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M/S Hasnain Marble Factory

Feasibility Study

Mohamad Economic Zone

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As per a report of the State Bank of Pakistan (SBP), the annual housing demand is

400,000 units in the country. This is the extent of the annual housing market in

Pakistan, which positively pronounces a persistent growth in construction sector

thereby substantiating opportunities and potential in marble tiles, which accounts for

almost 7% to 10% of the total material use for the construction of a unit.

On the other hand, known marble reserves in enormous quantities ensure the

availability of raw material for decades. Besides, development steps taken by the

government for this sector, its high export merit in countries, where the construction

of high buildings is brisk and progress in the value added products, a fair increase in

the profit margins of the manufacturer are not difficult to predict.

1.2. PROJECT BRIEF

Natural marble in its wide range of colors, texture, crystals, and various finishing

techniques, when properly applied, permit to decor every type of ambience

beautifully. Marble is an expressive material and by its various types can make your

ambience look sophisticated or simple, warm or cool, elegant or rustic, sumptuous or

minimalist. The eternal life of marble is disconnected from fashion and enhances the

beauty of our environment in the most natural way.

Tiles can be used on both the walls and floors. Specifically these can be laid in any

part of the house i.e. bathrooms, kitchens, bedrooms, portico, foyer, driveway,

drawing room/living rooms, study, lobby, etc.

The proposed project envisaged the manufacturing of marble tiles in various sizes and

their sales in the local and export market. However, it is pertinent to note that during

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discussions with the industry players it was found that more than 90% of the marble

tiles manufactured locally are used by the local construction industry.

The proposed marble tiles manufacturing unit will produce approximately 1500 sq. ft.

of tiles daily utilizing 80% of total capacity. For this purpose, cutting and sizing

machines will be installed. Large Size marble stone (10-15 ton) will be purchased

from the suppliers and production facility will cut them into different sizes on the

cutting machinery and these cut to piece stone will further be converted into marble

tiles using sizing machine. These tiles will be supplied to the whole sellers for

distribution.

1.2.1. PRODUCTS:

1) Marble Tiles & Slabs Marble is a natural stone in a class by itself, and for an air of

sophistication and artistry, marble is the classic choice. Marble tiles and slabs are

ornate and alluring with a naturally elegant appearance, and are suitable for a variety

of effects. For an application such as a front hallway or foyer, marble tile flooring

certainly sets an affluent and professional tone. Popular choices for unique, eye-

catching statements in more casual settings as well, you can imagine the stunning

effect of a marble tile floor in your kitchen, bathroom, or recreation room. Veined

with rivulets of subtle color on varied background of earthy tones, marble tile flooring

and marble slabs can be a subtle or a bold feature in the modern designer's vision.

1.3. PROPOSED BUSINESS LEGAL STATUS

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The legal status of business tends to play an important role in any setup; the proposed

marble tiles manufacturing unit is assumed to operate on Sole Proprietorship basis

under name and style of M/S Hasnain Marble.

1.4. PROJECT CAPACITY AND RATIONALE

Production capacity of the proposed Marble tiles unit would depend on the market

demand and size of the production facility. In the presence of latest machinery and

continuity in production, it is estimated that the production will be 1500 sq. ft to 1800

sq. ft tiles per day at the beginning of the project utilizing 80% of total capacity.

During discussions with the industry stakeholders operating in KP, it was estimated

that there is a demand of hundreds of thousands sq. ft. of marble daily; therefore, the

project's proposed capacity seems reasonable to begin with.

1.5. PROJECT INVESTMENT

The cost of the project including land requirement, building size, machines and

equipment and utilities, personnel requirement is given below: -

Description Cost (Rs. Mln)

Building Construction Cost 5.20
Land 1.00
Machinery & Equipment 5.00
Furniture & Fixtures 0.20
Preliminary Expenses 0.60
Fixed Cost 10. 00
Working Capital 5.00
Total Cost 15.00

A total of Rs. 15.00 million (approximately) is estimated to be the cost of the project.

The working capital requirement is estimated around Rs 4.365 million, and Rs. 25.18

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million would be the fixed investment; out of these Rs. 07 million would be used for

the purchase of land and construction cost has been estimated at Rs. 11.88 million. An

amount of Rs. 9.50 million has been estimated for the machinery and equipment. Rs.

0.5 million would be required for the arrangements and supply of the electricity.

1.6. PROPOSED LOCATION

Proposed location for setting up a marble tiles manufacturing unit will be in Mohmand

Industrial Estate and where the availability of marble and its transportation cost is low.

However, factors like availability of manpower, utilities and easy access to the target

markets should also be carefully examined. The project location is Mohmand

Industrial Estate (Mohmand) which is the newly merged district in KP and adjacent to

Martian, Sawabi and Peshawar, where extensive construction is in progress and

demand is high. Mohmand Agency once being the center of marble products

manufacturing industry has been proposed for this project.

1.7. KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS

Marble tiles business is dependent on the pricing and margins given to builders,

suppliers and retail customers. Secondly, availability of good quality stone is also

critical. Based on our discussions with the existing stakeholders, it was found that due

to obsolete quarrying technology and conventional methods, stone quality plays a

major role in stone pricing. In most of the cases it is expected that stone procured

directly from quarry would have fractures inside and hence wastage would be 20% to

30%. Beside the stone quality, supply chain also plays critical role in the success of

marble tiles business. During discussions with the existing players of the business, it

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was noted that product passes through three to five channels before final delivery to

the user. These include, quarry operator, raw stone supplier, sized stone supplier, tiles

manufacturer, tiles wholesaler and tiles retailer. Reduced number of channels may

increase the profit margins of the manufacturer. A new marble tiles manufacturer may

eliminate wholesaler and retailer in order to increase his/her profit margins.

1.8. MACHINERY REQUIREMENT

Both local and imported machinery is available for the production of marble tiles. As

discussed with market experts, local machinery is generally used in this sector;

however, some of the export oriented setups are using imported machinery which

enhances tiles quality and reduces wastage. For the purpose of this pre-feasibility,

following machinery is proposed which is easily available in the local market:

[Link] Name of the Machine No. of Total Cost in

Units Rs.
1. Vertical cutting machine 01 1800,000
2. Sizer machine 02 500,000
3. Titles cutting machine 03 400,000
4. Gantry crane – 20 ton 01 1500,000
5. Erection equipment LS 800,000
6. Support structure LS 900,000
7. Generator (50kVA) 01 1,500,000
Total

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There are many local suppliers of Marble tiles machinery working at KP and other

cities who could be contacted for obtaining machinery; however, during the course of

study is was found that manufacturers buy different machinery components from

different suppliers as there is no single integrated machinery supplier is available in

the market.

1.9. PLANT AND MACHINERY MAINTENANCE

Machinery is expected to be serviced on an annual basis. During the projection period,

maintenance expenses are estimated to be around 3% of the total cost of machine.

2.0. LAND & BUILDING REQUIREMENT 2.1. SITE DEVELOPMENT

The Marble tiles manufacturing unit is estimated to require a total area of One Acre

(approximately 43500 sq. ft) plot. Since heavy machinery and vehicles will be used

for transportation, cutting and stacking of stone and tiles—large open space would be

required. The Installation of a gantry crane, trolley platform and other infrastructure

development would draw considerable space and capital.

2.2. LAND & BUILDING REQUIREMENTS FOR MARBLE TILES

FACTORY

Land and building requirements for the Marble tiles factory would be as follows:

Details Size/Area Civil Works / Total

([Link].) Construction construction

Cost / [Link]. Cost

Factory/ Covered Area
Raw Marble Factory Area 7650

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Crushing Area 1350 1300 1,755,000

Vertical Machine 1800 1300 2,340,000
Sizer Machine 1350 1300 1,755,000
Cutter Area (36”) 1800 1300 2,340,000
Finished Products 900 1300 1,170,000
Machinery & other installed 450 1300 585,00

equipment
Office / Other Services 1350

Area in the Factory

Factory Office 900 1500 1,350,000
Other services (water plant, 450 1300 540,000

tool shop etc)

Total Covered Area 9000 5200,000
Cost of Land – 1000Sq. 1,000,000

Yds.

Note: Land and construction costs are subjected to the site location, therefore may

vary as the location would change

As per discussion with market expert, 1000 Yards area is sufficient as the premises for

the Factory of Marble tiles products manufacturing unit. The space has a provision for

the machinery installation, storage, staff and office requirements.

3.0. HUMAN RESOURCE REQUIREMENT

Marble tiles industry is a labor-intensive industry in Pakistan. A total 15 persons will

be required to handle the production operations of the marble tiles manufacturing unit.

The business unit will work on shift basis (12 hours daily as the trend is noticed).

Technical staff with relevant experience will be required for operating machines. Total

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approximate work force requirement for the business operations along with the

respective salaries are given in the table below:

Staff Title No of Individual Annual

Persons Salary Monthely Salary Salary

1. Business Unit 2

Manager/ Owner
Production Staff (Quarry / 1 25,000 25,000

Excavation Site) 300,000

Vertical Operator 1 36,000

18,000 432,000
Sizer Operator 1 54,000

18,000 648,000
Cutter Machine Operator 2 18,000 54,000 60,48000
Crane Operator 1 18,000 18,000 216,000
Helper / Laborer 3 14,000 210,000 2,520,000
Factory Workers 1 14,000 42,000 504,000
Packaging Department 2 14,000 84,000 1,00,8000

Staff
Total production Staff 11 504,000 60,48,000
General Administration

Selling staff
Accountant 1 30,000 30,000 360,6000
Office Assistant 1 18,000 18,000 216,000
Guard 1 14,000 28,000 336,000
Driver 1 15,000 15,000 180,000
Total GA/ S Staff 4 91,000 109,000
Total 15 595,000

7,140,000

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3.1. Experience Requirement for the Staff

Machinery and vehicle operations involved at a Marble tiles Production site are of

technical nature; therefore, it is proposed that all machinery operators (particularly

vertical cutting machine and Sizer) should have a minimum of two to three years'

experience of same type of operations / work.

4.0. FINANCIAL ANALYSIS & KEY ASSUMPTIONS

The project cost estimates for the proposed "M/S Hasnain Marble" have been

formulated on the basis of discussions with industry stakeholders and experts. The

projections cover the cost of land, machinery and equipment including office

equipment, fixtures etc. Assumptions regarding machinery have been provided,

however, the specific assumptions relating to individual cost components are given as

under,

4.1. LAND & BUILDING

Land for setting up the proposed marble tiles manufacturing unit would be purchased

which will cost around Rs. 1.0 million for a one acre area at the location of Mohmand

Industrial Estate. It has been assumed that it would be a plot and would need to be

constructed according to specific requirement of a typical tiles manufacturing facility.

4.2. FACTORY / OFFICE FURNITURE

A lump sum provision of Rs. 100,000 for procurement of office/factory furniture is

assumed. This would include table, desk, chairs, and office stationery The breakup of

Factory Office Furniture & Fixtures is as follows:

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Item Number Total Cost (RS)

Table & Chair for 1 20,000

Owner
Tables & Chairs for 1 30,000

Admin Staff
Waiting Chairs 5 25,000
Stools for workers/ 6 25,000

Labor
Total 100,000

4.3. DEPRECIATION TREATMENT

The treatment of depreciation would be on a diminishing balance method at the rate of

10% per annum on the following. The method is also expected to provide accurate tax

treatment.

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1. Machinery

2. Land & Building Construction and formation

3. Vehicles

4. Furniture and Fixtures etc.

4.4. UTILITIES

Marble tiles manufacturing plant will be operated using electricity for production

purposes. This would draw considerable amount of electricity. The cost of the utilities

including electricity, diesel/fuel, telephone, and water is estimated to be around Rs.

23.4 million per annum; electricity will account for the major portion of the utilities

expenses. Approximate cost of utilities has been given below:

Utility Total Monthly Total Annual Anuual % age

Cost (RS) Cost (RS) Increase

Electricity 25,000 3,000,000 5%
Gas or Furnance 10,000 120,000 3%

Oil, Lubricants

etc.
Diesel for 15,000 180,000 5%

Vehicles and

Machinery
Water 10,000 120,000 5%

Telephone 2000 24,000 5%

Total 287,000 3,444,000
4.5. WORKING CAPITAL REQUIREMENTS

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It is estimated that an additional amount of around Rs. 2.5 million will be required as

cash in hand to meet the working capital requirements. These provisions have been

estimated based on the following assumptions for the proposed business.

Description Amount in Rs.

First three months Salaries (Production Staff) 1,512000
Frist three months Utilities Charges 86,1000
First three months Misc. Expenses 75,000
Raw Material 1,917,500
Total 4,365,500

4.6. PLANT & MACHINERY INSTALLATION

Machinery installation and trial run expenses are assumed to be around Rs, 100,000/-.

4,7. VEHICLE FOR SUPPORT AND MAINTENANCE SERVICES

A loading vehicle would be required for providing services for the transportation of

material, equipment and labor etc, For this purpose, a transportation vehicle has been

proposed which will cost around Rs. 2,200,000

4.8. SELLING & DISTRIBUTION EXPENSES

For the purpose of this pre-feasibility, it has been assumed that the Marble tiles

manufacturer will mainly entertain local orders. In order to meet order booking,

delivery and selling expenses, a provision of amount equivalent to 2% of the annual

sales has been assumed.

4.9. MISCELLANEOUS EXPENSES

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Miscellaneous expenses of running the business are assumed to be Rs. 25,000 per

month. These expenses include various items like office stationery, daily

consumables, traveling allowances etc. and are assumed to increase at a nominal rate

of 10% per annum.

5.0. RAW MATERIAL INVENTORY

Based on our assumptions for the production facility, orders and availability of desired

material, it would be necessary to maintain 250 ton marble stone (equivalent to 15

days stone requirement) in order to cover any urgent order requirement.

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5.1. FINISHED GOODS INVENTORY

The proposed setup is assumed to maintain finished goods inventory to meet urgent

order supplies. For this purpose 10,000 sq. ft. of marble tiles will be maintained

5.2. REVENUE PROJECTIONS

For the purpose of revenue projection, annual growth rate of 5% has been assumed

which would cover anticipated growth in the industry as well as price. Based on our

discussions with the industry experts and entrepreneurs, it is anticipated that the sales

price will vary according to location. Therefore, most precise sales price and growth is

not possible to estimate.

PRICES OF TILES

Title Size Size Qty Sold Unit Price Total Sales

(Per day)
12x12 14 sood 350 100 35,000
12x24 ¾ 750 60 45,000
12x12 14 sood 150 170 25,500
12x24 ¾ 250 100 25,000
Total Sales 130,500

Price (Per

day)

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5.3. ACCOUNTS RECEIVABLES

Considering the industry norm, particular to the marble tiles sector and all of its allied

industries, it has been assumed that 70% of the sales will be on cash whereas,

remaining 30% sales will be on credit. A collection period of 60 days is assumed for

the credit sales. A provision for bad debts has been assumed equivalent to 2% of the

annual credit sales.

5.4. TAXATION

The business is assumed to be run as a sole proprietorship; therefore, tax rates

applicable on the income of a non-salaried individual taxpayer are used for income tax

calculation of the business.

5.5. OWNER'S WITHDRAWAL

It is assumed that the owner will draw funds from the business once the desired

profitability is reached from the start of operations. The amount would depend on

business sustainability and availability of funds for future growth.

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