185. PROFILE ON PRODUCTION OF DETERGENT POWDER
185-2
TABLE OF CONTENTS
PAGE
I.
SUMMARY
185-3
II.
PRODUCT DESCRIPTION & APPLICATION
185-3
III.
MARKET STUDY AND PLANT CAPACITY
185-4
A. MARKET STUDY
185-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME
185-6
MATERIALS AND INPUTS
185-7
A. RAW & AUXILIARY MATERIALS
185-7
B. UTILITIES
185-8
TECHNOLOGY & ENGINEERING
185-8
A. TECHNOLOGY
185-8
B. ENGINEERING
185-10
MANPOWER & TRAINING REQUIREMENT
185-11
A. MANPOWER REQUIREMENT
185-11
B. TRAINING REQUIREMENT
185-11
FINANCIAL ANLYSIS
185-13
A. TOTAL INITIAL INVESTMENT COST
185-13
B. PRODUCTION COST
185-14
C. FINANCIAL EVALUATION
185-15
D. ECONOMIC BENEFITS
185-16
IV.
V.
VI.
VII.
185-3
I.
SUMMARY
This profile envisages the establishment of a plant for the production of detergent powder with a capacity of 100 tonnes per annum.
The present demand for the proposed product is estimated at 2,726 tonnes per annum. The demand is expected to reach at 4,539 tonnes
by the year 2020.
The plant will create employment opportunities for 51 persons.
The total investment requirement is estimated at Birr 15.06 million, out of which Birr 7.5 million is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of
25 % and a net
present value (NPV) of Birr 10.09 million discounted at 8.5%.
II.
PRODUCT DESCRIPTION AND APPLICATION
Detergents, term applied to materials, the solutions of which aid in the removal of dirt or other foreign matter from contaminated surfaces. A detergent powder is a product formulated from the constituents such as surfactants, which perform the primary cleaning and washing action by reducing the surface tension of water builders, which boost the cleaning power of the surfactant and other additives. Detergent powder is proved to be effective in hard water and cool or cold water, whereas soap is often wholly ineffective under both conditions. The major use of detergent powders is in households for washing clothes and utensils. They are suitable for hand washing and also for machine washing in laundries and dish washers.
185-4
III.
MARKET STUDY AND PLANT CAPACITY
A.
MARKET STUDY
1.
Past Supply and Present Demand
The country’s requirement for detergent powder has been met through domestic production and imports. However, data on domestic production of the product is not readily available. Since imports are considered as a proxy for demand gap (i.e. the gap between domestic production and domestic demand), import data is used to estimate the demand for detergent powder. The quantity of imports of detergent powder is depicted Table 3.1.
Table 3.1 IMPORTS OF DETERGENT POWDER
Source :
Year
Import (Tonnes)
2000
3,843.31
2001
5,946.48
2002
4,143.1
2003
623.06
2004
2,630.29
2005
2,508.65
2006
3,039.32
Average
3,247.74
Customs Authority, External Trade Statistics.
185-5 As can be seen from Table 3.1, the quantity of imports fluctuated from year to year but, on the average, 3247.74 tonnes of detergent powder had been imported annually during the period 2000 – 2006. Due to the fluctuating nature of import the average of the last three years ( 2004 – 2006) is assumed to realsiticley reflect the current ( 2007) level of import or undtifed demaned for the product. Accordingly, the current demaned for the product is estimated at 2,726 tonnes.
2.
Projected Demand
The major factors that affect the demand for detergent powder include income and population growth. Accordingly, the demand for the product is projected by employing an average annual growth rate of 4%, which is equivalent to the growth rate of urban population. (See Table 3.2) Table 3.2 PROJECTED UNSATISFIED DEMAND FOR DETERGENT POWDER
Year
Projected Demand ( Tonnes)
2008
2,835.1
2009
2,948.5
2010
3,066.5
2011
3,189.1
2012
3,316.7
2013
3,449.4
2014
3,587.3
2015
3,730.8
2016
3,880.1
2017
4,035.3
2018
4,196.7
2019
4,364.6
2020
4,539.1
185-6
3.
Pricing and Distribution
The average retail price of different brands of locally produced detergent powder is Birr 2 per 100 grams. Allowing margin for wholesalers and retailers margins, the estimated factory gate price of the product for the envisaged plant is set at Birr 1.50 per 100 grams or Birr 8.60 per kg.
The products of the envisaged plant can get its market outlet through the existing wholesale and retail network.
B.
PLANT CAPACITY AND PRODUCTION PROGRAMME
1.
Plant Capacity
A plant with annual capacity of 3000 tonnenes, of detergent powder per year is envisaged on the basis of a production schedule of 300 days per annum and three shifts of eight hours a day. The plant capacity is determined by considering the unsatisfied demand and economy of scale limitations. Based on the market study the envisaged plant will have annual production capacity of 100 tonnes. The plant will operate in a single shift of 8 hours a day, and for 300 days a year.
2.
Production Programme
The schedule is worked out considering the time required for gradual build up in labour productivity and fine tuning of machinery and market penetration period. Production will commence at 70%, and then will grow to 85% and 100% in the second year, and the third year and then after, respectively. below.
Detail production programme is shown in Table 3.3
185-7 Table 3.3 PRODUCTION PROGRAMME Year
1
2
3-10
70
85
100
2,100
2,550
3,000
Capacity utilization (%) Production (tonnes) IV.
MATERIALS AND INPUTS
A.
RAW AND AUXILIARY MATERIALS
The major raw materials used to produce detergent powder are Alkyl benzene sulphonic acid, sodium tri polyphosphate, sodium sulphate, sodium silicate, and caustic soda. Caustic soda can be obtained locally while the other raw materials are supposed to be imported from foreign sources. How ever, there is a possibility to manufacture sodium sulphate and sodium silicate locally as the starting materials for these chemicals are locally available. Auxiliary material, printed polyethylene is necessary as packing materials.
Annual consumption of
raw and auxiliary materials at full production capacity and their corresponding cost is given in Table 4.1 below. The total cost of raw material is estimated at Birr 45,024240. Table 4.1 RAW AND AUXILIARY MATERIALS REQUIREMENT AND COST Sr.
Description
Qty
No.
Unit
Cost, [Birr]
Price
LC
FC
TC
1
Alkyl benzene sulphonic acid
720
22,968
2,480,544
14,056,416
16,536,960
2
Sodium tripolyphosphate
900
19,920
2,689,200
15,238,800
17,928,000
3
Sodium sulphate
540
2,280
184,680
1,046,520
1,231,200
4
Sodium silicate
660
11,364
1,125,036
6,375,204
7,500,240
Caustic soda
120
5,232
627,840
-
627,840
0.1
1,200,000
-
1,200,000
8,307,300
36,716,940
5
Printed
polyethylene
(250g det. Powder) Grand Total
bags,
12 million
45,024240
185-8
B.
UTILITIES
Electricity, water and fuel oil are the utilities required by the envisaged plant. Detailed requirement and costs of utilities are shown in Table 4.2. The total cost of utilities is estimated at birr 645,160.
Table 4.2 UTILITIES REQUIREMENT AND COST
Sr.
Description
Quantity
No.
1
Electricity (kWh)
2 3
Unit Price
Total Cost,
(Birr)
Birr
100,000
0.4736
47,360
Water (m )
30,000
5.50
165,000
Furnace oil (lt.)
80,000
5.41
432,800
3
Grand Total
V.
TECHNOLOGY AND ENGINEERING
A.
TECHNOLOGY
1.
Production Process
645,160
Standard detergent powder manufacturing plant consists of mixing, drying, after drying, packing and antipollution units. These units are briefly described as follows:
Mixing unit: - Alkyl benzene sulphonic acid is neutralized and mixed with builders such as
sodium tri polyphosphate, sodium silicate, sodium sulphate and other minor ingredients. This detergent slurry is transferred to the top of the spray drying tower by high pressure pump.
185-9 Drying unit: - The mixed slurry is sprayed from the nozzles at the top of the drying tower.
The sprayed detergent slurry is dried by hot air coming from the furnace. The dried detergent powder is taken out at the bottom of the tower, and is transferred to the sieve by belt conveyor and air lift equipment.
After drying unit: - Fine shaped detergent powder is screened by the sieve and stocked in
baggies after being perfumed.
Packing unit: - The final product is packed here. Detergent powder is fed into the packing
machine from baggies.
Anti pollution unit: - Dust contained in the exhaust air, is washed and separated by the
spraying system. This water, containing detergent dust is recycled to the mixing unit again.
2.
Source of Technology
The technology of detergent powder production can easily be purchased from India. Addresses of machinery suppliers are given below:1. Micro Machines Limited of India Tel: 91 281 368564 Fax: 91 281 366010
2. Comp Engineering and Exports 3025/8, shreenidhi chambers, senapati Bapat Road, pune Maharashtra 411016(India) Tel: + (91)-(20)-25658205/06 Fax: + (91)-(20)-25658204 E-mail:
mailto:
[email protected],
[email protected]?subject=Comp
Engineering and Exports Mail Through compdetergentplants.com
185-10
B.
ENGINEERING
1.
Machinery and Equipment
The list of machinery and equipment required by the envisaged plant is given in Table 5.1 below. The total cost of machinery and equipment with the envisaged capacity is estimated at Birr 7.5 million, out of which birr 6 million is required in foreign currency.
Table 5.1 MACHINERY AND EQUIPMENT REQUIREMENT
Sr.
Qty.
No.
Description
(No.)
1
Caustic soda solution tank
1
2
Alkyl benzene sulphonic acid tank
1
3
Neutralizer
1
4
Sodium silicate tank
1
5
Mixing vessel
1
6
High pressure tank
1
7
Pumps
Set
8
Furnace
1
9
Blowers
Set
10
Spray drying tower
11
Cyclone
Set
12
Conveyors
Set
13
Sieve
Set
14
Perfumer
1
15
Baggies
Set
16
Packing machine
1
17
Anti pollution unit
1
1
185-11
2.
Land, Building and Civil Works
2
The total land requirement, including provision for open space is 3000 m , of which 1,500 2
m will be covered by building. Estimating unit building construction cost of Birr 2,300 per 2
m , the total cost of building will be Birr 3.45 million. The cost of land leasing is Birr 0.15 2
per m , and for 80 years land holding will be Birr 36,000. Thus, the total investment cost of land, building and civil works will be Birr 3.486 million.
3.
Proposed Location
Detergent powder manufacture is principally a market as well as raw material oriented project. Hence, the plant is proposed to be located at Butajira town, Meskan woreda.
VI.
MANPOWER AND TRAINING REQUIREMENT
A.
MANPOWER REQUIREMENT
The plant requires 51 workers, and their annual expenditure, including fringe benefits, is estimated at Birr 539,250. For details see Table 6.1.
B.
TRAINING REQUIREMENT
There is already sufficient experience in the country in manufacturing detergent powder. On site training programme is, therefore, believed to be adequate for key production, maintenance and quality control personnel by the experts of machinery and technology supplier during commissioning and performance testing period. The total cost of training is estimated at Birr 30,000.
185-12
Table 6.1 MANPOWER REQUIREMENT AND ANNUAL LABOUR COST
Sr.
Description
No.
Req.
Salary, (Birr)
No. Monthly
Annual
1
Plant manager
1
2,000
24,000
2
Secretary
2
1,800
21,600
3
Production and technical manager
1
1,800
21,600
4
Finance and administration manager
1
1,800
21,600
4
Commercial manager
1
1,600
19,200
5
Accountant
2
2,400
28,800
6
Sales person
1
1,200
14,400
7
Purchaser
1
1,200
14,400
8
Clerk
2
900
10,800
9
Quality control manager
1
1,600
19,200
10
Chemist
3
2,700
32,400
11
Production foreman
3
2,700
32,400
12
Operator
9
5,400
64,800
13
Mechanic
3
1,800
21,600
14
Electrician
3
1,800
21,600
15
Unskilled labor
10
3,500
42,000
16
Driver
2
600
7,200
17
Guard
3
750
9,000
18
Cleaner
2
400
4,800
Sub-total
51
35,950
431,400
8,987.5
107,850
44,937.5
539,250
Employee benefit (25% BS) Total
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VII.
FINANCIAL ANALYSIS
The financial analysis of the detergent powder project is based on the data presented in the previous chapters and the following assumptions:-
Construction period
1 year
Source of finance
30 % equity 70 % loan
Tax holidays Bank interest
3 years 8%
Discount cash flow
8.5%
Accounts receivable
30 days
Raw material local
30days
Raw material, import
90days
Work in progress
5 days
Finished products
30 days
Cash in hand
5 days
Accounts payable
30 days
A.
TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr 15.06 million, of which 39
per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
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Table 7.1 INITIAL INVESTMENT COST
Sr.
Total Cost
No.
Cost Items
(‘000 Birr)
1
Land lease value
2
Building and Civil Work
3,486.0
3
Plant Machinery and Equipment
7,500.0
4
Office Furniture and Equipment
100.0
5
Vehicle
275.0
6
Pre-production Expenditure*
864.9
7
Working Capital Total Investment Cost
Foreign Share
36.0
2,799.7 15,061.6
39
* N.B Pre-production expenditure includes interest during construction ( Birr 714.92 (Birr 30
thousand ) training
thousand ) and Birr 120 thousand costs of registration, licensing and formation of the company
including legal fees, commissioning expenses, etc.
B.
PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 48.05 million (see Table 7.2). The material and utility cost accounts for 95.05 per cent, while repair and maintenance take 0.24
per cent of the production cost.
185-15
Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Cost
%
45,024.24
93.70
Utilities
645.16
1.34
Maintenance and repair
117.04
0.24
Labour direct
323.55
0.67
Factory overheads
134.81
0.28
Administration Costs
215.7
0.45
Total Operating Costs
46,460.50
96.69
Depreciation
1019.3
2.12
Cost of Finance
570.36
1.19
48,050.16
100
Raw Material and Inputs
Total Production Cost
C.
FINANCIAL EVALUATION
1.
Profitability
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as profit to total sales, net profit to
equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project.
The income statement and the other indicators of profitability show that the project is viable.
185-16
2.
Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at full capacity ( year 3) is estimated by using income statement projection.
BE =
Fixed Cost
=
29 %
Sales – Variable Cost
3.
Pay Back Period
The investment cost and income statement projection are used to project the pay-back period. The project’s initial investment will be fully recovered within 4 years.
4.
Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 25 % and the net present value at 8.5% discount rate is Birr 10.09 million.
D.
ECONOMIC BENEFITS
The project can create employment for 51 persons. In addition to supply of the domestic needs, the project will generate Birr 6.9 million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports.
