Flour Mill

Feasibility Report on

United Flour Mill

(AL-ALAQ)

READ! AND THY LORD IS THE MOST BOUNTENOUS, WHO TEACHETH BY THE PEN, TEACHETH MAN THAT WHICH HE KNEW NOT.

ALLAH DOES NOT LOOK AT YOUR FORMS AND POSSESSIONS BUT HE LOOKS AT YOUR HERTS AND DEEDS. (MUSLIM)

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Feasibility Report on

United Flour Mill

SMALL INDUSTRIAL ESTATE

BAHAWALPUR

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United Flour Mill

DEDICATED TO OUR PARENTS & RESPECTED TEACHER

MR JAVED IQBAL

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PREFACE

Department of Commerce, The Islamia University Bahawalpur has always been admirable in its efforts to equip the future executives with arms of creativity, flexibility and adaptability to meet the challenges offered by fast changing business environment. To achieve the above goals the department is providing both text and practical knowledge to its students with its available resources. Text knowledge is very well transferred to the students within the premises of the department; Practical knowledge requires the kind co-operation of various business organization of the country. Faculty members are always trying their best to ask the students to explore the market by assigning these different field activities and to conduct the “Feasibility Report”.

This report has been made on

“UNITED FLOUR MILLS” The key function of our work was to make Feasibility study and Feasibility Report. We have done our best efforts to complete this report efficiently and effectively with all abilities. We hope this report fulfills the criteria and expectations of Department of Commerce. We have tried our best to make it analytical as well as informative. May Allah help us in this world.

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ACKNOWLEDGMENT We first thanks to Allah, The Almighty who bestowed knowledge, health, vigor, to complete this report. “Life is a learning experience”. We have learned the validity of this statement time and time again. Every time we think we know something, we look back a year later and realize how little we know and how much we have learned. This Feasibility Report has convinced us again, not in the learning but also in terms of the vast team of talented people that take part in creating this report. We believe each person plays a piece of a puzzle to make the complete picture, some pieces are bigger then others, but without anyone piece the picture would not be completed. We feel great pleasure and honor to express our gratitude from the citadel of our hearts to the people whom we met, for their cooperation. Their sympathetic behavior has an ever-lasting impression on the pages of our memory. We also give honor to (In charge of Project Appraisal) Mr. Javed Iqbal who provide us an opportunity to get practical experience in fieldwork and whose guidance remained with us during completing this report. We are specially thankful to Ch Masood Majeed (owner of ASIA Flour Mill located in state of small industries Bahawalpur)who provide us necessary information and show us the working of flour mill. We also wordless to pay our humble gratitude to our parent, who have supported us to reach the point where we stand now and have been a great and enormous source of inspiration for us throughout the life.

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TABLE OF CONTENTS

Sr#

Name

Page No

1

PROJECT SUMMARY

1

2

ASSUMPTIONS

8

3

EXECUTIVE SUMMARY

9

4

MANAGEMENT

10

5

Estimated Cost of Land

11

6

Estimated Cost of Civil Works

7

Estimated Cost of Machinery

12

8

Estimated cost of the Project and interset during construction

13

9

Initial Net Working Capital Requirement

14

10

Estimated Income Statement

15

11

Production at 100% Capacity

16

12

Capacity Utilized

17

13

Raw Material:

18

14

Estimated Cost of Labour

18

15

Year Wise Wages of Labor:

19

16

Manufacturing Overhead Cost:

20

17

Administrative And General Expenses

21

18

Year Wise Administrative Salaries:

22

19

Year Wise Depreciation:

23

20

Pre-Production Expenses:

23

21

Cash Flow Statement

24

22

Balance Sheet

25

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23

Calculation of Internal Financial Rate of Return and Loan Repayment Schedule

26

24

Financial ratios

27

25

Financial Plan

28

27

Market Analysis

29

28

Technical Analysis

30

29

Manufacturing process/flow chart/diagram

31

30

Personel Analysis

33

31

SWOT Analysis

34

32

List of Machinery

35

33

Conclusion and Recomendations

34

Special Thanks

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PROJECT SUMMARY Name of Project.

Unitied Flour Mills

Location.

Small industries estate bahawalpur

Nature of Industry.

Flour Mills - A new Project

Product range

Flour,Maida and bran

Installed Capicity

8 body flour mill

1.M.FARHAN KHIZAR 2.Amir Fraz 3 humaira kanwal Purpose of Loan.

To meet the Capital cost of the Project.

Brief Description of Ma chinery

Machinery would be purchased from local suppliers of machinery having good reputation in market in this regard.

Estimated cost of the project

Debt 60% 40,6870 00

Eqyity 40% 27,1250 00

total 67,8120 00

Names of loans

Picic Long term loan

Name of civil contractor

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United Flour Mill M younas malik Satluj industries Small industries estate shop 5’6 Cell no: 03017711033

Introduction Wheat is one of the most important products for all of region of the world. Without wheat human life is uncompleted. It is become more important not only by the fact of improvement international value. It’s a first food item that an important for all over the world. That business also important for a Pakistan. And last decades the flour mill are increase due increase in demand of flour.

Reasons for Motivation 1. Availability of raw material 2. Availability of utilities 3. Availability of labor 4. Technical facilities 5. Whole year producing process 6. Large demand of the people. 7. Profitable Business

Proposed Location The most feasible location for the plant would be in or near the wheat producing regions of Punjab. This is advisable as transportation costs would be reduced and contact with growers/farmers directly can be made. It is usually the case that the farmers are willing to approach the manufacturing plant directly if it is located near to their lands. However, the availability of trained personnel in the locality has to be kept in mind as well as the availability of suitable residences because costs could rise if there was a problem in the accessibility of the location from other urban area.

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Decide Location When we make investment and open a plant than we first decide the location and study some regard about the location. The best location of any plant is important and greater effect on business. The business can run if all input is available. We decide location the small industrial area of Bahawalpur followings factor should be examined. 1. Availability of raw material The location that we decide, in that location the raw material of our plant is available. And we also examined the input constraint. And study any short and fall of raw material and how we can avoid that. 2. Availability of utilities After the analyses of the raw material then we examine the utilities. For example power water telecommunication road and other facilities. If the all facilities are available than open a project other wise rejects. 3. Availability of labor Then we examine labor. The workers are available for running a project. •

Available of skilled labor.

•

Available of unskilled labor.

•

Wage rate.

•

Training of employees.

Nature of the Business The nature of the business is partnership. Although selection totally depends upon the choice of entrepreneur. This business is based on the partnership and registered under partnership act 1932. U 4 YOU

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Name We decide that the name of our flour mill is Bahawal Flour Mill.

Covered Area The total area, which we want to establish a Flour mill, is 2 acres. The cost of one acre is 5million. The area required to the machinery building is 2kenal.

Human Resource Required Labor There are three types of the labor are required 1. Technical Labor 2. Supervisors 3. Loaders Technical Labor Technical labor is a permanent employee of the factory. 15 to 20 employees are required. 1.

Miller.

2.

Manager.

3.

Shift Incharge.

4.

Rule man.

5.

Washer Man.

6.

Silk Man.

7.

Accountant.

8.

Packers.

9.

Others Helper.

Supervisors These are also the permanent employee of the factory.10 to 15 employees are required. Loaders Loaders are the contractor employee of the company. 15to20 employees are required.

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What legal aspects do I need to consider while starting my business? While starting your business, government regulations need to be considered. These regulations may also cover special incentives offered by the government for that particular sector and other laws that may govern the business. You also must decide about the form of your organization (sole proprietorship, partnership etc). Establish Flour Mill following legal procedure is follows.

Legal Procedure Application for license to Establish Flour Mill Applications for licenses shall be made in Form “B” (annexed herewith as annex “A”) to the Licensing Authority of the district in which the applicant carries on or intends to carry on business involving the purchase, sale or storage for sale of food grains in wholesale quantities. To obtaining license applicant have to undertake on the application Form that he agrees to abide the conditions of license given in Form “A” (annexed herewith as annex “B”). If any applicant carries on such business or intends to carry on such business in more than one district he shall apply to the District Magistrate of the district in which he usually resides. A single application may include a request to carry on business in a number of districts.

APPLICATION FORM FOR LINCENSE 1. Applicant's name. 2. Applicant's profession. 3. Applicant's residence. 4. Situation of applicant's place(s) of business with full particulars regarding the number of house or premises, which he wants to get this license. 5. Place (s) of storage. 6. How long has the applicant been trading in food grains mentioned in the Schedule I to this order and any other food grains. 7. Quantities of foodgrains handled annual during the past three years.

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8. Food grains in respect of which license is required. 9. I have carefully read the conditions of license given in Form 'A' in Schedule II appended to the West Pakistan Foodgrains (Licensing Control) Order, 1957 and I agree to abide to them. Date……………………..

Signature of the applicant.

9. Issuance of License On receipt of application and on payment of a license fee of Rs. 10 for one district and Rs. 2 for each subsequent district the licensing authority shall issue license. 10. Renewal of License A license granted under this order shall, unless suspended, withdrawn or cancelled continue to be in force for one year from the date of the issue of the said license but shall be renewable annually by the licensee to the licensing authority by which the license was granted and on payment of the renewal fee of Rs. 5 for the first district and Rs. 1 for each subsequent district. Renewal of licenses shall be granted on the Renewal Endorsement Form shown in Form “C” (annexed herewith as annex “D”). If any person fails to apply and to deposit the renewal fee before the date when it is due to expire the license shall not be renewed Unless: A. the licensing authority is satisfied that there were good and sufficient reasons for the delay; and B. the licensee pays an extra fee of Rs. 5 for the first district and Rs. 1 for each subsequent district.

11. Duplicate License In the case of lost or damage of the license, a duplicate license shall be issued on payment of Rs. 5 for one district and Rs. 1 for each subsequent district when it is proved to the

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satisfaction of the licensing authority that the original license was lost or damage in a bona fide manner.

No Objection Certificate. (NOC) After the issue of license the owner get the No Objection Certificate (NOC) from the following department. 1-Industry Department 2- Environment Department After the issue of (NOC) the owner starts the business properly.

No Objection Certificate Fee. (NOC) No Objection Certificate Fee (NOC) pay the to the Industry Department and Environment Department is Rs.25000

Food Department Food Department gives the permission of quota of wheat on the base of urban bodies live in the district.

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ASSUMPTIONS

1.

Direct labour will increase every year 20%.

2.

Administration salaries will be increase 20% per year.

3.

Selling expense are 5% of sales revenue.

4.

Depreciation will be constant over the life of assets.

5.

The economic life of the project would be 10 year.

6.

The entire capital outlay would be incurred one year prior to the commencement of commercial operation.

7.

Motor vehicles, furniture, fixtures, and equipments would be replaced after 10 years.

8.

Salvage value at the end of the life of the project represents recovery of working capital original value of land, book value of land and book value of building.

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EXECUTIVE SUMMARY

We are the fresh graduates of MSc A/c & Finance double specialization. We are going to start a new business. We have made a research and seek different type of investment opportunities in Bahawalpur region. As Bahawalpur is an agricultural area having two major crops wheat and cotton. We have decided to invest the flour mill because there is much potential in this business and raw material is easily available. As population is increasing day by day so the demand of flour is increasing day by day so it is a very profitable project and it will contribute in the industrial sector of Bahawalpur region. United Flour Mill is a registered firm established with the objective of providing flour and to fulfill the increasing demand of Bahawalpur region. The two buy products are Maida and Bran. The mill is intending to starts it operations initially with one plant in Chak 12BC Yazman road Bahawalpur. It plans to expand its network latter in others Tehsils of Bahawalpur. Initially United Flour Mill operates at 75% of the capacity. United Flour Mill will starts its operations in September 2010.

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MANAGEMENT

1. Mr. Amir Fraz

CEO

2. Mr. Farhan Khizar

GM

3. Miss. Humaira kanwal

MD

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Annexure - I UNITED FLOUR MILL Estimated Cost of Land

Sr. No.

Description

Area in

Unit Cost

Rs ("000") Total Cost 8,16 0

Marlas 1

120

2

Land Registratioin & Legal Requirements 1% of cost of Land

3 4

Stamp Duty 2% of Cost of Land District Council Fee 1% of Cost of Land

120 120

68,00 0

120

680 1,36

82

0

163 82 8,48

680

Total Cost of Land

6

Annexure - II UNITED FLOUR MILL Estimated Cost of Civil Works Sr. No. 1 2 3 4 5 6

Description Machinery Hall(4 floor) Ware House(single story) office garage mchinery store work shop boundry wall main gate Total Cost of Civil Works

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Type of Unit of Covered Rate Per Rs ("000") Building Construction area Unit Total Cost RCC RCC RCC RCC RCC RCC

Square feet Square feet Square feet Square feet Square feet Square feet

11

10,880 5,440 2,720 2,720 2,720 2,720 1 1

700 400 550 350 350 350 130000 30000

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7,616 2,176 1,496 952 952 952 130 30 9,792

Feasibility Report on

United Flour Mill

UNITED FLOUR MILL Estimated Cost of Machinery Rupees ("000") Qty Unit Cost Total Cost

Sr.No. Description Grinding Section 1 Ruler bodies(USSR type)(1000mm Ruler size with ruler) 8 700,000 2 Plant Shifter(4 Section each) 4 470,000 3 Bran Finisher 1 255,000 4 High Pressure Suction Fan 1 300,000 5 Battery Cyclone 1 300,000 6 Air lock with Cyclone with Dividing Walls 20 155,000 7 Main Pipe(size 24inch,lenth 50feet) 8 Purification Machine 1 450,000 9 Low Pressure Suction Fan 1 200,000 10 Cyclone with Pipe(size 4*8) 1 11 Flour,Maida,sujji,Chollar Packing Bin(Steel) 8 155,000 12 Conveyor Werm 9" Size(feet) 2000 1,000 13 Lift Pipe(4 inch with band,8 gage) 1500 1,000 14 Ruler Body Receiver with Happer 20 5,000 15 Production Pipe(5 inch, 16 gage) 1500 500 Cleaning Section 1 Washing Machine Full Size USSR type Steel 1 550,000 2 Elevators with belt with bucket 56 feet length 5 312,000 3 Seperater Polland Type 4 300,000 4 Scorer 2 270,000 5 Suction Fan with Cyclone with Suction Pipe 4 325,000 6 Cocle Salender Polland type 2 550,000 Others Nut Bolt,Angle,Steel Sheet,Belt,Steel Jalli,Resham Jalli,etc Total Cost of Machinery

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5,600 1,880 255 300 300 3,100 2,300 450 200 200 1,240 2,000 1,500 100 750 550 1,560 1,200 540 1,300 1,100 100 26,525

Feasibility Report on

United Flour Mill Annexure - III

UNITED FLOUR MILL Estimated cost of the Project Sr.No. 1 2 3 4 5 6 7 8 9 10 11 Add:

Description Land Building Machinery Installation & Erection of Machinery Insurance 10% of Cost of Machinery Transportaion 10% of Machinery Vehicles Furniture and Fixture Office Equipment Pre-operating expenses Interest during construction Estimated fixed cost Net Initial Net Working Capital Total Estimated Cost of Project

LCY FCY Total cost ("000") 8,486 8,486 9,792 9,792 26,525 26,525 5,305 5,305 2,653 2,653 2,653 2,653 1,400 1,400 900 900 3,320 3,320 2,580 2,580 1,846 65,459 2,352 67,812

interest during construction total cost of project loan

"000"

67812 loan equity

40687 27125

interest during construction

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interest 60% 1845.964 40%

1846

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UNITED FLOUR MILL Initial Net Working Capital Requirement Rs. "000" A. 1

Current Assets: Inventories: a) Raw Material 5 Days Requirement: I)Wheat

2 3 4

B.

134

b) Finished Goods Total Cost of Inventory Advances and Deposits, & Prepayments Accounts Receivables (2% of Sales) Cash 1% of Amount withdrawn from Bank for Inventory Total Current Assets

2,721 2,855 4 1,613 21 4,494

Possible Current Liabilities: Less: Bank Borrowing 75% of Inventories Initial Net Working Capital

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2,141 2,352

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Annexure-VI

UNITED FLOUR MILL Estimated Income Statement Years ending September 30 :

2009

Sales COST OF SALES Raw Material Labor Manufacturing Overheads Depreciation Total Cost of Goods Manufactured Inventory Adjustment - Less Cost of Sales Gross Profit OPERATING EXPENSES: Administrative Expenses General Expenses Seling Expenses Total Operating Expenses Operating Profit OTHER EXPENSES: Financial Charges on: Long Term Loan Amortization of Pre-Production Expenses Total Other Expenses Profit Before Tax and Worker's Fund

2010

80,669

Profit/(Loss) Before Tax Tax Provisions @ 40% Net Profit

2011

95,010

100,985

16,536 15,439 22,450 2,576 57,001 5,700 51,301 29,368

17,633 18,527 23,356 2,576 62,093 509 61,583 33,426

18,742 22,232 24,263 2,576 67,814 6,272 61,541 39,444

3,780 1,750 4,033 9,563 # 19,804

4,536 2,100 4,750 11,386 # 22,040

5,443 2,520 5,049 13,012 26,431

6,103 860 6,963 12,841

5,493 860 6,353 15,687

4,882 860 5,742 20,689

12,841 5,136 # 7,705

15,687 6,275 # 9,412

20,689 8,276 12,413

36.41 24.55 15.92 9.55 22

35.18 23.20 16.51 9.91 21

Ratios: 1 Gross Profit/Sales 2 OperatingProfit/Sales 3 Pre-Tax Profit/Sales 4 Net Profit/Sales 5 Net Profit/Equity

39.06 26.17 20.49 12.29 22

Annexure-VI-A Production at 100% Capacity

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Crushing Of Wheat: 6400kg Kg of Wheat/day/machine Flour Maida Bran Total

No. of Machines 1 1 1

% Output 80 10 10 100

Quantity (000) 256 32 32 320

Annexure-VI-A

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Year ending 30th September:

2009 75%

Capacity Utilized

2010 80% Quantity ("000")

2011 85%

Production of Flour: a) Number of Units Manufactured Add: Opening Inventory Total Units available for Sales Less: Closing Inventory 10% of Production Units Sold

192 192 19 173

205 19 224 21 204

218 21 238 22 217

24 24 2 22

26 2 28 3 25

27 3 30 3 27

24 24 2 22

26 2 28 3 25

27 3 30 3 27

Production of Maida: b) Number of Units Manufactured Add: Opening inventory Total Units available for Sales Less: Closig Inventory 10% of Production Quantity Sold c)

Production of Bran:

Number of Units Manufactured Add: Opening Inventory Total Production available for Sales Less: Closing Inventory 10% of Production Quantity Sold

Sales Revenue: Description

Unit Price

a Flour b Maida c Bran Total Sales (a+b+c)

420 250 120

75% 72,667 5,407 2,595 80,669

Rupees 80% 85,585 6,368 3,057 95,010

85% 90,968 6,768 3,249 100,985

Annexure-VI-A

Raw Material: Years Capacity Utilized

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2009 75%

17

2010 80%

2011 85%

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Feasibility Report on

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Consumption of Raw Material: Description

Quanity ("000")

Wheat 6400kg/day/Machines

240

256

272

Cost of Raw material: Description

Rs. ("000")

Wheat @ 40/kg Packing material Total Cost

9,612 6,924 16,536

10,253 7,380 17,633

10,894 7,848 18,742

Annexure-VI-A UNITED FLOUR MILL Estimated Cost of Labour Labour Cost: a) Direct Labor: Sr. No. Milling Staff 1 Miller 2 Shift Incharge (Asst. miller) 3 Ruleman 4 Washing man 5 Silk man 6 Helper 7 Unskilled labour Total Add: Fringe Benefits (40% of Basic Salary) Total Cost of Milling Staff

Sr. No. Office Staff & Production Staff 1 Manager 2 Accountants 3 Cashier 4 Production Clerk 5 Wheat Clerk 6 Field Supervisor 7 Gunman/Chowkidar 8 Peon

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No. of Employees 1 1 2 1 1 8 12 26

Salary/Month /Worker 35,000 25,000 20,000 25,000 22,000 24,000 25,000 176,000

Annual Salary ("000") 420 300 480 300 264 2,304 3,600 7,668 3,067 10,735

No. of Employees 1 2 1 2 2 1 3 1

Salary/Month /Worker 35,000 25,000 20,000 23,000 22,000 26,000 15,000 14,000

Annual Salary ("000") 420 600 240 552 528 312 540 168

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Feasibility Report on Add:

United Flour Mill

Total Fringe Benefits (40% of Basic Salary) Total Cost of Office Staff & Production Staff

13

180,000

3,360 1,344 4,704

Assumptions: 1 Direct labor will increase every year @ 20%.

Year Wise Wages of Labor: Sr. No.

Description

2009

1 Milling Staff 2 Office Staff & Production Staff Total Cost of Labor

10,735 4,704 15,439

Years 2010 Rs ("000") 12,882 5,645 18,527

2011 15,459 6,774 22,232

Annexure-VI-A Manufacturing Overhead Cost: Description

Rs ("000")

a) Fixed Cost: Power: @ 288/400/KW/Month Insurance: @ 10% of Fixed Assets Cost

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2,765 4,923

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Maintenance and Depreciation: Overhauling Expenses @ 40000 Per machine Maintenance of Building @ 10% of Cost of Building Maintenance of Vehicles 10% of Cost of Vehicles

40 979 140

Total Fixed Cost b) Variable Manufacturing Expenses:

8,847

Power: @ 7.71/unit of 400/KW/Month 85% of which will be utilized Machinery Re. 3.00 Per 40/Kg on Crusing of wheat

18,119 18

Total Variable Cost

18,137

Year ending Manufacturing Overheads as per Different Capacities: Description

Years 2010 Rupees ("000") 75% 80% 8,847 8,847 13,603 14,510 22,450 23,356

2009

Fixed Cost Variable Cost Total Cost of Manufacturing Overheads

2011 85% 8,847 15,417 24,263

‘

Annexure-VI-A

Administrative And General Expenses

Sr. No.

No. of Employees

Designation

1 Manager 2 Accountants 3 Production Clerk 4 Cashier 5 Chowkidar/Gunman

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1 2 2 1 3

20

Salary/ Month 40,000 30,000 20,000 25,000 15,000

Rupees ("000") Annual Salary 480 720 480 300 540

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6 Peon/Sweeper Total Add: Fringe Benefits @ 40% Total Cost of Administrative Staff

1 9

15,000 145,000 58,000 203,000

180 2,700 1,080 3,780

General Expenses: Sr. No. Description 1 Travelling Expenses 2 Printing & Stationary 3 Telephone, Telex, Postage 4 Rents, Rates and Taxes 5 Entertainment 6 Legal & Audit 7 Miscellaneous Total

Year Exp. ("000") 300 200 250 300 200 250 250 1,750

Year Wise Administrative Salaries: Sr. No. 1 2 3 4 5 6

Designation

No. of Employees

Manager Accountants Production Clerk Cashier Chowkidar/Gunman Peon/Sweeper

1 2 2 1 3 1 10

Total Add: Fringe Benefits @ 40% Total Administrative Salaries per Year

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2009

Rupees ("000") 2010

2011

480 720 480 300 540 180 2,700 1,080 3,780

576 864 576 360 648 216 3,240 1,296 4,536

691 1,037 691 432 778 259 3,888 1,555 5,443

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General Expenses: Sr. No. 1 2 3 4 5 6 7 Total

Description Travelling Expenses Printing & Stationary Telephone, Telex, Postage Rents, Rates and Taxes Entertainment Legal & Audit Miscellaneous

300 200 250 300 200 250 250 1,750

Rupees ("000") 360 240 300 360 240 300 300 2,100

432 288 360 432 288 360 360 2,520

4,033

Rupees ("000") 4,750

5,049

Selling Expenses: Selling Expenses are assumed to be 5% of Sales Revenue Sr. No. 1

Description Selling Expenses 5% of Sales Revenue

Annexure-VI-A

Depreciation Schedule of Fixed Assets:

Sr. No. 1 2 3 4

Description Plant & Machinery Building Vehicles Furniture & Fixture Total

Note:-

Total Cost (Rs.) 37,135 9,792 1,400 900 49,227

Rs. ("000") 1,857 490 140 90 2,576

Depreciation will be constant over the life of assets.

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Year Wise Depreciation: Description Depreciation

2009 2,576

Years 2010 Rupees ("000") 2,576

2011 2,576

Pre-Production Expenses: Sr. No. 1 2 3 4 5 6 6

Description Rs. ("000") Registration Charges 400 Sales Tax Registration Charges 300 Consultancy & Report Preparation Charges 350 Printing & Stationary 250 Conveyance Charges 280 Telephone & Postage 300 Salaries and Wages during Construction 700 Total Preproduction Expenses 2,580

AnnexureVII

UNITED FLOUR MILL Cash Flow Statement End of Construction years ending 30th September:

Operating Years

2008

2009

2010

-

19,804 2,576 22,381

22,040 2,576 24,616

2011

SOURCES OF FUNDS: Operating Profits Add: Depreciation Total Funds from Operation Other Sources: Long Term Loan Paid-Up Capital

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40,687 27,125

23

-

-

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26,431 2,576 29,008

Feasibility Report on

United Flour Mill

Total Sources of Funds

67,812

22,381

24,616

29,008

APPLICATION OF FUNDS: Investment in Fixed Assets Financial Charges during Construction Pre-Production Expenses Repayment of: Long Term Loan Bank Borrowings Financial Charges On: Long Term Loan Bank Borrowings PAYMENT OF: Taxes Dividends

57,713 1,846 2,580

-

-

-

-

-

6,103 -

4,069 -

4,069

5,493

4,882

6,275 10,000 438 25,664 3,344 18,347 21,691

short term investment Increase in Current Assets (Other than Cash)

3,000 138

4,811

5,136 5,000 573

Total Application of Funds Cash Surplus/(Deficit) Cash at the Beginning of the Year Cash at the end of the year

65,277 2,535 2,535

10,914 11,467 2,535 14,002

20,271 4,345 14,002 18,347

-

-

Annexure-VIII

UNITED FLOUR MILL Balance Sheet Year ending 30th September:

End of Construction 2008

ASSETS: CURRENT ASSETS: Cash and Bank Balance Short Term Investment Accounts Receivable Inventories: Wheat Finished Goods Advances, Deposits and Prepayments Total Current Assets FIXED ASSETS: Fixed Assets at Cost Accumulated Depreciation on Fixed Assets

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Operating Years 2009 2010 Rupees ("000")

2011

2,535 3,000 -

14,002 3,000 1,613

18,347 8,000 1,900

21,691 18,000 2,020

134 4 5,672

481 2,850 4 21,950

513 3,105 4 31,868

545 3,391 4 45,650

59,559 -

59,559 2,576

59,559 5,153

59,559 7,729

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Fixed Assets Net Intangibles Total Assets

59,559 2,580 67,812

56,983 1,720 80,653

54,407 860 87,135

51,830 97,480

5,136 4,069 9,205

6,275

8,276

4,069 10,344

4,069 12,344

40,687 40,687

36,618 36,618

32,550 32,550

28,481 28,481

27,125 27,125 67,812

27,125 7,705 34,829 80,653

27,125 17,117 44,242 87,135

27,125 29,530 56,655 97,480

LIABILITIES AND EQUITY: CURRENT LIABILITIES: Taxes Payable Dividend Payable Worker's Fund Payable Current Maturity of Log Term Debt Total Current Liabilities

-

LONG TERM DEBTS: Long Term Debt Total long Term Debt EQUITY: Paid-Up-capital Retained Earnings Total Equity Total Liabilities and Equity

Annexure - XII

UNITED FLOUR MILL Loan Repayment Schedule

Years 1 2 3 4 5 6 7 8 9 10

Opening Balance 40,687 36,618 32,550 28,481 24,412 20,344 16,275 12,206 8,137 4,069

Interest Principle 6,103 5,493 4,882 4,272 3,662 3,052 2,441 1,831 1,221 610

4,069 4,069 4,069 4,069 4,069 4,069 4,069 4,069 4,069 4,069

Closing Balance 36,618 32,550 28,481 24,412 20,344 16,275 12,206 8,137 4,069 -

Annexure-XI

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UNITED FLOUR MILL Calculation of Internal Financial Rate of Return Years 1 2 3 4 5 6 7 8 9 10

Capital Outlay 60,431 4,811 573 438 2,300 -

Operating Worker's Depreciation Profit Fund 19,804 2,576 22,040 2,576 26,431 2,576 26,431 2,576 26,431 2,576 26,431 2,576 26,431 2,576 26,431 2,576 26,431 2,576 26,431 2,576 -

IFRR

Taxes 5,136 6,275 8,276 8,276 8,276 8,276 8,276 8,276 8,276

Net Cash Net Cash Inflow Return (Outflow) (60,431) 22,381 17,570 19,480 18,906 22,733 22,295 20,732 20,732 20,732 20,732 20,732 18,432 20,732 20,732 20,732 20,732 20,732 20,732 20,732 20,732

30%

RATIOS Netprofit margin ratio net profit net sale year net profit sale

2010 7704.727 80668.71

2011 9412.266 95009.81

2012 12413.34 100985.3

net profit margin ratio

9.551073

9.906625

12.29223

current asst current liability 2010 21950.04 9205.197

2011 31868.3 10343.56

2012 45650 12344.27

2.384526

3.080981

3.69807

Current ratio

year current asst current liability

Current ratio

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Debt/equity ratio total debt totalequity year total debt totalequity

2010 45823.61 34829.48

2011 42893.26 44241.74

2012 40825.26 56655.09

Debt/equity ratio

1.315656

0.96952

0.720593

Sponsors stake 27124.75 Amir fraz Farhan khizar Humaira kanwal

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10849.9 10849.9 5424.95 27124.75

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Annexure - XIII UNITED FLOUR MILL Financial Plan Rupees ("000") Description Total Fixed cost of the project Initial Permanent working capital Total cost of the project Long Term Debt Equity Participation Total Capital Required Debt/Equity Ratio

LCY 65,459 2,352 67,812

-

40,687 27,125 67,812

Debt-to-Equity Ratio:

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FCY

-

60 :

28

Total cost 65,459 2,352 67,812 40,687 27,125 67,812

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Market Analysis Brief description of market: Like every other industry, milling is subject to increased market pressures. Customers demand consistent quality and product variety while production efficiency must be maintained if not improved. A FOSS solution can prove an important ally in walking such a tightrope. Pakistan has a rich and vast natural resource base, covering various ecological and climatic zones; hence the country has great potential for producing all types of food commodities. Agriculture has an important direct and indirect role in generating economic growth. The importance of agriculture to the economy is seen in three ways: first, it provides food to consumers and fibres for domestic industry; second, it is a source of scarce foreign exchange earnings; and third, it provides a market for industrial goods

Production in Pakistan for the last 5 years (000 tons):

2004-05 21612

2005-06 21277

2006-07 23295

2007-08 20959

2008-09 23421

Present demand: Present demand of flour is about 25525000 tons in this current year. Demand supply gap: The supply of flour is about 23225000 tons and demand is about 25525000 tons.

Ex-factory price(price which u will sell to whole sellers) The ex-factory price of 20kg bag of floure is 540 The ex-factory price of 20kg bag of maida is 740 The ex-factory price of 20kg bag of bran is 220

Retail price The retail price of 20kg bag of floure is 560 The retail price of 20kg bag of maida is 760 The retail price of 20kg bag of bran is 240 U 4 YOU

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Distribution channel: First of all our salse man collect the orders from whole sale dealers than from whole sale dealer the shop keeper collect the flour than ultimate consumers purchase from retail store Strategic Recommendations Initially, the product would be launched in the local market. The preferred mode of distribution is going directly to the wholesalers. There is an option of having no involvement of any distributor between the manufacturer and the wholesaler in the city where manufacturing is being done. By giving healthier profit margins to the wholesalers, the wholesalers will hence promote the product. This strategy is important to introduce such a product and to create an extensive distribution and sales channel. The company will later expand into other cities through a distributor network.

Technical analysis Brief description of technical aspects: There are five roll systems in a flour mill: break, sizing, midds (for middlings), low grade, and residue. In the break system, the kernel is opened, the bran flattened and the endosperm broken into large chunks. Al-though some flour is produced here, the goal in the break system is not to produce a lot of flour but to maximize separation of bran from endosperm. Because the break rolls are at the beginning of the milling process, the quality of the work done here effects each subsequent step, thus determining both the yield of flour and the quality of that flour. If the rolls are too aggressive, portions of the bran may be torn or ground into dust that will be impossible to separate from the endosperm in later steps. In the sizing system, rolls are used to further flatten and separate bran and germ from the endosperm. Sizing rolls are either finely corrugated or smooth. Coarse and fine sizings are produced on these rolls. Most of the high quality flour is produced in the midds reduction system. Here the rolls are either very finely corrugated or smooth. U 4 YOU

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Each time stock passes between a pair of rolls, the resulting milled stock is run through a purifier, primarily gyratory bolters with stacks of sieves with different screen and cloth meshes. Vibration and air flow contribute to stratification and separation of the material. The material which will pass through ("thrus") the finest (bottom) sieve cloth in the purifier is flour. Each set of rolls thus has its own flour "stream," identified by the roll the stock came from before arriving at the purifier: 1st Break, 2nd Break, 1st Midds, Sizings, etc. The "overs" of each sieve (particles not fine enough to pass through) are directed to another set of rolls for further reduction, or to one of the residue streams: bran, germ, shorts, or red dog. None of these end up in the flour. Indeed, any part of the wheat that does not enter one of the flour streams will be one of these four "by-products." These materials, unless there is a specialty market for them, are generally sold as feedstock. The separation by size, grade, etc. at each stage of the milling process creates many dozens of "streams" which wind their way through the mill. In the end, the various streams are blended and mixed to make various grades of flour, then treated with the addition of malted barley, bleaching agents, enrichments, etc. before packaging. If all the flour streams are combined and blended, the resulting flour is "Straight Grade." 'Patent" is the flour from those streams containing the least bran and germ particles, thereby the whitest and lowest in ash. "Clear" flour, on the other hand, is from the "dirtier" flour streams. While straight and clear flours will have more protein than the patent flour from the same wheat on the same mill run, this additional protein is from the aleurone and germ, not gluten from the endosperm.

Area we will cover: Our flour mill established in bahawalpur. We can supply of flour in bahawalpur division. There are three district in this region in which we will supply our products.

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Manufacturing process/flow chart/diagram: Wheat received in the Factory

Wheat is weighted on the Plate Form

Elevator 1

Elevator 2

Elevator 3

Elevator 4

Wheat goes to Separators for Clearing

Separator 1 Wheat goes to Bin to send it for Washing

Washing Machine Wheat goes to Bin to send it for Grinding

Roller Body

Sifter

Packing

Output is send to Market

Separator 2

Separator 3

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3)Personnel analysis: Factory staff: S.NO

Type of Staff

Number required

Basic salary per Person, per month

Total salaries per year

1

skilled

14

30000

4068000

2

Un-skilled

12

25000

3600000

ADMINISTRATION AND GENERAL STAFF No. of Salary/Month Annual Sr. No. Office Staff & Production Staff Employees /Worker Salary ("000") 1 Manager 1 35,000 420 2 Accountants 2 25,000 600 3 Cashier 1 20,000 240 4 Production Clerk 2 23,000 552 5 Wheat Clerk 2 22,000 528 6 Field Supervisor 1 26,000 312 7 Gunman/Chowkidar 3 15,000 540 8 Peon 1 14,000 168 Total 13 180,000 3,360 Add: Fringe Benefits (40% of Basic Salary) 1,344 Total Cost of Office Staff & Production Staff 4,704 Assumptions:

SWOT Analysis Strengths:

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The labor to manufacture flour is easily available we can reach easily to low cost labor. Moreover the location for our project is very attractive. We can avail maximum advantage from this market.

Weaknesses: Our weakness is that we are not producing flour up to the present demand of the consumer. Because we have dependend on govt for wheat and electricity problem is also our weakness.

Opportunities: Pakistan is an agricultureal country, the production of wheat is very high.flour is neccessry for all kind of people so, demand of wheat is repedly increases.also there is no enough flour mills to fullfill the demand so, there is great opportunity to establish flour mill.

Threats: Competitive Structure of the market The market of the flour mills is highly competitive; therefore if the entrepreneur is not well responsive and fulfilling the demand of the consumer he/she may not be able to capitalize the opportunity properly.and the qotta system is used the supply of wheat not provided to flour mills according to their demands.

.

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List of machinery Now we will discuss the process of converting Wheat into Flour There are two section of working area in the Hafiz flour mill 1. Washing section. 2. Grinding section.

Now we will discuss these sections and what is happening in these sections in detail.

WASHING SECTION There are few machineries are used for the processing of flour. We will discuss these machineries in detail one by one. Following are the machineries. 1. SEPRATOR. 2. ELEVATOR. 3. SCOLDER MACHINE. 4. LOW PRESSURE FAN. 5. WASHING MACHINE. 6. STORAGE BIN. 7. MAGNETIC MACHINE.

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1. Seprator separator is the first machine which is used in the washing section and the person who operate this machine is roll man. First when the wheat pool, there are lot of dust and mummnies in the wheat. This machine’s main function is that to separate the dust and mummnies from the wheat.

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2. ELEVATOR Elevator is the machine which is help full for lifting the wheat at each section. it is just like the lift and performing the same function of lift. There are two types of elevator are used in the mill. First is traditional elevator and other is new technological elevator. Traditional way is that the wheat is lift through the simple belt.

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Scolder Machine. With the help of elevator the wheat is shift to the scorer machine.The scorer machine is one of the most important machines. The main function which is performed by this machine is to put out the outer layer of the wheat. This is necessary to understand that this machine put out the outer layer of dry wheat. It is necessary that the wheat is dry at least twelve hours and then put into the scorer machine.

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LOW PRESSURE FAN Low pressure fan is the fan that pressurized the wheat for the purpose of cleaning. This means that after outing the scorer machine some dust include and this fan clean such dust. This fan is not too much power full as the high pressure fan.

Low pressure Fan

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WASHING MACHINE Washing machine acutely performs three types of functions. 1. Wash with water. 2. Further put out the outer layer 3. To put out the stones.

Wash with water. This machine firstly washed the wheat through the water after passing the water the wheat will be too much clean and then transfer for further process.

Further putout the outer layer of wheat After wash with the water wheat is transferred for again thrashing. In during the trashing again put out the outer layer of wheat.

Put out the Stones Washing machine also performs the function to put out the stones from the wheat.

Magnetic Machine

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Magnetic machine is used to catch the iron particles included in the wheat. In this machine magnets are installed which help to catch the iron particles.

Grinding Section U 4 YOU

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Ruler Body Ruler body is the machine through which grinding of wheat takes place. This is the first step of grinding. Wheat comes after the washing section firstly put into the ruler body for the grinding purpose.

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Shifter The other machine which is used in the grinding section is the shifter. This machine main function is that it shifts the flour into different categories. Categories means that special type of flour is separate from the bran and suji. There are separate boxes for each item.

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PURIFIER Purifier machine is used to make the suji.It is independent from the shifter.purifier has different boxes and each box has show different effect which means that from one box wastage material is stored and other boxes are for the preparation of suji.

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Air Lock

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Air lock is used to cease the air because if the air is include in the production then all the production may be destroy. So that’s why air lock is used to cease the air.

High pressure Fan

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High pressure fan has a same function as the low pressure fan but the main difference is that the high pressure fan has a high voltage power full machine.

Battery Cyclones

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Battery cyclones is also help full for the cleaning and it take the pressure from the low pressure fan and the high pressure fan.

Production worm

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Production worm is the line through which the final product is being passed at the packing room.

The above all the machinery is used to convert the wheat into flour. The above is all the process of production of flour.

Conclusion and Recomendation

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We conclude that on the basis of field work and surveu of flour mills that the flour is neccessry product so its demand increse day by day. There is no chance to decrease the demand of flour. Pakista is an agricultural country and wheat is the one of the major crop. Availability of raw material is very easy. So, conclusion is that the flour mill is a profit motive business because no chance of decrease of demand. Our recommendation to new investors is that they must invest in flour mill because from the last year there is the shortage of flour in pakistan. So, they step forward to minimize this shortage, and also contribute in the economic as well as social groth of Pakistan.

Special Thanks

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We bow our head, before ALLAH Almighty, who blessed us with potential and stamina to complete our fesibility report on flour mill. First of all would like to pay our special regards to Respected “Sir Mr. JAVED IQBAL” who provides us guidance at each and every step, in completion of all this fesibility report. We are especially thankful to those personalities who help us in collecting data during the fieldwork and also in our practical work. In this regard our thanks goes to: Mr:Arsalan rabbani, Mr: Jawad-ul-hasan, Mr: Hunain khan, Mr: hasan qureshi, Mr: Farzan rafi, mr: Shakeel ahmed, Mr: Mohsin shazad, Mr: Adnan ch and all of our class fellows.

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