SMEDA Light Weight Roof Tiles Manufacturing Unit

Pre-Feasibility Study
Light Weight Roof Tiles

Manufacturing Unit
Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor, LDA Plaza, Egerton Road, Lahore.
Tel: (042) 111-111-456, Fax: (042) , 6304926, 6304927
Helpdesk@smeda.org.pk
REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KHYBER PAKHTUNKHWA BALOCHISTAN
8th Floor, LDA Plaza, Egerton 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Road, Lahore. Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Tel: (042) 111-111-456 Karachi. The Mall, Peshawar. Airport Road, Quetta.
Fax: (042) 6304926, 6304927 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 2831623, 2831702
helpdesk@smeda.org.pk Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
Helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
June, 2010
Pre-feasibility Study Roof Tiles 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-24
Prepared by SMEDA-Balochistan
Issue Date June 2010
Issued by SMEDA-Balochistan
II
BAL-PREF-24/June, 2010
1 Purpose of the document............................................................................... 3
2 Project Profile................................................................................................ 3
2.1 Project Brief ................................................................................................................3
2.2 Opportunity Rationale..................................................................................................4
2.3 Market Entry Timing ...................................................................................................4
2.4 Proposed Business Legal Status ...................................................................................4
2.5 Proposed Product Mix .................................................................................................4
2.6 Production Capacity.....................................................................................................5
2.7 Project Investment .......................................................................................................5
2.8 Recommended Project Parameters ...............................................................................5
2.9 Suitable Location.........................................................................................................5
2.10 Key Success Factors ....................................................................................................6
2.11 Strategic Recommendations.........................................................................................6
3 Current Industry Structure .......................................................................... 6
3.1 National Industry .........................................................................................................7
4 Market analysis ............................................................................................. 8
4.1 Marketing Channels.....................................................................................................9
4.2 Marketing Constraints..................................................................................................9
4.3 Price structure..............................................................................................................9
5 Basic Requirements/ Technical Analysis ....................................................10
5.1 Varieties of Tiles to be Produced ...............................................................................10
5.2 Molds ........................................................................................................................10
5.3 Basic Raw Materials ..................................................................................................10
5.4 Production Process Flow............................................................................................10
5.5 Machinery and Equipment Requirement ....................................................................12
6 Human Resource Requirement ...................................................................13
7 Land and Building Requirement.................................................................13

7.1 Recommended Mode .................................................................................................14
8 Project Economics ........................................................................................14
9 Financial Analysis ........................................................................................15

9.1 Project Cost ...............................................................................................................15
9.2 Projected Income Statement.......................................................................................16
9.3 Projected Balance Sheet.............................................................................................17
9.4 Projected Cash Flow Statement..................................................................................18
10 Key Assumptions ......................................................................................19
III
10.1 Production Related Assumptions ...............................................................................19

10.2 Costs Assumptions ....................................................................................................19
10.3 Revenue Assumptions................................................................................................19
10.4 Financing Assumptions..............................................................................................20
10.5 Depreciation Rates.....................................................................................................20
10.6 Cash Flow Assumptions ............................................................................................20
10.7 Economy Related Assumptions..................................................................................20
IV
Introduction to SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was established with
the objective to provide fresh impetus to the economy through the launch of an aggressive
SME support program.1i
Since its inception in October 1998, SMEDA had adopted a sectoral SME development
approach. A few priority sectors were selected on the criterion of SME presence. In depth
research was conducted and comprehensive development plans were formulated after
identification of impediments and retardants. The all-encompassing sectoral development
strategy involved recommending changes in the regulatory environment by taking into
consideration other important aspects including financial aspects, niche marketing,
technology upgradation and human resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits and
vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear,
textiles, surgical instruments, urban transport and dairy. Whereas the task of SME
development at a broader scale still requires more coverage and enhanced reach in terms of
SMEDA’s areas of operation.
Along with the sectoral focus a broad spectrum of business development services are also
offered to the SMEs by SMEDA. These services include identification of viable business
opportunities for potential SME investors. In order to facilitate these investors, SMEDA
provides business guidance through its help desk services as well as development of project
specific documents. These documents consist of information required to make well-
researched investment decisions. Pre-feasibility studies and business plan development are
some of the services provided to enhance the capacity of individual SMEs to exploit viable
business opportunities in a better way. This document is in the continuation of this effort to
enable potential investors to make well-informed investment decisions.
1
For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk
BAL-PREF-24/ June, 2010 -2-

1 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document/study
covers various aspects of project concept development, start-up, and production, finance
and business management.
2 PROJECT PROFILE
The proposed project is about establishment of a manufacturing facility for production of
light weight roof tiles in the adjoining areas of cities and major towns. The document
highlights all the marketing, management, and financial aspects required for the
establishment and successful running of the project.
2. 1 Project Brief
Roof is a very important part of any construction and it comes in many shapes and sizes.
There are a wide variety of roofing materials that are used in construction today with a
range of advantages and disadvantages. The choice of roof depends upon a number of
factors, including the location, climate, desired look, maintenance and cost. In addition
the easy/simple installation of the roofs and the durability of the roofing material are also
very important considerations.
In addition to reinforced concrete roof, other more economic roofing materials include
metal sheets, wood, clay and tiles etc. Roofing tiles are one of the preferred construction
materials for low cost housing and commercial constructions (warehouses, factories etc.).
These tiles can be made of clay brick (e.g., clay fired at a high temperature) or fabricated
from concrete.
The proposed project is related to the production of pre-fabricated concrete roofing tiles.
The tiles can be designed in a way to achieve high performance in wide range of roof
requirements such as converting flat roofs to pitched roofs, construction of housing,
community centers, warehouses and factories etc. It is also suitable for roofing of schools
and other public buildings especially in the rural areas.
The lightweight roofing tiles manufacturing unit will fulfill the local housing construction
demand of tiles of different sizes and strengths depending upon the individual
requirements of the customer. Roofing tiles used in Balochistan are generally available in
12”x12” however, given the customer demand tiles of different specification can also be
manufactured.

2. 2 Opportunity Rationale
One of the most basic human needs is shelter, which for most people consists of a few
walls and a roof over heads. Providing shelter to every family has also become a major
issue for the governments. Being a basic need, the demand for the homes has increased
greatly in past two decades. The major cause in increase of demand of housing is
population growth and rapid pace of urbanization. In addition, the trend is shifting from
joint family system to individual family systems in the urban areas. All of these factors
have resulted in major increase in demand for new housing units all over the country.
Roof tiles have gain popularity, especially with the lower income segment of the
population, because they are lower in cost as compared to reinforced concrete roofs.
Other advantages of tile include durability (compared to wooden/mud roofs), easy
installation, easy maintenance and fire safety, as they are non-combustible.
Light weight roofing tiles have a number of uses including public, private, commercial
and residential projects and it has well-proven market demand making it a good business
opportunity.
2. 3 Market Entry Timing

Demand of new housing remains constant throughout the year, however, construction
activities slow down in some parts of the country where weather is extremely cold in
winters. It is, therefore, recommended to initiate the operations at the end of winters in
the colder areas. In other areas the business can be initiated at any time.
2. 4 Proposed Business Legal Status
The business can be started as sole proprietorship or partnership basis. Furthermore,
comparatively fewer complications are involved in forming, administering and running
the sole proprietorship or partnership businesses.
2. 5 Proposed Product Mix

The Proposed project can produce 900 tiles of 12”x12” in one day.
Table 2.1: Product Mix

Product Average Production Per Day Price Tile (Rs.)
12” x 12” Tiles 900 11

2. 6 Production Capacity
The financial statements for this project are based on the production of 900 tiles/ day.
However, the project can be initiated with the production of 300 tiles / day in smaller
towns and other areas where the demand is comparatively lower.
2. 7 Project Investment
The total project investment is Rs. 2.47 Million which includes Capital Cost of Rs. 2.31
Million and Working Capital of Rs. 0.16 Million. The project is assumed to be financed
through 60% equity and 40 % debt basis.
2. 8 Recommended Project Parameters
Table 2.2 : Project Parameters

Max Capacity Human Resource Technology/Machinery Location
Quetta, Mastung, Kalat,
Sibi, Pishin, Killa
Saifullah, Ziarat and other
900 Tiles/Day 4 Full time Local Made cities of towns of Pakistan
Financial Summary
Cost Of Capital
Total Cost IRR NPV Pay Back Period (WACC)
Rs. 2.47 M 35% 3,066,657 3.57 Years 16%
2. 9 Suitable Location
The choice of location depends upon the availability of raw materials and the proximity
of target market. The proposed low cost roofing structure is used in single story buildings
or it may also be used in the top floor of a two story building. Demand for such type
mainly exists for housing projects in towns and smaller cities. Additionally, in larger
cities the low cost roofs are used in suburban housing schemes, ware houses and
factories. The production unit can be established in cities and towns of Pakistan where
the basic raw materials including cement, sand and water are easily available. Quetta,
Mastung, Kalat, Sibi, Pishin, Killa Saifullah and Ziarat etc. are some of the areas
recommended for starting such facility in Balochistan.
Infrastructure Requirements
 Road
 Electricity
 Water

2. 10 Key Success Factors
 Growing demand for new housing units throughout the year.

 Growing demand from the institutional market (warehouses, factories, government
buildings etc.).
 Lower cost of construction as compared to Reinforced concrete roof.
2. 11 Strategic Recommendations
 Establishment of the unit in areas where basic infrastructure including water and
electricity are available.
 There are great fluctuations in the cost of raw materials; therefore, the business must
be efficiently managed.
 With small amount of training the efficiency of that staff can be increased.
3 CURRENT INDUSTRY STRUCTURE

Construction is a complex sector of the economy, which involves a broad range of
stakeholders and has wide ranging linkages with other areas of activity such as
manufacturing and the use of materials, energy, finance, labor and equipment. Globally,
construction industry is regarded as one of the largest fragmented industry. An estimate
of annual global construction output was closer to U.S $ 4.5 trillion in 20042.
The construction industry is also a prime source of employment generation offering job
opportunities to millions of unskilled, semi-skilled and skilled work force. The
distribution of construction employment is highly different in high-income and low
income countries. The high-income countries produce 77 per cent of total construction
output with 26 per cent of global employment in construction sector. The rest of the
world (comprising low- and middle-income countries) produces only 23 per cent of
output but has 74 per cent of employment in this sector3. The share of construction in the
labour force varies, from about 5 per cent to 8 per cent in larger developed countries, and
up to double-digit figures in some developing countries. The indirect creation of jobs in
the sector has been estimated at around two to one. Construction is one of the largest
employers worldwide, and a major gateway for new jobseekers, especially for unskilled
workers.4
The construction sector consists of the following areas:

 Infrastructure, repair and maintenance
 Public and private housing
 Non-residential public property (e.g. hospitals and schools)
2
Source: Engineering News Record, USA
3
ILO Press Release, Geneva2001
4
ILO , Committee on Sectoral and Technical Meetings and Related Issues, March 2009

 Industrial (e.g. factories and processing plant)

 Commercial construction
Construction sector deals with all economic activities directed to the creation, renovation,
repair or extension of fixed assets in the form of buildings, land improvements of an
engineering nature. It includes hospitals, schools, townships, offices, houses and other
buildings; urban infrastructure (including water supply, sewerage, drainage); highways,
roads, ports, railways, airports; power systems; irrigation and agriculture systems;
telecommunications etc.
3. 1 National Industry
Construction activities and its output is an integral part of a country’s national economy
and industrial development. The construction industry is often seen as a driver of
economic growth especially in developing countries. The industry can mobilize and
effectively utilize local human and material resources in the development and
maintenance of housing and infrastructure to promote local employment and improve
economic efficiency. Construction makes a noticeable contribution to the economic
output of a country; it generates employment and incomes for the people and therefore
the effects of changes in the construction industry on the economy occur at all levels and
in virtually all aspects of life.
Construction sector is playing an important role in Pakistan’s economy as well and

serving as major contributor for economic development of the nation. The industry
generates employment opportunities for millions of unskilled, semi-skilled and skilled
work force. In addition it provides growth impetus to other related sectors through
backward and forward linkages.
Although the construction sector had only a 2.07 percent share in GDP in year 2008-09,
its share of the employed labor force was disproportionately large at 6.6 percent in the
same period. Construction industry had experienced exceptional growth in early 2000s.
It grew by a remarkable 24.3 percent in 2006-07. However due to the economic downturn
it declined by 5.5 percent in 2007-08 and further declined by 11.2 percent in 2008-09.
The industry received this set back as result of reduction in both infrastructure projects
and decline in the housing sector. The major cause contributed to the decline was lack of
finance and the decline in the property market.
Table 3.1: Growth Performance of Construction Sector

(Percent Growth)
Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Percent
18.6 10.2 24.3 - 5.5 - 11.2 15.3
Growth
Source: Economic Survey of Pakistan 2009-10

Despite the continued economic downturn the sector showed a positive growth rate of
15.3 percent in 2009-10. It is hoped that the situation will further improve over the next
years mainly because a major portion of remittances from the overseas Pakistanis are
meant for the property sector. In 2009-10, there has been a decline in Foreign Direct
Investment (FDI) in a number of sectors; yet, construction sector received US$ 86 million
investment in the same period5.
In addition the industry itself is moving at a fast pace. New methods, techniques and
technology are developing rapidly which means that the costs of construction can be
reduced at the same time while improving the quality.
Table 3.2 Employed Labour Force by Sectors
(Percent)
2007-08 2008-09
Sector
Total Male Female Total Male Female
Agriculture 44.6 36.9 75.0 45.1 37.3 74.0
Manufacturing 13.0 13.3 11.8 13.0 13.3 11.9
Construction 6.3 7.8 0.4 6.6 8.3 0.4
Transport 5.5 6.8 0.2 5.2 6.6 0.2
Services 13.7 14.4 10.6 13.66 11.1 11.6
Others 2.3 2.9 0.2 0.10 2.9 0.3
Total 100.00 100.00 100.00 100.00 100.00 100.00
Source: Labour force survey 2008-09 Federal Bureau of Statistics
4 MARKET ANALYSIS
There are different types of roofing options including reinforced concrete structure, clay
bricks, metal roof etc. Due to the soaring construction costs, low cost roof option is in
high demand in most of the rural and urban areas of the country. The tiles are used in a
large number of construction projects including non-traditional/traditional housing,
community centers, warehouses, factories etc. It is also suitable for roofing of schools
and other public buildings especially in the rural areas.
The roof tiles manufacturers are concentrated in different parts of Quetta city including
eastern by pass, Airport Road and Double Road. This is a highly unorganized sub sector
5
Economic Survey of Pakistan 2009-10

of construction, since there are no specific quality standards. The manufacturers use
different quantities of raw materials disproportionately in the production of same amount
of tiles. Cement and reinforcement wires are two of the priciest raw materials and
manufacturers change their quantities/ratio resulting in great variations in the cost, price
and quality of tiles.
4. 1 Marketing Channels
The marketing channels are relatively simple in case of prefabricated roof tiles. The tiles
are directly sold to the private housing customers. Besides housing sector the tiles are
marketed to corporate customers who use them in construction of warehouses, factories,
low cost housing projects etc.
4. 1. 1 Transportation and Packaging

Concrete roofing does not require any special packaging; however, they must be handled
carefully during the transportation. Different means of transportation include trucks,
tractor trolleys, Shahzore and pick-ups etc.
4. 2 Marketing Constraints
The production process of the roof tiles is not highly standardized. Major portion of the
cost of tile is attributed to the quantity of cement and number/diameter of reinforcement
wire used in a single tile. There are variations in quantity of cement and the number of
reinforcement wires used, additionally, the diameter of reinforcement wire is also
reduced by some manufactures. This results in great variation in the production cost of
single tile. Therefore, it is difficult to compete solely on the basis of price in this sector.
The entrepreneur can, however, attain competitive edge in this industry by standardizing
the production process. Higher strengths can be produced with the addition of
supplementary cement and using good quality of reinforcement wires.
4. 3 Price structure
The price of the tile largely depends upon the quantities and mix of raw materials used.
Price is normally determined by the amount of cement used and number of reinforcement
wires used in the tile. Owing to the nature of supply and demand, short-term price
fluctuations may also occur.
Some of the factors influencing producer prices are:

 Amount of Cement used
 Number of reinforcement wires used
 Diameter of reinforcement wires

5 BASIC REQUIREMENTS/ TECHNICAL ANALYSIS
5. 1 Varieties of Tiles to be Produced

The unit can produce 12”x12” tiles; however given the demand tiles of different sizes can
also be produced.
5. 2 Molds
The molds can be made of wood or metal, for this project it is proposed that metallic
molds are used since they are much more durable and long lasting as compared to
wooden molds. One mold consists of two tiles placed side by side.
5. 3 Basic Raw Materials
 Cement
 Sand
 Crushed Stone
 Stone Powder
 Iron Wire
 Water
5. 4 Production Process Flow
The roofing tiles that are made of cement, sand, gravel mixture which are reinforced with
steel wires. The tiles are made in wooden or steel frame, which is placed on an oiled smooth
surface. After half-filling the mold with cement sand mixture, six to twelve iron wires are
placed in crisscrossed manner. Then the remaining mold is filled up with the mixture. The
tiles are left to set down in the mold for one day and after removing from mold they are
placed in water for further two days. After removing from water they are left to cure for
seven days before they are used in construction.
BAL-PREF-24/ June, 2010 - 10 -

PROCESS FLOW CHART
Step 1: Ordering & Stockpiling

the Raw Materials
Step 2: Mixing
(Day 1)
Step 3: Molding
(Day 1)
Step 4: De-molding and

setting
(Day 2 -10)
Step 5: Storage &

Distribution
The following steps describe the production of lightweight roofing tiles in detail.
Step 1: Ordering & Stockpiling the Raw

 Raw material required for the production of lightweight roofing tiles i.e. sand,
cement, iron wires and gravel will be ordered and stored as per the production
requirement.
o It is recommended to store raw materials for one weeks production
requirements for efficient running of project and orders fulfillment on time.
Step 2: Mixing
 Lightweight roofing tile production begins by mixing aggregates. Sand is pre-washed
to remove dirt contaminants. When aggregate are mixed thoroughly water is added to
the mixture.
o In the local roof tile industry the mixing is performed manually however for
higher production requirements aggregate mixer machine may also be used.
BAL-PREF-24/ June, 2010 - 11 -

Step 3: Molding
 The mold is lubricated with a thin layer of motor oil and kerosene mixture. It allows
the tile to be easily removed from the mold after setting. The lubrication is applied by
using paint brush.
o The lubrication is done by used motor oil purchased from motor workshops.
 After lubrication the mold is half filled with aggregate mixture. At this point metal
wires are placed on the aggregate in a crisscross manner. Six to twelve wires are used
depending upon the requirement of the customer. The diameter of wire also varies.
After adding the wires the mold is completely filled with aggregate.
 When the molds are full, the concrete is compacted and the upper surface is made
smooth by using masonry tools.
o The size and design of the mold determines the size and design of the finished
tile.
Step 4: De-molding and Setting

 The mold containing the wet concrete tile is moved to setting area. Initially, small
amount of water is applied to keep the tiles wet. After about one day the tiles are
removed from the mold and moved to a water tank where they are kept immersed in
water for further two days.
 After being removed from the water tank the tiles are kept in ambient temperature for
another seven days to become firm.
Step 5: Storage and distribution

 The tiles do not require specific storage requirements, they are normally stored in
open air. The tiles are inspected for defects before they are sent for shipment.
5. 5 Machinery and Equipment Requirement

Major cost of the equipment is attributed to the molds (known as “firma” by the local
industry), in addition to the molds the project requires very simple masonry equipment.
(Cement mixer is only feasible to be used if the production capacity is in excess of 1,000
tiles / day). The details of required equipment are as follows:
Table 5.1 : Machinery and Equipment Requirement

Items Total Cost Rs.
1 Tile Molds (450 molds)* 697,500
2 Misc. Equipment (Shovels, Wheel 30,000
borrow, Brushes and other masonry
tools)
Total 727,500
* One mold produces 2 tiles
BAL-PREF-24/ June, 2010 - 12 -

5. 5. 1 Office Equipment and Furniture
Table 5.2 : Office Equipment and Furniture

Furniture / Office Total Cost
equipment (Rs.)
1 Furniture 25,000
2 Office Equipment 20,000
Total 45,000
6 HUMAN RESOURCE REQUIREMENT

Roof tiles manufacturing is very simple process hence unskilled workers with some
instructions can easily start the production. The personal needed for the project are as
under:
Table 6.1: Human Resource Requirement

Description No. Monthly Total Salary
Salary / / Year (Rs.)
Person (Rs.)
Labour (Unskilled) 3 5,000 180,000
Chokidar (Guard) 1 5,000 60,000
Total Salary 240,000
7 LAND AND BUILDING REQUIREMENT

Total required land for this project is 10,000 Sq. Feet. It will comprise of production area,
Storage area for raw materials and storage area for finished products. The finished
product and raw materials (with the exception of cement) does not require covered area
therefore they can be stored in open air. However, a storage room for cement is required
and a small office should also be constructed at the production facility. The area required
in square feet is as under:
Table 7.1: Land and Building Requirement

Description Quantity Cost/ Total Cost
/ Area Unit (Rs.)
Office 196 1,000 196,000
Store 256 800 204,800
Production Shed 324 250 81,000
Water Tank - - 44,000
Total 525,800
BAL-PREF-24/ June, 2010 - 13 -

7. 1 Recommended Mode
The project can be started on purchased or leased land depending upon the price of the
land. Since price of land in the suburbs of cities and in rural districts of Balochistan is not
very high the land is assumed to be purchased for this purpose. For smaller production
capacity however, it is recommended to start the project on leased land.
8 PROJECT ECONOMICS
Table 8.1
Equity Project
Internal Rate of Return (IRR) 40% 35%
Payback Period (yrs) 3.58 3.57
Net Present Value (NPV) 2,634,951 (@ 18%) 3,066,657 (@ 16%)
BAL-PREF-24/ June, 2010 - 14 -

9 FINANCIAL ANALYSIS
9. 1 Project Cost
Capital Investment Rs. in actuals
Land 1,000,000
Building/Infrastructure 525,800
Machinery & equipment 727,500
Furniture & fixtures 25,000
Office equipment 20,000
Pre-operating costs 10,000
Training costs -
Total Capital Costs 2,308,300
Working Capital Rs. in actuals

Equipment spare part inventory -
Raw material inventory 62,164
Cash 100,000
Total Working Capital 162,164
Total Investment 2,470,464
Initial Financing Rs. in actuals

Debt 992,569
Equity 1,477,895
Lease -
Export re-finance facility -
BAL-PREF-24/ June, 2010 - 15 -

9. 2 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 2,428,800 3,121,800 3,633,630 4,005,778 4,406,355 4,846,991 5,331,690 5,864,859 6,451,345 7,096,479
Cost of goods sold 1,708,586 2,135,859 2,433,337 2,638,536 2,854,841 3,088,962 3,342,373 3,616,674 3,913,596 4,235,014
Gross Profit 720,214 985,941 1,200,293 1,367,242 1,551,514 1,758,029 1,989,317 2,248,185 2,537,749 2,861,465
General administration & selling expenses

Administration expense 60,000 65,842 72,252 79,287 87,006 95,477 104,773 114,974 126,168 138,452
Travelling & Comm. expense (phone, fax, etc.) 30,000 32,921 36,126 39,643 43,503 47,739 52,386 57,487 63,084 69,226
Office expenses (stationary, etc.) 6,000 6,584 7,225 7,929 8,701 9,548 10,477 11,497 12,617 13,845
Professional fees (legal, audit, etc.) 6,072 7,805 9,084 10,014 11,016 12,117 13,329 14,662 16,128 17,741
Depreciation expense 103,540 103,540 103,540 103,540 103,540 103,540 103,540 103,540 103,540 103,540
Amortization expense 2,000 2,000 2,000 2,000 2,000 - - - - -
Subtotal 207,612 218,691 230,227 242,413 255,766 268,421 284,506 302,160 321,537 342,804
Operating Income 512,602 767,250 970,066 1,124,829 1,295,749 1,489,608 1,704,811 1,946,024 2,216,212 2,518,661
Other income 3,454 8,975 18,405 30,429 45,131 65,646 92,413 123,035 157,982 201,101
Gain / (loss) on sale of assets - - - - - - - - - -
Earnings Before Interest & Taxes 516,055 776,225 988,471 1,155,258 1,340,879 1,555,254 1,797,224 2,069,060 2,374,194 2,719,762
Interest expense 168,737 144,681 116,536 83,606 45,078 - - - - -

Earnings Before Tax 347,319 631,544 871,935 1,071,652 1,295,802 1,555,254 1,797,224 2,069,060 2,374,194 2,719,762
Tax 76,410 138,940 191,826 235,763 285,076 342,156 395,389 455,193 522,323 598,348
NET PROFIT/(LOSS) AFTER TAX 270,909 492,604 680,109 835,889 1,010,725 1,213,099 1,401,835 1,613,866 1,851,872 2,121,414
Balance brought forward 270,909 763,513 1,443,622 2,279,511 3,290,236 4,503,334 5,905,169 7,519,036 9,370,907
Total profit available for appropriation 270,909 763,513 1,443,622 2,279,511 3,290,236 4,503,334 5,905,169 7,519,036 9,370,907 11,492,321
Owner's Withdrawals - - - - - - - - - -
Balance carried forward 270,909 763,513 1,443,622 2,279,511 3,290,236 4,503,334 5,905,169 7,519,036 9,370,907 11,492,321
BAL-PREF-24/ June, 2010 - 16 -

9. 3 Projected Balance Sheet

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 100,000 245,375 652,121 1,188,391 1,854,536 2,658,521 3,906,091 5,335,244 6,968,265 8,829,971 11,280,088
Accounts receivable - 199,627 228,107 277,620 313,948 345,704 380,275 418,302 460,132 506,145 556,760
Finished goods inventory - 74,286 89,408 101,612 109,939 118,952 128,707 139,266 150,695 163,066 176,459
Raw material inventory 62,164 84,724 104,567 122,235 142,575 166,299 193,972 226,249 263,896 307,809 -
Total Current Assets 162,164 604,013 1,074,203 1,689,859 2,420,998 3,289,476 4,609,044 6,119,060 7,842,988 9,806,991 12,013,307
Fixed assets
Land 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Building/Infrastructure 525,800 499,510 473,220 446,930 420,640 394,350 368,060 341,770 315,480 289,190 262,900
Machinery & equipment 727,500 654,750 582,000 509,250 436,500 363,750 291,000 218,250 145,500 72,750 -
Furniture & fixtures 25,000 22,500 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2,500 -
Office equipment 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -
Total Fixed Assets 2,298,300 2,194,760 2,091,220 1,987,680 1,884,140 1,780,600 1,677,060 1,573,520 1,469,980 1,366,440 1,262,900
Intangible assets
Pre-operation costs 10,000 8,000 6,000 4,000 2,000 - - - - - -
Total Intangible Assets 10,000 8,000 6,000 4,000 2,000 - - - - - -
TOTAL ASSETS 2,470,464 2,806,773 3,171,423 3,681,539 4,307,138 5,070,076 6,286,104 7,692,580 9,312,968 11,173,431 13,276,207
Liabilities & Shareholders' Equity

Current liabilities
Accounts payable - 130,495 164,486 188,198 204,545 221,921 240,855 261,501 284,028 308,624 305,991
Total Current Liabilities - 130,495 164,486 188,198 204,545 221,921 240,855 261,501 284,028 308,624 305,991
Other liabilities
Deferred tax - 76,410 80,025 80,025 80,025 80,025 64,020 48,015 32,010 16,005 (0)
Long term debt 992,569 851,065 685,504 491,799 265,163 - - - - - -
Total Long Term Liabilities 992,569 927,475 765,529 571,824 345,188 80,025 64,020 48,015 32,010 16,005 (0)
Shareholders' equity
Paid-up capital 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895 1,477,895
Retained earnings - 270,909 763,513 1,443,622 2,279,511 3,290,236 4,503,334 5,905,169 7,519,036 9,370,907 11,492,321
Total Equity 1,477,895 1,748,803 2,241,407 2,921,517 3,757,405 4,768,131 5,981,229 7,383,064 8,996,930 10,848,802 12,970,216
TOTAL CAPITAL AND LIABILITIES 2,470,464 2,806,773 3,171,423 3,681,539 4,307,138 5,070,076 6,286,104 7,692,580 9,312,968 11,173,431 13,276,207
Note: Total assets value will differ from project cost due to first installment of leases paid at the start of year 0
- - - - - - (0) 0 (0) 0 (0)
BAL-PREF-24/ June, 2010 - 17 -

9. 4 Projected Cash Flow Statement
- - - - - - (0) 0 (0) 0 (0)

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 - 270,909 492,604 680,109 835,889 1,010,725 1,213,099 1,401,835 1,613,866 1,851,872 2,121,414
Add: depreciation expense - 103,540 103,540 103,540 103,540 103,540 103,540 103,540 103,540 103,540 103,540
amortization expense - 2,000 2,000 2,000 2,000 2,000 - - - - -
Deferred income tax - 76,410 3,615 - - - (16,005) (16,005) (16,005) (16,005) (16,005)
Accounts receivable - (199,627) (28,479) (49,514) (36,328) (31,756) (34,570) (38,027) (41,830) (46,013) (50,615)
Finished good inventory - (74,286) (15,122) (12,204) (8,327) (9,013) (9,755) (10,559) (11,429) (12,372) (13,392)
Equipment inventory - - - - - - - - - - -
Raw material inventory (62,164) (22,560) (19,843) (17,668) (20,340) (23,724) (27,672) (32,277) (37,648) (43,912) 307,809
Accounts payable - 130,495 33,991 23,712 16,347 17,376 18,935 20,646 22,527 24,596 (2,633)
Other liabilities - - - - - - - - - - -
Cash provided by operations (62,164) 286,880 572,305 729,976 892,780 1,069,148 1,247,570 1,429,153 1,633,021 1,861,706 2,450,117
Financing activities
Change in long term debt 992,569 (141,504) (165,560) (193,705) (226,635) (265,163) - - - - -
Issuance of shares 1,477,895 - - - - - - - - - -
Cash provided by / (used for) financing activities
2,470,464 (141,504) (165,560) (193,705) (226,635) (265,163) - - - - -
Investing activities
Capital expenditure (2,308,300) - - - - - - - - - -
Cash (used for) / provided by investing activities
(2,308,300) - - - - - - - - - -
NET CASH 100,000 145,375 406,745 536,271 666,145 803,985 1,247,570 1,429,153 1,633,021 1,861,706 2,450,117
Cash balance brought forward 100,000 245,375 652,121 1,188,391 1,854,536 2,658,521 3,906,091 5,335,244 6,968,265 8,829,971
Cash available for appropriation 100,000 245,375 652,121 1,188,391 1,854,536 2,658,521 3,906,091 5,335,244 6,968,265 8,829,971 11,280,088
Cash carried forward 100,000 245,375 652,121 1,188,391 1,854,536 2,658,521 3,906,091 5,335,244 6,968,265 8,829,971 11,280,088
BAL-PREF-24/ June, 2010 - 18 -

10 KEY ASSUMPTIONS
10. 1 Production Related Assumptions
 Initial production capacity of unit is assumed to be 80 % which will increase @ 10%

annually to 95 % at maximum.
Production Capacity
Product Average Daily No. of Labour Total Daily

Production / person Production
Tiles 300 3 900
10. 2 Costs Assumptions
Cost of goods sold for cement tiles is determined for by adding cement, sand, gravel, sand
powder, iron wires, water and direct labour costs. This cost varies owing to the different ratios
of raw materials are used by different manufacturers, for this project average cost of goods sold
is assumed to be Rs. 7.7 per tile.
10. 2. 1 Administration and Labor Costs:

 Labor cost is calculated assuming one labour can produce 300 tiles per day.
Description No. Monthly Total Salary

Salary / / Year (Rs.)
Person (Rs.)
Labour (Unskilled) 3 5,000 180,000
Chokidar (Guard) 1 5,000 60,000
Total Salary 240,000
10. 3 Revenue Assumptions

Sales price ranges from Rs. 10 to Rs. 14 per tile depending upon the quality of tile. Sale price
for this project has been calculated as Rs. 11 per tile. The sales price growth rate is assumed to
increase at 10% per annum.
BAL-PREF-24/ June, 2010 - 19 -

Revenue year 1
Production Sale Price/ Total
Quantity Sold * Unit (Rs.) Revenue (Rs.)
220,800 11 2,428,800
* Subtracting finished product inventory from total production (Year 1)
10. 4 Financing Assumptions
Debt 40 %
Equity 60 %
Required rate of return on equity 18 %
WACC 16 %
10. 5 Depreciation Rates
Building and Infrastructure 5%

Office Equipment 10 %
Machinery and Equipment 10 %
10. 6 Cash Flow Assumptions
Accounts Receivables Cycle (In Days) 30

Accounts Payable Cycle (In Days) 30
Cash in Hand Rs. 100,000
10. 7 Economy Related Assumptions
Inflation rate 10 %
Electricity growth rate 10 %
Water price growth rate 10 %
Wage growth rate 10 %
BAL-PREF-24/ June, 2010 - 20 -

SMEDA Light Weight Roof Tiles Manufacturing Unit

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SMEDA Light Weight Roof Tiles Manufacturing Unit

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Pre-Feasibility Study

Light Weight Roof Tiles

Small and Medium Enterprise Development Authority

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

not bind SMEDA in any legal or other form.

1 Purpose of the document............................................................................... 3

7 Land and Building Requirement.................................................................13

9 Financial Analysis ........................................................................................15

10.1 Production Related Assumptions ...............................................................................19

BAL-PREF-24/ June, 2010 -2-

1 PURPOSE OF THE DOCUMENT

BAL-PREF-24/ June, 2010 -3-

2. 3 Market Entry Timing

2. 5 Proposed Product Mix

Table 2.1: Product Mix

BAL-PREF-24/ June, 2010 -4-

2. 8 Recommended Project Parameters

Table 2.2 : Project Parameters

BAL-PREF-24/ June, 2010 -5-

2. 10 Key Success Factors

 Growing demand for new housing units throughout the year.

3 CURRENT INDUSTRY STRUCTURE

The construction sector consists of the following areas:

BAL-PREF-24/ June, 2010 -6-

 Industrial (e.g. factories and processing plant)

Construction sector is playing an important role in Pakistan’s economy as well and

Table 3.1: Growth Performance of Construction Sector

BAL-PREF-24/ June, 2010 -7-

Table 3.2 Employed Labour Force by Sectors

Source: Labour force survey 2008-09 Federal Bureau of Statistics

BAL-PREF-24/ June, 2010 -8-

4. 1. 1 Transportation and Packaging

Some of the factors influencing producer prices are:

BAL-PREF-24/ June, 2010 -9-

5 BASIC REQUIREMENTS/ TECHNICAL ANALYSIS

5. 1 Varieties of Tiles to be Produced

BAL-PREF-24/ June, 2010 - 10 -

PROCESS FLOW CHART

Step 1: Ordering & Stockpiling

Step 4: De-molding and

Step 5: Storage &

Step 1: Ordering & Stockpiling the Raw

BAL-PREF-24/ June, 2010 - 11 -

Step 4: De-molding and Setting

Step 5: Storage and distribution

5. 5 Machinery and Equipment Requirement

Table 5.1 : Machinery and Equipment Requirement

BAL-PREF-24/ June, 2010 - 12 -

5. 5. 1 Office Equipment and Furniture

Table 5.2 : Office Equipment and Furniture

6 HUMAN RESOURCE REQUIREMENT

Table 6.1: Human Resource Requirement

7 LAND AND BUILDING REQUIREMENT

Table 7.1: Land and Building Requirement

BAL-PREF-24/ June, 2010 - 13 -

BAL-PREF-24/ June, 2010 - 14 -

Working Capital Rs. in actuals

Total Investment 2,470,464

Initial Financing Rs. in actuals

BAL-PREF-24/ June, 2010 - 15 -

9. 2 Projected Income Statement

Statement Summaries SMEDA

General administration & selling expenses