Cotton Towels Manufacturing Unit

Pre-Feasibility Study
COTTON TOWELS MANUFACTURING UNIT
Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE
PUNJAB
REGIONAL OFFICE
SINDH
REGIONAL OFFICE
KPK
REGIONAL OFFICE
BALOCHISTAN
3rd Floor, Building No. 3,

Aiwan-e-Iqbal Complex,
Egerton Road Lahore,
Tel: (042) 111-111-456
Fax: (042) 36304926-7
helpdesk.punjab@smeda.org.pk
5TH Floor, Bahria

Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
helpdesk-khi@smeda.org.pk
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
helpdesk-pew@smeda.org.pk
Bungalow No. 15-A

Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
helpdesk-qta@smeda.org.pk
January 2007
Cotton Towels 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-63
Revision
Prepared by
SMEDA-Punjab
Issue Date
2003
Revision Date
January , 2007
Issued by
Library Officer
PREF-63/January2007/ Rev 2
INTRODUCTION TO SMEDA
PURPOSE OF THE DOCUMENT
PROJECT BRIEF
1
2
3
4
4
4
Opportunity Rationale
Proposed Capacity
Total Project Cost
Production Process Flow
3. 1
3. 2
3. 3
3. 4
5
5
5
6
CURRENT INDUSTRY STRUCTURE

MARKETING
4
5
7
8
Guidelines for Towels Export Business- Key Success Factors

Total Market Size and Growth
Major Exporters
Major Importers
5. 1
5. 2
5. 3
5. 4
RAW MATERIALS
MACHINERY DETAILS
HUMAN RESOURCE REQUIREMENT
LAND & BUILDING
6
7
8
9
Total Land Requirement

Covered Area Requirement
Recommended Mode
Suitable Locations
Utilities Requirement
9. 1
9. 2
9. 3
9. 4
9. 5
10
11
12
13
14
15
15
Initial Project Cost

Estimated Time for Project Completion
15
16
KEY SUCCESS FACTORS

THREATS FOR THE BUSINESS
REGULATIONS
KEY ASSUMPTIONS
FINANCIAL STATEMENTS
15. 1
15. 2
15. 3
16
17
17
17
18
Projected Income Statement

Projected Cash flow Statement
Projected Balance Sheet
10
11
12
13
13
13
14
14
14
PROJECT COST
10. 1
10.2
8
9
9
10
18
19
20
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.
Since its inception in October 1998, SMEDA adopted a sectoral SME development
approach where key 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 overhauling of the regulatory environment by taking into consideration
other important aspects including finance, marketing, technology and human resource
development.
SMEDA has so far successfully formulated strategies for key sectors including, Fruits &
Vegetables, Marble & Granite, Gems & Jewelry, Marine Fisheries, Leather & Footwear,
Textiles, Surgical Instruments, Transport and Dairy. Whereas the task of SME
development at a broader scale still requires more coverage and enhanced reach in terms
of SMEDAs areas of operation.
Along with the sectoral focus a broad spectrum of Business Development Services is also
being 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 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 capitalize on viable
business opportunities.
2
PURPOSE OF THE DOCUMENT
Pre-feasibility studies are developed primarily to facilitate potential entrepreneurs in

project identification for investment. Pre-feasibility Studies may form the basis on which
an important investment decision maybe made. The document covers various aspects of
the business venture from project concept development to, financing and business
management
3
PROJECT BRIEF
Towel is an important product used in every day life. Towels and its allied products
constitute an important sector of textile industry. In made ups, towels sub-sector is the
second largest after bedwear in terms of production and exports. Towels are
manufactured in various sizes, shapes and qualities depending upon customers
requirements.
The proposed project is for setting up a Towels Manufacturing Unit. This will be a
vertically integrated unit including the facility of weaving, dyeing, finishing and
stitching. Most of its production will be for export purpose as this is an export-oriented
order based industry, hence contributing towards the earnings of foreign exchange for the
country. There is a vast range of towel products like towels, terry towels, warp pile
fabric, dish cloth, wash cloth, floor cloth, bar mops, bathrobes, bath mats, dusters, kitchen
towels etc. All the calculations and financial workings have been done while treating this
as an export based project.
The yarn used in the production of towels is 10/s, 16/s and 20/s cotton, polyester/cotton
yarn is also used to increase the strength of the product. Pakistan Towel Industry
produces a complete range of towels which include hand towels, bath towels, face towels,
kitchen towels, wash cloths, etc., available in rich assortment of patterns and designs in
eye-catching colors. The towel manufacturers in Pakistan also produce a large range of
allied products of towels including, terry bar mops, terry bathrobes, terry face towels,
terry wash cloths, shop towels, terry gloves, terry pillow covers, terry coverlets and all
other terry made-ups as desired by the buyers.
3. 1
Opportunity Rationale
Exports of towel products from Pakistan constitute a major share of the world market.
Pakistan has approximately 8% share in the world market of towel products1. The annual
average growth rate in the value of exports from Pakistan in the recent five years has
been 8% for towels2.
The international demand for towels is increasing at a fast rate due to the reasons that
European Union has recently withdrawn duties from Pakistan and also due to the
population trends resulting into increase in consumption of related products.
Pakistans largest market is USA, about two third of Pakistani exporters provide towels to
USA3. More than 50% of world exports of towels come from Asia. The market share of
Asia in world exports is increasing due to lower labor costs. Pakistan has a good share in
exports from Asia. The availability of suitable raw material and development of certain
skill levels are the favoring factors for further establishment of Towel industry in the
country. Towels of Pakistan have won the appreciation of customers all over the world.
Jacquard towels, woven with double yarn in floral patterns and rich colors, speak
volumes for their excellent craftsmanship. Beautiful, absorbent, smooth, white and dyed
Pakistani towels are exported to Europe, United States, Canada and to all other countries
earning substantial foreign exchange for the country.
3. 2
Proposed Capacity
The proposed capacity of this unit is 20 looms producing 150 tons of towels per annum
based on daily two shifts of 8 hours for 300 days. This unit has the capability for
horizontal as well as vertical integration.
3. 3
Total Project Cost
The total project cost of this Cotton Towel Manufacturing unit is Rs. 38.9 million.
Textile Vision 2005

TMAP Special Report No. 14 The News
3
Textile Vision 2005
2
3. 4
Production Process Flow
Purchase of
Yarn
Production of
Grey Fabric
on Looms
Quality
Inspection
Heating of
Fabric in Kier
Tumbling and
Finishing in
Tumble
Warping
of Yarn
Dyeing of
Fabric in
Winch
Cutting of
Fabric
Fabric
Drying
Stitching and
Labeling of
Towels
Sizing of
Yarn
Alignment
of Fabric in
Stenter
Packing of
Towels
Most of the towel industry is classified as constituted of small and medium sized units
having smaller productions, and mostly manufacturers do not have complete processing
facilities. The woven towel is sent to independent processing units. This reduces the
capital cost of the manufacturers, but at the same time, increases the quality cost. Quality
control becomes very difficult when processing is sub-contracted. The decision to
establish an in-house processing facility is supported by the fact that orders that a
manufacturer gets from buyers are in line with the manufacturing capabilities, so there is
a need to invest in modern processing facilities. Since this is an export-oriented industry,
so quality is the most important tool that a manufacturer can use to achieve good price
and market share of its product through the modern processing facilities. For a new
entrant, it may be difficult to fetch orders without any proper production facility.
Another important processing step is drying. Since the weight per unit area is higher for a
towel as compared to other woven fabrics, so drying time is relatively higher. Majority of
the manufacturers uses atmospheric drying in the sunlight. Large manufacturers have
their own hydroextractors that improve the quality of their final product. Due to the
quality issues, a hydroextractor has been recommended for this project.
Final operation is cutting and stitching. This is fairly a simple operation and does not
require much expertise. There are no major technology issues in this operation of towel
manufacturing.
A complete towels unit with looms and dyeing section has been recommended instead of
outsourcing some of the processing functions. According to industry sources, it is
difficult to get the production processed on regular basis from other units because the
unit, which is giving good quality, usually remains busy. Outsourcing results into
increased costs of production hence reducing profits. Most of the export-oriented units in
the country have their own processing facilities.
CURRENT INDUSTRY STRUCTURE
The Towel Industry of Pakistan comprises of approximately 300 manufacturers and

exporters with a diverse range of towel products. The towel industry relies largely on
locally manufactured machines to produce products that have a good demand in the
international market. Pakistani exporters have been able to sell towel products on
competitive prices and have made considerable progress in terms of value addition and
quality issues over the last 10 years. The exports of towel and allied products have
increased substantially despite the stagnation in countrys exports. Following is the
geographical split of manufacturers and exporters in Pakistan:
Table 4-1: Geographical Split of Towels Manufacturers and Exporters in Pakistan4
Northern Region
Lahore
Kasur
Faisalabad
Gujranwala
Multan
Others
Total for Northern Region
Southern Region
Karachi
Total for Southern Region
Number of units
14
3
4
17
1
6
45
Number of units
255
255
Table 4-2: Towels Manufacturers in Northern Region Exporters and Local

Sellers5
Northern Region
Local Sellers
Local Sellers and Exporters
Medium Exporters
Large exporters
Total
Number of units
29
7
6
3
45
Table 4-3: Towels Manufacturers in Southern Region Exporters and Local Sellers
Southern Region
Local Sellers
Local Sellers and Exporters
Medium Exporters
Large exporters
4
5
Number of units
27
22
200
6
Source: Towels Manufacturers Association of Pakistan - TMAP

Source: Towels Manufacturers Association of Pakistan - TMAP
Southern Region
Total
Number of units
255
It is obvious from the above table that major concentration of this industry is in the
southern region of the country. This is due to the initial development of industry in
Karachi and the fact that manufacturers can avoid transportation costs from
manufacturing units to ports. In addition, many imported chemicals used in dyeing
process are available at lower prices in Karachi. This industry is characterized by
majority of the manufacturers and exporters located in few major cities.
The above manufacturers and exporters of towels products have diverse production
facilities ranging from complete vertically integrated units, to stitching units, from
weaving units to dyeing units, etc. A few are also working as commercial exporters
without any production facility.
According to the estimates given by industry sources, approximately 90% of the revenues
generated by this industry are from exports while 5% of the rejected exports are sold in
the local market, and remaining 5% comes from local requirements.
5
MARKETING
In view of the fact that main raw material and skilled manpower is available in Pakistan,
the scope for towel exports from Pakistan is unlimited. However, marketing is a very
vital aspect of this industry as this is an export oriented order based industry.
Export orders can be obtained through direct marketing in the international markets either
by initiating contacts with potential customers through formal communications or visiting
those countries especially USA, Europe and Gulf countries. The Towel Manufacturers
Association of Pakistan (TMAP) is well organized and has an impeccable record in its
conduct and administration of textile quota and trade fairs. It participates in Heim
Textile Fair regularly and organizes space for its members. However, in the absence of
export orders, other factories that have excess export orders can also provide subcontract
work on CMT (cut, make and trim) basis.
TMAP is also involved in getting latest trade inquiries raised from various countries; the
members can also obtain this information to focus their marketing efforts on target
countries.
5. 1
Guidelines for Towels Export Business- Key Success Factors
To enter in the export business of towels, following basic guidelines can provide help to
any new entrant in this business:
1. Ensure good quality at all costs. This is a basic key for a successful exporter.
Therefore, quality issues should be the primary focus. In this respect, a quality
certification can be very helpful in marketing the quality issues related to towels
products. Although, the stress on quality in this industry is not as important as in any
other textile based industry, like, polo shirts, bed sheets, curtains etc. However, a
2.
3.
4.
5.
5. 2
certification like ISO 9000 can be helpful in obtaining orders and building an
impression in the eyes of buyers.
Commitments with buyers regarding quality, price and shipment are the basic
essentials to enter and grow in the export business.
Many towel-manufacturing companies are considering it worthwhile setting up their
overseas offices and warehouses. Overseas office can not only assist in sales, but also
keep the exporter continuously informed about the latest buyer's requirements and
market demands. Warehouses of supplier(s) in the customer's countries make it
convenient for the customer to make the purchase decisions effectively, as in this case
customer gets the required products on LDP (Landed Duty Paid) basis and without
any hassle of being involved in shipment and import procedures.
It is very important in successful marketing to be active and quickly responsive to the
customer demands. Being flexible with buyers regarding their requests and
requirements can help to develop mutual understandings with them.
Participation in trade fairs is very helpful in knowing customers requirements and
obtaining orders. International Trade Fairs provide an excellent opportunity to
introduce a new entrant in the international markets.
Total Market Size and Growth
Total global trade value of Towel products is more than US$ 4.0 billion. Cotton Towels
have a substantial share in the total exports of Towel and related products.6
Table 5-1: Trade of Towel Products in World7
Towels Products
Towels
Woven Cotton Pile
Cleaning Clothes
Terry Towel
Total
5. 3
Percentage Share
56%
30%
11%
3%
100%
Major Exporters
China is the major exporter of towel products and Pakistan holds second position in the
global exports of towels, with 8 % market share. Total exports in 1997 were $305
million. In Europe, Portugal, Germany and Belgium are the major exporters. Following
are the percentage shares of these countries:
Table 5-2: Percentage Share in World Exports8
Countries
China
Pakistan
Percentage Share
28%
8%
Source: Textile Vision 2005

8
7
Countries
Portugal
Germany
Belgium
Others
Total
5. 4
Percentage Share
7%
7%
6%
44%
100%
Major Importers
Regional distribution of towel imports is quite balanced. Of the six major importers, three
countries belong to Europe, two to Asia and one to American Continent. USA is the top
importer and also has the highest average import growth rate. It is interesting to note that
the average growth rates of all the major importers of towel products have been positive.
Following are the percentage shares of the major countries importing towel products:
Table 5-3: Percentage Share in World Imports9
Countries
USA
Hong Kong
Japan
Germany
UK
France
Others
Total
Percentage Share
19%
11%
10%
8%
8%
7%
36%
100%
RAW MATERIALS
Following is the list of raw materials, which are used in the manufacturing of towels:
1. Towels fabric is made from 10/s, 14/s, 16/s and 20/s yarn or a mix of cotton-polyester
depending upon requirements of customers.
2. Dyeing chemicals (reactive colors, caustic soda, soda ash, hydrogen per oxide,
common salt, detergent and wetting).
3. Stitching threads.
4. Poly Bags (packing material).
10
MACHINERY DETAILS
Following combination of machines is required for manufacturing of approximately

150,000 Kgs of towel per annum based on daily two shifts of 8 hours for 300 days in a
year
Table 7-1 Machinery Details
Machines
unit
Looms
Hanks to Cone and Cone to Hanks Winder
Weft Pirn Winder
Kier
Winch
Hydro-extractor
Sizing 9 drum with double dip system
Warping
Tumble
Stenter
Inspection Rolling Machine
Boiler
Stitching machines
Cutter
Other Equipments-Furnace Oil Tank,
Frames, Trollies and Water Pump
Sales tax
Installation costs for machines Including
Transformer, Cable and Control Panel
Total Cost of installed machinery
20
1
1
1
2
1
1
1
1
1
2
1
5
1
Cost per machine

(Rs)
226,000
57,000
42,000
650,000
350,000
250,000
4,950,000
370,000
375,000
375,000
375,000
3,500,000
40,000
100,000
Total Cost (Rs)

4,520,000
57,000
42,000
650,000
700,000
250,000
4,950,000
370,000
375,000
375,000
750,000
3,500,000
200,000
100,000
499,125
2,600,719
39
11
1,000,000
20,938,844
HUMAN RESOURCE REQUIREMENT
For a unit of 20 looms, following manpower is required:

Table 8-1: Permanent Employees
Salary per
Employee
No of
Employee per
month
OPERATING FIXED
COSTS
Chief Executive
1
62,000
Export & Marketing
1
45,000
Manager
Accountant
1
17,000
Accounts Clerk
1
8,000
Store Clerk
1
8,000
Technician/Electrician
1
6,000
Security Guard
4
4,500
Peons
2
4,000
TOTAL
12
92,500
PRODUCTION
FIXED COSTS
Production Supervisor
1
22,000
Weaving Manager
1
35,000
Dying Master
1
20,000
Boiler Engineer
1
25,000
Asstt. Dying Master
1
18,000
Asstt. Weaving Manager
1
18,000
Total Production Fixed
138,000
Costs
6
TOTAL FIXED
PAYROLL
18
230,500
Salary per
month
Salary
per
annum
62,000
45,000
744,000
540,000
17,000
8,000
8,000
6,000
18,000
8,000
110,000
204,000
96,000
96,000
72,000
216,000
96,000
2,064,000
22,000
35,000
20,000
25,000
18,000
18,000
264,000
420,000
240,000
300,000
216,000
216,000
138,000
1,656,000
248,000
3,720,000
Table 8-2 Contractual employees 10

Employee
Warping labor
Sizing labor
Weavers
Fabric handlers- Dying Department
10
No of
3
3
4
20
Salary per
month
4,000
4,000
5,500
4,000
Salary per
month
12,000
12,000
22,000
80,000
The costs of contractual employees are calculated on 100% capacity of the unit
12
Salary per
annum
144,000
144,000
264,000
960,000
Cutting Master
Cutting Helper
Stitching machine operators
Packing staff
Total
1
3
5
5
44
8,500
4,000
6,000
4,000
40,000
8,500
12,000
30,000
20,000
196,500
102,000
144,000
360,000
240,000
2,358,000
L AND & B UI L DI NG
9
9. 1
Total Land Requirement
For above mentioned recommended size of towels manufacturing unit, approximately

one-acre (8-kanal) area of land is required.
9. 2
Covered Area Requirement
Following is the covered area requirement split into various departments and sections:
Table 9-1: Covered Area Requirement
Sections/Departments
Yarn & Dyeing Materials Store
Sizing Section
Warping Section
Weaving Section11
Dyeing & Finishing Hall12
Cutting, Stitching & Packing
section:
Cutting Room
Stitching Section
Packing Section
Towels Store
Total Factory Area
Office Building
Total Area
Area (sq. ft.) per

section
125 per machine
Total Area (sq. ft.)

800
1,000
1,000
5,000
6,000
150 per table

100 per machine
150 per employee
750
1,000
750
700
17,000
1,500
18,500
Table 9-2: Construction Cost

Cost
Required Area(Sq.ft)
Land
Factory Building
11
12
Cost per Sq. Ft.(Rs)
18,500
17,000
This area can accommodate 40 looms as part of the expansion plan in future years.
This includes the space for boiler hall, inspection hall and control room.
13
180
550
9. 3
Recommended Mode
It is recommended that this project should be started in an owned building because this
set-up will involve installation of heavy machinery, underground cabling and other
fixtures with considerable cash outlay.
9. 4
Suitable Locations
The clusters of towels industry exist predominantly in Karachi, Gujranwala, Faisalabad

and Lahore. As most of the manufactures are based in these major cities, it is
recommended that such unit should be located in any of these areas. However, the basic
criteria for the selection of location within these clusters should be the accessibility of
raw material and skilled manpower. Also, basic utilities like electricity, gas, waters and
public transport is must for the establishment of such sort of unit.
9. 5
Utilities Requirement
Electricity
Gas
Furnace Oil
Telephone
Fax
Internet
14
10 PROJECT COST
10.1 Initial Project Cost
Following are the initial project cost:
Table 10-1: Project Cost
Fixed Assets
Land and Building
Plant & Machinery
Civil Works
Furniture Fixture
Vehicles
Cost
13,430,000
20,938,844
100,000
421,500
1,200,000
36,090,344
Current Assets
Pre operating expenses
Raw Material Inventory
Cash and Banks balances
1,000,000
1,332,000
500,000
2,832,000
38,922,344
Total
Table 10-2: Project Financing
Financing
Equity financing 61%
Debt financing 39%
Total
23,742,630
15,179,714
38,922,344
Table 10-3: Project Economics

Projects Economies
Net Present Value (in Rs)
Equity
31,442,293
Project
31,077,815
33.98%
30.88%
7.08
5.57
Internal Rate of return

Payback Period (in Years)
15
10.2 Estimated Time for Project Completion
1 months for completion of initial formalities i.e. formation, registration of the

company etc.
10 months for purchase of land and construction of building.
3 months for sanction of loan (In case, if financing has to be arranged through bank).
4 month for purchase of machinery, its installation and trial run.
1 month for furnishing and staff / labor appointments.
The projects can take-off within one year, as some of the activities will be in progress
simultaneously.
In case if the project is self financed, if the building is rented and if machinery is also
locally procured then this set-up will not take more then 6 months.
11 KEY SUCCESS FACTORS

The total commercial viability of this proposed towels unit depends on the regular supply
of export orders. This requires aggressive marketing efforts at the entrepreneur's end and
the concerned management team. A detailed discussion on the marketing aspect has
already been done in the marketing section of this study.
Comparing Pakistans major importers with the worlds major importers, Pakistan is
completely out of sync with the world market mix. The countries of Middle East are not
included in list of major importers. USA is the largest importer but only 1-2 % of
Pakistans total exports is going to USA. Pakistan does not have any major exports to
markets like Japan, Hong Kong, Germany and France. There is an opportunity for the
Pakistani towels products manufacturers and exporters that they should target these
markets and get Pakistan its due share.
Following are other key points that can be taken as key success factors for any export
based towels unit.
Outlets in Gulf countries
Assurance of consistent good quality
Surety of on time delivery
Competitive rates
Cost efficiency
Better services to the customer i.e. claim settlement etc.
Better communication development with customers
16
12 THREATS FOR THE BUSINESS
Close competition among local exporters causes reduction in prices of the orders in
process.
The labor force at the lowest level i.e. skilled / semi-skilled manpower, machine
operators are quite unorganized. Their job behaviors and seriousness about the
completion of any assigned job are always unpredictable; however, a motivated
Production Supervisor can overcome this.
Non-availability of technical personnel especially for dyeing, processing and
finishing.
In case of CMT based unit, the requirement of credit and/or delay of payments from
customers might cause disturbance in the cash cycles.
13 REGULATIONS
As such no special regulation is applicable on this industry except the normal

industrial rules and regulations. It does not require any prior sanction/approval from
the government to establish a Towels industry as a whole except for installation of
boiler.
Being the export-based unit, government offers incentives in terms of treating exports
as zero-rated for sales tax, tax rebates at the rate of 3% and re-finance facilities.
Towels Manufacturers Association of Pakistan (TMAP) is the administrative body in

Pakistan with the primary objective to safeguard the interests of exporters and
manufacturers in Pakistan. Moreover, every export shipment is verified by TMAP in
order to enable the exporter to claim tax rebate from the Government.
The advantages of being registered with TMAP are:
1. The first hand knowledge of international trade inquiries,
2. Prompt awareness of any changes in Government policies, and
3. A platform for manufacturers and exporters to share knowledge and experience.
4. A platform for manufacturers and exporters to discuss any unwanted change in
the Government policies and to solve individual problem of any manufacturers.
14 KEY ASSUMPTIONS
Percentage Increase in Raw material cost
Percentage Increase in Labor cost
Electricity price growth rate
Gas price growth rate
Percentage Increase in Other Costs
Selling Price Per Unit in US $
Conversion Rate US $/Pak Rupees
1%
5%
10%
10%
5%
5.00
60.00
17
15 FINANCIAL STATEMENTS
15.1 Projected Income Statement
Sale Value
Costs
Total Material
Labour
Gas & Furnace oil
Electricty
Total Variable Cost of Production
Fixed Overheads - Production
Payroll
Depreciation
Maintenance
Total Production Cost
Contribution Margin
Gross Profit
Operating Overheads
Payroll
Depreciation
Other operating costs
Legal and professional charges
Amortization of pre-operating expenses
Total
Operating Profit
Financial Charges
Long Term Loan
Profit Before Tax
Losses Carried Forward
Tax @20%
Profit after tax
Retained earnings at the beginning
Avaiable for distribution
Retained earnings at the end
Year 1
27,000,000
Year 2
31,833,296
Year 3
37,531,805
Year 4
44,250,409
Year 5
52,171,717
Year 6
61,511,026
Year 7
72,522,173
Year 8
85,504,437
Year 9
100,810,668
Year 10
118,856,882
13,320,000
1,414,800
180,000
1,440,000
16,354,800
15,550,461
1,717,125
228,867
1,830,935
19,327,388
18,154,417
1,984,813
264,546
2,328,001
22,731,777
21,194,411
2,655,860
407,002
2,960,013
27,217,286
24,743,458
3,069,891
470,450
3,421,458
31,705,257
28,886,800
2,495,917
598,170
4,785,356
36,766,243
33,723,954
3,029,264
760,562
6,084,496
43,598,275
39,371,098
3,676,580
967,041
7,736,330
51,751,049
45,963,868
4,462,221
1,229,576
9,836,607
61,492,271
53,660,611
5,415,742
1,563,384
12,507,073
73,146,810
1,656,000
3,038,884
75,000
4,769,884
21,124,684
10,645,200
5,875,316
1,738,800
3,038,884
78,750
4,856,434
24,183,822
12,505,908
7,649,474
1,825,740
3,038,884
82,688
4,947,312
27,679,089
14,800,027
9,852,715
1,917,027
3,038,884
86,822
5,042,733
32,260,019
17,033,123
11,990,390
2,012,878
3,038,884
91,163
5,142,926
36,848,183
20,466,459
15,323,534
3,767,583
4,075,662
95,721
7,938,967
44,705,210
24,744,783
16,805,816
3,955,962
4,075,662
100,507
8,132,132
51,730,407
28,923,898
20,791,766
4,153,760
4,075,662
105,533
8,334,955
60,086,005
33,753,388
25,418,432
4,361,448
4,075,662
110,809
8,547,920
70,040,192
39,318,396
30,770,476
4,579,521
4,075,662
116,350
8,771,533
81,918,343
45,710,072
36,938,539
2,064,000
237,150
100,000
50,000
100,000
2,551,150
3,324,166
2,167,200
237,150
105,000
52,500
100,000
2,661,850
4,987,624
2,275,560
237,150
110,250
55,125
100,000
2,778,085
7,074,630
2,389,338
237,150
115,763
57,881
100,000
2,900,132
9,090,258
2,508,805
237,150
121,551
60,775
100,000
3,028,281
12,295,253
2,634,245
237,150
127,628
63,814
100,000
3,162,837
13,642,979
2,765,957
237,150
134,010
67,005
100,000
3,304,122
17,487,644
2,904,255
237,150
140,710
70,355
100,000
3,452,470
21,965,962
3,049,468
237,150
147,746
73,873
100,000
3,608,236
27,162,240
3,201,941
237,150
155,133
77,566
100,000
3,771,791
33,166,748
2,125,160
1,199,006
239,801
959,205
959,205
959,205
2,125,160
2,862,464
572,493
2,289,971
959,205
3,249,175
3,249,175
1,700,128
5,374,502
1,074,900
4,299,602
3,249,175
7,548,777
7,548,777
1,275,096
7,815,162
1,563,032
6,252,130
7,548,777
13,800,907
13,800,907
850,064
11,445,189
2,289,038
9,156,151
13,800,907
22,957,058
22,957,058
425,032
13,217,947
2,643,589
10,574,357
22,957,058
33,531,415
33,531,415
17,487,644
3,497,529
13,990,115
33,531,415
47,521,530
47,521,530
21,965,962
4,393,192
17,572,769
47,521,530
65,094,300
65,094,300
27,162,240
5,432,448
21,729,792
65,094,300
86,824,092
86,824,092
33,166,748
6,633,350
26,533,398
86,824,092
113,357,490
113,357,490
15.2 Projected Cash flow Statement

Year 0
Profit after tax
Adjustment of non-cash changes and other items:
Depreciation
Amortization of preoperating expenses
Working Capital Changes
(Increase)/decrease in trade debtors
(Increase)/decrease in stocks
Increase/(Decrease) in payables
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
959,205
2,289,971
4,299,602
6,252,130
9,156,151
10,574,357
13,990,115
17,572,769
21,729,792
26,533,398
3,276,034
100,000
3,276,034
100,000
3,276,034
100,000
3,276,034
100,000
3,276,034
100,000
4,312,812
100,000
4,312,812
100,000
4,312,812
100,000
4,312,812
100,000
4,312,812
100,000
Net Cash Flow from operating activities

Pre-operating expenses
Fixed Capital expenditure
Net Cash Flow from investing activities
(1,332,000)
(1,332,000)
(1,332,000)
(1,000,000)
(36,090,344)
(37,090,344)
(2,700,000)
(223,046)
2,197,800
(725,246)
3,609,993
-
(483,330)
(260,396)
407,085
(336,640)
5,329,365
-
(569,851)
(303,999)
436,193
(437,657)
7,237,979
-
(671,860)
(354,905)
509,235
(517,530)
9,110,634
-
(792,131)
(414,334)
594,507
(611,958)
11,920,228
-
(933,931)
(483,715)
694,059
(723,588)
14,263,582
(7,037,781)
(7,037,781)
(1,101,115)
(564,714)
810,280
(855,549)
17,547,379
-
(1,298,226)
(659,277)
945,963
(1,011,540)
20,974,042
-
(1,530,623)
(769,674)
1,104,367
(1,195,931)
24,946,674
-
(1,804,621)
5,366,061
349,602
3,911,042
34,857,253
-
Capital issued
Receipt of long term Loan
Repayment of long term loan
Net Cash Flow from financing activities
Cash generated (injected) during the year
Opening balance of cash and cash equivalent
Closing balance of cash and cash equivalent
23,742,630
15,179,714
38,922,344
500,000
500,000
(3,035,943)
(3,035,943)
574,050
500,000
1,074,050
(3,035,943)
(3,035,943)
2,293,423
1,074,050
3,367,473
(3,035,943)
(3,035,943)
4,202,036
3,367,473
7,569,509
(3,035,943)
(3,035,943)
6,074,691
7,569,509
13,644,200
(3,035,943)
(3,035,943)
8,884,285
13,644,200
22,528,485
7,225,801
22,528,485
29,754,286
17,547,379
29,754,286
47,301,664
20,974,042
47,301,664
68,275,706
24,946,674
68,275,706
93,222,380
34,857,253
93,222,380
128,079,632
19
15.3 Projected Balance Sheet
CAPITAL AND RESERVES

Issued, subscribed and paid up capital
Retained Earnings
LONG TERM LOAN
Long Term Loan @16%
CURRENT LIABILITIES
Creditors accrued and other liabilities
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
23,742,630
23,742,630
23,742,630
959,205
24,701,834
23,742,630
3,249,175
26,991,805
23,742,630
7,548,777
31,291,407
23,742,630
13,800,907
37,543,536
15,179,714
12,143,771
9,107,828
6,071,886
3,035,943
38,922,344
2,197,800
39,043,405
2,604,885
38,704,519
3,041,079
40,404,371
3,550,314
44,129,793
4,144,821
50,844,508
4,838,879
62,112,924
36,090,344
36,090,344
36,090,344
(3,276,034)
32,814,309
36,090,344
(6,552,069)
29,538,275
36,090,344
(9,828,103)
26,262,241
36,090,344
(13,104,138)
22,986,206
36,090,344
(16,380,172)
19,710,172
43,128,125
(20,692,984)
22,435,141
23,742,630
22,957,058
46,699,687
-
Year 6
23,742,630
33,531,415
57,274,045
-
Year 7
23,742,630
47,521,530
71,264,160
-
5,649,159
76,913,319
Year 8
Year 9
Year 10
23,742,630
65,094,300
88,836,929
23,742,630
86,824,092
110,566,721
23,742,630
113,357,490
137,100,120
6,595,123
95,432,052
7,699,489
118,266,211
8,049,092
145,149,211
43,128,125
(33,631,422)
9,496,703
43,128,125
(37,944,234)
5,183,891
FIXED CAPITAL EXPENDITURE

Operating fixed assets - at cost
Accumulated derpreciation
Preoperating expenses
CURRENT ASSETS
Raw Material Inventory
Trade debts
Cash and Banks balances
43,128,125
43,128,125
(25,005,797) (29,318,609)
18,122,328
13,809,516
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
1,332,000
500,000
1,832,000
1,555,046
2,700,000
1,074,050
5,329,096
1,815,442
3,183,330
3,367,473
8,366,244
2,119,441
3,753,180
7,569,509
13,442,131
2,474,346
4,425,041
13,644,200
20,543,587
2,888,680
5,217,172
22,528,485
30,634,336
3,372,395
6,151,103
29,754,286
39,277,784
3,937,110
7,252,217
47,301,664
58,490,991
4,596,387
8,550,444
68,275,706
81,422,536
5,366,061
10,081,067
93,222,380
108,669,507
11,885,688
128,079,632
139,965,321
38,922,344
39,043,405
38,704,519
40,404,371
44,129,793
50,844,508
62,112,924
76,913,319
95,432,052
118,266,211
145,149,211
20

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