Issued by Library Officer

PREF-37/May, 2010/2
Pre-Feasibility Study PET Bottles Manufacturing Unit

TABLE OF CONTENTS
Table of Contents .................................................................................................................3
1 Executive summary..................................................................................................1
2 Introduction ..............................................................................................................2
2.1 Project Brief ...........................................................................................................2
2.2 Project Rationale ....................................................................................................2
2.3 Proposed Capacity..................................................................................................3
2.4 Total Project Cost...................................................................................................3
3 Current Industry Structure ....................................................................................3
4 Products Offered ......................................................................................................4
4.1 Production Mix ......................................................................................................4
5 Production Process...................................................................................................5
5.1 Manufacturing Stages.............................................................................................6
5.1.1 One-Step Process ...........................................................................................6
5.1.2 Two-Step Process...........................................................................................6
6 Machinery Requirement..........................................................................................7
6.1 Injection molding machines ...................................................................................8
6.2 Compressor ............................................................................................................8
6.3 Cooling tower, Chiller unit ....................................................................................8
6.4 Workshop Machines ..............................................................................................8
7 Production.................................................................................................................8
7.1 Injection Molding...................................................................................................8
7.1.1 Injection Molding Capacity Details ...............................................................8
7.1.2 Injection Molding Process Details .................................................................9
7.2 Stretch Blow Process............................................................................................10
7.3 Production Capacity of the Project ......................................................................10
7.4 Starting Production Capacity ...............................................................................11
8 Human RESOURCE Requirement ......................................................................11
9 Land & building .....................................................................................................11
10 Project Economics..................................................................................................12
11 financial analysis ....................................................................................................13
11.1 Projected Income Statement.................................................................................13
11.2 Projected Balance Sheet.......................................................................................14
11.3 Projected Cash Flow Statement ...........................................................................15
12 Key Assumptions....................................................................................................16
13 ANNEXTURE ........................................................................................................18

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Pre-Feasibility Study PET Bottles Manufacturing Unit

1 EXECUTIVE SUMMARY

The PET Bottles Manufacturing unit is a project of Plastic Sector, in which, the most
convenience-size bottles are made from Polyethylene Terephthalate. PET has become the
material of choice for bottled beverages because it is lightweight and shatter resistant, and
PET has been extensively tested for safety. PET resin has superior properties i.e. attractive,
pure, safe, good barrier, no leakage, design flexibility, recyclable, etc. Bottles made with
PET are widely used for everything from water and fruit juice to soft drinks etc.

Every day, million of consumers rely on the safety and ease of plastic bottles to help to
preserve the quality and freshness of what we drink and serve our families. Plastic make
possible an array of opportunities for transporting, storing and serving our favorite
beverages, and today’s convenience-size bottles are an increasingly popular choice for
busy people everywhere.

A PET Bottles Manufacturing Unit with a capacity of 5.27 million bottles per year needs a
capital investment estimated at Rs. 10.97 million for construction and purchasing
machinery & equipment. In addition to this, an estimated sum of Rs. 2.72 million is
required as working capital. The total project cost is estimated at Rs. 13.69 million.
Projected IRR, Net Present Value (NPV) and Payback of this project are 38%, Rs.
16,221,149 and 4.32 years respectively.

In this pre-feasibility study, all the calculations have been based on 5.27 million bottles of
three different sizes 0.5, 1.5 & 5 litter bottles. Due to high demand of 1.5 litter bottles its
percentage in the product mix is high 65.57% as compared to 0.5 and 5.0 litter bottles
which are 32.79% and 1.64% respectively.

PREF-37/May, 2010/2
Pre-Feasibility Study PET Bottles Manufacturing Unit

2 INTRODUCTION
2.1 Project Brief
PET bottles are a packaging medium, made up of Polyethylene Terephthalate (PET). These
are widely used in food grade packaging and are the preferred packaging medium in this
segment, due to their several advantages over other resins like PE, HDPE and PVE.1
The objective of this pre-feasibility study is to provide information for setting up a PET
bottles manufacturing unit. Proposed location for this project is Lahore.

2.2 Project Rationale


PET bottles are used as packaging in a variety of products. The demand of PET bottles is
on a rise as most of the food manufactures from different businesses are converting to PET
bottles for the packaging of their products. The PET bottles/containers are commonly used
for the packaging of the following:
• Mineral Water
• Carbonated Beverages
• Edible Oil
• Household Food Containers
• Detergents
• Paints
• Lubricating Oils
• Feeding Bottles for Babies
As PET bottles provide better packaging, and have a lower cost than the bottles made from
glass and other materials, different businesses in beverage, food and non-food industry are
shifting towards PET bottles.
The PET resin has superior properties, which are as follows:
♦ Attractive: Products look good, pure and healthy because of attractiveness of PET
bottles.
♦ Pure: Products taste good as PET complies with international food contact regulations.
♦ Safe: PET bottles are tough and virtually unbreakable. If they do fail, they split, not
shatter. Their high impact and tensile strength makes them ideal for carbonated
products.
♦ Good barrier: The low permeability of PET to oxygen, carbon dioxide and water
means that it protects and maintains the integrity of products giving a good shelf life.
PET also has good chemical resistance.
♦ Lightweight: One tenth the weight of an equivalent glass pack, PET bottles reduce
shipping costs, and because the material in the wall is thinner, shelf utilization is

1
PE stands for Polyethylene, HDPE stands for High Density Polyethylene, PVE stands for Poly Vinyl
Ethylene
2

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Pre-Feasibility Study PET Bottles Manufacturing Unit

improved by 25% on volume compared to glass. High strength, low weight PET bottles
can be stacked as high as glass.
♦ No leakage: Absolute closure integrity is possible because of the injection molded
neck finish. The absence of a weld line in the base means that PET bottles have no
leakage.
♦ Design flexibility: PET bottles are suitable for containers of all shapes, sizes, neck
finish designs and colors.
♦ Recyclable: Used PET bottles can be washed, granulated into flakes and reshaped as
PET bottles or employed as material for strapping, carpeting, fiber filling, etc.
Specially designed thick-wall bottles can be washed, refilled and reused. PET is made
from the same three elements (carbon, oxygen, and hydrogen) as paper, and contains
no toxic substances. When burned, it produces carbon dioxide gas and water, leaving
no toxic residues. Being recyclable is the most important factor of success of business
of PET bottles. It consumes less energy and produces less pollution than glass or metal
packaging. PET is completely recyclable material, and in many European and Latin
American countries, PET bottles are designed to be refilled and used over and over
again. In the US, more than 600,000,000 pounds of PET bottles are recycled annually.

2.3 Proposed Capacity


The production capacity of the proposed project is estimated at 5.27 million bottles per
year.

2.4 Total Project Cost


The cost of the project is estimated at Rs 13.69 million having a Capital Investment of Rs.
10.97 million and Working Capital provision of Rs. 2.72 million.

3 CURRENT INDUSTRY STRUCTURE


Majority of the businesses in Pakistan are converting from the bottle containers of
traditional material to plastic substitutes for packaging of their products. The domestic
manufacturing of plastic products is growing at 10-15 percent annually. Businesses from
different fields are shifting from conventional packaging to PET bottles. Carbonated
beverage, edible oil and mineral water industries are good examples for the increasing
demand of PET bottles, as majority of the players in these industries have shifted to PET
bottles. Within five years, the share of PET bottles has grown from 2-3 percent to 18-20
percent in the carbonated beverage market.
With every passing day, new industries are shifting to PET bottling because of lower cost
and better preservation of their product.

Because of the high demand of PET bottles, there has been an increase in small
manufacturing units of PET bottles in the main cities of Pakistan. The major players of the
industry are Gatron and Five Star Industries. There are around 35 small and medium units
working in Lahore including Mega Plast, Plas Pack, S.K. Plast (Pvt.) Ltd, Uni Plast
International, Al Quresh Bottles etc. These units manufacture variety of products, ranging
from bottles for mineral water to packaging for pesticides.
3

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Pre-Feasibility Study PET Bottles Manufacturing Unit

4 PRODUCTS OFFERED
The proposed project will be capable of making PET bottles of different sizes. Commonly
manufactured sizes shall be 0.5, 1.5 and 5 liter. The size of bottles will depend on customer
specifications.
Table 4-1 Details of Product Mix
Product Offered
0.5 Liters PET Bottles
1.5 Liters PET Bottles
5 Liters PET Bottles

The target customers of Pet bottle are Mineral Water, Beverages and Edible oil industries.
The production of 1.5-liter bottles is the highest, as they are used in the beverage and
mineral water industries which are the two largest consumers of PET bottles. Along with
this, the production of 0.5 liter bottles is also increasing because of the increase of usage in
mineral water bottles. The production of 5 liter is lower then the other two because they are
mostly used in edible oil packaging.

4.1 Production Mix


Keeping in view the demand of the product mix the proposed production is divided into the
below proportion.
Table 4-2 Production Mix
Description Production Ratio2
0.5 Liter bottle 32.79 %
1.5 Liter bottle 65.57%
5 Liter bottle 1.64%
100%

2
Production ratios have been calculated from the capacities of the machinery and are explained in the
following pages.
4

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Pre-Feasibility Study PET Bottles Manufacturing Unit

5 PRODUCTION PROCESS
Figure 5-1 Process Flow Diagram of PET Bottles Manufacturing
Drying the PET

PET absorbs moisture from the atmosphere.


This must be removed before processing
using a dehumidifying drier.

Plasticizing the PET

Dried PET Pellets are compressed and


melted by a rotating injection Screw.

Injection molding the


Preform
Molten PET is injected into an
injection cavity and cooled rapidly to
form a "Preform".
(The Original test-tube-like form, from which
bottles are blown is know as a Preform).

Opitimizing the
Preform
Temperature
The temperature of the preform is
adjusted to the correct profile for
blowing.

Stretch blow molding


the container.
The hot Preform is simultaneously stretched
and blown (thereby, orienting the crystals of
and strengthening the PET) into a shaped
blow mold to form a tough, lightweight
container.

Container
ejection
The finished container
is ejected.

PREF-37/May, 2010/2
Pre-Feasibility Study PET Bottles Manufacturing Unit

PET bottles manufacturing process involves two basic stages of Pre-form manufacturing
and Bottle Stretch Blow Molding.
1. Pre-form manufacturing process consists of following steps:
a. Resin drying and dehumidification
b. Melting of resin and injection into mold
c. Injection blow molding
d. Primary cooling
e. Secondary cooling
f. Ejection and storage
2. Bottle Stretch Blow Molding, process involves:
a. Pre-form feeding
b. Pre-form heating
c. Transfer of heated pre-forms to blow wheel
d. Bottle stretch blow molding
e. Bottle ejection

5.1 Manufacturing Stages


Bottles can be made through two types of processes.
1. One-step process
2. Two-step process

5.1.1 One-Step Process


In a one-step process, the PET bottles are made directly from the resin. Both the pre-form
manufacturing and stretch blow molding is performed on a single line.
Main features of the one step process are as follows:
1. Lesser Power consumption.
2. Lower initial investment.
3. Same number of injection cavities and blow molds as on conventional machine.
4. Better thermal efficiency because the residual heat in the pre-forms from the
injection molding process is used for blowing.
5. Bottles free from scruff marks, as performs are not re-gripped before blowing.
6. Highly oval or rectangular cross-sectioned containers.
7. Different pre-form designs, as pre-form wall is thicker to retain heat where
stretching is required.

5.1.2 Two-Step Process


In a two-step process, PET bottles are made in two discrete steps. The first step involves
making the pre-form, and the next, the production of bottle. The pre-forms are produced
earlier and stored, and stretch blow molding is done as and when required.
Main features of two-step production process are as follows:
1. Higher operating efficiency because of separate injection and blow molding
function.
2. Higher initial investment. Buying pre-forms instead of making them can save
money.

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Pre-Feasibility Study PET Bottles Manufacturing Unit

3. Different cycle times of the two separate machines, so the outputs are matched by
increasing the number of injection cavities.
4. More suitable for high volume production of less technically demanding containers
such as carbonated soft drink bottles.
5. Thermal efficiency lower since the pre-forms are first cooled to the room
temperature for storage purposes and then re-heated to suitable blowing
temperature.
6. Better adaptability to fluctuation in demand, as pre-forms can be stockpiled. Care
must be taken in controlling storage conditions to ensure consistent aging and
moisture absorption of different pre-form batches.
7. Centralized pre-form production facility can be created to supply several blow
molders.
8. Higher flexibility, as bottle makers can make or buy pre-forms.
9. Higher inventory of pre-forms, as they are frequently scuffed before blowing.
10. Degree of ovality restricted owing to the difficult of temperature profiling of the
pre-forms.
11. Thinner pre-form walls, so that it heats up faster where stretching is required.
6 MACHINERY REQUIREMENT
Table 6-1 Machinery Requirement
Unit Cost Total Cost (Rs.)
Injection Molding Machine I 1 500,000 500,000
Injection Molding Machine II 1 450,000 450,000
Blow Molding Machine I 1 595,000 595,000
Blow Molding Machine II 1 595,000 595,000
Compressor 1 250,000 250,000
Cooling Tower 1 170,000 170,000
Chiller Unit 1 100,000 100,000
Lathe 8 ft, refurbished 1 350,000 350,000
Lathe 5.5 ft, 1 200,000 200,000
Pillar Drill 26 inches, with 1 100,000 100,000
pump
Facer 1 192,000 192,000
Shaper 26 inch 1 168,000 168,000
Die Molds 250,000 250,000
Production Shells 150,000 150,000
Generator (50 KWH) Made in 1 295,000 295,000
3
China
Total Cost 4,365,000

3
As per prevailing policy, industrial grids provide consistent electric supply to industrial units. In case if
unit doesn't place in industrial grid area then generator is required
7

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Pre-Feasibility Study PET Bottles Manufacturing Unit

6.1 Injection molding machines


Injection molding machines of two different sizes are required as the proposed production
mix depends upon different sizes.
The refurbished injection molding machines of the following brands are available in the
market:
Kawaguchi, JSW, Meiki, Nessei, Net Star, Toshiba, Hayabusa, Senki.
Usually, there is a guarantee of 6 months from the date of installation for the machinery,
but not for its electrical parts and components. The machinery delivery time is 15-20 days
if it is available off-the-shelf, but if not, then it has to be imported, which can take up to 4
months, depending upon the availability.
The stretch blow molding machines are also being manufactured locally.

6.2 Compressor
The compressor will be used with the stretch blow machine. It will supply compressed air
to the blow-molding machine.

6.3 Cooling tower, Chiller unit


The cooling tower is required to generate cooling water for cooling the compressors.

6.4 Workshop Machines


Lathe machines, pillar drill, facer and shaper are required for the workshop. All the
machines required for the workshop are manufactured locally.

7 PRODUCTION
For the purpose of this project, the injection molding machine with total barrel capacity of
111 grams will be used for the production of pre-forms of 0.5 liter bottles only. The other
injection-molding machine will be used for the production of pre-forms of 1.5 liters and 5
liter bottles in the ratio of 80:20. This machine with high barrel capacity will enable the
business to make 19 liter bottles at a later stage.

7.1 Injection Molding

7.1.1 Injection Molding Capacity Details


A JSW Series 70-ton machine is available in the injection capacities of 111 grams, 145
grams or 192 grams. For the purpose of this pre-feasibility study, the machine with
injection capacity of 111 grams has been used. For PET, it is recommended that a factor of
70% be used to determine the shot size as a percentage of total barrel capacity.
This means that for the 111 grams machine, it will be able to make a shot size of 78 grams
(111 grams X 70%)
0.5 –liter bottle weighs roughly 15 grams, so the 111 gram machine will be able to make
maximum of 4 pre-forms.

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Pre-Feasibility Study PET Bottles Manufacturing Unit

Second machine will be used for the production of 1.5 and 5-liter PET bottles (Kawaguchi
Series). 175 ton machine comes in Shot Weights of 302 grams or 373 grams or 537 grams.
For the purpose of this study, the machine of 537 grams has been used. Using the 70%
recommended factor, this machine will be able to make a shot size of 376 grams (537
grams X 70%)
A 1.5-liter Bottle weighs roughly 33 grams. Hence the 537-gram machine will be able to
make a maximum of 10 pre-forms in one stroke.
A 5-liter Bottle weighs roughly 340 grams. Hence the 537-gram machine will be able to
make a maximum of 1 pre-form in one stroke.
Both injection-molding machines take 18-20 seconds to complete one stroke.

7.1.2 Injection Molding Process Details


The primary role of the injection-molding machine is to develop performs.
The raw material (PET bottles grade resin) is placed in the hopper of an injection-molding
machine where it is fed into a chamber for melting. Melting is done by conducting heat
into the material in a "Plunger" machine, while the material is primarily heated by shearing
or mechanically working the material in a "Screw" machine. Several shots of material are
heated and held in the injection unit.
Once melted, the material is forced, under pressure, into the mold where it conforms to the
shape of the cavity. The mold is temperature controlled, usually by circulating
temperature-controlled water through it. Once the part is cooled, the mold is opened and
the part removed. The mold is then closed and ready for the next shot. The mold is
clamped shut while the material is being injected in to the cavity since the cavity pressure
may be as high as 5,000 psi4. The clamp is sized by the "Tonnage" it holds.
An injection-molding machine usually takes 18-20 seconds, depending upon the make and
the model, to complete one stroke. The number of pre-forms made depends upon the
mold/die and the number of cavities. The higher the number of cavities in a mold, the
higher will be the clamping force required.
The injection molding machine making pre-forms for 5-liter bottle is the same as the one
making pre-form for 1.5 liter bottle, but the production of the 5 liter bottles will be less.
The details of production capacity for the injection molding machines are given in below
table:

4
pounds per square inch
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Pre-Feasibility Study PET Bottles Manufacturing Unit

Table 7-1 Production Capacity of Injection Molding Machine


Produ
Stroke
Per Stroke Installed Share in ct Mix Annual
Production per
Production cap/day Production Cap./ Production
minute
Day
0.5 Liters PET
4 3 5,760 100% 5,760 1,728,000
bottle
1.5 Liters PET
10 3 14,400 80% 11,520 3,456,000
bottle
5 Liters PET
1 3 1,440 20% 288 86,400
bottles
Total 17,568 5,270,400

7.2 Stretch Blow Process


The stretch blow-molding machine has a capacity of handling about 360 pre-forms in an
hour using one shell. The pre-forms are to be manually fed into the stretch blow-molding
machine by an operator.
The stretch blow-molding machine has a conveyor, which feeds pre-heated pre-forms into
the stretch blow-molding machine. The stretch blow-molding machine blows a bottle of
1.5-liter capacity in about 14 seconds. By incorporating the operator handling time, the
time of stretch blow molding along with ejection is about 17 seconds.
Table 7-2 Production Capacity Stretch Blow Molding Machine
Time Required Hourly Installed
(Sec)/Stroke5 Production Capacity/Day
0.5 Liter 11 2,252 18,018
1.5 Liter 17 1,447 11,574
5 Liter 59 409 3,269

7.3 Production Capacity of the Project


Since every bottle has to pass through both the processes of injection molding and stretch
molding, so the total production capacity of the unit will be determined by the bottleneck
of the process. This means that the lower of the capacities of the two processes will be the
total capacity of the unit.
As the maximum capacity of injection molding machine for 0.5 liter bottles is 5,760 and
the capacity of stretch blow molding machine for 0.5 liters bottles is 18,018, so the
maximum production of 0.5 liters bottles that can be obtained from the unit is 5,760
bottles. Similarly, the total production capacities of the 1.5 liter and 5 liter bottles can be
worked out. Table 7-5 summarizes the production capacities of the three sizes of PET
bottles being recommended in this pre-feasibility study.

5
Stretch Blow machine blows 4 bottles in one stroke.
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Pre-Feasibility Study PET Bottles Manufacturing Unit

Table 7-3 Maximum Production Capacity of Unit


Stretch Maximum
Injection Annual Percentage
Blow Production of
Product Molding Installed Share in
Molding the unit per
Production Capacity Production
Capacity day
0.5 Liter 5,760 18,018 5,760 1,728,000 32.79%
1.5 Liter 12,672 11,574 11,574 3,456,000 65.57%
5 Liter 288 3,269 288 86,400 1.64%
Total 5,270,400 100%

7.4 Starting Production Capacity


Starting capacity utilization of this unit is 40%. The maximum capacity level that can be
achieved is 90%.

8 HUMAN RESOURCE REQUIREMENT


Table 8-1 Human Resource Requirement
Number of Monthly Salary Annual Salary
Personnel (Rs) in (Rs)
CEO 1 50,000 600,000
Production Manager 1 30,000 360,000
Accountant 1 14,000 168,000
Injection Machine Operators 2 12,000 288,000
Blow Machine Operators 2 12,000 288,000
Pre-form Handler 1 8,000 96,000
Helpers 4 7,000 336,000
Guards 2 7,000 168,000
Total 14 192,000 2,304,000

9 LAND & BUILDING


For the proposed project, an area of about 5,000 sq. ft. is required. It is recommended that
the land should be bought. The details of the area required for different activities are given
below:
Table 9-1 Building Covered Area Requirement
Description Area (sq. ft) Cost per Sq. ft. Total in (Rs)
Management building 100 1300 130,000
Production Area 1,728 800 1,382,400
Raw Material Store 252 700 176,400
Finished goods store 510 700 357,000
Loading area 696 700 487,200
Workshop Area 855 700 598,500
Cooling Tower/Chiller 684 600 410,400
Total Construction Cost 4,950 3,541,900
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10 PROJECT ECONOMICS

Capital Investment Rs. In actuals


Land 2,358,889
Building/Infrastructure 3,541,900
Machinery & equipment 4,365,000
Furniture & fixtures 81,250
Office equipment 112,000
Pre-operating costs 508,000
Total Capital Costs 10,967,039

Working Capital Rs. In actuals


Raw material inventory 2,312,572
Cash 410,710
Total Working Capital 2,723,282

Total Investment 13,690,320

Initial Financing Rs. In actuals


Debt 50% 6,845,160
Equity 50% 6,845,160

Initial Financing Equity Project


IRR 48% 38%
Payback Period (yrs) 4.25 4.32
Net Present Value (Rs.) 17,945,535 16,221,149

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Pre-Feasibility Study PET Bottles Manufacturing Unit

11 FINANCIAL ANALYSIS
11.1 Projected Income Statement
Statement Summaries SMEDA
Income Statement

Rs. In actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 16,257,024 22,353,408 29,506,499 37,866,673 47,603,818 58,909,724 64,800,697 71,280,766 78,408,843 86,249,727
Cost of goods sold 12,347,210 16,470,549 20,664,692 25,304,121 30,431,003 36,091,566 38,341,738 40,748,705 43,324,710 46,083,045
Gross Profit 3,909,814 5,882,859 8,841,806 12,562,553 17,172,815 22,818,158 26,458,959 30,532,061 35,084,133 40,166,682

General administration & selling expenses


Administration expense 1,272,000 1,027,130 1,127,133 1,236,872 1,357,296 1,489,444 1,634,459 1,793,592 1,968,219 2,159,847
Rental expense - - - - - - - - - -
Utilities expense 143,119 157,431 173,174 190,492 209,541 230,495 253,544 278,899 306,789 337,468
Office expenses (stationary, etc.) 12,720 10,271 11,271 12,369 13,573 14,894 16,345 17,936 19,682 21,598
Promotional expense 325,140 447,068 590,130 757,333 952,076 1,178,194 1,296,014 1,425,615 1,568,177 1,724,995
Insurance expense - - - - - - - - - -
Professional fees (legal, audit, etc.) 81,285 111,767 147,532 189,333 238,019 294,549 324,003 356,404 392,044 431,249
Depreciation expense 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920
Amortization expense 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800
Subtotal 2,517,985 2,437,388 2,732,961 3,070,120 3,454,225 3,891,297 4,208,085 4,556,166 4,938,631 5,358,876
Operating Income 1,391,829 3,445,471 6,108,845 9,492,433 13,718,589 18,926,861 22,250,874 25,975,896 30,145,502 34,807,806

Other income 21,471 27,017 44,007 113,337 247,239 494,816 871,180 1,340,227 1,894,188 2,739,840
Earnings Before Interest & Taxes 1,413,300 3,472,488 6,152,852 9,605,770 13,965,829 19,421,677 23,122,054 27,316,122 32,039,690 37,547,646

Interest expense - 1,014,823 820,366 592,410 325,184 48,291 - - - -


Earnings Before Tax 1,413,300 2,457,666 5,332,486 9,013,360 13,640,645 19,373,386 23,122,054 27,316,122 32,039,690 37,547,646

Taxable earnings for the year 1,413,300 2,457,666 5,332,486 9,013,360 13,640,645 19,373,386 23,122,054 27,316,122 32,039,690 37,547,646
Tax 494,655 860,183 1,866,370 3,154,676 4,774,226 6,780,685 8,092,719 9,560,643 11,213,891 13,141,676
NET PROFIT/(LOSS) AFTER TAX 918,645 1,597,483 3,466,116 5,858,684 8,866,419 12,592,701 15,029,335 17,755,480 20,825,798 24,405,970

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Pre-Feasibility Study PET Bottles Manufacturing Unit

11.2 Projected Balance Sheet


Statement Summaries SMEDA
Balance Sheet

Rs. In actuals
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 410,710 1,020,712 780,453 2,153,334 5,402,478 11,080,153 21,907,564 36,171,111 53,177,352 73,101,830 109,554,201
Accounts receivable - 812,851 1,930,522 2,592,995 3,368,659 4,273,525 5,325,677 6,185,521 6,804,073 7,484,480 8,232,929
Finished goods inventory - 102,893 137,255 172,206 210,868 253,592 300,763 319,514 339,573 361,039 384,025
Equipment spare part inventory - - - - - - - - - - -
Raw material inventory 2,312,572 3,187,013 4,216,419 5,423,369 6,833,445 8,475,607 9,344,356 10,302,153 11,358,124 12,522,331 -
Total Current Assets 2,723,282 5,123,470 7,064,648 10,341,904 15,815,449 24,082,876 36,878,361 52,978,300 71,679,121 93,469,681 118,171,155

Fixed assets
Land 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889 2,358,889
Building/Infrastructure 3,541,900 3,364,805 3,187,710 3,010,615 2,833,520 2,656,425 2,479,330 2,302,235 2,125,140 1,948,045 1,770,950
Machinery & equipment 4,365,000 3,928,500 3,492,000 3,055,500 2,619,000 2,182,500 1,746,000 1,309,500 873,000 436,500 -
Furniture & fixtures 81,250 73,125 65,000 56,875 48,750 40,625 32,500 24,375 16,250 8,125 -
Office equipment 112,000 100,800 89,600 78,400 67,200 56,000 44,800 33,600 22,400 11,200 -
Total Fixed Assets 10,459,039 9,826,119 9,193,199 8,560,279 7,927,359 7,294,439 6,661,519 6,028,599 5,395,679 4,762,759 4,129,839

Intangible assets
Pre-operation costs 508,000 457,200 406,400 355,600 304,800 254,000 203,200 152,400 101,600 50,800 -
Total Intangible Assets 508,000 457,200 406,400 355,600 304,800 254,000 203,200 152,400 101,600 50,800 -
TOTAL ASSETS 13,690,320 15,406,789 16,664,247 19,257,783 24,047,607 31,631,315 43,743,080 59,159,298 77,176,400 98,283,240 122,300,993

Liabilities & Shareholders' Equity


Current liabilities
Accounts payable - 797,824 1,586,584 2,037,245 2,519,583 3,055,295 3,597,872 3,984,755 4,246,377 4,527,419 4,139,202
Total Current Liabilities - 797,824 1,586,584 2,037,245 2,519,583 3,055,295 3,597,872 3,984,755 4,246,377 4,527,419 4,139,202

Other liabilities
Long term debt 6,845,160 6,845,160 5,716,375 4,393,134 2,841,936 1,023,513 - - - - -
Total Long Term Liabilities 6,845,160 6,845,160 5,716,375 4,393,134 2,841,936 1,023,513 - - - - -

Shareholders' equity
Paid-up capital 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160 6,845,160
Retained earnings - 918,645 2,516,128 5,982,244 11,840,928 20,707,347 33,300,048 48,329,383 66,084,863 86,910,661 111,316,631
Total Equity 6,845,160 7,763,805 9,361,288 12,827,404 18,686,088 27,552,507 40,145,208 55,174,543 72,930,023 93,755,821 118,161,791
TOTAL CAPITAL AND LIABILITIES 13,690,320 15,406,789 16,664,247 19,257,783 24,047,607 31,631,315 43,743,080 59,159,298 77,176,400 98,283,240 122,300,993

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PREF-37/May, 2010/2
Pre-Feasibility Study PET Bottles Manufacturing Unit

11.3 Projected Cash Flow Statement


Statement Summaries SMEDA
Cash Flow Statement

Rs. In actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activities
Net profit - 918,645 1,597,483 3,466,116 5,858,684 8,866,419 12,592,701 15,029,335 17,755,480 20,825,798 24,405,970
Add: depreciation expense - 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920 632,920
amortization expense - 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800 50,800
Deferred income tax - - - - - - - - - - -
Accounts receivable - (812,851) (1,117,670) (662,474) (775,663) (904,866) (1,052,153) (859,844) (618,552) (680,407) (748,448)
Finished good inventory - (102,893) (34,361) (34,951) (38,662) (42,724) (47,171) (18,751) (20,058) (21,467) (22,986)
Equipment inventory - - - - - - - - - - -
Raw material inventory (2,312,572) (874,441) (1,029,405) (1,206,950) (1,410,076) (1,642,162) (868,750) (957,797) (1,055,971) (1,164,208) 12,522,331
Accounts payable - 797,824 788,760 450,661 482,338 535,712 542,576 386,884 261,622 281,042 (388,217)
Cash provided by operations (2,312,572) 610,003 888,526 2,696,122 4,800,341 7,496,099 11,850,924 14,263,547 17,006,241 19,924,478 36,452,370

Financing activities
Change in long term debt 6,845,160 - (1,128,785) (1,323,242) (1,551,197) (1,818,424) (1,023,513) - - - -
Issuance of shares 6,845,160 - - - - - - - - - -
Cash provided by / (used for) financing activ 13,690,320 - (1,128,785) (1,323,242) (1,551,197) (1,818,424) (1,023,513) - - - -

Investing activities
Capital expenditure (10,967,039) - - - - - - - - - -
Cash (used for) / provided by investing activ (10,967,039) - - - - - - - - - -

NET CASH 410,710 610,003 (240,259) 1,372,881 3,249,143 5,677,676 10,827,411 14,263,547 17,006,241 19,924,478 36,452,370

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Pre-Feasibility Study PET Bottles Manufacturing Unit

12 KEY ASSUMPTIONS
Table 12-1: Operating Assumptions
Hours operational per day 8
Days operational per month 25
Days operational per year 300

Table 12-2: Production Assumptions


Annual production capacity (Bottles) 5,270,400
Capacity utilization (1st Year) 40%
Capacity growth rate (yearly) 10%
Maximum Capacity utilization 90%
First Year utilized production (Bottles) 2,108,160

Table 12-3: Economic Assumptions


Electricity growth rate 10%
Wages growth rate 10%
Machine maintenance growth rate 5%

Table 12-4: Cash Flow Assumptions


Accounts Receivable cycle (in days) 30
Accounts Payable cycle (in days) 30
Raw material inventory (in days) 30
Finished Goods inventory (in days) 3

Table 12-5: Raw Material Assumptions


Initial Cost /Kg (Rs) 110
Sales Tax 16% 17.60
Freight Cost per Truck 26,000
Weight per Truck (kg) 9,000
Freight Cost per kg 2.89
Total Raw material Cost (Rs/kg) 130
Raw material growth rate 5%
Raw Material Inventory in store (Months) 3

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PREF-37/May, 2010/2
Pre-Feasibility Study PET Bottles Manufacturing Unit

Table 12-6: Expense Assumptions


Professional fees (audit, legal etc.) 0.5% of Revenue
Office Expenses (stationery, entertainment, etc.) 1% of total administrative costs
Promotional Expenses 1% of revenue

Table 12-7: Depreciation Rates


Depreciation Method Straight Line
Building & infrastructure 5%
Machinery & Equipment 10%
Furniture & Fixtures 10%

Table 12-8: Financial Assumptions


Project life (Years) 10
Debt: Equity 50:50
Interest rate on long term debt 16%
Discount rate for calculation of NPV 20%

Table 12-9: Raw Material Consumption Per Bottle


Size Weight (grams) Rate Total Cost (Rs.)
0.5 Liter 15.75 130 2.06
1.5 Liter 34.65 130 4.52
5 Liter 350.20 130 45.70
Weighted average cost of Raw material per bottle (Rs.) 4.39

Table 12-10: Product Average Sale Price


Size Price (Rs)
0.5 Liter 3.60
1.5 Liter 7.92
5 Liter 81.60
Weighted Average Price (Rs) 7.71

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PREF-37/May, 2010/2
Pre-Feasibility Study PET Bottles Manufacturing Unit

13 ANNEXTURE

Raw Material Supplier:

Company Name Gatron Industries Liminted.


Address 8th Floor, Textile Plaza, M.A. Jinnah / Dunnolly Road, P.O. Box
5801,Karachi-74000, Pakistan
Phone: 0092-21- 111-71-71-71
Fax 0092-21- 2416532
Email headoffice@gatronova.com
Website www.gatronova.com

Machinery Suppliers & Consultant:

Company Name KNC International


Address Suit No.1, 5th Floor Sharja Centre 62-Shadman Market Lahore
Pakistan
Phone: 0092-42-7532157-58
Fax 0092-42-7532159
Email info@knc.com.pk
Website www.knc.com.pk

Company Name Universal Resources & Traders


Address 387 A, Geo Plaza near Picking Hotel, Model Town, Gujranwala
Phone: 0092-55-3840241
Fax 0092-55-3840241
Email urt@brain.net.pk

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PREF-37/May, 2010/2

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