Project profile on knitting mill
Table of Contents
1. Executive Summary......................................................................................2
2. Product Description and Application...........................................................3
3. Market Study, Plant Capacity and Production Program...............................3
3.1 Market Study..................................................................................3
3.1.1 Present Demand and Supply...............................................3
3.1.2 Projected Demand.............................................................5
3.1.3 Pricing and Distribution.....................................................6
3.2 Plant Capacity and production capacity..........................................7
4. Raw Materials and Utilities ........................................................................8
4.1 Availability and Source of Raw Materials.......................................8
4.2 Annual Requirement and Cost of Raw Materials and Utilities........9
5. Location and Site.........................................................................................10
6. Technology and Engineering.........................................................................10
6.1 Production Process...........................................................................11
6.2 Machinery and Equipment ..............................................................13
6.3 Civil Engineering Cost......................................................................15
7. Human Resource and Training Requirement ................................................17
8. Financial Analysis.........................................................................................18
8.1 Underlying Assumption....................................................................18
8.2 Investment.....................................................................................19
8.3 Production Costs.............................................................................20
8.4 Financial Evaluation.........................................................................21
1
1. Executive Summery
This project profile envisions the founding of a plant for the production of weft
knitted fabrics with a capacity of 5125 tons per annum. The plant is intended to sell
100 % of its product to the international market so that it could earn foreign currency
to the country and able to reach the vast market opportunity for project promoter.
The present demand for the proposed weft knitted fabric is estimated at 21,304 tons per
annum. The demand for weft knitted fabric is likely to reach at 123,031 tons per year
by the year 2015 based on the projection made on the five year growth and
transformation plan of Ethiopian textile sector.
The total investment requirement is estimated at Birr 169,860,469 Birr, out of which
38.2% is required for plant and machinery, 32.67 % is for working capital, 17.52% for
building and civil work and the rest 11.7 is expend for office eq. The project will
create employment opportunity for 136 people.
The project is financially viable that it will reach breakeven point at 20% of the
capacity and has a payback period of 2 years.
Generally, the project has a backward linkage effect with the yarn industries and
forward linkage with the knitted fabric finishing and garment manufacturing
industries. The establishment of such factory will have a foreign exchange saving and
earning effect to the country by substituting the current imports and by exporting to
the world market.
2
2. Product description and application
Weft knitting is a method of forming a fabric in which the yarn loops are made in
horizontal way from a single yarn and intermeshing of loops take place in a circular or
flat form in across wise basis.
Compared to woven and non woven fabrics, Knitted fabrics have very good feature of
flexibility in movement, mobility, elasticity and good behavior of recovery from
wrinkling. Besides, knitted fabrics are quite easy for multiple designs and pattern
changes.
The knitted fabric structure has good absorbency makes it most comfortable to wear.
It is often used for clothing such as t- shirts, socks, t- shirts gloves, shirts, sweaters,
blouses, formal dresses, high fashion clothes, pajamas and underwear.
Beautiful drape makes knitted fabrics appropriate for many furnishing applications like
car seat cover, furniture covers and back fabric for synthetic coats. It is also used
for upholstery.
3. MARKET STUDY AND PLANT CAPACITY
3.1 MARKET STUDY
3.1.1. Past Supply and Present Demand
As long as an extreme attention is given to the textile manufacturing sector in the
country, a number of foreign and domestic investors are launching many mechanized
cotton farms, cotton ginning, spinning mills and textile industries in the country. All
the incentives provided such as tax free market for textile products in economic giant
continents like US and Europe, 70% by 30% Development Bank loan scheme, 80 years
lease land for investors and 5 years tax free spare parts import and other
3
opportunities cheered on many investors to be drawn to the textile sector. Along with
the above incentives and motivations the textile manufacturing industries are
migrating to Africa and other poor countries due to the increase of labor cost in
countries like Turkey, Italy and others. On the contrary, Ethiopia has relatively lower
cost labor force and good source of raw material. All the listed reasons fueled the
textile sector to show up dramatic change in number and influence the economy of the
country. Even though, there is knitting production capacity of 11,100 tons per year1in
the country, there is still bigger domestic and international knitted textile product
demand (‘Then good luck, and remember the sky's the limit.").
The market segment for proposed project is 100% targeted to the international
market for the coming 10 years. Ethiopia has exported few amount of knitted fabric
for the past 10 years despite the fact that the market for developing nations are still
at large and the government had planned in the Growth and transformation plan to
export textile products as it is depicted in the following table.
Table 3.1 Export Market demand plan of weft knitting
Year(EC)
1
Knitted fabric Export
plan (In ton)
knitted fabric
Exported (ton)
Growth Rate (%)
1996
4,444
5110.6
15.0%
1997
5,697
6551.6
15.0%
1998
7,304
8399.6
15.0%
1999
9,365
10770
15.0%
2000
12,006
13807
15.0%
2001
15,392
17701
15.0%
2002
18,108
20824
15.0%
2003
21,304
24500
15.0%
[GTP plan for textile sector, TIDI 2011] and textile digest 2003
4
3. 1.2. Projected Demand
During mid of 2003 Textiles Intelligence published a report "World Markets for Knitted
Textiles and Apparel: Forecasts to 2010" showing that world production of knitted
textiles and apparel was over 17 million tons accounting for one third of world textile
market, and the output will grow by 25% over the following ten years, reaching over 21
million tons. [Source : Textile digests report, 2003].
In terms of knitwear production, a report published in January/February 2010 by juststyle shows that during 2004 to 2008, China increased its world market share in knitwear
from 20% to 32% partly due to the removal of quotas and also due to the range of yarns
and capabilities available. However, price of knitwear from China is relatively high. The
report also reveals that currently the fastest-growing countries for knitwear are
Nicaragua, Vietnam, Cambodia and Indonesia.
Accordingly, an average annual growth rate of weft knitting is about 15% hence, by taking
the estimated present demand as a base and applying a 15% growth rate the projected
demand for the product is shown in Table 3.22
2
[GTP plan for textile sector, TIDI 2011]
5
Table 3.2 Export Market demand Projection
Year(EC)
Projected
Demand Knitted
fabric (ton
Existing
Capacity
knitted
fabric(In ton)
Unsatisfied
demand Lint
cotton (ton)
Growth
Rate(%)
2003
21,304
11,100
10,204
15.82%
2004
25,309
11,100
14,209
6.22%
2005
26,989
11,100
15,889
14.05%
2006
31,399
11,100
20,299
21.93%
2007
40,219
11,100
29,119
15.00%
2008
46,252
11,100
35,152
15.00%
2009
53,190
11,100
42,090
15.00%
2010
61,168
11,100
50,068
15.00%
2011
70,343
11,100
59,243
15.00%
2012
80,895
11,100
69,795
15.00%
2013
93,029
11,100
81,929
15.00%
2014
106,983
11,100
95,883
15.00%
2015
123,031
11,100
111,931
15.00%
As revealed by the data set in Table 3.2, Weft knitting fabric consumption had
exhibited an average annual growth of 15% during the years 1996 to 2003. Assuming
the same growth trend will increase to 15%, the future demand for cotton yarn is
projected to range from 21,304 tons in year 2003 to 123031 tons by the year 2015.
The unsatisfied local market demand by the year 2015 is determined to be 111,931
tons assuming that the existing Knitting capacity 11,100 tons is remained unchanged for
the coming 10 years as it is shown in table 3.2.
3.1.3 Pricing and Distribution
Based on current average price of the world Knitted fabric market price, the average
price of Birr 148 Birr/ Kg is adopted for financial analysis.
6
Table 3.5 Price distribution
Value
addition to
yarn
Product Mix
U/m
Current price(Birr)
Single Jersey
kg
20%
138
45%
Rib
kg
40%
161
35%
Interlock
kg
30%
149.5
20%
Average selling Price
Weight (%)
148.35
3.2 Plant capacity and production program
3.2.1 Plant capacity
On the basis of the projected data obtained, the weft knitting mill is supposed to produce
knitted fabric from carded, combed, and dyed yarn and other textile fiber materials at a
capacity of 16 tons/day and 5125 tons per annum.
The knitting mill will work 320 days per annum and 24 hours per day in 3 shifts.
3.2.4 Production program
The planned capacity will be achieved in the third year of the establishment year of
the knitting mill. In a period of 12 months project time, the project will be realized.
It is estimated that production starts at 80% plant capacity in the first year, 90% in
the second year and it will continue to work with this capacity for the coming 10
years.
7
Table 3.6 Yearly Production Program
Year
1
2
80
90
100
100
4096
4608
5120
5120
Capacity Utilization (%)
Knitted fabric (Tons)
3 4 and above
Remark: No of working days in a year is 320
4. Raw Materials and utilities
4.1 Raw Materials
The main raw material required to produce the knitted fabric is raw cotton yarn. The
major suppliers of these raw materials are Quality yarn manufacturing mill all over the
country. There are auxiliary materials like poly bag, hessian cloth, and tie wire and
etc...
Table 4.1 Raw and Auxiliary materials & costs
S/n
Description
U/M
Qty
Cost(Birr)
A. Raw material
LC
FC
TC
1 Combed Yarn (45%)
kg
1990656
235,892,736
235,892,736
2 Dyed yarn (20%)
kg
884736
104,841,216
104,841,216
3 Carded yarn (25%)
kg
1105920
131,051,520
131,051,520
4 Open end yarn (10%)
kg
442368
52,420,608
52,420,608
Sub Total
524,206,080
B. Auxiliary material
1 Packing materials
kg
2,621,030
Sub Total
2,621,030
2,621,030
C. Miscellaneous
5,242,061
Sub Total
5,242,061
Total
532,069,171
8
4.2 Utilities
Electricity, fuel and water are the three major utilities required by the envisaged
plant. Total annual cost of major utility items at full operation capacity of the plant is
Birr 3,066,100.Details are shown in the table below:
Table 4.2 Utilities Requirement
S/N
Utility
Requirement (Annual)
Unit price
1 Electricity
3456000 kwh
0.55 Birr/Kwh
1,900,800
2 Fuel(Diesel Oil)
80,000lt
14.50 Birr/lt
1,160,000
3 Water
2000 m3
2.65 Birr/m3
5,300
Total
Cost(Birr)
3,066,100
5. Location and Site
Location of the plant is determined on the proximity of raw materials, availability of
infrastructure, availability of skilled man power and distance to potential market
outlet.
In view of this, the envisaged plant will be established in Oromiya regional state in
Sebeta industrial zone.
9
6. Technology and Engineering
1 Production process
Knitted structures are progressively built-up from row after row of intermeshed loops.
The newly-fed yarn is converted into a new loop in each needle hook. The needle then
draws the new loop head first through the old (fabric) loop, which it has retained from the
previous knitting cycle. The needles, at the same time, release, (cast-off or knock-over)
the old loops so that they hang suspended by their heads from the feet of the new loops
whose heads are still held in the hooks of the needles.3
A cohesive knitted loop structure is thus produced by a combination of the intermeshed
needle loops and yarn that passes from needle loop to needle loop.
Weft knitting is the more diverse, widely spread and larger of the two sectors, and
accounts for approximately one quarter of the total yardage of apparel fabric compared
with about one sixth for warp knitting. Weft knitting machines, particularly of the
garment-length type, are attractive to small manufacturers because of their versatility,
relatively low total capital costs, small floor space requirements, quick pattern and machine
changing facilities, and the potential for short production runs and low stock-holding
requirements of yarn and fabric.
3
Knitting Technology, David Spencer
10
Chart-1 Knitting process flow chart
Yarn receipt
Yarn weighing
Weft knitting
Circular knitting
Flat knitting
Plain
Rib
Single
jersey
Rib
Inspection
Weighing
Delivery
11
Interlock
6.2 Sources of Technology
The source of technology for weft knitting machines is from reputable knitting machine
manufacturers such as Mayer & cie, Fukahara, Hanshin, Stoll Shima and Seiki which are
originated from Germany, Japan and South Korea respectively. The reconing machine is
originated from india.
The utility machines are selected from the most famous and branded European
manufacturer like Luwa (Switzerland), Atlascopco (Belgium) and Iveco (Italy).
6.3 Machinery and Equipment
4
The main features of the knitting machine Originally, the term ‘machine’ used to refer to
a mechanism on a bearded needle frame such as the fashioning mechanism on the straight
bar frame. Today, it refers to the complete assembly.
A knitting machine is thus an apparatus for applying mechanical movement, either hand or
power derived, to primary knitting elements, in order to convert yarn into knitted loop
structures.
The machine incorporates and co-ordinates the action of a number of mechanisms and
devices, each performing specific functions that contribute towards the efficiency of the
knitting action.
The main features of a knitting machine are as follows:
1 The frame or carcass, normally free standing and either circular or rectilinear according
to needle bed shape, provides the support for the majority of the machine’s mechanisms.
2 The machine control and drive system co-ordinates the power for the drive of the
devices and mechanisms.
4
Knitting technology ,David Spenser
12
3 The yarn supply consists of the yarn package or beam accommodation, tensioning devices,
yarn feed control and yarn feed carriers or guides.
4 The knitting system includes the knitting elements, their housing, drive and control, as
well as associated pattern selection and garment-length control device (if equipped).
5 The fabric take-away mechanism includes fabric tensioning, wind-up and accommodation
devices.
6 The quality control system includes stop motions, fault detectors, automatic oilers and
lint removal systems. Machines may range from high-production, limited-capability models
to versatile, multi-purpose models having extensive patterning capabilities. The more
complex the structure being knitted, the lower the knitting speed and efficiency. The
simplest of the knitting machines would be hand-powered and manipulated whereas power
driven machines may be fully automatically-programmed and controlled from a computer
system.
13
Table 6.1 Machinary and Equipment requirement & Cost for knitting
5
Price(Birr)
S/N
Description
MLBF 20E, 30” Dia Fleece
M/C
RELANIT 4 24E, 30” Dia
Single Jersey M/C
INOVIT 2.0 18E, 30” Dia
Inter Lock M/C
FV 2.0, 16E, 30” Dia Rib
M/C
RELANIT 4, 28E, 26” Dia
Single Jersey
DXC 3S(2) 24E, 22” Dia
Single Jersey M/C
VXC 3S(2) 24E, 24”
Dia.Single Jersey M/C.
DXC 3S(2) 24E, 20” Dia
Single Jersey M/C.
MBF 3.2 20E, 30” Dia
Fleece M/C.
HB-103 52” X 14g Flat
Knitting M/C
HJ-118,52” X 14g Flat
Knitting M/C (Jacquard )
CMT-211,84”X14g Semi
Jacquard Flat Knitting M/C
SFF-152T54”X14g Semi
Jacquard Flat Knitting M/C
Reconing M/C
Compressor
Air coditioning system
Stand by Generator
1
2
3
4
6
7
8
9
10
11
12
13
14
15
16
17
18
Brand
Mayer &
Cie
Mayer &
Cie
Mayer &
Cie
Mayer &
Cie
Mayer &
Cie
Origin
TC(Birr)
Germany
Set
4
840,432
3,361,727
Germany
pcs
6
1,050,540
6,303,239
Germany
pcs
2
612,815
1,225,630
Germany
pcs
2
542,779
542,779
Germany
pcs
2
924,475
1,848,950
Fukahara
Japan
pcs
3
672,345
2,017,036
Fukahara
Japan
pcs
2
714,367
1,428,734
Fukahara
Mayer &
Cie
Japan
pcs
2
630,324
1,260,648
Germany
pcs
2
1,008,518
2,017,036
Hanshin
S.Korea
pcs
12
864,065
10,368,778
Hanshin
S. Korea
pcs
4
1,920,667
7,682,669
Stoll
Germany
pcs
2
1,152,400
2,304,801
Shima Seiki
PEAS
Atlascopco
Luwa
Iveco
Japan
India
Belgium
Switherland
Italy
pcs
pcs
pcs
pcs
pcs
10
1
1
1
1
740,829
894,000
500,000
400,000
350,000
7,408,288
894,000
500,000
400,000
350,000
pcs
1
FOB Price
Freight,Insurance,customs
& Bank charges,Material
handeling cost
49,914,315
14,974,294
Total CIF Land cost
5
U/M Qty U/p(Birr)
14,974,294
64,888,609
Machinery catalogues of knitting machine manufacturers
14
6.3. Land, building and civil work
The proposed plant requires a total land area of 10000m2. The floor space required for
plant building, ware house, parking lot and for other facilities. A building with single story
covering an area of 3800m2 will be constructed to accommodate the production hall and
office building respectively. The total estimated cost of building civil works at the rate of
Birr 6,000 per m2 is Birr 29,764,800. The lease period for the land 80 years and the
payment of lease prices is in 40 years.
Moreover, advance payment of lease based on the type of investment is 10%.The lease
price is payable after the grace period annually. Accordingly, in order to estimate the land
lease cost of the project profiles it is assumed that all manufacturing projects will be
located in Oromia region, industrial zone. Therefore, for this profile since it is a
manufacturing project a land lease rate of Birr 6.5 Birr/M2/year is adopted.
7. Man power and training requirements
7.1 Man power requirement for operation
The manpower requirement is considered at 136 personnel for various levels. This includes
Casual labor, technical, supervisory staff and administrative staff. Table below, shows the
list of manpower required along with annual labor cost.
15
Table 7.1 Man power Requirement of weft knitting mill
Req
No
S/N Description
Monthly salary
Annual salary
1 Factory Manager
1
10,000
120,000
2 Secretary
1
3,000
36,000
3 Production and Tech Manager
1
7,500
90,000
4 Production supervisor
3
4,000
144,000
5 Mechanical maintenance supervisor
1
4,000
48,000
6 Electrical Supervisor
1
4,000
48,000
90
1,000
1,080,000
8 Mechanic
4
1,300
62,400
9 Electrician
3
1,300
46,800
11 Quality and Laboratory manager
1
7,500
90,000
12 Process testers
3
2,000
72,000
13 Marketing Manager
1
7,500
90,000
14 Administration and Finance manager
1
7,500
90,000
15 Accountant
1
5,000
60,000
16 Clerks
1
1,000
12,000
17 Cashier
1
1,200
14,400
18 Purchasers
1
1,500
18,000
19 Store Keepers
2
1,000
24,000
20 Guard
8
700
67,200
21 Messenger
1
600
7,200
22 Driver
3
800
28,800
23 Cleaner
7
600
50,400
7 Machine Operators
Sub Total
2,299,200
Employee Benefit ( %)
15%
344,880
Grand Total
136
2,644,080
16
7.2 Man power requirement for Project execution
Table 7.2 below, shows the list of manpower required along with annual labor cost.
Total manpower needed, including skilled and unskilled labor is 30 persons.
Table 7.2 Man power Requirement of knitting mill and 12 months labour
cost
S/N Description
Req. No
Monthly
salary/head
Annual salary
1 Project Manager
1
16,000
192,000
2 Project Engineer
1
10,000
120,000
3 Construction Forman
1
6,000
72,000
4 Electrician
2
4,000
96,000
5 Mechanics and Plumbers
2
4,000
96,000
6 Secretery
1
3,000
36,000
7 Finance and Adminstration
1
10,000
120,000
8 Acountant
1
7,000
84,000
9 Purchaser
1
5,000
60,000
1
1,500
18,000
10
2,000
240,000
12 Driver
1
1,000
12,000
13 Guard
7
1,000
84,000
10 Cashier
11 Daily Labourer
Sub Total
Employee Benefit( %)
Grand Total
30
1,230,000
30%
369,000
1,599,000
17
7.3 Training, Design and Consultancy
The total cost required for design, consultancy, training and commissioning is
estimated to be Birr 3.7 million.
Table 7.3 Design, consultancy ,training and test run cost
S/N
Description
Est Budget/year(Birr)
1 Engineering,Design & consultancy fee
2,000,000
2 training
700,000
3 Comissioning and test run with 10% contingency
1,000,000
3,700,000
4 Total
8. Financial Analysis
8.1 Underlying Assumption
The financial analysis of cotton yarn producing plant is based on the data provided in
the preceding chapters and the following assumptions
A. Construction and Finance
Construction period
12 months
Source of Finance
30% equity and 70% Loan from bank
Tax Holidays
5 years
Bank Interest rate
8.50%
Discount for cash flow
8.50%
Value of Land
Based on the lease rate of oromiya
Spare parts & Repair and Maintenance
5% of the fixed investment
18
B. Depreciation
Building
5%
Machinery and Equipment
10%
Office Furniture
10%
Vehicles
20%
Pre-Production(Amortization)
20%
C. Working Capital(Minimum day of coverage)
Raw Material Local
30 days
Raw Material Foreign
120 days
Factories supplies in stock
30 days
Spare part in stock and Maintenance
60 days
Work in Progress
5 days
Finished Product
20 days
Account receivable
30 days
Cash in Hand
20 days
Accounts payable
30 days
8.2 Investment
The investment cost of the project including working capital is estimated at Birr 170 million.
The owner shall contribute 30% of the finance in the form of equity while the remaining 70%
is to be financed by bank loan.
19
Table 8.1 Total Initial Investment
Item
LC
Land
Building and Civil Work
FC
Total
5,200,000
19,000,000
5,200,000
10,764,800
29,764,800
Office Equipment
1,200,000
1,200,000
Vehicles
8,000,000
8,000,000
Plant machinery and equipment
64,888,609
64,888,609
Total Fixed investment cost
84,853,409
109,053,409
5,299,000
5,299,000
90,152,409
114,352,409
Pre-Production(Capital Expenditure)
Total initial investment cost
Working capital at full capacity
55,508,060
Total
79,708,060
55,508,060
90,152,409
169,860,469
8.3 Production Cost
The total production cost at full capacity operation is estimated at Birr 553.4million.
Raw material and utilities accounts for 96.7%, while the rest together costs 3.3% of
the total production cost.
Table 8.3 Total Production cost at full capacity
Items
Cost
1. Raw Material
532,069,171
2.Utilities
3,066,100
3.Wages and salaries
2,644,084
4.Spares and Maintenance
2660345.855
5. Depreciation
10,905,341
6.Marketing and Promotion
2,030,000
7.Adminstrative Expense
5,320,692
Total Production cost
553,375,042
20
8.4 Financial Evaluation
I. Profitability
According to the projected income statement (See Annex 1) the project will generate
profit beginning from the first year of operation and increases on wards. The income
statement and other profitability indicators also show that the project is viable.
II. Breakeven Analysis
The breakeven point of the projects is given by the formula:
BEP = Fixed Cost
Sale –Variable Cost at full capacity.
The project will break even at20 % of capacity utilization
III. Payback Period
Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment less working
capital in 2 years.
9. Economic and Social Benefits and Justification
Based on the foregoing presentation and analysis, we can learn that the proposed
project possesses wide range of benefits that complement the financial feasibility
obtained earlier. In general, the envisaged project promotes the socio-economic goals
and objectives stated in the growth and transformation plan of the government.
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 58.1
million per year and Birr 581 million within the project life. Such result induces the
project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the country.
21
B. Tax Revenue
In the project life under consideration, the region will collect about Birr 168million
from corporate income tax. Such result create additional fund for the government
that will be used in expanding social and other basic services in the region.
C. Employment and Income Generation
The proposed project is expected to create employment opportunity to several
citizens of the country. That is, it will provide permanent employment to
136professionals as well as support stuffs.
D. Pro Environment Project
The proposed production process is environment friendly.
22
ANNEXES
23