Textile Spinning Mill 403l60

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Table of Contents Contents Executive Summary Name & Location of Project Products, Installed Capacity, Means Of Finance Introduction Implementation Schedule Financial Ratios Market Analysis Technical analysis Machinery Description Financial Analysis Projected Financial Statements SWOT Analysis Recommendation Conclusion

Page # 02 04 05 06 08 09 11 16 18 22 27 30 32 34

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Executive Summary

Title: “TEXTILE SPINNING MILL” Project Assignment: Each student of M.COM (Finance) 4th semester required preparing a Project Assignment. The Project assignment is given to increase our knowledge about “Project Management”. Objectives: SWTO analysis of Textile Spinning Mill. 2. Identify and list down the all aspects and important points of Textile Spinning Mill. 3. What is a Production Process. 4. What is Cost of unit, Means of finance, Estimated income statement, Estimated Balance sheet, etc. 1.

Approach to Project: The Team of project have analyze, summarize, and interpret the data, which are collected different primary and secondary sources. Data Collection: Both primary and secondary means of data will be used to collect the Data. Like Books, Internet, personal visits, teacher guidance etc.

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Primary Sources: The Team of Project personally visited the SPINNING MILL for practical view: Unit selected is; ‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’ Questionnaire: Project Team has prepared a Questionnaire that contains 50 Questions and exists on 10 pages for Management of ‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’ Data Preparation & Analysis: After collection of all the data through both primary & secondary means, team will used MS. Word, MS. Excel, MS. Power point etc. Time Frame: Time period is allowed is one month 03/05/2010 to 15/06/2010. Limitation: Team has visited the various people but the information given by them is just based of approximation.

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Name of Project “KSZ SPINNING MILL”

Location of Project Head office:

“P.O. BOX. 1245 Small-Industries Bahawalpur”

Tel:

062-2750337

Fax:

+92-62-277653, 277652

Person:

ZOHAIB SALEEM ( G.M)

E-mail:

[email protected] Kashif Nazeer

Branch:

7- BC HASILPUR ROAD BAHAWALPUR.

CITY “ Pakistan- Bahawalpur”

LOCATION 7- BC HASILPUR ROAD BAHAWALPUR.

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PRODUCTS Cotton Yarn(22 single)

Installed Capacity The capacity of projected plant produces161000 Bags at 100% Efficiency per Year.

Cost of Project RS. In (000)

611,215

Fixed Cost Initial Working Capital

+

1 07,276

718,491

Means of Finance

Debt Equity

53% 47%

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Names of Lender United Bank Ltd. Bahawalpur.

Names of Sponsors A- Kashif Nazeer B- Salman Khalid C- Zohaib saleem

Name of Civil Contractor Mr. Dilshad Abbasi Civil Engineer Shahzad & co. Bahawalpur # 0313-6800085

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Name of MachinerySupplier Trützschler Group(China)

Mr. Jorg Hellwig

CEO

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Implementation Schedule Implementation Schedule Sr.No. 1

2

Activities Engineering studies and deg of civil works:

Month

Start

January

2010

Complete Construction of Building and Civil works:

February

2010

Start

February

2010

September

2010

March

2010

September

2010

Complete 3

Year 2010

2010

4

Order for foreign machinery Arrival of foreign machinery at sea port

5

Arrival of foreign machinery a site

October

2010

6

Installation of Machinery

October

2010

7

Arrival of local machinery at site Trial Run Operation

September

2010

November

2010

Start Commercial production

December

2010

8

9

9

Financial Ratios Current Ratio Current Ratio

1.42

1.26

1.31

10

Gross Profit Ratio GROSS

PROFIT

34.3%

33.8% 33.6%

28.9%

28.4%

Operating Profit Ratio

OPERATING PROFIT

%

28.3

Net Profit Ratio Net Profit

11%

Internal Rate of Return IRR= 39%

Payback Period

2 YEARS.

14.7%

21%

11

Sponsor’s Stake

47%

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Market Analysis INTERNATIONAL MARKET ANALYSIS Of the total 163 million spindles in the world, 113 million spindles are installed in Asia. China has the largest number of installed spindles in the world and s for25% of the world and 39% of the Asia. There has been no change in China’s spinning capacity during the period 1992-96. China is followed by India, which has 32 million spindles and contributes 20% to the world and 30% to Asian installed spindles. India has increased its spinning capacity at a growth rate of 3%.Yarn is a $27 billion global market. Two third of the total global spinning capacity is installed in Asia and as a result Asian exporters for 40% of total world exports. Major Asian yarn producing countries are China, India and Pakistan. Major markets for Cotton Yarn are Hong Kong, China, Japan, Italy, , Korea, UK and the USA. Cotton yarn is the largest product category within yarn and s for around 25% of total global exports. However 92% of yarn exports from Pakistan are concentrated just in this one category.

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National market analysis Pakistan is the third largest player in Asia. Pakistan’s spinning capacity is 5% of the total world and 7.6% of the capacity in Asia. Pakistan’s growth rate has been 6.2% and is second only to Iran amongst the major players

Year

No. of Units

Installed Spindles

Capacity Rotors

Looms

Operative Spindles

Capacity Rotors

1994-95

277

5568

75

15

4827

67

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

307 334 471 494 503 440 442 442

6216 6860 8419 8610 8717 8230 8368 8392

81 95 138 132 143 143 149 166

15 14 14 14 13 10 10 10

5333 5520 6105 6262 6458 6538 6631 6671

67 79 82 74 80 87 80 66

2003-04

443

8477

150

10

6825

66

2004-05 2005-06 2006-07 2007-08

444 446 449 453 521

8600 8736 8922 9568 9768

145 155 167 171 182

10 08 11 10 15

6913 7011 7231 7315 7454

70 75 69 80 85

2008-09

(Source: APTMA)

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PRODUCTION OF YARN Cotton is required for spinning of yarn. There are about 440 spinning units in the county and the production of yarn is detailed as under:

Year

Yarn Produced (000) KGS

1994-95

1,055,228

1995-96

1,118,270

1996-97

1,234,539

1997-98

1,498,948

1998-99

1,413,648

1999-00

1,505,244

2000-01

1,530,855

2001-02

1,540,720

2002-03

1,547,632

2003-04

1,678,532

2004-05

1,720,580

2005-06

1,780,582

2006-07

1,865,680

2007-08

1,921,585

2008-09

1,985,654

(Source: APTMA)

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ESTIMATED DEMAND AND SUPPLY Demand of yarn is increasing @ 10% per annum while the supply is increasing @ 5% per annum. Cotton yarn is gaining popularity on healthy grounds and also for rapid increase in population Estimated demand and supply is detailed as under considering 5% increase in production and 10% increase in demand . Year

Supply

Demand

Gap

1994-95

2320

2547

227

1995-96

2436

2801

365

1996-97

2558

3081

523

1997-98

2686

3390

704

1998-99

2820

3729

909

1999-00

2961

4102

1141

2000-01

3109

4512

1403

2001-02

3264

4963

1699

2002-03

3428

5460

2032

2003-04

3599

6006

2407

2004-05

3779

6606

2827

2005-06

3858

6761

2903

2006-07

3945

6822

2877

2007-08 2008-09

4051 4175

6921 7055

2870 2880

Local market analysis The area in which we will locate our unit is the cotton belt area and we have lot of access to raw material market like ginned cotton is available from the whole of the country in four province particularly. Punjab Sindh The cotton belt areas in both the provinces are  Multan  Kehrore paka  Lodhran  Vehari  Khan pur  Sahiwal  Bahawal pur

Present Demand The Demand of Yarn in last few years is increasing because the agriculture sector is now growing and the demand of Yarn in Textile sector also increasing.

Distribution Channel We sale our product directly to weaving sector there is no middle man include but some time middle man may include.

Technical Analysis

THE PROJECT The project envisages the establishment of a Textile Spinning Unit consisting of 15000 spindles using cotton and as a raw material for the production of yarn.

FACILITIES FOR THE PROJECT PARTICULARS OF LAND

The location of the project is selected after taking into consideration the following factors. AVAILABILITY OF RAW MATERIAL

Bahawalpur is cotton growing area; therefore, plenty of raw material is available. AVAILABILITY OF MANPOWER

There is no dearth of manpower because there are quite a good number of industries and the skilled labor is attracted to this region.

Grid Station: Because there is grid station so we selected this land.

LABOUR: Both skilled and unskilled labour is abundantly in this area and no difficulty is foreseen in hiring and retaining experienced and efficient workers.

List of Machinery

Blow Room

Card

Drawing

Simplex

Ring Frame

Coning

Cost of Machinery

RS in(000) item

unit cost

Qty price

Blowroom

8,000,000

3

24,000

Card

7,250,000

15

108,750

Drawing

8,500,000

5

42,500

Simplex

7,500,000

8

60,000

Ring Frame

1,500,000

15

22,500

Autocone

8,500,000

9

76,500

COST OF MACHINARY Import Duty COST OF MACHINARY

334,250 15%

50,138 384,388

Personnel Analysis

a) istrative Salaries Chairman Chief Executive President Financial Controller Purchase Manager Computer Manager Personal Manager Assistants Clerks and Typists Driver and Peons Sweepers TOTAL Add: Fringe Benefits @ TOTAL

Nos 1 1 1 1 1 1 1 3 3 6 5 10%

Salary per Month

Annual

(Rs.)

(000)

40,000 20,000 10,000 10,000 8,000 8,000 7,000 5,000 4,500 4,500 4,000

480 240 120 120 96 96 84 180 162 324 240 2,142 214 2,356

Cost

Financial Analysis Brief Description of Finance In Financial Analysis we see the sources of finance and calculate the ratios of our project that how much it is profitable for us and also we make financial statements to know that how much it is feasible for us.

Cost of Project The total cost of project is Rs. 718,4 91,000

Means of Finance In the sources of finance we take Loan from UBL and the remaining is from the Sponsors.

Initial Working Capital

CURRENT ASSETS Cash s Receivable @2% of sales Raw materials Imported components Imported raw material Packaging materials Finished Goods Inventory 5% of production Stores & Spares Advances & deposits Total CURRENT LIABILITIES s Payable Accrued Expenses Bank Borrowings 50% of inventories Total INITIAL NET WORKING CAPITAL

(Rs. in 000 ) 27,533 2%

24,151 66,354 0 0

60,378 20,000 20,000 218,417 inventor 3% y inventor 3% y 50%

23,888 23,888 63,366 111,141

107,276

Estimated Production Operating Years :

YAER 1

YEAR 2

65%

70%

104,650

112,700

YEAR 3

Production Effeciency Assumed : b) Porduction of yarn 22 single Add : Begining Inventory Available for sale Less : End. Inventory

104,650 5%

SALE b) Porduction of WASTE Add : Begining Inventory Available for sale Less : End. Inventory SALE

5,233

5%

5,233

117,933 5,897

75% 120,750 5,897 126,647 6,332

99,418 60%

112,036 65%

120,314 70%

108,000

117,000

126,000

0

5,400

6,120

108,000 5,400 102,600 102,600

122,400 6,120 116,280 116,280

132,120 6,606 125,514 125,514

sale in amount price per bag 22 Single

12,10 0

sale of waste

45

Total Sales sale increase with Total Net Sales ending inventory of finished goods yarn

1,202,9 52

1,355,6 34 1,455,803

4,617 1,20 7,569

5,233 1,36 0,867

5,648 1,46 1,451

1,20 7,569

1,56 4,997

1,68 0,669

6

6

7

15%

5%

waste

0,148

7,782

2,790

231

262

282

Raw Material Requirement

a) Cotton bails

49,000

65% I 31,850 31,850

a) Cotton bails raw material inc. by

15% Rs. In (000)

1- COST OF RAW MATERIALS a) cotton @ Rs.25000 TOTAL Beginning inventory of raw material ending inventory of raw material material used

70% II 34,300 39,445

Rs. In (000) 75% III 36,750 42,263

per bail

3%

796,250

986,125

796,250

986,125

1,056,56 3 1,056,56 3

0

23887.5

29583.75

23888 794,81 7

29584 980,42 9

31697 1,054,4 49

Cost of Project COST OF THE PROJECT

Rs. in ( 000 ) FOREIGN

LOCAL 30,40

- Project Land & Its Development

0

- Building & Civil Works -Foreign Machinery

5

113,77 384,38

- Engineering /Technical Fees

0

2,00 0

3,84

3,84

4

4 1,23

9

- Vehicles

0

- Mark-up during Construction

4

- Initial Net Working Capital TOATL COST OF THE PROJECT: MEANS OF FINANCE Debt

10 7

2,00

- Furniture & Fixture

TOTAL FIXED COST:

384,38 8

10 7

- Contingencies

113,77 5 8

-Insurance & clearance

- Pre-production Expenses

30,40 0

(UBL)

- Erection & Installation

1,23 9

2,50

2,50 0

61,33

61,33 4

11,43

11,43

0

0 20

20

0

0 226,82

8

384,38 8

611,21 5

107,27

107,27

6 334,1 04

384, 388

6 718, 491

384,38 UBL GUARANTEE

0

8

384,38 8

384, TOTAL DEBT: Equity

388

384,38 8 334,10

334,10 - Paid-up Capital (Sponsors)

4

-

4 334,10

TOTAL EQUITY TOTAL DEBT & EQUITY

TOTAL

4 334,1 04

388

384,

718,49 1

Income Statements I 65%

For the year ending Sept. 30, Efficiency Assumed : SALES COST OF GOODS SOLD : - Raw Materials - Labour - Manufacturing Expenses - Excise Duty \ Sales tax -Royalty fee - Depreciation Cost of Goods Manufactured Add: Beginning Inventory Less: Ending Inv.

1,207,5 69

5%

Cost of Goods Sold :

OPERATING PROFIT OTHER INCOME NON OPERATING EXPENSES - Financial Expenses Amortization workers welfare fund workers participation fund Sub-Total PRE-TAX PROFI T

1,680,66 9

980,429 20,592 6,699

1,054,449 22,651 6,941

37,002 856,99 5 0 63,313 793,68 2

37,002 1,044,7 21 63,313 71,349 1,036,6 85

37,002 1,121,0 43 71,349 76,621 1,115,7 71

4,791 60,378

9% 9%

1,564,9 97

III 75%

794,817 18,720 6,457

413,88 7

GROSS PROFIT OPERATING EXPENSES - & General Expenses - Selling Expenses Total Operating Expenses

( Rs. in 000 ) II 70%

528,31 1 564,898 5,031 78,250

5,282 84,033

65,170 348,71 7 10,761

83,281 89,316 445,03 1 475,582 74,129 246,803

59,952 1,143 31,385 31,385 123,864

53,953 1,143 40,053 40,053 135,202

47,651 1,143 42,802 42,802 134,399

235,614

383,958

587,986

Provision for Taxes NET PROFIT RETAINED EARNINGS

40%

94,246 141,368 141,368

153,583 230,375 230,375

235,194 352,792 352,792

Balance Sheet

As on Sept. 30, ASSETS Cash Marketable Securities s Receivables Finished Goods Inventory Raw Material Inventory Stores & Spares Advances & Deposits

Construction.

I

27,533 0 24,151 60,378 66,354 20,000 20,000

248,607 117,922 277,741 63,313 23,888 132,969 44,323

Total Current Assets Fixed Assets at cost Less: Accumulated Depreciation. Net Fixed Assets: Preliminary Expenses:

218,417 599,785

Total Assets: LIABILITIES & EQUITY Current Liabilities - s Payable - Accrued Expenses - Workers Participation. Fund -Workers Welfare Fund - Dividends Payable - Taxes Payable - Bank Borrowings - Cur. Mat. of L T Debt Total Current Liabilities: Long-term Liabilities Total Long-term Liabilities EQUITY sponsor’s - Un-appropriated Profit Total Equity: Total Liabilities & Equity:

(Rs. in 000) II

III

908,762 599,785

1,046,299 5,560 359,949 71,349 29,584 150,433 50,144 1,713,3 18 599,785

1,284,657 6,050 386,554 76,621 31,697 160,000 60,000 2,005,5 79 599,785

829,632

37,002 562,783 10,287 1,481,8 33

74,003 525,782 9,144 2,248,2 44

111,005 488,780 8,001 2,502,3 60

23,888 23,888 0 0

35,910 277,741 31,385 31,385

547,749 359,949 40,053 40,053

588,234 386,554 42,802 42,802

63,366

94,246 170,527

153,583 215,649

235,194 231,588

111,141 384,388

641,192 365,168

1,357,0 36 326,729

1,527,1 75 288,291

384,388

365,168

326,729

288,291

334,104 0 334,104

334,104 141,368 475,472 1,481,8 33

334,104 230,375 564,478 2,248,2 44

334,104 352,792 686,895 2,502,3 60

599,785 11,430

829,632

Cash Flows

Const. Year SOURCES Operating Profit Add Back: Depreciation Amortization Funds from Operations paid up capital (sponsor’s) UBL GUARANTEE - Custom Debentures Accrued Expenses payable Increase in Current Liabilities. Increase in Bank Borrowings TOTAL SOURCES APPLICATION OF FUNDS Investment in Fixed Assets: -Preliminary Exp Financial Expenses Repayment of : UBL loan Workers Participation Fund -Workers Welfare Fund Taxes Dividend Increase in current Assets: TOTAL Surplus/(Deficit) Cash Balance - Opening Cash Balance - Ending

0 0

I 348,717 37,002 1,143

(Rs. in 000) II

III

445,031 37,002 1,143

475,582 37,002 1,143 513,72 7 0 386,862 483,175 334,104 0 0 0 384,388 0 23,888 23,888 0 63,366

530,051 -107,161

599,785 11,430 0

0 1,143 59,952

0 1,143 53,953

0 0

19,219 31,385 31,385 94,246 0 351,350

38,439 40,053 40,053 153,583 0 119,226

715,844 170,139 45,122 15,938 1,244,14 699,80 829,632 809,752 1 4

0 0 190,884 802,099 27,533 0 27,533

0 1,143 47,651

38,439 42,802 42,802 235,194 0 53,413 461,44 588,678 446,449 5 221,074 797,692 238,359 1,046,29 27,533 248,607 9 1,284,65 248,607 1,046,299 7

SWOT ANALYSIS

STRENGTHS: • This is high where there a few, large players in a market e.g. the large grocery chain • If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains. • The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another. • The power of suppliers tends to be a reversal of the power of buyers WEAKNESSES • Shortage of Electricity in Pakistan cut down the Business. • Highly dependent on cotton production.

Opportunities: •

A developing market such as quality yarn production

•

Mergers, t ventures or strategic alliances

•

Moving into new market segments that offer improved profits

•

A new international market

• A market vacated by an ineffective competitor Threats A new competitor in your home market • price wars with competitors • A competitor has a new, innovative product or service •

Firm has opportunity to operate successfully in emerging markets by using its great strengths. •

• Strong competition in current market and also desire to make rapid growth, Market development has become favorable strategy for current situation. • As company is doing good business and there is strong financial position as mentioned from ratio analysis so there is chance of innovation and high profits can be earned. • Company should try to expand its market share by providing quality products at low price and by attracting customer’s attention through stylish and improved design and outlook of packing.

Conclusion We conclude that on the basis of survey of spinning Mill that the Yarn is necessary product so its demand increases day by day. There is no chance to decrease the demand of Yarn. Pakistan is an agricultural country and it plays a very important role in our economy. Availability of raw material is very easy. So, conclusion is that the spinning Mill is a profit motive business because no chance of decrease of demand. Our recommendation to new investors is that they must invest in spinning Mill. So, they take step forward to come and invest or to start this business, and also contribute in the economic as well as social growth of Pakistan.