MODEL BUSINESS PLAN OR VERTICAL SHAFT BRICK KILN IN...

MODEL BUSINESS PLAN FOR

VERTICAL SHAFT BRICK KILN

IN PAKISTAN

Mian Suleman Gul Skat Coordinator - (EEBP) House A-17, Main Double Road Pak PWD Housing Society, Lohe Bher ISLAMABAD

12 March 2010 Our ref: A-59-

Dear Mr. Gul MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTAN We refer to our appointment on the captioned matter. We have prepared the accompanying model business plan for Vertical Shaft Brick Kiln in Pakistan. Model business plan includes executive summary, terms of reference and details of market study, vertical shaft brick kiln technology, technical consultant, the project and financial analysis. With respect to the financial projections, our work was limited to tests of the results of the computations of the methods of compiling the forecasts and such other procedures which we considered necessary. The model business plan and financial projections are based on estimates, assumptions and other information available to us as of 11 March 2010. Since the model business plan and financial projections are based on estimates, assumptions and forecasts, the reliability of which is dependent on future events and transactions and the validity of which we can not vouch for, we do not express an opinion on them. Finally, we wish to extend our appreciation for the co – operation and courtesy extended to us by the management and other staff members in accomplishing our task. Very truly yours, for RIAZ AHMAD & COMPANY MUDDASSAR MEHMOOD Partner

DISCLAIMER

The purpose and scope of this model business plan is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information provided by the management of technical consultants and gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. RACO does not assume any liability for any financial or other loss resulting from this model business plan in consequence of undertaking this activity. The prospective user of this model business plan is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The contents of the model business plan do not bind RACO in any legal or other form.

Riaz Ahmad and Company Chartered Accountants

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTAN

I N D E X

DESCRIPTION SECTION PAGE NO.

EXECUTIVE SUMMARY 01 TERMS OF REFERENCE 02 VERTICAL SHAFT BRICK KILN (VSBK) TECHNOLOGY 03 Introduction 3.1 Working principle of VSBK 3.1 Kiln operation 3.3 Kiln design 3.4 Brick production process 3.4 Advantages of VSBK technology 3.5 Comparison with other technologies 3.6

Environmental performance 3.6

Social performance 3.7

Brick quality 3.8



I N D E X


VSBK worldwide 3.9 Nepal 3.9 Bangladesh 3.10 Sudan 3.10 Afghanistan 3.11 India 3.11 Vietnam 3.12

VSBK in Pakistan 3.12 TECHNICAL CONSULTANT – SKAT 04 Brief history 4.1 Partnership with worldwide organizations 4.2 VSBK technology experience 4.3 Key management 4.4 Offices 4.4 Technical assistance being offered 4.5



I N D E X


MARKET STUDY 05 Construction Sector in Pakistan 5.1

Growth of economy 5.1 Growth of construction sector 5.2

Bricks Industry in Pakistan 5.3

Size of bricks Industry 5.4

Production capacity 5.5

Bricks production 5.6

Grades of bricks 5.7

Types, shapes and sizes of bricks 5.8

Molding practices 5.10

Firing practices 5.11

Bricks Market 5.12

Size of bricks market 5.12 Growth of bricks market 5.13

Projected demand of bricks 5.13



I N D E X


Substitute of bricks 5.14

Trend of urbanization 5.15 Brick prices 5.16

Comparative growth in prices 5.17

Position of End-User 5.18

Factors Affecting Real Estate Sector 5.18

Future Developments 5.19 Stakeholders 5.19

Know-how of stake-holders 5.19 Government agencies 5.20 Major builders & developers 5.21 Major architects & consultants 5.22

Trade Associations 5.23

NGO’s 5.23 Environment agencies 5.23 Recommendations 5.23



I N D E X


THE PROJECT 06 Introduction 6.1 Project concept 6.1 Possible business models 6.1 Proposed business model 6.2 Project implementation 6.2 Proposed site plan 6.2 The Project cost and source of finance 6.4

Leasehold Land 6.4 Buildings 6.5 Plant and machinery 6.5 Furniture and office equipment 6.6 Electric equipment 6.6 Vehicles 6.6 Pre-operating expenses 6.6 Contingencies 6.6



I N D E X


Source of finance 6.6 Brick production capacity 6.7 Organization and management 6.7 Project staff 6.7 FINANCIAL ANALYSIS 07 Assumptions used in financial projections 7.1 Project implementation 7.1 The project cost and source of finance 7.1 Capacity utilization 7.3 Stores and spares 7.3 Trade debts 7.3 Advances and other receivables 7.3 Trade and other payables 7.3 Revenue 7.4



I N D E X


Cost of sales 7.4

Salaries, wages and benefits 7.4

Molders 7.4 Raw material 7.4

Coal combustion 7.5

Depreciation 7.5 Other costs 7.5

Other income 7.6 Dividend 7.6 Taxation 7.6 Analysis of financial statements 7.7 Conclusion 7.9



LIST OF ANNEXES

CONTENTS ANNEX NO.

PRODUCTION FLOW CHART OF BRICKS V - 1

PROPOSED MANAGEMENT STRUCTURE P - 1

MAIN ASSUMPTION SHEET FP – A

PROJECTED BALANCE SHEET FP – B

PROJECTED PROFIT AND LOSS FP – C

PROJECTED CASH FLOW STATEMENT FP – D

PROJECTED FIXED ASSETS FP-B-1

PROJECTED STORES, SPARES AND LOOSE TOOLS FP-B-2

PROJECTED STOCK-IN-TRADE FP-B-3

PROJECTED TRADE DEBTS FP-B-4

PROJECTED ADVANCES AND OTHER RECEIVABLES FP-B-5

PROJECTED TRADE AND OTHER PAYABLES FP-B-6

EXECUTIVE SUMMARY

(SECTION – 1)


MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTAN EXECUTIVE SUMMARY

1.1

01. Riaz Ahmad and Company Chartered Accountants, a member firm of NEXIA international formed consortium with Messrs AC Nielsen (marketing consultant) to prepare model business plan for Vertical Shaft Brick Kiln (VSBK). Energy Efficient Brick Production Project (EEBP) (technical consultant) appointed us for this assignment. 02. The main objectives of the project are:

• To introduce environment friendly brick production technology in Pakistan. • To promote energy efficient brick production technology. • To support entrepreneurs in design, construction and operations of VSBK units.

TECHNICAL CONSULTANT – SKAT 03. EEBP has been mandated by Swiss Agency for Development and Cooperation (SDC) to carryout a technology transfer project in Pakistan with the aim to pilot and demonstrate environment-friendly construction material and technologies in particular the introduction of VSBK. Skat is a leading Swiss consultancy firm working internationally in development, co-operation and specializing in technical, social, institutional and economic aspects of infrastructure and environmental management, water supply and sanitation, solid waste management, sustainable building and settlement development as well as mobility and transport. Skat is involved in the Brick Sector Study in Bangladesh, Nepal, Afghanistan and in Pakistan. Skat is currently implementing projects on promoting energy efficiency in the building material industry in Nepal, Afghanistan and Pakistan. Details of past experience and other expertise are given in Section “3” of this report. VERTICAL SHAFT BRICK KILN (VSBK) TECHNOLOGY 04. Vertical Shaft Brick Kiln (VSBK) technology is an energy efficient, environment friendly and economically viable technology for firing clay bricks. It has a benefit of continuous operation with impressive fuel economy. The VSBK is a vertical kiln with stationary fire and moving brick arrangement. A typical VSBK consists of one or more shafts located inside a rectangular brick structure. The shaft is loaded from the top in batches of green bricks. Red bricks are unloaded from the bottom of the kiln. Fuel is usually added in two forms; internal fuel and external fuel. Details of working principle and other technical information about the operations of VBSK are given in Section “4” of this report. MARKET STUDY 05. Brick making is a valuable industry to Pakistan providing employment in rural areas where agriculture may not be enough to sustain all the people. Around 12,000 brick kilns in the country have overall capacity of producing around 78 billion fired bricks per annum. Details of market study are given in Section “5” of this report.



1.2

06. Market study - Section “5” covers construction sector in Pakistan, size of bricks industry, production capacity, bricks production, grades of bricks, types shapes and sizes of bricks, molding practices, firing practices, bricks market, size of bricks market, growth of bricks market, projected demand of bricks, substitute of bricks, trend of urbanization, brick prices, comparative growth in prices, position of end-user, factors affecting real estate sector, future developments, stakeholders, know-how of stake-holders, government agencies, major builders and developers, major architects and consultant and trade associations. THE PROJECT 07. Project cost has been estimated at Rupees 14.50 million and will be financed through equity. The project will be in operation in a period of 6 months. Details of each head of the proposed project have been given in Section “6” of this report. 08. The project will be incorporated under the provisions of Companies Ordinance 1984, as a Private Limited Company. Details of organization and management structures are given in Section “6” of this report. 09. Project engineering, including determination of the scope of project's operations, detail of civil works, cost estimates for machinery, equipment and construction works are given in Section “6” of this report. 10. Keeping in view available technology of proposed VSBK project, we have proposed rated capacity of 5,380,800 bricks per annum based on 4 VSBK shafts. ANALYSIS OF FINANCIAL STATEMENTS 11. Based on the results of the financial projections brief findings are as under:

• Revenue, profit before tax and profit after tax will be as under:

YEARS REVENUE PROFIT BEFORE TAX PROFIT AFTER TAX

1,000,000 Year 1* 9.00 0.87 0.83Year 2 19.43 2.19 2.10Year 3 20.99 2.41 2.36Year 4 22.67 2.63 2.00Year 5 24.48 2.86 2.17Year 6 26.44 3.09 2.50Year 7 28.55 3.33 2.50Year 8 30.84 3.51 2.69Year 9 33.30 3.79 2.91Year 10 35.97 4.01 3.07

-------------------- RUPEES IN MILLION --------------------



1.3

• Investor’s ratios i.e. Profit before tax, Profit after tax, Return on equity, Return on assets, Earning per share and Break up value per share will be as under:

YEARSPROFIT BEFORE

TAX

PROFIT AFTER

TAX

RETURN ON

EQUITY

RETURN ON

ASSETS

EARNING PER

SHARE

BREAK UP VALUE PER

SHARE

Year 1* 9.68 9.18 5.39 5.28 0.57 10.57Year 2 11.28 10.78 12.03 11.58 1.44 12.01Year 3 11.49 11.23 13.39 12.86 1.63 12.14Year 4 11.62 8.82 11.47 10.98 1.38 12.02Year 5 11.69 8.86 12.45 11.87 1.50 12.02Year 6 11.70 9.44 14.07 13.37 1.72 12.24Year 7 11.65 8.77 13.85 13.13 1.73 12.47Year 8 11.38 8.73 14.48 13.68 1.86 12.82Year 9 11.38 8.73 15.64 14.70 2.01 12.83Year 10 11.16 8.55 16.38 15.33 2.12 12.95

-------- RUPEES --------------------------------- (%) -------------------------

*Year 1 represents commercial operations of six months

• Pay back period of the project is more than 4.1 years. • Internal rate of return (IRR) of the project will be 28%. • Net present value of the project is given below:

15% 16% 17% 18%

3.00% 10.79 9.18 7.81 6.64 4.00% 11.49 9.72 8.24 6.98 5.00% 12.33 10.36 8.73 7.37 6.00% 13.36 11.13 9.32 7.83

SENSITIVITY ANALYSISDISCOUNT FACTORTERMINAL

GROWTH RATE ------------ RUPEES IN MILLION ------------

CONCLUSION 12. In view of current market prices and the financial results, the project is economically viable. The financial projections reveal healthy and bright prospects of the project.

TERMS OF REFERENCE

(SECTION – 2)



TERMS OF REFERENCE

2.1

01. Riaz Ahmad and Company Chartered Accountants, a member firm of NEXIA international formed consortium with Messrs AC Nielsen (marketing consultant) to prepare model business plan for Vertical Shaft Brick Kiln (VSBK). Energy Efficient Brick Production Project (EEBP) (technical consultant) appointed us for this assignment. 02. Scope of work for this assignment is given below: • The objective of the model business plan is to develop a standard document for establishing and

operating a successful VSBK unit of at least 2 shafts, which should guide and help a ‘new comer’ VSBK entrepreneur to understand the business

• The contents of the business plan should include following specific areas which needs to be

addressed by the Consultant but not limited to:

1. Company introduction 2. Project details 3. VSBK technology (Actual data available from 3 Brick kiln units) 4. Opportunity market assessment 5. Competition 6. Industry analysis (Islamabad area) 7. Influence on industry 8. Economic, political and social influences 9. Operational plan 10. Marketing Plan (Segmentation, Positioning, Pricing and Promotion) 11. Financial analysis (Projection) 12. Financing requirements (Working capital) 13. Initial investment 14. Average workers 15. Performance projection and loans 16. SWOT analysis

• The Consultant will submit a brief methodology, inception report explaining how the study on

bricks market in Pakistan shall be conducted. This inception report shall be examined by the advisor on EEBP project and Skat (7 days after receiving the TORs.)

• The Consultant will prepare and submit first draft report, describing the vision 2015 for the

brick sector along with the potential opportunities, by the end of November 2009 • The Consultant will prepare, finalize and submit the final report on Brick Market Study in

Pakistan along with the recommendations latest by mid of December, 2009



TERMS OF REFERENCE

2.2

• The Consultant will prepare and discuss weekly progress reports with the National Project Director/ Advisor on EEBP project

03. Deadline for submission of draft report was extended by the management due to their internal reasons. 04. Technical information was provided to us by the management of EEBP project. 05. Following persons have worked on this assignment: RIAZ AHMAD AND COMPANY CHARTERED ACCOUNTANTS Mr. Sarfraz Mahmood Team Leader FCA, FITM, FICS Mr. Atif Bin Arshad Team member ACA Mr. Muddassar Mehmood Team member ACA Mr. Waqas Ali Khokhar Team member C.A. Finalist Mr. Raoon Akram Team member ACCA Assistants Four team members M.B.A., M.Sc. (Statistics), M.A. (Economics), MCS (Computer Sciences) MESSRS AC NIELSEN Mr. Syed Asad Ali Team member Mr. Ahsan Saeed Hashmi Team member

VERTICAL SHIFT BRICK KILN

(VSBK) TECHNOLOGY

(SECTION – 3)



VERTICAL SHAFT BRICK KILN (VSBK) TECHNOLOGY

3.1

INTRODUCTION 01. Conventional burnt clay bricks will continue to be the main walling material for meeting the huge demand for housing in the foreseeable future; not withstanding substantial efforts to develop alternatives. 02. Current technologies for brick production such as clamps, downdraught kilns and Bull’s Trench Kilns consume large quantities of fuel such as coal, firewood and other biomass. The devastating effect of the pollution caused by huge amount of emissions from the brick industry has attracted the attention of worldwide regulatory agencies who have issued deadlines after which the polluting kilns are to" clean up or close down". 03. Vertical Shaft Brick Kiln (VSBK) technology is an energy efficient, environment friendly and economically viable technology for firing clay bricks. Combining the simplicity and low cost of updraft firing with very impressive fuel economy, plus the benefits of continuous operation. Its operation is very similar to that of a vertical shaft lime kiln, with coal and bricks being loaded at the top, and fired bricks combined with a small amount of ash being unloaded at the bottom. WORKING PRINCIPLE OF VSBK 04. The VSBK is a vertical kiln with stationary fire and moving brick arrangement. The kiln operates like a counter current heat exchanger, with heat transfer taking place between the air (moving upwards) and the bricks (moving downwards). A typical VSBK consists of one or more shafts located inside a rectangular brick structure. The shafts are 1 to 1.25 meters wide with nominal lengths of 1 m, 1.5m, 1.75m or 2.0 m. The inside surface is a brick wall, often lined with refractory fireclay bricks. The gap between the shaft wall and outer kiln wall is filled with insulating materials (such as pure “rappish3”). Provision for peepholes and thermocouple probes are provided along the shaft height to monitor the position of fire as well as temperature profile of the kiln. 05. Schematic diagram of working principle of VSBK is given on next page:




3.2

Schematic Diagram of VSBK

06. The shaft is loaded from the top in batches of green bricks. Each batch typically contains four layers of bricks set in a predetermined pattern. The kiln itself can be divided into three distinct sections. The top section is the brick preheating zone, the middle section is the firing and heat soaking zone and the lower section is the brick cooling zone.




3.3

07. Fuel is usually added in two forms; internal fuel and external fuel. The internal fuel is added with the soil during prior to brick molding. Different internal fuels used in VSBK are coal powder, fly ash, biomass fuels such as rice husk and bagasse. Only coal is used as external fuel in VSBK. 08. VSBK is a natural draft kiln, requiring no electricity for supply of combustion air. The air required for combustion enters from the bottom of the kiln. It extracts the heat from the cooling bricks before reaching the firing zone. 09. The flue gases leaving the firing zone exchange heat with dry bricks loaded thereby preheating them. The flue gases finally enter the chimney through the flue duct at a temperature of 60o to 150oC. The stack of bricks rest on square support bars (which can be removed or inserted) and supported in turn by a pair of horizontal beams across the arches in the unloading tunnel. For evacuation of exhaust gases, typically, two circular chimneys are provided at opposite corners of each shaft. Lids are provided to cover the shaft top, which direct the gases to the chimney through the flue system / chimney. A single screw jack system is used for unloading of fired bricks (Figure 1).

Figure 1

KILN OPERATION 10. During initial firing operation, a fire is lit in the firebox at the bottom of the brick setting (or top). During continuous operation (stabilized operating conditions), one batch of dried green bricks is loaded in layers at the top at a time. A weighed / measured quantity of sized coal is spread on each layer uniformly to fill the gaps formed in the stacked bricks. The size of coal (in case of the pilot




3.4

kilns) was generally found to be more than 25mm. However, depending upon the type of soil being used for brick making this may vary. The temperature of the firing zone varies between 950 to 1050oC depending on the vitrification temperatures of the soil. The fired and cooled bricks are unloaded from the shaft bottom, using a trolley which runs on rails along the length of the unloading tunnel. The trolley is lifted and lowered using a single screw mechanism. 11. During unloading, all chimney dampers are opened for removing flue gases through the chimney though the lid is open. The trolley is lifted up by rotating the screw system. For unloading, the trolley is lifted so that the whole stack of bricks in the shaft rests on it. The support bars are taken out, when the load is released. The whole stack is then lowered till the layer with openings appears, through which the support bars are then reinserted. On further lowering, the load of the stack is taken by the support bars except for the batch being unloaded, which comes down along with the trolley finally resting on a pair of rails. The trolley is later pulled out along the rails laid out on the floor of the tunnel. The bricks subsequently unloaded and sorted out for dispatch. The next batch of bricks is now loaded at the shaft top. The frequency of unloading - loading varies from 90 to 150 minutes. The residence time of a batch in the kiln typically varies from 14 to 25 hours. KILN DESIGN 12. VSBK is modular in construction. The production capacity of VSBK is dependent on the number of shafts in operation. The most important component in VSBK construction is the shaft size and its verticality. The size of the shaft determines its production capacity and is dependent on the size of the dry brick loaded in it. In VSBK, coal which is the external fuel used, is added between the brick stacking during each batch of loading. About 5 to 10 mm gap is required to spread the fuel between the bricks. Thus the exact dimension (length, width, and height) of dry green bricks are vital in determining the size of the shaft (inner length and width). 13. The skill in operation of VSBKs is to keep the firing zone in the middle of the shaft. The draught of air moving up from the bottom cools the fired bricks in the cooling zone and it itself gets heated. Maximum temperatures of upto 10500C are attained in the central firing zone. The hot gases moving upwards dry and heat up the green bricks in the preheating zone. The recovery of sensible heat accounts for the high energy- efficiency of the VSBK technology. BRICK PRODUCTION PROCESS 14. Brick production process using VSBK technology is given in Annex “V-1”




3.5

ADVANTAGES OF VSBK TECHNOLOGY Energy Efficiency 15. It represents a very high-energy efficient method of firing bricks resulting in an energy saving of 30 % compared to BTK and more than 50% compared to clamps. The fired quality is better than the quality of bricks fired in other traditional kilns such as clamps. Land Requirement 16. This kiln is very compact, requiring a small area of land. For the same production capacity, the land requirement is about half compared to BTK. Operations 17. Its construction and operation is very easy to learn and does not require electricity to function. Environmental Impact 18. VSBK as a technology is much less emissive while considering not only GHG emissions but also in terms of SPM, SOx, NOx etc. The fuel used in VSBK is powdered coal and due to complete burning of coal, only a small amount of ash comes out as waste particle. Quality 19. It produces better and uniform quality of fired bricks compared to clamps Impact of Weather 20. The kiln is not affected by variations in the weather. It can be operated during monsoons because unlike other traditional kilns, VSBK has a roof, which means protection from rain and year-round operations. Other brick kilns are able to operate only for 8 months in a year. Quick Turnover 21. Bricks are ready for sale after firing within two days of loading. Production Volume 22. Kiln is very flexible in terms of volume of production based on market demand




3.6

Fuel Material 23. The kiln is highly suitable for use where fuel is incorporated into the brick. In several parts of the country, agricultural residue like rice husk or fuels like coal dust are mixed with clay before molding. This allows use of inferior quality fuel and, in general, reduction in production cost. VSBK, because of its fast firing characteristics, is particularly suited for firing of brick containing internal fuel. COMPARISON WITH OTHER TECHNOLOGIES 24. Here we compare VSBK with other kiln technologies with respect to criteria related to:

• Environmental performance • Social performance • Brick quality

25. Table below gives comparison of different types of kiln:

Table 1 PERFORMANCE CRITERIA

TYPE OF KILN ENVIRONMENTAL PERFORMANCE

SOCIAL PERFORMANCE

BRICK QUALITY

VSBK High High Medium Moveable and fixed chimney BTK Low Low Medium Tunnel kiln High Medium High Clamp and intermittent kiln’s Low Medium Low Environmental Performance 26. Overall environmental performance of a brick kiln depends on factors such as energy efficiency which is linked to CO2 emissions ; air pollution in the form of CO, SPM, SO2, HF emissions ; ambient air quality in the vicinity of the kiln and its impact on humans and vegetation. VSBK: 27. On all the environmental performance criteria, VSBK scores are high. It is most energy-efficient and has lowest CO2 emissions. It also has low specific emissions of SPM and HF 10, 11. Initial Chinese VSBK designs had problems related with poor ambient air quality at the loading platform. This problem has been solved through the incorporation of properly designed chimneys and well ventilated loading platforms.




3.7

Tunnel kiln: 28. Tunnel kilns, if designed and operated properly, also have high environmental performance. Experience in Vietnam has shown that by avoiding air leakages in the kiln, operating kilns at their designed capacities and reducing the mass of kiln cars, tunnel kilns can be made more efficient and their environmental performance improved. Bull's Trench Kilns: 29. BTKs have poor environmental performance, particularly due to heavy air pollution and fugitive dust emissions. Clamps and intermittent kilns: 30. Clamps also have poor environmental performance, particularly in view of their very high energy consumption, as well as heavy air pollution during firing. For rural units and small-scale production, self supply of rural population, it may still be the most suitable solution. 31. A relative comparison of environment performance of brick kilns is shown in Table 1, where it can be seen that VSBK and tunnel kiln have a better environmental performance compared to BTKs and clamps. Social Performance 32. There are a variety of social indicators that can be used to define social performance of a kiln. From the view of working conditions, indicators such as occupational health risks for workers and drudgery are important. In the context of developing countries, decentralized production is desirable, and thus suitability of the kiln technology for small-scale production would be considered an important social indicator. VSBK: 33. On social performance indicators, a properly designed VSBK scores highly. Through incorporation of chimneys, mechanization of green brick lifting and brick loading process, it is possible to minimize occupational health risk and drudgery for workers. VSBK has been found to be a suitable technology for small- and medium-scale production (0.5 to 4 million bricks per year). Tunnel kiln: 34. Tunnel kiln operations are generally safe for workers and drudgery is minimized through mechanization. However, the tunnel kiln is not suitable for small- and medium-scale production and




3.8

is generally used for production of excess of 10 million bricks per year. A highly mechanized tunnel kiln can reduce employment opportunities drastically. BTK: 35. The BTK poses several occupational health risks for workers, particularly firemen, who are exposed to excessive heat, dust and gases. As the entire kiln operations including fuel feeding, loading and unloading of bricks are manual, drudgery is high in BTK operations. In terms of production capacity, BTKs are quite suitable for medium scale production (2 to 8 million bricks per year). Clamps and intermittent kilns: 36. Arranging green bricks and fuel as well as unloading of fired bricks are all manual operations and involve a lot of drudgery. However, clamps and intermittent kilns generally do not pose the severe occupational health risks of BTKs. Clamps and intermittent kilns are suitable for small scale, decentralized production. Brick Quality 37. It is desirable that a brick kiln provides a high percentage of high-quality bricks and the number of rejects and breakages is as low a percentage as possible. The ability of a kiln to produce good-quality bricks from a variety of raw materials (clays) generally depends on the rate of heating and cooling, as well as the operator's control over the firing process; generally, a slow firing kiln or a kiln with better control is able to handle much wider variety of clays. Another important property is the kiln’s stability to fire a variety of products (solid bricks, hollow bricks, tiles and so on). A kiln’s suitability to fire hollow bricks is an important parameter because hollow brick production requires both less energy and less clay, and walls made up of hollow bricks have better insulation properties. VSBK: 38. The quality of fired brick depends to a very large extent on the quality of green bricks. The VSBK produces better quality and has lower breakage rates when the green bricks are of good quality ( adequate strength, regular shape and size and so on ) for example when they are produced using machines such as extruders and soft mud molding machines. In China and Vietnam, where all the bricks are extruded, VSBK fired brick quality is better compared to the quality of bricks fired in traditional kilns. In India and Nepal, VSBK has given good results with hand-molded bricks also. VSBKs have generally been used to fire solid bricks in South Asia. Nevertheless, VSBK has been used extensively to fire hollow bricks in Vietnam.




3.9

Tunnel kiln: 39. Tunnel kiln is also a good option on all parameters, be it quality of fired bricks, control over the firing process, ability to fire a variety of clays as well as to fire diversified products, including a variety of hollow bricks. BTK: 40. Due to large temperature differences within the kiln, a large variation is observed in the quality of fired bricks in a BTK: generally only 70 % of the bricks are of the highest quality. The firing process in a BTK is very slow (typical heating and cooling rates of less than 25 º C/hr) and thus the kiln is able to handle a variety of clays. BTK is not as versatile as a tunnel kiln in its ability to fire a variety of hollow bricks. Clamps and intermittent kiln: 41. There is generally very little control over the firing process in clamps and intermittent kilns, so a large variation in brick quality is observed within a batch as well as from one batch to another. Generally, the quality of the fired product as well as the percentage of saleable bricks is low compared to other technologies. 42. In terms of comparison in brick quality the tunnel kiln emerges as the best option. VSBK WORLDWIDE 43. The evolution and initial development of VSBK technology tool place in rural China. The first version of VSBK in China originated from traditional updraft intermittent kiln during 1960's. During 70's, the kiln became popular in several provinces of China. In 1985, Chinese government commissioned the Energy Research Institute of the Henan Academy of Sciences at Zhengzhou (Henan province), to study the kiln to improve the energy efficiency. The Government partly supported the dissemination of the technology. Several thousand VSBKs are operating in China. Nepal 44. In 1991 under a GTZ-GATE project, a twin-shaft VSBK was constructed at Kathmandu Brick Factory, Lubhu, Nepal. One more VSBK was built in Biratnagar, Nepal. With an energy consumption of 1 Mj per kg of fired bricks, the energy saving potential of the VSBK technology was clearly demonstrated. However, both kilns ran into early technical problems that the entrepreneurs could not solve unaided. In spite of strong indications that the technology had a great potential, initial enthusiasm was eventually replaced by disappointment and the two Nepalese VSBKs were closed down. The lack of access to reliable technical support was responsible for the failure.




3.10

45. Technical problems faced during the initial introduction of the VSBK technology in Nepal in 1991 were solved during a nearly 10 year long technology development phase concentrated mainly in India. Thus a global VSBK technology dissemination potential was realized. 46. The growing concern of environmental pollution resulted from brick production in Kathmandu Valley made it an urgent issue to change the prevailing BTK firing process with an environmentally accepted brick firing technology. The VSBK technology, after a commercial success with more than 40 operating kilns in India, was an obvious choice. 47. A feasibility study, conducted by Skat in 2002, confirmed the commercial potential of VSBK with a general positive impact on the environment. Thus a VSBK Technology Transfer Program in Nepal was signed between Swiss Development Agency and HMG, Nepal in February 2003 for reintroducing it in Kathmandu Valley. 48. The introduction strategy of the VSBK technology to Nepal includes a demonstration phase that is presently being implemented. During this phase two pilot kilns have already been constructed. Brick quality, environmental and energy performance confirmed previous efforts, notably from India. An economic study as well as feed backs from entrepreneurs proofs the economic viability of the new technology in the Nepali context. The long term technical support required by future entrepreneurs has been ensured through a local network of commercially operating support service providers trained by the VSBK program. Bangladesh 49. With the assistance of SDC, a brick kiln owner from Bangladesh visited the VSBK units in Nepal. Inspired by what he saw, the entrepreneurs subsequently built a VSBK near Dhaka. Unfortunately, the need for specialized technical assistance was again overlooked. As a consequence, this Bangladeshi pilot plant was never commissioned. 50. The attempt to transfer know-how to Bangladesh was a spontaneous, private initiative. Unfortunately, the entrepreneur did not know the finer aspects of the technology and without the requisite technical back up; he made fundamental mistakes in the design and construction of his kiln. Sudan 51. A VSBK was adapted for the use in Sudan during 1996. A pilot kiln was constructed by the Building and Road Research Institute (BRRI) of the University of Khartoumin in cooperation with GTZ-GATE. The fuel used was carbonized agricultural waste from cotton stalks, sunflower stalks or bagasse. The carbonized fuel, reduced to a granular size was dispersed among the green bricks when loading the kiln from the top. This VBSK was the first of its kind, which uses carbonized agricultural waste. No recent updates on the operations of the technology are available.




3.11

Afghanistan 52. In 1995, the Pakistan VSBK-GTZ project provided training for engineers and kiln-crews from Herat, Afghanistan in order to construct one 6-shaft VSBK for the Afghanistan Rehabilitation & Energy Conservation Association. Private entrepreneurs constructed three additional 6-shaft VSBK units and a total of 4 such units (i.e. 24 shafts, each of 1m x 1m) were reported to be in operation in 1996. India 53. In 1996, SDC (Swiss Agency for Development and Cooperation) supported an organized transfer of VSBK technology to India through an elaborate Action Research Program. The process was initiated through a team of local and international experts. This team was commissioned to analyze the mistakes committed in earlier attempts to transfer the VSBK technology beyond its native environment and to identify the success factors responsible for its growth in China. Based on the outcome of the study, a project was formulated for the transfer of the VSBK technology to different geographical regions in India. 54. The first VSBK kiln was set up in Central India at Datia in Madhya Pradesh. The kiln was based on Chinese designs and was set up in joint partnership with an experienced local brick clamp owner. Initially, a team of experienced Chinese specialists provided on-site operational support services. Local support and key personnel were provided by Development Alternatives to assist in the construction process and operation of the kiln. This pilot kiln confirmed the potential energy savings associated with VSBK and demonstrated the technical feasibility of short cycle brick firing using indigenous soils and fuels. 55. Buoyed by encouraging results, a second kiln using slightly larger shafts was constructed in Orissa, Eastern India. This was quickly followed by a third kiln for firing extruded bricks, set up in association with (and at the behest of) a reputed manufacturer of fired clay products — COMTRUST in Kerala, South India. All of these early kilns assisted in the building of local capacity for design, construction and operation while demonstrating improved environmental performance. The performance of the kilns was continuously upgraded with the assistance of local partners, consultants and international back stoppers. As of May 2003, more than forty commercial kilns are operational throughout the whole country. 56. The technology dissemination phase has helped in paving the way for a purely commercial multiplication process in India through various agencies the prime being Development Alternatives.




3.12

Vietnam 57. An UNDP project funded by “Small Grant Program of the Global Environment Fund” introduced the first ever VSBK in Vietnam in 2001. The VSBK was constructed under the supervision of Chinese experts and the VSBK became operational in December, 2001. 58. After the successful operation of this VSBK, about one hundred VSBKs were built across Vietnam in a short period of two years. However, most of the VSBKs were self copied without proper design and construction advice from experts, which resulted into complication in operation, uneven shaft size and excess flue gas on the top of the loading platform. However, the Ministry of Science and Technology awarded a gold medal to a VSBK company for energy saving and environmental performance in December, 2003. 59. This clearly indicates that if the VSBK technology is properly transferred, the VSBK technology know-how locally anchored, there is an immense potential to transfer and bride the existing traditional brick making system into an environmental cleaner future. VSBK IN PAKISTAN 60. In 1993, a VSBK was demonstrated in Peshawar, Pakistan; again under GTZ-GATE development projects. This was followed by construction of several VSBK units in the same region. 61. In Pakistan, the VSBK demonstration units (with twin shaft design) were marketed as an alternative to Bull’s Trench Kiln (BTK) technology. However, the typical production level of a BTK varies between 15,000 to 50,000 bricks per day in Pakistan. With only two shafts, the VSBK demonstration units could not produce more than 3,000 bricks per day. There was a clear imbalance between output capacity of these dissimilar technologies. 62. This difference proved to be a major stumbling block in attracting the attention of BTK owners toward VSBK. Inappropriate information on the limits and potentials of VSBK technology resulted in a misjudgment in its marketability. 63. As a consequence of this oversight, the VSBK technology made no significant break-through in Pakistan beyond the early pilot project processes. 64. However Energy Efficient Brick Production Project (EEBP) has been mandated by the Swiss Agency for Development and Cooperation (SDC) to carry out a technology transfer project in Pakistan with the aim to pilot and demonstrate VSBK and to address all issues that had been faced during commissioning of kiln in Peshawar.




3.13

65. After establishing the project office in Rawalpindi, three pilot entrepreneurs have successfully constructed their VSBKs and conducted the initial operation. Currently the project is in the phase of supply tuning and operational optimization and it is expected that the pilot entrepreneurs will achieve full scale production by the end of the year. 66. However, the operational experiences and data gathered so far allows adjusting previous economic simulations and drawing a detailed picture of the economic viability of VSBK in Pakistan:

• The project has demonstrated that high quality VSBKs can be established with local material supply, within the expected price level.

• The laboratory tests have proven that VSBK bricks can compete with the upper brick quality

segment of the Pakistani brick market.

• The Project has demonstrated that a correctly operated VSBK reduces energy consumption (and CO2 emissions) by 30-50%.

• First production cost assessments have confirmed, that a full scale VSBK will generate

considerably higher profits than a traditional brick kiln and that its comparative advantage will further increase with the rising coal price.

• VSBK considerably improve working conditions, in particular exposure to toxic gasses and

heat and will offer alternatives to bonded- and child labor exploitation.

• The first production experiences have shown that the kiln can be operated on a high profit level. However, the production and supply tuning must be conducted carefully and cannot be ignored to achieve the desired results.

ANNEX "V-1"

● ● ● ● ● ● ● ●

●

●

Coal is sprinkled on each layer of bricks

Mixing of clay and water

In case of internal fuel combustion coal is also mixed in the clay

Pug mill is used for the homogenization

Molders is used for the molding of green bricks

Sand is used as a releasing agent

Screw jack is used for unloading purposes.

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILNFLOW CHART OF THE PRODUCTION OF BRICK

COOLING CHAMBER

CLAY

PRODUCTION OF GREEN BRICK THROUGH CLAY PRODUCTION OF RED BRICK THROUGH BAKING

STORAGE HOUSE

WATER

After baking in VSBK bricks are sent to cooling chamber to protect them from thermoshock

Clay and sand is purchased from suppliers

MOLDING (MOLDERS)

VSBKPUG MILL

CRUSHING OF COAL

DRYING & STORAGE OF

GREEN BRICKS

UNLOADING OF BRICKS

MIXING

Green bricks are dried in Sunlight

TECHNICAL CONSULTANT SKAT

(SECTION – 4)



TECHNICAL CONSULTANT - SKAT

4.1

BRIEF HISTORY 01. Skat was founded in 1978 as part of the Institute for Latin American Research and Development Cooperation at the University of St. Gallen. The acronym "Skat" originally stood for Schweizerische Kontaktstelle für Angepasste Technik, meaning Swiss Centre for Appropriate Technology. Skat’s aim is to help in the fight against poverty through support to the livelihoods of disadvantaged and marginalized people. The organization has accumulated a great deal of knowledge and experience since its establishment in 1978. Skat applies its knowledge through collaboration with partners from all continents. Skat works in a multi-disciplinary, integrated and participatory way. Sustainability is accorded prime importance in all Skat activities. 02. Skat is a leading Swiss consultancy firm working internationally in development co-operation and specializing in technical, social, institutional and economic aspects of infrastructure and environmental management, water supply and sanitation, solid waste management, sustainable building and settlement development as well as mobility and transport. It has developed innovative technologies that have been successfully applied in the sectors of water, sanitation and construction. Skat has established system for knowledge management, which enhance the sharing of idea and experiences between partners on all continents. 03. The legal constitution of Skat was an association whose members were mostly Swiss development NGOs, some representatives from public and private institutions, and individuals. 04. Since its early days, Skat has focused on three areas of expertise: water and sanitation, architecture and construction, and transport infrastructure. The spectrum of Skat’s activities and competencies grew steadily. Increasingly, Skat dealt not only with "appropriate technology", but also with a wider range of topics related to technology and management. This growing breath of expertise is reflected by an adjustment of the name to "Swiss Centre for Development Cooperation in Technology and Management". 05. Skat gradually became a prime resource centre, which collected, documented and disseminated knowledge and experience on technologies and their application for interested target groups in both North and South. 06. In line with the shifts towards higher private sector involvement in development cooperation, Skat decided in 1997 to transform itself into a private limited company. The new company took over the association's mandate, i.e. to make a well-balanced contribution to the technical cooperation by merging highly professional consulting services with equitable sharing of knowledge. This approach means to collect relevant information on appropriate technologies, document lessons learnt and disseminate them to partners. 07. In 2001 Skat’s Board of Directors decided to set up the Skat Foundation together with the NGOS Helvetas, Caritas, and Swisscontact. The Skat Foundation is a charitable institution for




4.2

sharing and disseminating Skat’s longstanding knowledge and experience with partners in the developing world in a professional manner, and for initiating new activities to promote the exchange of knowledge and experience in development cooperation. Skat bears all administrative and operating costs of the Skat Foundation. 08. Skat is registered as a private limited company under the name Skat. The shares are owned by the Skat staff, partner organizations and friends of Skat. 09. Skat staff is committed to providing high quality services and to continuously improving the way we work. Since 1997 Skat has used a certified quality management system according to the ISO 9001:2000 standard. Skat Foundation 10. In 2002, Skat set up the Skat Foundation to promote the sharing of knowledge and experience between partners in the developing and developed world. The Skat Foundation is a legally independent not-for-profit organization supervised by the Swiss Federal Supervisory Board for Foundations. PARTNERSHIP WITH WORLDWIDE ORGANIZATIONS 11. Skat works in partnership with organizations (NGOs and competence centers) in the North and South. These long-term partnerships are an excellent basis on which to build local capacity in developing countries. Its partners in north and south include: Partners in the North

• Caritas Switzerland • EMPA-Swiss Research and Test Laboratory • Helvetas-Swiss Association for International Cooperation • International Water and Sanitation Centre (IRC) • SANDEC-Water & Sanitation in Developing Countries (EAWAG) • Swiss Red Cross (SRC) • Swiss Tropical Institute (STI) • Swisscontact-Swiss Foundation for Technical Cooperation • Swiss Agency for Development and Cooperation (SDC)




4.3

Partners in the South

• Aga Khan Planning and Building Services (AKPBS), Pakistan • CINARA-Instituto de Investigación y Desarollo en Agua Potable, Saneamiento Básico y

Conservación del Recurso Hídrico, Colombia • Centre Régional pour l'Eau Potable et l'Assainissement à faible coût, Burkina Faso (CREPA) • Development Alternatives (DA), India • Institute of Water and Sanitation Development (IWSD), Zimbabwe • Network for Water and Sanitation International (NETWAS), Kenya

VSBK TECHNOLOGY EXPERIENCE 12. The involvement of Skat in VSBK dates back to 1994 with the involvement in the Brick Sector Study in Bangladesh. Skat was actively involved in shaping the VSBK Technology Transfer Project in India and was the organization, responsible to provide technical and quality development inputs. Mandated by Swiss Agency for Development and Cooperation (SDC), Skat is currently implementing projects on promoting energy efficiency in the building material industry in Nepal, Afghanistan and Pakistan. 13. Role of Skat within VSBK programme is the implementation agency and is responsible for the overall programme management (including strategic orientation). The overall programme coordination is provided from the Skat’s head office in Switzerland. VSBK in Nepal 14. Skat together with Development Alternatives has introduced the Vertical Shaft Brick Kiln Technology (VSBK) in Nepal. The project aims at reducing stack emissions, enhancing energy efficiency and achieving change in the living and working conditions of the kiln workers. Two pilot kilns are already accomplished, in particular through the active initiative of private entrepreneurs. 15. Skat has currently started a follow-up programme phase, where VSBK will be further mainstreamed and commercialized in Nepal. VSBK in Afghanistan 16. Skat conducted a feasibility study in November/ December 2005 in Afghanistan for VSBK Technology. In 2006 the VSBK Technology Transfer to Afghanistan was launched. This includes the active involvement of key stakeholders such as pilot entrepreneurs, support service providers, government departments, etc. Skat has implemented first knowledge sharing and capacity building activities which have been organized by the ongoing VSBK Programmes in Nepal and India.




4.4

Stakeholders receive and exchange tangible information about the VSBK technology for informed decision making as well as to be enabled to arrange for the required pilot project preparations. VSBK in Pakistan 17. Energy Efficient Brick Production Project (EEBP) has been mandated by SDC to carryout a technology transfer project in Pakistan with the aim to pilot and demonstrate environment-friendly construction material and technologies in particular the introduction of VSBK. In Pakistan, the first pilot kilns have started firing and are currently fine-tuning the production process. In cooperation with Swiss and Nepali experts, a local team of engineers has introduced the new technology in the Islamabad and Rawalpindi area. Three brick pilot entrepreneurs have been supported in building demonstration kilns. KEY MANAGEMENT 18. Skat consists of an interdisciplinary team of 16 engineers, architects, planners, and economists, with an average of more than 15 years of international experience in development cooperation. Three support staff assist the team. OFFICES 19. The overall programme coordination is provided from the Skat’s head office in Switzerland. The detail’s of Skat’s offices is given under: Head office Address: Skat Vadianstrasse 42 CH-9000 St.GallenSwitzerland Phone: +41712285454 Fax: +41 71 228 54 55 Webs: www.skat.ch, www.skat-foundation.org Emails:

General enquiries: [email protected] Publications: [email protected]

Skat Foundation: [email protected] Office in Pakistan Address: House A-17, Main Double Road Pak PWD Housing

Society Lohe Bher, Islamabad, Pakistan Phone: +92 51 597 0540-41, +92 51 250 7745 Fax: +92 51 595 7746 Mobile: +92 301 817 4708 E-mail: [email protected] Web: www.eebp.pk




4.5

TECHNICAL ASSISTANCE BEING OFFERED 20. Prospective investor(s) will receive technical assistance from Energy Efficient Brick Production Project (EEBP) under the SDC funded VSBK programme. EEBP engineers / experts will closely work with proposed investor to design, install and test the VSBK kiln. This close cooperation with EEBP will ensure that the plant is set up in a timely and proper manner. Skat’s experience in setting up VSBK units in other parts of the world will prove very useful in commissioning the new kiln in Pakistan. 21. Another major benefit from the cooperation with EEBP will be the training that is provided to firemen / firemaster. EEBP has also agreed to provide support to train green-brick moulders. 22. All these above stated services / assistance will be provided free of cost.

MARKET STUDY

(SECTION – 5)



MARKET STUDY

5.1

01. Messrs AC Nielsen carried out market study on construction sector and brick industry in Pakistan. 02. Findings emanating from marketing consultant’s report are given as under: CONSTRUCTION SECTOR IN PAKISTAN Growth of Economy 03. The growth of Pakistan’s economy during the current decade has been as under:

GDP GROWTH (%) 2000-

01 2001-

02 2002-

03 2003-

04 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 1.8 3.1 5.1 6.4 8.4 5.8 6.8 4.1 2.4

Source: Economic Survey of Pakistan

Growth of Gross Domestic Product (GDP)

1.83.1

5.16.4

8.4

5.86.8

4.1

2.4

0123456789

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

% p

er a

nnum

04. The economy of Pakistan recorded excellent growth during 2002-03 to 2006-07 but it had to face decline afterwards, chiefly because of political uncertainty. 05. The political instability and the resultant economic slowdown that started in 2007-08 are still going on and putting negative impact on different sectors including construction



MARKET STUDY

5.2

Growth of Construction Sector 06. The growth of construction sector during the current decade has been as under:

CONSTRUCTION SECTOR GROWTH (%) 2000-

01 2001-

02 2002-

03 2003-

04 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09 0.5 1.6 4.0 (10.7) 18.6 10.2 24.3 (3.9) (10.8)

Source: Economic Survey of Pakistan

Construction sector growth trend

-10.7

10.2

24.3

-10.8-3.9

18.6

41.60.5

-15

-10

-5

0

5

10

15

20

25

30

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

%

07. The construction sector of Pakistan had an average growth of 1.2% during 2000-01 to 2003-04. But the sector experienced a great boom grew during 2004-05 to 2006-07 when it grew at an average rate of 18% per annum. The growth was mainly because of construction activities generated by large public and private projects. Dozens of mega housing schemes were launched and developed in urban areas, like Lahore, Rawalpindi/Islamabad, Faisalabad, Hyderabad, Multan, Gujranwala, Sialkot and Sargodha, etc. All these projects, except those in Karachi, caused tremendous demand for bricks, while the projects in Karachi consumed cemented blocks. Similarly, dozens of highrise commercial buildings were also established during the same period. The volume of civil works in public sector, chiefly by the local governments was also immense during the same period. 08. The major housing projects launched, developed or partially executed during that period in Lahore include Bahria Town, Eden Villas, DHA (New phases), Green Forts, Izmir, Sukh Chayn, EME, Valencia, Central Park, Askari Villas and Saudi-Pak, etc. While the projects in Rawalpindi/Islamabad include Bahria Town, DHA (New phases), Canyon View, Highlands, Anchorage, Chak Shahzad, Soan Gardens, and Al-Haram City, etc.



MARKET STUDY

5.3

Sukh Chayn, Lahore Lake City, Lahore Paragon City, Lahore Education City, Islamabad

Eden Projects, Lahore The Centaurus, Islamabad Creek Vistas, Karachi Pace Circle, Lahore

Designs of ready-villas in upscale housing projects in Lahore and Rawalpindi / Islamabad 09. After the 3-year boom in real estate market, the pace of construction sector slowed down mainly because of political turmoil that was initiated by the assassination of a national leader. The political instability is still going on and the economic recession persists. Hence, the sector faced a negative growth of 3.9% and 10.8% per annum during 2007-08 and 2008-09, respectively. Source: Market sources BRICKS INDUSTRY IN PAKISTAN 10. Centre-to-Upper Punjab and NWFP regions were covered by marketing consultant. 11. Pakistan’s 170 million people constitute 6th largest population of the world. The Punjab is the largest province with 58% of overall population, i.e. around 100 million people. The Centre-Upper Punjab contains around 50 million population, while the population of NWFP province is around 30 million. Hence, around 80 million people reside in the two regions under study. 12. Out of 35 districts of the Punjab province, 18 districts exist in the Centre-Upper region. On the other hand, the NWFP province, including the Tribal Areas, consists of 28 districts. The districts of Punjab are well populated, while those of NWFP are less populated. 13. The Centre-Upper Punjab is altogether a plain region, while most of the areas of NWFP are mountainous. Fired bricks are the only source of construction throughout the Punjab region



MARKET STUDY

5.4

with a very limited usage of non-fired clay bricks and crop fiber in rural construction. On the other hand, the majority of districts in NWFP, being mountainous, consume stone pieces as a substitute to fired bricks. 14. The major consumption centres for bricks in Centre-Upper region are the cities of Lahore, Sheikhupura, Gujranwala, Gujrat, Sialkot, Jhelum, Sargodha, Rawalpindi and Islamabad, while those in NWFP are the cities of Peshawar, Charsadda, Nowshehra, Mardan and D.I. Khan. Majority of brick kilns exists in or around these consumption centres. Size of Bricks Industry 15. In absence of data on bricks sector, the volume of the industry has been estimated through market sources. According to the market sources, around 12,000 brick kilns exist throughout Pakistan. The geographical spread of kiln industry is as under:

NO. OF KILNS SHARE (%) Centre-Upper Punjab 4,500 38 Rest of the Punjab 3,500 29 NWFP 1,000 8 Sindh & Balochistan 3,000 25 Total 12,000 100

Source :Industry sources

Spread of brick industry

Centre-Upper Punjab38%

NWFP8%

Rest of the Punjab29%

Sindh & Balochistan

25%

16. Among the estimated 12,000 brick kilns in the country, some 5,500, i.e. 46% are present in the two target regions.



MARKET STUDY

5.5

Production Capacity 17. In Punjab, the capacity of brick kilns is relatively large, i.e. 0.5 to 0.9 million per circle, while the kilns in other provinces have smaller capacities, i.e. 0.4-0.7 million per circle. One circle is completed in around 30 days and each kiln completes 6-9 circles per annum depending on the facilities of green brick molding and storage in rainy season and extreme winter. Based on the operations of 10 months on average, the capacity of kilns has been worked out as under:

NO. OF KILNS

ANNUAL CAPACITY RANGE PER KILN

ANNUAL AVERAGE CAPACITY PER KILN

TOTAL CAPACITY

MILLION MILLION BILLION

[A] [B] [C] [A x C] Centre-Upper Punjab 4,500 5-9 7 32 Rest of the Punjab 3,500 5-9 7 25 NWFP 1,000 4-7 5.5 6 Sindh & Balochistan 3,000 4-7 5.5 17 Total 12,000 80 Source : Estimates based on industry opinion

18. Around 12,000 brick kilns in the country have overall capacity of producing around 78 billion fired bricks per annum. 19. The split of capacity is as under:

Split of capacity by region


NWFP8%


Sindh & Balochistan

21%

20. The regions under study have capacity of producing around 38 billion fired bricks per annum that makes 48% of the nation-wide capacity.



MARKET STUDY

5.6

Bricks Production 21. The crises in bricks industry during 2007-08 caused the closure of many kilns. Incorporating the impact of these closures, the annual production by the kiln industry has been estimated as under:

TOTAL NO. OF KILNS

NO. OF KILNS IN OPERATION

AVERAGE ANNUAL PRODUCTION PER

KILN

TOTAL PRODUCTION

MILLION BILLION

[A] [B] [C] [B x C] Centre-Upper Punjab 4,500 3,500 7 25 Rest of the Punjab 3,500 2,600 7 18 NWFP 1,000 700 5.5 4 Sindh & Balochistan 3,000 2,200 5.5 12 Total 12,000 9,000 59 Source : Estimates based on industry opinion

22. Around 9,000 brick kilns are presently operational in the country. These kilns collectively produce around 59 billion bricks per annum.



MARKET STUDY

5.7

23. The split of brick production by region is as under:

Split of brick production by region


NWFP7%


Sindh & Balochistan

20%

24. The kilns in the two target regions produce around 29 billion fired bricks per annum that make 49% of the national production.

Grades of Bricks

25. The brick firing process in the conventional kilns brings out three grades in each batch, i.e. A, B and C grade bricks. The proportion of B and C grades varies from kiln to kiln and batch to batch. The share of A-grade bricks ranges from 60% to 90% in different kilns depending on the quality of coal used, quantity and timing of fuel feeding, type of clay and expertise of kiln workers. The average share and respective detail for each grade is as follows:

GRADE AVERAGE SHARE IN

BATCH

LOCATION IN THE BATCH

REASONS OF BEING THIS GRADE PROPERTIES

A-grade bricks 75% Middle layers The bricks receive required heat

for the required time Rightly baked, unbroken edges, right shape

B-grade bricks 15% Upper layers Heat at this location is lower than

required Lowly baked, de-shaped

C-grade bricks 10% Lowest layers

Heat at this location is higher than required + the weight of entire batch is on these bricks

Excessively baked, cracked, de-shaped, mass excretion

Source : Industry sources

Share of different grades in overall production

A-grade bricks75%

B-grade bricks15%

C-grade bricks10%



MARKET STUDY

5.8

26. The production of different grades is as under:

SHARE IN A BATCH

OVERALL PRODUCTION IN PAKISTAN

PRODUCTION IN TARGET REGIONS

% BILLION BILLION A-grade bricks 75 44 22 B-grade bricks 15 9 4 C-grade bricks 10 6 3 Total 100 59 29 Source : Industry estimates

27. The production of A, B and C grade bricks in the target regions is around 22, 4 and 3 billion bricks per annum, respectively. 28. B grade bricks have 25-30% low rates than A-grade bricks, while the price of C-grade bricks is nominal. A-grade bricks are used in general construction, while B-grade is supplied to low-affording rural areas for construction there. C-grade bricks are mostly used to support brick production process within the kiln or sold out to be used as brick crush. Types, Shapes and Sizes of Bricks 29. The following types of bricks are produced in the country

TYPES SHAPES SIZES (INCH) USES SUPPLIERS FUEL

USEDSolid building bricks

Rectangular • 9x4.5x3 • 10x5x3 • 8.5x4.25x2.75

- Buildings - Flooring - Street soling /canal lining

All brick kilns

Plain and design fascia bricks

Rectangular, square, penta/ hexagonal, tapered, round-edged hybrid, etc.

• 9x3x1 • 9x2.25x1 • 9x2.25x1.5 • 9x2.25x2.25 • 9x3x2.25 • 9x1.5x1.5, etc.

- Building exterior

Round pillar bricks

Half circular • 9x4.5x3 Round pillars

Hollow/ cavity bricks

Rectangular • 9x4.5x3 Special applications

Specific brick kilns like Tariq Bricks, Niazi Bricks, Butt Brothers, Javed Bricks, Bismillah Bricks and Shabbir Enterprises, etc.

Coal and other non-fuel items

(Source : Industry/market sources)



MARKET STUDY

5.9

30. The widely used size of building bricks is 9x4.5x3 inch, respectively and the same is considered the standard size in building and soling applications. The bricks of this size are stated to be most suitable and economical in both production and masonry processes. This size is easy to handle, place, fire, transport and installed. While 10x5x3 inch is the size that is the specified size for irrigation applications, i.e. canal lining, etc. However, the usage of this size, even for irrigation applications is presently nil. On the other hand, the kilns in Narowal and Sialkot have been reported to produce undersized bricks of 8.5x4.25x2.75 inch mainly because of higher heat requirement for baking clay there and its being a standard size there in those areas for long. 31. As a whole, 9x4.5x1.5 size is widespread and is almost all districts throughout the target regions of Punjab and NWFP, including Lahore, Gujranwala, Faisalabad, Islamabad, Peshawar and Nowshera. Solid bricks are considered to be the ideal building material, especially in load-bearing walls, while hollow bricks and cement blocks are not considered to be reliable in such walls. 32. Special purpose bricks like fascia bricks, round pillar bricks and hollow bricks are produced in the same Bull’s Trench kilns using similar fuels. Though fascia bricks can be fired in every kiln, highly skilled labor is required to mould, place and fire them. So, only a few kilns have real expertise in producing them. Such kilns are mainly located in Lahore and include Tariq Bricks, Niazi Bricks, Butt Brothers, Javed Bricks and Shabbir Enterprises. These bricks are fired with traditional fuel, i.e. coal and other supplementary materials like wood logs, wood dust and crop residues, etc.

Brick kiln in Lahore producing facia bricks

Fascia Bricks produced in Lahore

Buildings decorated with fascia bricks



MARKET STUDY

5.10

33. Fascia bricks are available in a variety of dimension, i.e. 9x3x1, 9x2.25x1, 9x2.25x1.5, 9x1.5x1.5, 9x2.25x2.25, 9x3x2.25 inch, etc., while design bricks are artistically designed to be used in combination with plain fascia bricks. These bricks are produced in a large assortment of sizes, shapes and designs. The market of fascia bricks is growing because of their prestigious look and durability. 34. Hollow bricks have a very specific application, i.e. low-weight structures and thermo-insulation. Currently the usage of these bricks is meager, rather negligible. The manufacturers of fascia bricks like Tariq Bricks, Niazi Bricks, Butt Brothers, Javed Bricks and Shabbir Enterprises also produce hollow bricks, but they don’t maintain stock rather produce only the ordered quantity. Another producer in Hattar is also reported to have specialized facility for the production of hollow and fascia bricks. 35. Hollow bricks are generally produced in 9x4.5x3 inch size. Being costlier than normal bricks, the hollow bricks are used only in specialized application, i.e. in industries/restaurants to minimize heat exchange between production/furnace /kitchen area and other sections and offices. These are also reported to be used in large commercial projects in partition walls to have reduced dead load on building structure. Source: Industry/market sources Molding Practices 36. Hand molding of green bricks is common practice across the brick kiln sector of Pakistan. Only a few kilns have been reported to use mechanized molding using Chinese, Korean and local machines/extruders. Such units exist in Lahore, Daska (Sialkot), Rahimyar Khan and Islamabad. The industry sources report that some units adopted the mechanized technology, but abandoned it because of problem of skilled labor, maintenance, load shedding and low acceptability of extruded bricks by builders and architects. Though the dimensional accuracy and compressive strength of mechanized bricks are better, the baking quality, water absorbency and bonding with cement compound are perceived to be lower than those of hand molded bricks. The machine molded bricks are also not preferred by end users mainly because of less durable plaster on the high finish surface of these bricks. 37. The producers of hand molded bricks state that excessive pressing of clay by molding machine affects the porous texture of bricks that requires extra fuel for firing and reduces the bonding capacity of finished brick. Furthermore, the issues like capital investment, non-availability of skilled operators, difficult access to repair facilities & spare parts and high maintenance cost prohibit the penetration of mechanized molding technology among the kiln sector. The kilns currently having green brick extruders mostly use them for the production of special high finish bricks, fascia bricks, design bricks, pillar bricks and hollow bricks. The common building bricks are mostly molded manually even at these kilns. 38. The only problem with hand molding practice is stated to be high dependence on labor. The labor related issues include non-availability of skilled molders, issuance of heavy advances,



MARKET STUDY

5.11

child labor concerns, bonded labor perceptions and undue supervision by labor department and NGOs. If these problems persist, the penetration of mechanized molding is likely to increase. Source: Industry sources Firing Practices 39. The basic firing material used throughout the kiln industry is coal, while majority of kilns use supplementary materials as well. These materials differ from area to area depending on the easy and economic availability there. The supplementary materials include wood logs, wood dust (boora), rubber tyre, synthetic nylon shoes, corn cores, mango cores, cotton crop residues, sugar mills waste and fabric scrap, etc. 40. Due to specific composition of soil there, the brick producers in Southern Punjab use low quality coal of Lakhra (Sindh) supplemented by wood dust, corn cores, cotton crop residue and sugar mills waste in their kilns. Even a kiln in Pak Pattan has been reputed to have sole usage of wood dust for firing bricks. On the other hand, the usage of supplementary fuels is relatively low in Centre-Upper Punjab.

Coal unloaded at a kiln Coal and wood dust Firing in the kiln Dark smoke due to low

quality coal and supplementary materials

41. Pakistan has huge coal resources estimated at over 185 billion tones. The domestic coal generally ranks from lignite to sub-bituminous. The major sources include Chakwal, Choasaidan Shah and Khoshab in Punjab, while Quetta, Hernai, Shahwig and Dukki, etc. in Balochistan. The present production/extraction of coal in the country is around 4 million tonne. Brick kiln sector consume almost 40% of the locally produced coal, i.e. 1.6 million tonne per annum. 42. Further to the local production, over 6 million tonne of coal is imported as well. The imported coal is mostly used by cement, power and steel sectors. The countries of import include Indonesia, Australia, South Africa, Canada, China and Russia. 43. Presently, the price of local coal that is consumed by brick kilns ranges from Rupees 4500 to 9000 per tonne, inclusive of transportation, depending on the origin and quality of coal. Coal prices are increasing fast because of its strong demand vis-à-vis limited supply. The demand of coal in the country has increased as many industries, especially cement producers have shifted coal because of shortage of natural gas and high prices of furnace oil. While the supplies have been reduced as the labor in mines are fast shifting to their home towns in Swat and Afghanistan.



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5.12

44. The growth in prices of coal has been reflected by the following index numbers over the years:

INDEX NO. OF AVERAGE EX-MINE PRICE DURING THE YEAR BASE YEAR 2001-01=100

2000-01 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Index No. 100 100 101.3 117 118 128 137 Growth per annum - - 1% 15% 1% 8% 7%

Source: Statistical Yearbook of Pakistan / FBS Monthly Statistical Bulletin

45. The average growth in coal prices has been recorded as 7% per annum. 46. The cost of transporting coal from mines to the kilns has also gone high. This overall high cost has not only augmented the production cost but also increased the requirement of working capital. This has ultimately made the operations quite cost intensive resulting in inefficiency or closure of kilns with poor financial base. 47. Each kiln in the Centre-Upper Punjab is reported to need 80-100 tonne coal supplemented by other fuels for each circle of production, i.e. in around 30 days. The average firing cost at the kilns in the target regions stands at around Rupees 800-1000 per 1000 bricks. 48. None of the brick kiln in Pakistan is reportedly using natural gas for firing bricks as it is as inefficient in maintaining the required temperature, i.e. 1100-1150o C. BRICKS MARKET Size of Bricks Market 49. Excluding the C-grade bricks, the net market in Pakistan is estimated to be around 53 billion bricks per annum, while 26 billion bricks in the target regions. The detail of market is as under:

OVERALL MARKET MARKET IN TARGET REGIONS VOLUME OF

BRICKS VALUE VOLUME OF BRICKS VALUE

Billion Rupees in Billion Billion Rupees in Billion A-grade bricks 44 114 22 57 B-grade bricks 9 16 4 7 Total 53 130 26 64 Source : Industry estimates



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5.13

Growth of Bricks Market 50. As per the market sources, the growth of bricks market is closely associated with the growth of construction sector. Hence, the tentative growth of bricks market is as under:

GROWTH (%) 2000-

01 2001-

02 2002-

03 2003-

04 2004-

05 2005-

06 2006-

07 2007-

08 2008-

09

Construction sector 0.5 1.6 4.0 (10.7) 18.6 10.2 24.3 (3.9) (10.8)Bricks market 1 2 4 (10) 18 10 24 (4) (10) Source: Economic Survey of Pakistan/Market sources

Growth of bricks market in Pakistan

10

24

-10-10-4

18

421

-15

-10

-5

0

510

15

20

25

30

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

%

Projected Demand of Bricks 51. As per the market sources, the market for bricks is less likely to regain its position of 2004 to 2007 in the near future owning to the ongoing law-and order situation, political uncertainty and economic slow-down. The market might grow in the range of 3 to 7% for different years making the average growth at 5% during the next five years. The estimated average growth and respective market size are exhibited as under: 2009-10 2010-11 2011-12 2012-13 2013-14

Market size (billon bricks) 56 58 61 64 68

Pakistan

Growth 5% 5% 5% 5% 5%

Market size (billon bricks) 27 29 30 32 33

Target regions (Centre - North Punjab & NWFP) Growth 5% 5% 5% 5% 5% Source: Market estimates



MARKET STUDY

5.14

Projected demand of bricks

6865625956

3332302927

01020304050607080

2009-10 2010-11 2011-12 2012-13 2013-14

Bln.

bri

cks

Pakistan Target regions

52. The national market of fired bricks in Pakistan is projected to reach the level of 68 billion, while that of the target regions to 33 billion per annum by 2013-14. Substitute of Bricks 53. Different substitutes of bricks exist in Pakistan. These include:

PRODUCT CONSUMPTION AREAS INTENSITY Cemented blocks Widely in Karachi, while

rarely in other cities 100% substitute of fired bricks in Karachi. Meager use in other areas of the country

Pre-cast walls/roofs Throughout Pakistan Significantly used in industrial buildings and agricultural/industrial boundary walls

Chiseled stones Mountainous areas Widely used in mountainous areas PU Sandwich panels Urban and industrial areas Newly introduced concept. Presently, rare

usage in large retail and industrial projects. 54. Due to non-existence of fired bricks industry in Karachi, cemented blocks are used there for decades. Also, post earthquake constructions in mountainous areas have preferred the use of lighter materials including hollow cement blocks.

Cement blocks

55. As the weight and cost of hollow cement block (HCB) is lighter than bricks, their usage in external and internal partition walls of building structure reduces the weight and total cost of the structure.

56. Cement blocks are perceived as cost effective but less durable as compared to the fired bricks. Though some builders in Lahore, Rawalpindi /Islamabad and Faisalabad have also used



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5.15

blocks in commercial projects, but the concept has not been welcome and the fired bricks remain the top choice of property owners, architects and builders in these cities.

57. Mainly produced in cottage sector, the blocks are available in different sizes and compositions. The most common sizes are 15x7.5x3.5, 15x7.5x5.5 and 15x7.5x7.5 inch, etc. The majority of cement block producers exist in unorganized sector, however the organized sector suppliers include Izhar (Lahore-Karachi) , National Builders (Lahore), Pak Dream (Hattar), Prime (Lahore), Envicrete (Karachi), Caracrete (Karachi), Hubcrete (Karachi), Magnacrete (Karachi) and Amcon Corporation (Islamabad), etc. Some builders in Karachi and Lahore install a temporary unit of block manufacturing at the site and produce the required block as the construction goes on. The usage of blocks is projected to grow phenomenally in Karachi, but penetration in rest of Pakistan is not expected. Hence, cemented blocks are not going to put any negative impact on current market of bricks.

58. Pre-cast roofs were introduced 20-25 years back and have now got good penetration, especially in industrial projects. On the other hand, pre-cast slabs and pillars are relatively newer introduction and have been used by some builders to build boundary walls of industrial units, farms, warehouses and housing societies. The aspects of fast erection and portability/re-usage are contributing to the acceptability of pre-cast roofs and walls. Though these products have got considerable penetration, the share in overall construction is still insignificant. Hence, pre-cast roofs are not likely to put any significant impact on bricks market in Pakistan. 59. Non-existence of brick kilns in elevated mountainous areas and difficult transportation of the same makes chiseled stones the basis construction material in elevated mountainous areas and people have been using stone masonry even before bricks were introduced there. Stones are readily available there and are cost effective. However, bricks are becoming substitute of stones in these areas; still the conversion is quite slow. The consumption of stones is projected to decline due to high urbanization and the preference for seismic risk proof materials in these areas. 60. Polyurethane Sandwich Panels are imported into the country to be installed in large industrial buildings, warehouses and retail stores. Fast erection and low thermo-conductivity are the factors that make it preferable for some entrepreneurs. No major supplier of PU panels exists in Pakistan; rather these are mostly imported directly by the projects owners or builders. Though the current usage of these panels is very low, a high growth in their demand is projected by the market players.

61. Despite the existence and growing penetration of substitute products, fired bricks remain the most preferred building material because of their strength, durability, easy availability, affordable rates and cultural association of users. Source: Industry/market sources Trend of Urbanization 62. The share of the urban population in Pakistan has grown from 17% in 1951 to 32% in 1998 and further to 35% in 2009. The level of urbanization in Pakistan is now the highest in



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South Asia. The urban population contributes about three quarters of Pakistan's GDP and almost all of the government revenue. Source: United Nations Population Fund 63. The following table exhibits the trend of urbanization in the country.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 [Estd.]

Overall population 139 142 145 148 151 154 157 160 163 167 Urban population 46 47 48 49 51 52 54 56 57 60 Urbanization 33% 33% 33% 33% 34% 34% 34% 35% 35% 36%

Source: Economic Survey of Pakistan 2008-09 64. As per the UN Population Fund, Pakistan’s urban population is likely to be equal to its rural population by 2030. An expected positive consequence of the increasing urbanization of society will be the creation of over 100 million strong middle class by 2030. This large urban population will create increased construction activity giving further boost to the demand of bricks in the country. Source: United Nations Population Fund Brick Prices 65. The present ex-kiln price of A-grade bricks in the target regions stands in the range of Rupees 2700 to 3800, while that of B-grade in the range of Rupees 1800-2200 per 1000 bricks. Due to strong demand in large consuming centres like Lahore, Rawalpindi, Islamabad and Faisalabad, the brick prices there are 10-20% higher than in small cities and towns. 66. The growth in prices of bricks has been reflected by the following index numbers over the years:

INDEX NO. OF AVERAGE PRICE DURING THE YEAR 2000-01 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Index No. 100 102.5 104.8 122.7 129 111.6 119.3 Growth per annum - - 2% 17% 5% -13 7% Source: Statistical Yearbook of Pakistan / FBS Monthly Statistical Bulletin 67. The average growth in brick prices has been recorded as 8% per annum. 68. The pricing of bricks is highly affected by supply and demand situation and the obligation for the kilns to be run on full capacity. During 2005 to 2007, the construction sector experienced tremendous growth. The launch of mega projects in private and public sector



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5.17

created huge demand for bricks and the growth in prices was highest, i.e. 17% in 2005-06. But the growth rate again came down the next year to 11% as a number of new kilns had added into the supply and neutralized the strong demand with large supplies. 69. The position of brick industry further worsened by the sudden deterioration of law-and-order and political situation in the country in December 2007. This unfavorable condition badly damaged the construction sector and squeezed the demand of bricks causing further decrease in profit margins of brick producers. As the kilns are bound to be run on full capacity, almost all the kilns had to bear heavy production losses, while many of them were forced to shut the operations. However, the closure of some brick units put a positive impact on the operational units as the demand and supply balance improved and the prices again got better. 70. Presently, the operational kilns are reporting to have good profit margins. But, the demand and supply situation is again likely to be disturbed and the brick prices might again come down as the closed units are preparing to resume their operations. Comparative Growth in Prices 71. The comparative growth in prices of bricks and other construction material is as under:

Av. growth rates of building material

18%

7%4% 4% 3% 2% 1%

0%2%4%6%8%

10%12%14%16%18%20%

Iron bars& sheets

Cementedblocks

Cement Bricks Sanitarywares

Paint &varnish

Ceramictiles

Av.

gro

wth

per

ann

um

INDEX NO. OF AVERAGE PRICE DURING THE YEAR

PRODUCT 2000-01

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

AVERAGE GROWTH

PER ANNUMIron bars & sheets 100 147 177 166 175 233 319 18% Cemented blocks 100 109 113 114 117 120 151 7% Bricks 100 102.5 104.8 122.7 129 111.6 119.3 8% Cement 100 102.5 105 123 129 112 119 4% Sanitary wares 100 107 109 112 115 118 125 3% Paint & varnish 100 115 113 107 107 110 128 2% Ceramic tiles 100 96 98 98 101 105 99 1%

(Source: Statistical Yearbook of Pakistan / FBS Monthly Statistical Bulletin)



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5.18

72. The prices of bricks have been increasing at an average rate of 4% during the current decade, while those of iron bars and cemented blocks at 18% and 7% per annum, respectively.

73. The growth in prices of cement remained equivalent to that of bricks, while the growth in case of sanitary wares, paint & varnish and ceramic tiles was relatively lower.

POSITION OF END-USER

74. The end users are becoming more and more inclined to modern construction techniques and materials. They prefer luxury and prestige. The launch and success of lifestyle communities and expensive flats & penthouses in major cities is the reflection of acceptance of modern means of living among the tenants. The know how of end users about construction materials is quite low, hence they seeks the services of architects, consultant and designers to select the best available material to satisfy their sense of independent and prestige.

FACTORS AFFECTING REAL ESTATE SECTOR Political Stability and Law-And Order: 75. Political stability reinforces macro-economic indicators that result in significant investment in large infrastructure and real estate projects. The political stability during 2003 to 2006 contributed to the outstanding growth of real estate sector and emergence of mega housing societies and highrise commercial projects. On the other hand the country is experiencing economic recession and sluggish real estate growth for the last 2-3 years, chiefly because of ongoing political crises and security situation. The political uncertainty is likely to sustain and the real estate, construction and bricks sectors are projected to maintain slow growth in near future. Economic Growth: 76. Good economic growth during 2003 to 2006 increased the affordability of people and they were in better position of expanding their businesses and improving lifestyles. That created hike in demand of commercial and residential property during that period and the construction sector too grew notably. However, the economic deterioration in and after 2007 discouraged investments in all sectors including real estate and construction. The GDP of Pakistan stood at just 2.4% in 2008-09 that is among the lowest in the history. As the economic slowdown is projected to go on, the real estate and construction sectors are not expected to revive in the years to come.

Foreign Remittances: 77. The bigger the foreign remittances, the more money is available for investment. The huge remittances received after 9/11 were mostly directed towards real estate business causing a genuine boom in this sector during 2003 to 2005. However, after saturation in 2006, the investments were diverted to other sectors like stock market, telecom and media. Government Policies: 78. The government policies also influence the demand and prices of real estate. For instance, when the interest rate on fixed deposits was reduced to the extent of 3-4% in 2002, the



MARKET STUDY

5.19

depositors withdrew their money and invested in other areas, especially real estate sector. This became one of the reasons of market boom. Liberal policy towards housing financing is also a contributor towards demand of capital goods and real estate. The present high interest rates make the real estate sector less attractive for investors.

Source: Market sources FUTURE DEVELOPMENTS 79. The present situation of commercial and residential development is not encouraging. A number of commercial and residential projects are under construction in Lahore and Islamabad, but the construction of them is either halted or going on with slow pace. Such projects include Zaid Centre, I-Max Complex, Pace Circle, Pace Towers, Alamgir Towers, IT Tower and Tricon Corporate Centre in Lahore, while Gold Crest, Centaurus, Highlands and Canyon Views in Islamabad. Almost same is the situation of dozens of housing societies in these cities. However, the tempo of development and construction in Karachi is relatively fast. 80. Different investors have announced the establishment of more mega highrise projects in Lahore and Islamabad. Such upcoming projects include Chaman Mall, Classic Tower, Kalma Tower, Parco Tower, Sarrc Tower, LDA Tower, Liberty Mall, JW Marriot Hotel, Lahore Regency Hotel and Raddison Hotel. The launch of these projects has been halted for some years owing to unfavorable state of economy and real estate growth. 81. The sluggish pace of the under-construction projects and delays in launch of new projects reflect slow growth of real estate and construction sectors. However, the growth can be fast if the political stability and security situation in the country improves.

Source: Market sources

STAKEHOLDERS Know-How of Stakeholders 82. The stakeholders of construction industry like architects, consultants, builders and suppliers have reported to have less knowledge about the technical aspects of traditional and modern construction materials like bricks, cement, sand, stone crush, steel bars, tiles, sanitary wares, pipes and fittings, marble, granite, glass, PU panels and doors & windows, etc. They determine the quality and specification of construction material through brands, product sheets, manual tests, general observation and sometimes lab tests. However, the role of supplier is much important in decision process for construction products. In absence of complete knowledge, the builders and end-users rely, to much extent, on the information and the products supplied by the producers and suppliers. 83. In case of bricks, architects and builders know about the specification like dimension, uniformity, color, water absorbency and PSI, etc. The architects believe that the attributes of a good brick are as under:



MARKET STUDY

5.20

Attribute Benefits Testing method Red color Shows good quality of clay and right baking Observation Accurate dimensions, no broken edges and no de-shaping

Ensures good finish to walls and controlled quantity of mortar for masonry/plaster

Observation, manual measurement

No extra baking Brittleness makes masonry difficult Observation of shape and color, striking sound

No under baking Softness reduces durability Observation of shape and color, striking sound

Right strength / PSI Ensures load-bearing and overall durability (PSI should be in the range of 2000-3000)

Striking/breaking, PSI lab test

Water absorbency Ensures good quality of bricks (A brick should absorb water equal to 20% of its weight)

Manual water test

Source: Builders/architects/dealers 84. All these factors are judged by them through observation or manual tests like sound test, striking and breaking. There’s no general practice of lab test in case of bricks. However, some projects require lab test for measuring strength. In such case Pound per Inch (PSI) is conducted through UTS (Ultimate Tensile Strength) machine that is available at PCSIR, PSQC/PITAC, Engineering universities and some private sector metal or ceramic industries. However, the widespread practice is just manual tests like observation, striking, sound testing, etc. The builders and masons are experienced enough to judge the quality of bricks through this practice. 85. Only a few brick producers have their printed material and websites that includes company profile and product catalogue. Such material contains only the images and dimension of products, while other specifications are not printed there. Such producers include Niazi Bricks, Butt Brothers and Shabbir Enterprises. Source: Builders/architects/dealers Government Agencies 86. The government bodies related to housing and construction include:

• Ministry of Housing • Works Department • Pakistan Housing Authority • City Development Authorities (CDA, KDA, LDA, RDA, FDA, etc.) • Karachi Building Control Authority (KBCA) • House Building Finance Corporation

Source: Secondary sources/ market information



MARKET STUDY

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Major Builders & Developers 87. The real estate boom during 2004 to 2007 attracted a good number of builders and developers from international market. These developers launched mega projects like Creek Marina (Karachi), Creek Vistas (Karachi), Crescent Bay (Karachi), Zaid Centre (Lahore), Pace Circle (Lahore), Sports City (Lahore), Gold Crest (Islamabad) and Centaurus (Islamabad), etc. The international builders & developers that are engaged in real estate projects in the country are: International Builders/Developers

• Abu Dhabi Group (UAE) • Al-Ghurair Giga Pakistan (Pvt.) Ltd. (UAE) • Al-Tamimi Group (UAE) • Bukhatir Group (UAE) • Creek Marina (Pvt.) Ltd. (Singapore) • Crescent Standard Group (Singapore) • Emaar Pakistan (UAE) • Barka Group

88. A number of prestigious projects have also been launched and completed by domestic developers. The major players in different cities are listed below: Domestic Builders/Developers in Karachi

• Amberco (Pvt.) Ltd. • Associated Constructors Ltd. • Builders & Developers (Pvt.) Ltd. • Chapal Builders (Pvt.) Ltd. • Defence Housing Authorities (DHA) • Fine Arch Builders & Developers • Kawish Builders & Real Estate • Kingcrete Builders (Pvt.) Ltd. • Lakhani Builders Ltd. • Orient Group of Companies • Pak Gulf Construction Ltd. • Rabi Builders Ltd. • Rufi Builders & Developers • Saima Developers (Pvt.) Ltd. • Sasi Real Estate (Pvt.) Ltd. • Taloo Builders & Developers • Zohra Builders Ltd.



MARKET STUDY

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Domestic Builders/Developers in Lahore • Abid Group • Ahad Developers Ltd. • Alamgir Developers Ltd. • Bahria Developers • Defence Housing Authority (DHA) • Eden Developers • Lake City Holding • Pace Properties Ltd. • Rafi Group • Tricon Developers • Urban Builders & Developers

Domestic Builders/Developers in Islamabad • Bahria Developers Ltd. • Defence Housing Authority (DHA) • Sam Builders Ltd. • Sardar Builders (Pvt.) Ltd. • SunCity Pakistan (Pvt.) Ltd

Source: Secondary sources/ market information Major architects & consultants International Consultants

• Areaa Construction (Turkey) • Chan Tse Ann (Singapore) • China State Construction Engineering Corporation (CSCEC) • GOCG (China) • Halcrow Group Limited (UK) • Hirche Bedner (USA) • IVCC Bachy (UK) • Kaston Singapore • Meinhardt (Singapore) • TAK Management (Malaysia) • WS Atkins Plc. (UK)



MARKET STUDY

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Domestic Consultants • Associated Contractors Ltd. • Builders Associates Ltd. • Habib Rafiq (Pvt.) Ltd. • Tammar Associates (Pvt.) Ltd. • Supercon (Pvt.) Ltd.

Source: Secondary sources/ market information TRADE ASSOCIATIONS 89. Association of Builders and Developers (ABAD) is the central representative body of Pakistani builders & developers. 90. All Pakistan Brick Kilns Association (APBKA) represents the nationwide brick producers, while provincial, regional and district associations/unions also exist in bricks sector. Source: Secondary sources/ market information NGOs 91. A number of international agencies and NGOs have been reported to be engaged in rehabilitation and reconstruction activities in Pakistan. Such bodies include UNHCR, USAID, Agha Khan Foundation, Human Development Organization, Al-Khidmat, Khidmat-e-Khalq Foundation and Azad Kashmir Fund for Earthquake Relief. Source: Secondary sources/ market information ENVIRONMENT AGENCIES 92. Pakistan Environment Protection Agency (Pak-EPA) is the chief regulatory authority on environment in the country. Source: Secondary sources/ market information RECOMMENDATIONS 93. The present concern of brick producers, builders, architects/engineers, end-users and general public towards environment is quite low. They don’t consider brick industry as a large pollutant as kilns mostly exist away from urban population, while peri-urban and rural population is also not so affected because of very high chimneys of these units. They report that other pollutants like road transport, railways, chemical factories, cement factories, crushers, open drains and solid waste pose rather serious threat to environment and human health. If the people are less conscious about these larger sources of pollution, brick kilns don’t comes under any of



MARKET STUDY

5.24

their concerns. The builder and architects/engineers think that environment friendliness might be an important aspect in decision of brick selection, but it will not impact the decision process so seriously as the bricks used in Pakistan are harmless to health, no matter these are produced in a pollution generating unit. Hence, EEBP will need to launch a campaign to generate awareness among regulatory agencies, builders/architects, end users and general public. In this way, awareness programs can be launched in collaboration with Pakistan Environment Protection Agency.

94. Cost effectiveness of VSBK should be chiefly highlighted as the increasing cost of fuel, labor transport has reduced the profit margins of brick producers and many of them have been severely affected by this. The main focus of the marketing VSBKs should be cost, and not the environment friendliness.

95. The control on production volume at VSBK through multiple shafts is another advantage that can appeal the existing kiln owners and new entrepreneurs. In conventional kilns, the owner is bound to carry on with its full production no matter the market demand and cash-flow situation allows it or not. Hence, the kilns are to be run even during market recession and so bricks be sold on lower rates that cause losses to the owners. The kiln owners have no choice of controlling the volume of brick production. On the other hand, the VSBK owners will be able to control the production volume by running or closing any shaft of the kiln. This aspect is also recommended to be highlighted. 96. More pilot VSBKs should also be developed in other areas like Lahore, Sialkot, Sargodha and Faisalabad. The clusters of kilns in these areas will be able to observe the VSBK technology once it is in operation near them. In this connection, PR should be developed with the opinion leaders of this industry (i.e. union office bearers).

97. As VSBKs require a large investment, some partnership with government agencies or banks should be developed to ensure easy and economical access towards financing options for entrepreneurs. In this connection, Small & Medium Enterprise Development Authority (SMEDA) can be of much help. 98. Further to this desk research, quantitative and qualitative surveys are suggested for in-depth analysis of production and consumption patterns in the country. In such surveys, concepts should be properly tested through detailed concept cards and demonstrations.

THE PROJECT

(SECTION – 6)


MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTAN THE PROJECT

6.1

INTRODUCTION 01. Energy Efficient Brick Production Project (EEBP) has been mandated by the Swiss Agency for Development and Cooperation (SDC) to carry out a technology transfer project in Pakistan with the aim to pilot and demonstrate environment-friendly construction materials and technologies in particular the introduction of Vertical Shaft Brick Kiln Technology (VSBK). The technology is a brick manufacturing system, originating in China which has been further developed in India with the participation of Skat and which is a far more energy-efficient and environment-friendly than most of the traditional systems, hence reducing air pollution in urban areas. SDC has provided financial assistance to execute EEBP project in Pakistan with the aim to support investing entrepreneurs in design, construction and operation of modern brick production units. PROJECT CONCEPT 02. Conventional burnt clay bricks will continue to be the main walling material for meeting the huge demand for housing in the foreseeable future; not withstanding substantial efforts to develop alternatives. Current technologies for brick production such as clamps, downdraught kilns and Bull’s Trench Kilns consume large quantities of fuel such as coal, firewood and other biomass. The devastating effect of the pollution caused by huge amount of emissions from the brick industry has attracted the attention of worldwide regulatory agencies who have issued deadlines after which the polluting kilns are to" clean up or close down". 03. Vertical Shaft Brick Kiln (VSBK) technology is an energy efficient, environment friendly and economically viable technology for firing clay bricks. Combining the simplicity and low cost of updraft firing with very impressive fuel economy, plus the benefits of continuous operation. Its operation is very similar to that of a vertical shaft lime kiln, with coal and bricks being loaded at the top, and fired bricks combined with a small amount of ash being unloaded at the bottom. POSSIBLE BUSINESS MODELS 04. The project can be operated by the prospective investor(s) with various combinations of following possible options each having their own financial results:

SOIL RESERVES

LAND NO. OF SHAFTS

TYPE OF COMBUSTION

TYPE OF PROCESSING

Owned or Leased or Purchase from

supplier

Leased or Owned

2 or 4 or 6 External fuel or Internal fuel

Manual or Mechanized



6.2

• The investor has the option either to purchase or obtain land for soil reserves on lease or purchase soil from supplier on as and when required basis

• The investor has the option either to purchase or obtain land for buildings on lease

• VSBK technology can be operated with 2, 4 or 6 number of shafts

• There are two methods of combustion of coal i.e. external fuel combustion and internal

fuel combustion. In internal fuel combustion and external fuel combustion consumption and wastage ratio of coal during the process of the baking of green brick is as under:

DESCRIPTION INTERNAL FUEL COMBUSTION

EXTERNAL FUEL COMBUSTION

Coal consumption in gms / brick 130 160 Wastage of coal (%) 3 60

• Green bricks can be molded either through manual processing with the use of molds

which is labor intensive or through mechanized processing with the use of extruder PROPOSED BUSINESS MODEL 05. The proposed project will be operated by the prospective investor(s) using 4 VSBK shafts with the manual process of the molding of green bricks through molds and internal fuel combustion of coal. The prospective investor will obtain land for soil reserves and buildings on lease. PROJECT IMPLEMENTATION 06. The timelines for the completion of project is 6 months. PROPOSED SITE PLAN 07. Proposed site plan suggested by the technical consultant is given below:



6.3



6.4

THE PROJECT COST AND SOURCE OF FINANCE 08. The project cost and source of finance of the proposed 4 VSBK shafts project is given below:

PROJECT COST

Leasehold Land - Buildings 8.38 Plant and machinery 1.47 Furniture, and office equipment 0.10 Electrical equipment 0.52 Vehicles 2.00 Pre-operating expenses 0.25 Contingencies 0.64

13.35

Initial working capital 1.15

Total 14.50

SOURCE OF FINANCE

Sponsor’s equity 14.50 Debt - Total 14.50

RUPEES IN MILLION

LEASEHOLD LAND 09. The total area of land required for the proposed 4 VSBK shafts project will be 106 kanals. Land will be obtained on lease rental of Rupees 2,000 per kanal per annum. 10. This land will include soil reserves, area for green bricks molding, storage area of green and red bricks, area required for the construction of buildings for 4 VSBK shafts, residential quarters and office. Details are given below:

LAND AREA REQUIRED kanal Soil reserves 40 Green bricks field and storage area 60 4 VSBK shafts 4 Residential quarters and office 2 Total 106



6.5

11. Land required for soil reserves having an area of 40 kanals will be obtained on lease rental of Rupees 2,000 per kanal per annum. 12. Land required for the drying of green bricks and its storage having an area of 60 kanals will be obtained on lease rental of Rupees 2,000 per kanal per annum. 13. Based on the design proposed by the technical consultant 4 VSBK shafts will be constructed on an area of 4 kanals. Land will be obtained on lease rental of Rupees 2,000 per kanal per annum. 14. Residential quarters for the staff members and molders and an office will be constructed on an area of 2 kanals. Land will be obtained on lease rental of Rupees 2,000 per kanal per annum. It will include 34 residential quarters each of an area of 250 sq. ft. and one office of 500 sq. ft. BUILDINGS 15. Based on the design proposed by the technical consultant, total covered area of buildings will be 27,000 sq. ft. having total construction cost of Rupees 8.38 million. This will include construction cost of 4 VSBK shafts, 34 residential quarters and an office. Details of covered area, rate of construction and total cost are given below:

BUILDINGS COVERED AREA

RATE OF CONSTRUCTION COST

Sq. ft Rupees per sq. ft. Rupees in million4 VSBK shafts 18,000 - 4.20 Residential quarters 8,500 450 3.83 Office 500 700 0.35 Total 27,000 - 8.38

16. The area required for the construction of 4 VSBK shafts is 18,000 sq. ft. having total construction cost of Rupees 4.20 million. 17. For proposed 4 VSBK shafts project, 34 residential quarters for 42 staff members and 25 molders each having a covered area of 250 sq. ft. with construction cost of Rupees 450 per sq. ft. and one office having a covered area of 500 sq. ft. with construction cost of Rupees 700 per sq. ft. will be constructed having total construction cost of Rupees 4.18 million. PLANT AND MACHINERY 18. Based on the information provided by the technical consultant, plant and machinery of Rupees 1.47 million will be purchased for proposed 4 VSBK shafts project.



6.6

19. Quantity and rate wise details of plant and machinery are given below:

DESCRIPTION COST PER UNIT RUPEES QUANTITY RUPEES

Pug mill 250,000 2 500,000Unloading mechanism 125,000 4 500,000Wheel barrows 2,000 40 80,000Water pump 200,000 1 200,000Stainer 2,000 20 40,000Coal crusher 75,000 2 150,000Total 1,470,000

FURNITURE AND OFFICE EQUIPMENT

20. Furniture and office equipment of Rupees 0.10 million will be procured for the project. It will include tables, chairs and cupboards etc.

ELECTRICAL EQUIPMENT 21. Electrical equipment of Rupees 0.52 million will be purchased for the proposed 4 VSBK shafts project. It will include thermocouples, temperature indicators and UPS. VEHICLES 22. Vehicles of Rupees 2.0 million will be procured for the proposed 4 VSBK shafts project. It will include tractor, trolley and water tanker. PRE-OPERATING EXPENSES 23. Pre-operating expenses will be 2% of the total project cost. Pre-operating expenses will be capitalized in the ratio given in accompanying table:

Table – 1 CLASS OF ASSETS PERCENTAGE

Buildings 75% Plant and machinery 25%

CONTINGENCIES 24. Contingencies will be 5% of the total project cost including pre-operating expenses. Contingencies will be capitalized in the ratio given in Table - 1. SOURCE OF FINANCE 25. We have assumed that proposed 4 VSBK shafts project will be financed through equity. Equity will be injected and assets will be constructed and procured during the construction phase of the project.



6.7

BRICK PRODUCTION CAPACITY 26. Keeping in view available technology of proposed 4 VSBK shafts project, we have proposed following rated and actual capacity of red bricks:

Rated Capacity - No. of bricks per day 15,200 Operational efficiency (%) 100%Operational day s 354 Total production - No. of bricks per annum 5,380,800 Wastage of bricks (5%) 269,040 Actual production - No. of bricks per annum 5,111,760

27. The production of green bricks can be only possible in 210 days of the year because of rainy and humid season in rest of the year. However, baking of green bricks will be done during the whole year. ORGANIZATION AND MANAGEMENT 28. The project will be established by private party (wholly owned by private sector) as a corporate entity established under the provision of Companies Ordinance, 1984. 29. The proposed management structure of the project is given in Annex “P-1” PROJECT STAFF 30. Number of staff members, their qualification and their monthly salaries required for proposed 4 VSBK shafts project is summarized in the accompanying table:

Number of person

Description Qualification Per shift

No. of shifts Total

Salary per month Total

Rupees Rupees Kiln Manager Intermediate - - 1 15,000 15,000Fire Master Intermediate 1 2 2 11,000 22,000Fire Men Matric 6 3 18 9,000 162,000Supervisor (Green bricks)

Matric / Intermediate - - 2 10,000 20,000

Drivers - - - 2 7,500 15,000Coal crusher operators - - - 4 7,500 30,000Pug mill operators - - - 8 7,500 60,000Coal mixer - - - 5 7,500 37,500 42 361,500 31. Manual processing will be opted for the molding of green bricks. 25 molders will be hired for this purpose. Molders will be paid on the basis of number of green bricks molded i.e. Rupees 350 per thousand bricks.

ANNEX "P-1"

Fire men

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANPROPOSED MANAGEMENT STRUCTURE

Kiln ManagerSupervisor - Green bricks

Drivers Molders Fire master

Board of Directors

FINANCIAL ANALYSIS

(SECTION – 7)


MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTAN FINANCIAL ANALYSIS

7.1

ASSUMPTIONS USED IN THE FINANCIAL PROJECTIONS 01. We have prepared the projected Balance sheet (Annex FP-B), projected Profit and loss (Annex FP-C) and Cash flow statement (Annex FP-D) based on site visits, information / data provided to us by Energy Efficient Brick Production Project (EEBP) (technical consultant), Messrs AC Nielsen (marketing consultant) and publicly available market information. PROJECT IMPLEMENTATION 02. The timelines for the completion of the project is six months. THE PROJECT COST AND SOURCE OF FINANCE 03. The project cost and source of finance of the proposed 4 VSBK shafts project is given below:

PROJECT COST

Leasehold Land - Buildings 8.38 Plant and machinery 1.47 Furniture, and office equipment 0.10 Electrical equipment 0.52 Vehicles 2.00 Pre-operating expenses 0.25 Contingencies 0.64

13.35

Initial working capital 1.15

Total 14.50

SOURCE OF FINANCE

Sponsor’s equity 14.50 Debt - Total 14.50

RUPEES IN MILLION

04. Details regarding each head of the project cost have been given in Section “6” of this report.



7.2

Leasehold Land 05. The total area of land required for the proposed 4 VSBK shafts project will be 106 kanals. Land will be obtained on lease rental of Rupees 2,000 per kanal per annum. This will include soil reserves, field for green bricks production, storage house of green and red bricks, shafts of VSBK. Details regarding the area and cost of the land of the project are given in Section “6” of this report. Buildings 06. Based on the information provided by technical consultant, we have assumed that total covered area of buildings will be 27,000 sq. ft. having total construction cost of Rupees 8.38 million. This will include construction cost of 4 VSBK shafts, 34 residential quarters and an office. Details regarding the covered area of buildings along with construction cost per sq. ft. are given in Section “6” of this report. Plant and Machinery 07. We have assumed that plant and machinery of Rupees 1.47 million will be purchased for proposed 4 VSBK shafts project. Quantity and rate wise details of plant and machinery are given in Section “6” of this report. Furniture and Office equipment 08. We have assumed that furniture and office equipment of Rupees 0.10 million will be procured for the project. Electrical equipment 09. We have assumed that electrical equipment of Rupees 0.52 million will be purchased for the proposed 4 VSBK shafts project. Vehicles 10. We have assumed that vehicles of Rupees 2 million will be procured for the proposed 4 VSBK shafts project. Pre-operating expenses 11. We have assumed that pre-operating expenses will be 2% of the total project cost. Pre-operating expenses will be capitalized in the ratio given in accompanying table:

Table – 1 CLASS OF ASSETS PERCENTAGE

Buildings 75% Plant and machinery 25%



7.3

Contingencies 12. We have assumed that contingencies will be 5% of the total project cost including pre-operating expenses. Contingencies will be capitalized in the ratio given in Table - 1. Source of finance 13. We have assumed that proposed 4 VSBK shafts project will be financed through equity. Equity will be injected and assets will be constructed and procured during the construction phase of the project which is 6 months. CAPACITY UTILIZATION Brick production capacity 14. Keeping in view available technology of proposed 4 VSBK shafts project, we have proposed following rated and actual capacity of red bricks:

Rated Capacity - No. of bricks per day 15,200 Operational efficiency (%) 100%Operational day s 354 Total production - No. of bricks per annum 5,380,800 Wastage of bricks (5%) 269,040 Actual production - No. of bricks per annum 5,111,760

STORES AND SPARES 15. We have assumed that stores and spares will be 2.50% of opening cost of plant and machinery. 30 tonnes of stock of coal will be maintained at the end of each projected financial year. TRADE DEBTS 16. We have assumed 15 debtors days for collection of revenue of red bricks from the customers. ADVANCES AND OTHER RECEIVABLES 17. We have assumed that advances and other receivables will be 2.50% of total expenditure excluding depreciation at the end of each projected financial year. TRADE AND OTHER PAYABLES 18. Creditor days are assumed to be 15 for the payments to suppliers.



7.4

REVENUE 19. Based on market study and prevailing rates, we have assumed that selling price per thousand bricks will be Rupees 3,500. 20. Selling price will increase at the rate of 8 percent in each projected financial year. COST OF SALES SALARIES AND WAGES 21. Number of staff members and their monthly salaries has been assumed as given in Section “6” of this report. 22. Salaries and wages will increase at the rate of 10 percent per annum for subsequent years. MOLDERS EXPENSES 23. Manual processing will be opted for the molding of green bricks. 25 molders will be hired for this purpose. Molders will be paid on the basis of number of green bricks molded i.e. Rupees 350 per thousand bricks. It is only possible in 210 days because of rainy and humid season in remaining part of year 24. This rate will increase at 5 percent per annum. RAW MATERIAL 25. Soil is the major raw material used in the production of green bricks. A mixture of soil and water is prepared and then coal powder is added into it, if the method of combustion is internal fuel. Coal crusher is used for the crushing of coal into coal powder. This mixture is then further mixed in pug mill for the purpose of homogenization. Sand is used as a releasing agent. 26. We have assumed that soil will be obtained from soil reserves and sand will be purchased from the supplier. Cost of different components of the raw material are as follows:

Rupees Rupees

Sand 100 538,080 Water 100 538,080

DESCRIPTION COSTRATE PER 1000

BRICKS

27. Rates will increase at the rate of 10 percent per annum.



7.5

COAL COMBUSTION 28. Rate of coal is assumed to be Rupees 6,000 per tonne. Consumption and wastage ratio of coal during the process of the baking of green brick in VSBK is as under:

Coal consumption in gms / brick 130 Wastage of coal (%) 3%Wastage of coal in gms / brick 3.9 Coal consumption including wastage in gms / brick 133.90 Cost of coal including wastage (Rupees per bricks) 0.80

29. Coal prices will increase at the rate of 7 percent per annum. DEPRECIATION 30. Depreciation on fixed assets will be charged at the straight line method on the cost of the assets using following rates:

DESCRIPTION DEPRECIATION RATE % Land - Buildings 5 Plant and machinery 20 Furniture and office equipment 10 Electric equipment 10 Vehicles 15

31. Additions and write-off of cost and accumulated depreciation of fixed assets will be made when the book value of the asset is equal to nil value. OTHER COSTS 32. Other cost incurred for the production of bricks will include following:

DESCRIPTION RUPEES

Leased rentals (Rupees 2,000 per kanal per annum) 212,000 Transportation cost (Rupees 75 per thousand bricks) 403,560 Consumables per annum 300,000 Spades, Buckets and others 140,000 Repair & maintenance per annum (8% of of cost of plant and machinery ) 135,300 Electricity expenses per annum 720,000 Diesel per annum 360,000 Other expenses per annum 240,000 Molds 27,000 Excavator (Hired) Rental (Rupees 0.13 per brick) 699,504



7.6

33. Transportation cost of Rupees 75 per thousand bricks includes carriage of green bricks from the field to the kiln and the storage house and of red bricks to the storage house paid to the contractor. 34. Consumables include tongs, crow bars, C-channels, mask, glasses and helmets etc. 35. We have assumed that expenses will increase at the rate of 10 percent per annum. OTHER INCOME 36. Other income includes sale of damaged bricks and sub-standard coal which is not useable. 37. Damaged bricks will be sold at the rate of Rupees 2,000 per trolley. We have assumed that one trolley will be equivalent to the wastage of 10 days production. 38. Coal of standard size and quality is required for the baking process for the red bricks. Sub-standard coal will be sold at the rate of Rupees 1,500 per tonne. 39. Selling prices of damaged bricks and sub-standard coal will increase at 8 percent per annum. DIVIDEND 40. We have assumed that rate of dividend per share paid to the shareholders will be as below:

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10- - 15% 15% 15% 15% 15% 15% 20% 20%

TAXATION 41. We have calculated the income tax liability in accordance with the provisions of Income Tax Ordinance, 2001.



7.7

ANALYSIS OF FINANCIAL STATEMENTS 42. Based on the results of the financial projections brief findings are as under:

• Revenue, profit before tax and profit after tax will be as under:

YEARS REVENUE PROFIT BEFORE TAX PROFIT AFTER TAX

1,000,000 Year 1* 9.00 0.87 0.83Year 2 19.43 2.19 2.10Year 3 20.99 2.41 2.36Year 4 22.67 2.63 2.00Year 5 24.48 2.86 2.17Year 6 26.44 3.09 2.50Year 7 28.55 3.33 2.50Year 8 30.84 3.51 2.69Year 9 33.30 3.79 2.91Year 10 35.97 4.01 3.07

-------------------- RUPEES IN MILLION --------------------


FINANCIAL ANALYSIS

05

10152025303540

Year 1* Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10YEARS

Rup

ees i

n M

illio

n

REVENUE PROFIT BEFORE TAX PROFIT AFTER TAX



7.8

• Investor’s ratios i.e. Profit before tax, Profit after tax, Return on equity, Return on assets, Earning per share and Break up value per share will be as under:

YEARSPROFIT BEFORE

TAX

PROFIT AFTER

TAX

RETURN ON

EQUITY

RETURN ON

ASSETS

EARNING PER

SHARE

BREAK UP VALUE PER

SHARE

Year 1* 9.68 9.18 5.39 5.28 0.57 10.57Year 2 11.28 10.78 12.03 11.58 1.44 12.01Year 3 11.49 11.23 13.39 12.86 1.63 12.14Year 4 11.62 8.82 11.47 10.98 1.38 12.02Year 5 11.69 8.86 12.45 11.87 1.50 12.02Year 6 11.70 9.44 14.07 13.37 1.72 12.24Year 7 11.65 8.77 13.85 13.13 1.73 12.47Year 8 11.38 8.73 14.48 13.68 1.86 12.82Year 9 11.38 8.73 15.64 14.70 2.01 12.83Year 10 11.16 8.55 16.38 15.33 2.12 12.95

-------- RUPEES --------------------------------- (%) -------------------------


FINANCIAL ANALYSIS

02468

1012141618

Year 1* Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10YEARS

%

PROFIT BEFORE TAX PROFIT AFTER TAX RETURN ON EQUITY RETURN ON ASSETS



7.9

FINANCIAL ANALYSIS

0

2

4

6

8

10

12

14

Year 1* Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

YEARS

Rup

ees

EARNING PER SHARE BREAK UP VALUE PER SHARE

CONCLUSION 43. In view of current market prices and the financial results, the project is economically viable. The financial projections reveal healthy and bright prospects of the project.

ANNEX FP-A

MAIN ASSUMPTIONS SHEET - SCENARIO

1. TECHNOLOGY VSBK2. SOIL RESERVES Leased Land Rupees3. LAND Leased Soil Reserves 40 kanals - - Land 100%4. NO. OF SHAFTS 4 Green bricks field and storage 60 kanals - Rupees per kanal - Buildings 100%5. FUEL COMBUSTION Internal Fuel VSBK shafts 4 kanals - Rupees per kanal - Plant and machinery 100%6. MOLDING Manual Residential quarters and office 2.00 kanals - Rupees per kanal - Furniture and office equipment 100%

106 - Electrical equipment 100%Buildings Vehicles 100%Kiln construction 4 kanals 2,100,000 Rupees per 2 shafts 4,200,000 Residential quarters 34 quarters 250 sq.ft per quarter 450 Rupees per sq.ft 3,825,000

Balance Sheet Office 1 office 500 sq.ft per quarter 700 Rupees per sq.ft 350,000 Profit and Loss statement 27000 8,375,000 Cash Flow statement Plant and machineryOperating Fixed Assets Pug Mill 2 Nos. 250,000 Rupees per unit 500,000 Stores and spares Unloading mechanism 4 Nos. 125,000 Rupees per unit 500,000 Buildings 75%Stock-in-trade Wheel barrows 40 Nos. 2,000 Rupees per unit 80,000 Plant and machinery 25%Trade debts Water pump 1 Nos. 200,000 Rupees per unit 200,000 Advances and other receivables Stainer 20 Nos. 2,000 Rupees per unit 40,000 Long term loans Coal crusher 2 Nos. 75,000 Rupees per unit 150,000 Trade and other payables - Nos. - Rupees per unit -

1,470,000 Furniture and office equipment 100,000 Land 0%Electrical equipment 520,000 Buildings 5%Vehicles 2,000,000 Plant and machinery 20%Pre-operating expenses 2% percentage of total cost 249,300 Furniture and office equipment 10%

Injection in Contingencies 5% percentage of total cost including pre-operating expenses 635,715 Electrical equipment 10%1 Year 100% Total Cost 13,350,015 Vehicles 15%2 Year 0% Initial Working Capital 1,149,985 3 Year 0% Total Project Cost 14,500,000

Sources Of FinancingRepayment in half yearly installments Debt -

Equity 14,500,000 Debt 0%No. of installments 10 Total 14,500,000 Equity 100%

6 MONTHS

DEBT TO EQUITY RATIO

DEPRECIATION RATES USING STRAIGHT LINE BASIS

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANMAIN ASSUMPTIONS SHEET - SCENARIO VSBK

TIMELINES

CAPITAL EXPENDITURE ASSUMPTIONS

PROJECT COST AND SOURCE OF FINANCING

PROJECT SCENARIOS(Highlighted fields can be changed)

SHEETS LINKS

EQUITY / DEBT INJECTION RATIO & REPAYMENT SCHEDULE

CAPITALIZATION OF PRE-OPERATING EXPENSES AND

CONTINGENCIES

Page 1 of 3

ANNEX FP-AMODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANMAIN ASSUMPTIONS SHEET - SCENARIO VSBK

Rated Capacity - No. of bricks produced per day 7,600 per 2 shafts 15,200 % of opening cost of plant & machinery 2.50%Operational efficiency 100% Coal Stock tonnes 30Operational days per annum 354 Total production - No. of bricks produced per annum 5,380,800 Wastage of bricks - No. of bricks per annum 5% 269,040

Actual production - No. of bricks per annum 5,111,760 Stock days 30

Sale price of bricks Rupees 3,500 per 1000 Bricks Debtors days 15

Salaries and wages No. of persons Salary per monthRupees Rupees As a percentage of total expenditure excluding depreciation 2.5%

Kiln Manager 1 15,000 15,000 Advance per molde Rupees - Fire Master 2 one person per shift (2 shifts) 11,000 22,000 Fire Men 18 9,000 162,000 Supervisor (Green bricks) 2 10,000 20,000 Drivers 2 7,500 15,000

Creditors days 15

Benefits to the staff 0% of the salary - Total 42 60,000 361,500

Fixed assets 0%Molders 25 350 Rupees per 1000 bricks 1,883,280 Revenue 8%

Staff cost 10%Raw material Expenses of molders 5%

Rupees - Cost of coal 7%Sand Rupees 538,080 per annum Expenses 10%Water Rupees 538,080 per annum

ADVANCES AND OTHER RECEIVABLES

TRADE AND OTHER PAYABLES

127,500

COST OF SALES

TRADE DEBTS REVENUE

STOCK-IN-TRADE

STORES AND SPARES

GENERAL ASSUMPTIONS

PRODUCTION

7,500 Coal crusher and Pugmill operators and coal mixer

4 Coal crusher, 8 Pugmill operators and 5 coal mixer17

RATE OF INFLATION

Page 2 of 3

ANNEX FP-AMODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANMAIN ASSUMPTIONS SHEET - SCENARIO VSBK

Cost of Coal Rupees 6,000 per tonne Interest rate - six months kibor plus 2.50% 15%Internal Fuel 2.50%Coal consumption (gms per bricks) 130 Coal consumption including wastage (tonne per 1,000 bricks) 0.134 Rupees 804 cost of coal per 1,000 bricksWastage of coal 3% 0.004 tonne per 1,000 bricks

Wastage of bricks Rupees per trolley 2,000 Leased rentals Rupees 212,000 per annum 10 days of wastage of production is equal to a trolley

No. of trolleys per annum 35 Transportation cost (Green and Red bricks) Rupees 403,560 per annum Wastage of coal Rupees per tonne 1,500

Consumables Rupees 300,000 per annum

Spades, Buckets and others Rupees 140,000 per annumTurnover tax 0.50%

Repair & maintenance Rupees 135,300 per annum Normal tax 20%

Electricity expenses Rupees 720,000 per annumRate of dividend per share

Diesel Rupees 360,000 per annum Year 1 0%Year 2 0%

Other expenses Rupees 240,000 per annum Year 3 15%Year 4 15%

Molds Rupees 27,000 per annum Year 5 15%Year 6 15%

Excavator (Hired) Rental Rupees 699,504 per annum Year 7 15%Year 8 15%

Technical expertise / training cost Rupees - per annum Year 9 20%Year 10 20%

OTHER INCOME

GENERAL ASSUMPTIONS

RATE OF INTERESTCOST OF SALES

DIVIDEND

RATE OF TAXATION

Page 3 of 3

ANNEX FP-B

Annex Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

NON CURRENT ASSETS

Operating fixed assets FP B-2 12,773,921 11,621,732 10,469,543 9,317,354 8,165,165 8,704,230 7,552,041 8,349,853 7,197,664 6,045,475

CURRENT ASSETS

Stores, spares and loose tools FP B-3 180,000 240,281 260,081 281,861 305,819 332,173 361,162 393,050 428,127 466,712 Stock-in-trade 677,173 718,357 774,039 834,678 900,732 972,700 1,051,130 1,138,705 1,229,831 1,331,478 Trade debts 374,863 809,705 874,481 944,440 1,019,995 1,101,595 1,189,722 1,284,900 1,387,692 1,498,707 Advances and other receivables FP B-4 188,750 402,210 435,619 472,002 511,634 554,815 601,873 653,168 709,094 770,082 Cash and bank balances 1,445,536 4,298,907 5,515,254 6,366,259 7,373,227 7,005,037 8,322,267 7,860,551 8,829,951 9,946,029

2,866,323 6,469,460 7,859,475 8,899,241 10,111,408 9,966,320 11,526,154 11,330,374 12,584,696 14,013,008

Total Assets 15,640,243 18,091,192 18,329,018 18,216,595 18,276,573 18,670,550 19,078,195 19,680,226 19,782,360 20,058,483

CURRENT LIABILITIES

Current Maturity of Long term loan - - - - - - - - - - Trade and other payables FP B-5 314,583 670,349 726,031 786,670 852,724 924,692 1,003,122 1,088,613 1,181,823 1,283,470

314,583 670,349 726,031 786,670 852,724 924,692 1,003,122 1,088,613 1,181,823 1,283,470

WORKING CAPITAL 2,551,740 5,799,110 7,133,444 8,112,570 9,258,684 9,041,628 10,523,032 10,241,760 11,402,873 12,729,538

TOTAL CAPITAL EMPLOYED 15,325,661 17,420,842 17,602,987 17,429,925 17,423,849 17,745,858 18,075,074 18,591,613 18,600,536 18,775,013

LONG TERM LOAN - - - - - - - - - -

NET CAPITAL EMPLOYED 15,325,661 17,420,842 17,602,987 17,429,925 17,423,849 17,745,858 18,075,074 18,591,613 18,600,536 18,775,013

REPRESENTED BY:

Equity FP A 14,500,000 14,500,000 14,500,000 14,500,000 14,500,000 14,500,000 14,500,000 14,500,000 14,500,000 14,500,000 Accumulated Profit FP C-1 825,661 2,920,842 3,102,987 2,929,925 2,923,849 3,245,858 3,575,074 4,091,613 4,100,536 4,275,013

15,325,661 17,420,842 17,602,987 17,429,925 17,423,849 17,745,858 18,075,074 18,591,613 18,600,536 18,775,013

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANPROJECTED BALANCE SHEET

ANNEX FP-C

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

SALESBricks 8,945,580 19,322,453 20,868,249 22,537,709 24,340,726 26,287,984 28,391,022 30,662,304 33,115,289 35,764,512 Wastage of bricks 35,000 75,600 81,648 88,180 95,234 102,853 111,081 119,968 129,565 139,930 Wastage of coal 16,142 34,868 37,657 40,670 43,923 47,437 51,232 55,330 59,757 64,537

8,996,722 19,432,920 20,987,554 22,666,558 24,479,883 26,438,274 28,553,336 30,837,602 33,304,611 35,968,979

COST OF SALESSalaries and wages 2,169,000 4,771,800 5,248,980 5,773,878 6,351,266 6,986,393 7,685,032 8,453,535 9,298,889 10,228,778 Expenses of molders 941,640 1,977,444 2,076,316 2,180,132 2,289,139 2,403,596 2,523,776 2,649,965 2,782,463 2,921,586 Raw material

Sand 269,040 591,888 651,077 716,184 787,803 866,583 953,242 1,048,566 1,153,422 1,268,764 Water 269,040 591,888 651,077 716,184 787,803 866,583 953,242 1,048,566 1,153,422 1,268,764

Leased rentals 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 Cost of Coal 2,163,082 4,628,995 4,953,024 5,299,736 5,670,717 6,067,668 6,492,404 6,946,873 7,433,154 7,953,475 Transportation cost (Green and Red bricks) 201,780 443,916 488,308 537,138 590,852 649,937 714,931 786,424 865,067 951,573 Consumables 150,000 330,000 363,000 399,300 439,230 483,153 531,468 584,615 643,077 707,384 Spades, Buckets and others 70,000 154,000 169,400 186,340 204,974 225,471 248,019 272,820 300,102 330,113 Repair & maintenance 67,650 135,300 135,300 135,300 135,300 135,300 135,300 135,300 135,300 135,300 Electricity expenses 360,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722 Diesel 180,000 396,000 435,600 479,160 527,076 579,784 637,762 701,538 771,692 848,861 Other expenses 120,000 264,000 290,400 319,440 351,384 386,522 425,175 467,692 514,461 565,907 Depreciation 576,094 1,152,189 1,152,189 1,152,189 1,152,189 1,152,189 1,152,189 1,202,189 1,152,189 1,152,189 Molds 27,000 29,700 32,670 35,937 39,531 43,484 47,832 52,615 57,877 63,665 Excavator (Hired) Rental 349,752 769,454 846,400 931,040 1,024,144 1,126,558 1,239,214 1,363,135 1,499,449 1,649,394 Technical expertise / training cost - - - - - - - - - - Mark-up expense - - - - - - - - - -

8,126,078 17,240,574 18,576,940 20,032,279 21,617,560 23,344,789 25,227,109 27,328,910 29,515,948 31,955,476 PROFIT BEFORE TAX 870,644 2,192,346 2,410,614 2,634,279 2,862,323 3,093,484 3,326,226 3,508,692 3,788,662 4,013,503

Provision for tax 44,984 97,165 53,469 632,341 693,398 596,475 822,011 817,153 879,739 939,026

PROFIT AFTER TAX 825,661 2,095,182 2,357,145 2,001,938 2,168,925 2,497,009 2,504,216 2,691,539 2,908,923 3,074,477

ACCUMULATED PROFIT BROUGHT FORWARD - 825,661 2,920,842 3,102,987 2,929,925 2,923,849 3,245,858 3,575,074 4,091,613 4,100,536

Less: Dividend - - 2,175,000 2,175,000 2,175,000 2,175,000 2,175,000 2,175,000 2,900,000 2,900,000

ACCUMULATED PROFIT CARRIED FORWARD 825,661 2,920,842 3,102,987 2,929,925 2,923,849 3,245,858 3,575,074 4,091,613 4,100,536 4,275,013


PROJECTED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED

ANNEX FP-D

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

CASH FLOWS FROM OPERATING ACTIVITIESPROFIT BEFORE TAX 870,644 2,192,346 2,410,614 2,634,279 2,862,323 3,093,484 3,326,226 3,508,692 3,788,662 4,013,503

Adjustment for:Depreciation 576,094 1,152,189 1,152,189 1,152,189 1,152,189 1,152,189 1,152,189 1,202,189 1,152,189 1,152,189 Mark-up expense - - - - - - - - - -

Cash inflow from operating activities before working capital changes 1,446,739 3,344,535 3,562,802 3,786,468 4,014,512 4,245,673 4,478,415 4,710,881 4,940,851 5,165,692

Adjustment for working capital changes(Increase) / decrease in current assets

Stores, spares and loose tools (180,000) (60,281) (19,800) (21,780) (23,958) (26,354) (28,989) (31,888) (35,077) (38,585) Stock-in-trade (677,173) (41,184) (55,682) (60,639) (66,053) (71,968) (78,430) (87,575) (91,127) (101,647) Trade debts (374,863) (434,842) (64,776) (69,959) (75,555) (81,600) (88,128) (95,178) (102,792) (111,015) Advances and other receivables (188,750) (213,460) (33,409) (36,383) (39,632) (43,181) (47,058) (51,295) (55,926) (60,988)

Increase/(decrease) in current liabilitiesTrade and other payables 314,583 355,767 55,682 60,639 66,053 71,968 78,430 85,492 93,210 101,647

(1,106,204) (394,000) (117,986) (128,122) (139,145) (151,134) (164,175) (180,444) (191,712) (210,588) Cash generated / (used in) from operating activities 340,535 2,950,535 3,444,817 3,658,346 3,875,366 4,094,539 4,314,240 4,530,437 4,749,140 4,955,104

Mark-up expense - - - - - - - - - - Income Tax paid (44,984) (97,165) (53,469) (632,341) (693,398) (596,475) (822,011) (817,153) (879,739) (939,026) Net cash generated / (used in) from operating activities 295,551 2,853,370 3,391,348 3,026,005 3,181,968 3,498,064 3,492,230 3,713,284 3,869,401 4,016,077

CASH FLOWS FROM INVESTING ACTIVITIESFixed capital expenditure (13,350,015) - - - - (1,691,254) - (2,000,000) - - Net cash generated / (used in) from investing activities (13,350,015) - - - - (1,691,254) - (2,000,000) - -

CASH FLOWS FROM FINANCING ACTIVITIESEquity 14,500,000 - - - - - - - - - Proceeds from Long term loan - - - - - - - - - - Repayment of Long term loan - - - - - - - - - - Dividend - - (2,175,000) (2,175,000) (2,175,000) (2,175,000) (2,175,000) (2,175,000) (2,900,000) (2,900,000) Net cash generated from financing activities 14,500,000 - (2,175,000) (2,175,000) (2,175,000) (2,175,000) (2,175,000) (2,175,000) (2,900,000) (2,900,000) Net increase/(decrease) in cash and cash equivalents 1,445,536 2,853,370 1,216,348 851,005 1,006,968 (368,190) 1,317,230 (461,716) 969,401 1,116,077 Cash and cash equivalents at the beginning of the year - 1,445,536 4,298,906 5,515,254 6,366,259 7,373,227 7,005,037 8,322,267 7,860,551 8,829,952 Cash and cash equivalents at the end of the year 1,445,536 4,298,906 5,515,254 6,366,259 7,373,227 7,005,037 8,322,267 7,860,551 8,829,952 9,946,029

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANPROJECTED CASH FLOW STATEMENT

ANNEX FP-B-1

1 2 3 4 5 6 7 8 9 10

FP-B Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

ADDITIONS TO FIXED ASSETSLand - - - - - - - - - - Buildings 9,038,761 - - - - - - - - - Plant and machinery 1,691,254 - - - - 1,691,254 - - - - Furniture and office equipmen 100,000 - - - - - - - - - Electrical equipment 520,000 - - - - - - - - - Vehicles 2,000,000 - - - - - - 2,000,000 - - Closing balance 13,350,015 - - - - 1,691,254 - 2,000,000 - -

WRITTEN-OFF FROM THE FIXED ASSETSLand - - - - - - - - - - Buildings - - - - - - - - - - Plant and machinery - - - - - 1,691,254 - - - - Furniture and office equipmen - - - - - - - - - - Electrical equipment - - - - - - - - - - Vehicles - - - - - - - 2,000,000 - - Closing balance - - - - - 1,691,254 - 2,000,000 - -

COST

Land - - - - - - - - - - Buildings 9,038,761 9,038,761 9,038,761 9,038,761 9,038,761 9,038,761 9,038,761 9,038,761 9,038,761 9,038,761 Plant and machinery 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 Furniture and office equipmen 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Electrical equipment 520,000 520,000 520,000 520,000 520,000 520,000 520,000 520,000 520,000 520,000 Vehicles 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Closing balance 13,350,015 13,350,015 13,350,015 13,350,015 13,350,015 13,350,015 13,350,015 13,350,015 13,350,015 13,350,015

Annex

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANFIXED ASSETS FOR THE YEAR ENDED

YEARS

ANNEX FP-B-1

1 2 3 4 5 6 7 8 9 10

FP-B Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

Annex

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANFIXED ASSETS FOR THE YEAR ENDED

YEARS

DEPRECIATION FOR THE YEARLand - - - - - - - - - - Buildings 225,969 451,938 451,938 451,938 451,938 451,938 451,938 451,938 451,938 451,938 Plant and machinery 169,125 338,251 338,251 338,251 338,251 338,251 338,251 338,251 338,251 338,251 Furniture and office equipmen 5,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Electrical equipment 26,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 Vehicles 150,000 300,000 300,000 300,000 300,000 300,000 300,000 350,000 300,000 300,000 Closing balance 576,094 1,152,189 1,152,189 1,152,189 1,152,189 1,152,189 1,152,189 1,202,189 1,152,189 1,152,189

WRITTEN-OFF FROM ACCUMULATED DEPRECIATIONLand - - - - - - - - - - Buildings - - - - - - - - - - Plant and machinery - - - - - 1,691,254 - - - - Furniture and office equipmen - - - - - - - - - - Electrical equipment - - - - - - - - - - Vehicles - - - - - - - 2,000,000 - - Closing balance - - - - - 1,691,254 - 2,000,000 - -

ACCUMULATED DEPRECIATIONLand - - - - - - - - - - Buildings 225,969 677,907 1,129,845 1,581,783 2,033,721 2,485,659 2,937,597 3,389,535 3,841,474 4,293,412 Plant and machinery 169,125 507,376 845,627 1,183,878 1,522,128 169,125 507,376 845,627 1,183,878 1,522,128 Furniture and office equipmen 5,000 15,000 25,000 35,000 45,000 55,000 65,000 75,000 85,000 95,000 Electrical equipment 26,000 78,000 130,000 182,000 234,000 286,000 338,000 390,000 442,000 494,000 Vehicles 150,000 450,000 750,000 1,050,000 1,350,000 1,650,000 1,950,000 300,000 600,000 900,000 Closing balance 576,094 1,728,283 2,880,472 4,032,661 5,184,850 4,645,785 5,797,974 5,000,162 6,152,351 7,304,540

CLOSING BOOK VALUE

Land FP-B - - - - - - - - - - Buildings 8,812,792 8,360,854 7,908,916 7,456,978 7,005,040 6,553,102 6,101,164 5,649,226 5,197,288 4,745,350 Plant and machinery 1,522,128 1,183,878 845,627 507,376 169,125 1,522,128 1,183,878 845,627 507,376 169,125 Furniture and office equipmen 95,000 85,000 75,000 65,000 55,000 45,000 35,000 25,000 15,000 5,000 Electrical equipment 494,000 442,000 390,000 338,000 286,000 234,000 182,000 130,000 78,000 26,000 Vehicles 1,850,000 1,550,000 1,250,000 950,000 650,000 350,000 50,000 1,700,000 1,400,000 1,100,000 Closing balance 12,773,921 11,621,732 10,469,543 9,317,354 8,165,165 8,704,230 7,552,041 8,349,853 7,197,664 6,045,475

ANNEX FP-B-2

Annex Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10


Opening cost of plant and machinery - 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254 1,691,254

As a percentage of opening cost of plant and machinery 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

- 42,281 42,281 42,281 42,281 42,281 42,281 42,281 42,281 42,281

Stock of Coal 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431

Closing balance 180,000 240,281 260,081 281,861 305,819 332,173 361,162 393,050 428,127 466,712


PROJECTED STORES, SPARES AND LOOSE TOOLS FOR THE YEAR ENDED

ANNEX FP-B-3



Stock days 30 30 30 30 30 30 30 30 30 30

Stock (No. of green bricks) 448,400 448,400 448,400 448,400 448,400 448,400 448,400 448,400 448,400 448,400

Per unit cost 3.02 3.20 3.45 3.72 4.02 4.34 4.69 5.08 5.49 5.94

Stage of completion 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%

Closing balance 677,173 718,357 774,039 834,678 900,732 972,700 1,051,130 1,138,705 1,229,831 1,331,478


PROJECTED STOCK-IN-TRADE FOR THE YEAR ENDED

ANNEX FP-B-4



Revenue 8,996,722 19,432,920 20,987,554 22,666,558 24,479,883 26,438,274 28,553,336 30,837,602 33,304,611 35,968,979

Debtors days 15 15 15 15 15 15 15 15 15 15

Closing balance 374,863 809,705 874,481 944,440 1,019,995 1,101,595 1,189,722 1,284,900 1,387,692 1,498,707


PROJECTED TRADE DEBTS FOR THE YEAR ENDED

ANNEX FP-B-5



Total expenses excluding depreciation 7,549,984 16,088,385 17,424,752 18,880,090 20,465,371 22,192,600 24,074,920 26,126,722 28,363,760 30,803,288

As a % of total Cost of operations excluding depreciation 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

Advances and other receivables to others 188,750 402,210 435,619 472,002 511,634 554,815 601,873 653,168 709,094 770,082

Advances to staffAdvance per molder - - - - - - - - - -

Closing balance 188,750 402,210 435,619 472,002 511,634 554,815 601,873 653,168 709,094 770,082

MODEL BUSINESS PLAN FOR VERTICAL SHAFT BRICK KILN IN PAKISTANPROJECTED ADVANCES AND OTHER RECEIVABLES FOR THE YEAR ENDED

ANNEX FP-B-6



Total expenses excluding depreciation 7,549,984 16,088,385 17,424,752 18,880,090 20,465,371 22,192,600 24,074,920 26,126,722 28,363,760 30,803,288

Creditors days FP A 15 15 15 15 15 15 15 15 15 15

Closing balance FP B-1 314,583 670,349 726,031 786,670 852,724 924,692 1,003,122 1,088,613 1,181,823 1,283,470


PROJECTED TRADE AND OTHER PAYABLES FOR THE YEAR ENDED

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