COMMUNITY BASED LIVELIHOODS RECOVERY PROGRAM (CBLRP) FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR AND NWFP CBLRP-UNIDO

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1 COMMUNITY BASED LIVELIHOODS RECOVERY PROGRAM (CBLRP) FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR AND NWFP CBLRP-UNIDO INVESTMENT OPPORTUNITY PROFILE FOR MARBLE PROCESSING PLANT IN NWFP SEPTEMBER 2007 SUBMITTED TO AYESHA KHAN CHIEF TECHNICAL ADVISOR Community Based Livelihood Recovery Program (CBLRP) United National industrial Development Organization (UNIDO) BY Sardar Shahid Farid Chartered Accountant Disclaimer All material included in this document is based on data/information gathered from various sources and certain assumption. Due care and diligence has been taken to compile this document. The document may contain human, mechanical error or non accuracy of the information at the source. No liability for error, or omission or unintentional misrepresentation will be accepted. We reserve the right to make correction and changes wherever desired in this document or its subsequent versions.

2 1. PROJECT EXECUTIVE SUMMARY 1.1 PROJECT BRIEF The project objective is to setup a marble processing plant in Manshera. The plant would process (cut to predefined sizes and polish) raw marble blocks and produce marble strips/tiles and slabs. The project would not only focus the construction industry and demand for marble within the area, but other parts of NWFP as well as Rawalpindi and Islamabad. Marble and Granite is included in the list of largest minerals extracted among chromite, coal, rock salt, lime stone, china clay, dolomite, fire clay, gypsum, silica sand etc.. In Manshera, there is a great demand for a fully equipped marble processing plant. The new plant could not only explore the construction industry within the area which is on a boom since past 5 years, but could also fulfill the orders from the adjoining areas. Finished goods include tiles, slabs and strips. The unit would have the100% capacity to process around 370,260 sq.ft. of marble The total capital cost of the project is Rs Million. The main raw material is raw marble in the form of huge blocks or big rock. Raw granite is also processed. These are available in abundance in the N.W.F.P. The NWFP marble reserves constitute about 77% of the country s total deposits. Out of 160 million tons of country reserve 158 million tons are in NWFP. 15 employees will be employed directly on the project. The civil works and installation of plant is estimated to complete in 06 months. 1.2 FINANCIAL SUMMARY Sales Rs 21Million Gross Profit Margin 60% Net Profit Margin 45% Internal Rate of Return 30% Pay back period 3 years Foreign collaboration sought Joint Venture Loan Market access Sub contracting Buy back arrangement Equipment purchase Management expertise Technical expertise Marketing expertise Technology transfer Joint R&D Other :- Studies Available Feasibility study Other Specify Date: 25 October 2007 Project description 1

3 2. PROJECT RATIONALE The plant would process (cut to predefined sizes and polish) raw marble blocks and produce marble strips/tiles and slabs. The project would not only focus the construction industry and demand for marble within Manshera city, but also in other parts of the province and the country. Once the facility starts at its full capacity, it could also supply marble steps, strips, tiles, and slabs to other parts of the region as well. Marble is included in the list of largest minerals extracted among chromate, coal, rock salt, lime stone, china clay, dolomite, fire clay, gypsum, silica sand etc. Since 1990 mining &quarrying has consistently contributed 0.5 percent to the Gross Domestic Product (Source Economic Survey). Marble processing is gaining popularity due to increase in its usage in construction industry. Today almost all the modern architectural designs of houses and plazas include the final touch of beautiful shades of marble in exterior as well as interior portions. There are large deposits of superior quality marble and granite in the area. There is also the possibility of getting the marble in block forms which will reduce the wastage and improve the profitability. The area is under the process of rehabilitation, in which large quantity of marble tile could be used. Possibility of exports as the quality is very good. The marketing of marble is reduced/ restricted due to incapability of meeting consistent supply, due to non employment of modern techniques. Comparatively low exports are due to improper marketing. The roads infrastructure of the province does not fully supports the transportation of heavy marble blocks from quarries to processing plants but this soon going to change as road infrastructure is improving. 3. MARKET OPPORTUNITY Due to modern architectural designs, use of marble steps/strips/tiles and slabs in the Construction industry of the province is increasing; additionally there is huge demand in other parts of the country. Pakistan s marble export is estimated at $20-30 million, which can be enhanced many fold if standardized production measures are ensured. Initially the supply will be targeted in the province and in the later years export potential will also be profited. There is no problem in the access to the potential market. The growing housing industry in Manshera, Abbottabad, Islamabad, increases the marketing potential of the project. Housing industry in the region is estimated to be growing at the pace of 7%. Major categories for usage of dimensional stones are architectural works, funeral trade and sculptures etc. In the architectural work that include construction and structural works the total share of the dimensional stone is 70% while in the decorative, sculptures and memorial art etc. its share is 30%. According to their peculiar characteristics, including weather effects, color fading, load tolerance, edge cuts, water absorption, color choice, hygienic factor, hardness etc; various type of dimensional stones are used in different locations and places. 2

4 The target customers for processed marble steps/strips/tiles and slabs include individuals and construction companies. There is great potential for the manufacturing of decorative items including marble handicrafts, Fire places, office table sets, sculptures etc. Pakistan s marble export is around estimated $20-30 million, which can be enhanced many folds if standardized production measures are ensured. There are large deposits of superior quality marble and granite in the area. There is also possibility of getting the marble in block forms which will reduce the wastage and improve the profitability. The area is under the process of rehabilitation, in which large quantity of marble tile could be used. There is also a good possibility of exports as the quality of marble is quite superior. The marketing of marble is reduced/ restricted due to incapability of meeting consistent supply, largely due to non-employment of modern techniques. Comparatively low exports are due to quality control in the production processes and improper marketing. The roads or physical infrastructure of the province does not fully support the transportation of heavy marble blocks from quarries to processing plants but this is soon going to change as road infrastructure is visibly improving. 4. BUSINESS PLAN The project will be run to produce the best quality marble products. Special care and quality control will be observed in finishing the marble products, so that the export targets can be achieved. This will maximize the profits. The selection/purchase of raw marble is of immense importance. Expertise will be employed in the purchase of best quality raw marble stone so that there is minimum wastage. 4.1 PRODUCT SALES The plant can process 370,360 Sq ft of marble at 100 % capacity. The sale price is Rs 57 per Sq ft. Capacity % 100% Marble processed Sq ft 370,260 Sale price Rs 57 Sale revenue Rs 21,104, RAW MATERIALS The cost of marble rock is Rs 23 sq ft, the prices slightly change with the color. The price of marble block is also higher. The total requirement of marble is around 400,000 Sq ft 4.3 PRODUCT MANUFACTURING PROCESS Slabs Slabs are large semi processed sheets of marble stone with varied sizes and thickness of 2 inches. They are further processed in the local industry or exported to the international markets. Slabs are cut on gang saws from large blocks of marble and granite. Unpolished Tiles These are processed and sold by units normally lacking machinery to finish and section the material. These are available in different sizes, colors and shades. These tiles are polished either at the factory or after application at the desired surface. 3

5 Polished Tiles These are the fully processed tiles sold in the market at competitively higher prices, which depend on vein structure color & shades. Decorative Items Decorative items including, pillars, fire places, railings, sculpture, flower vase, ashtrays, tabletops, office table sets and many other similar items are produced in many countries of the world. Marble Chips Marble Chips are tiny pieces normally of crushed marble used in flooring and facing in the construction industry. These are processed on completely different machinery set up that includes stone crushers of various grades. They vary in size from large grains of 1 inch to 0.5 centimeter, depending on the choice of the consumer. 4.4 PRODUCT DISTRIBUTION The final product will be directly supplied to wholesaler eliminating role of the middleman. Distribution network of the product is illustrated below: The marketing of the project will be based on the following strong grounds: Contacts with end users and Contractor Advertisement Promotion schemes Point of purchase displays 4

6 4.5 HUMAN RESOURCE REQUIREMENT The total human resource required for this project with their proposed/estimated monthly salaries is shown in the table 4.6 PROJECT FINANCIALS OPERATIONAL DATA The plant can process 370,360 Sq ft of marble at 100 % capacity, however the production in the first year is estimated at 70 %. Which will increase at 10% per year. The production, sales data is depicted below. Year 1 Year 2 Year 3 Year 4 Year 5 Capacity % 70% 80% 90% 100% 100% Marble processed Sq ft 259, , , , ,260 Sale price Rs Sale revenue Rs 14,773,374 16,883,856 18,994,338 21,104,820 21,104, FIXED COST The land, building/infrastructure other fixed assets costs is detailed below. Project Investments Land 4,500,000 Construction 1,197,650 Plant & Machinery 12,570,000 Furniture & Fixtures & Office Equipment 27,000 Vehicles 43,200 Pre-Operating Costs 72,500 Total Fixed Assets 18,410,350 5

7 4.6.3 WORKING CAPITAL The investment in the initial working capital is worked out Rs 1,796,549, as detailed below. AMOUNT IN RS First three months salaries 321,000 Misc expenses 100,000 Inventories 875,549 Cash requirements,500,000 Initial Working Capital 1,796, OVERHEAD COSTS Following Overheads are assumed to occur in the first year of production. Expense Year amount Depreciation 1,323,903 Insurance 628,500 Selling and Distribution 441,000 Miscellaneous 14,447 Total 2,407,850 6