socks manufacturing unit waqar hussain

Pre-Feasibility Study

SSOOCCKKSS MMANUANUFFACTURACTURIINGNG UNIT UNIT

Prepared By: WAQAR HUSSAINPrepared By: WAQAR HUSSAIN

Student No: 08023008Student No: 08023008

Subject: MANAGEMENTSubject: MANAGEMENT

CHINA UNIVERSITY OF CHINA UNIVERSITY OF PETROLEUM PETROLEUM

Pre-Feasibility Study Socks Manufacturing Unit

1 PURPOSE OF THE DOCUMENT ...............................................................................................

2 PROJECT PROFILE ....................................................................................................................

2.1 OPPORTUNITY RATIONALE ...................................................................................................... 2.2 PROJECT BRIEF ....................................................................................................................... 2.3 MARKET ENTRY TIMING ......................................................................................................... 2.4 PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 2.5 PROJECT CAPACITY AND RATIONALE ....................................................................................... 2.6 PROJECT INVESTMENT ............................................................................................................. 2.7 PROPOSED PRODUCT MIX ........................................................................................................ 2.8 RECOMMENDED PROJECT PARAMETERS ................................................................................... 2.9 PROPOSED LOCATION .............................................................................................................. 2.10 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ............................................................

3 SECTOR & INDUSTRY ANALYSIS ...........................................................................................

3.1 SECTOR CHARACTERISTICS .....................................................................................................

4 MARKET INFORMATION .........................................................................................................

4.1 LEADING EXPORTING COUNTRIES OF COTTON KNITTED SOCKS IN THE WORLD ......................... 4.2 TARGET CUSTOMERS ..............................................................................................................

5 PRODUCTION PROCESS ...........................................................................................................

5.1 PRODUCTION PROCESS FLOW .................................................................................................. 5.2 PRODUCT MIX OFFERED .......................................................................................................... 5.3 RAW MATERIAL REQUIREMENT ............................................................................................... 5.4 MACHINERY REQUIREMENT .................................................................................................... 5.5 FURNITURE & FIXTURE ........................................................................................................... 5.6 MOTOR VEHICLES .................................................................................................................

6 HUMAN RESOURCE REQUIREMENT...................................................................................

7 LAND & BUILDING REQUIREMENT ....................................................................................

7.1 LAND REQUIREMENT ............................................................................................................ 7.2 RECOMMENDED MODE.......................................................................................................... 7.3 UTILITIES REQUIREMENT ......................................................................................................

8 FINANCIAL ANALYSIS............................................................................................................ 8.1 PROJECT COSTS ....................................................................................................................

8.2 PROJECTED INCOME STATEMENT ........................................................................................... 8.3 PROJECTED BALANCE SHEET ................................................................................................. 8.4 PROJECTED CASH FLOW STATEMENT .....................................................................................

9 KEY ASSUMPTIONS .................................................................................................................


DISCLAIMER

The purpose and scope of this information memorandum 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 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. Organization does not assume any liability for any

financial or other loss resulting from this memorandum in consequence of

undertaking this activity. The prospective user of this memorandum is encouraged to

carry out additional diligence and gather any information he/she feels necessary for

making an informed decision.


11 PPURURPPOOSSEE OOFF TTHHEE DDOOCUCUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs to facilitate investment and provide an overview about textile business. The project pre- feasibility may form the basis of an important investment decision and in order to serve this objective, the document covers various aspects of socks manufacturing business concept development, start-up, production, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself.This particular pre-feasibility is regarding “Socks Manufacturing Unit” which comesunder “Textile” sector.


22 PPRROOJJEECCTT PPRROOFFIILLEE

22..11 OppOppoorrttuniunittyy RaRattiioonnaallee

Knitted socks are an item of general use. These have a sizeable market at home and also have an export potential. Cotton socks, as compared to nylon socks, are subject to rapid replacements. Further, due to higher rate of urbanization, local demand has also increased manifolds in recent years. So this validates the opportunity to set up a new sock manufacturing unit to capture the need of expanding market.

22..22 PPrroojjecectt BBrriieeff

Socks are broadly classified into two main categories, cotton and nylon or blended socks. Cotton socks are specially preferred by sportsmen, besides their normal use and also have export potential as well.Cotton sports socks are further classified into two types: Pouch socks and reel socks. Theproposed project will be manufacturing 60% pouch socks and 40% reel socks. It will be started with 30 machines. All the equipment for the project is supposed to be new. Second hand machinery can also be sued to reduce the cost of project, which is easily available in the market. The project will be started with 70% initial year capacity.

22..33 MMaarrkkeett EEnnttrryy TTiimminingg

Various products and services have high dependence on their commercialization timing and delivery to the customers. But the socks manufacturing unit can be started at any time during the year.

22..44 PPrrooppoosseedd BBuussinineessss LLeeggaall SSttaattuuss

The said project can be a proprietorship or a partnership and even it can be registered under company law with corporate law authority. Selection totally depends upon the choice of the entrepreneur. This pre-feasibility assumes the legal status of a sole proprietorship.

22..55 PPrroojjecectt CaCappaacciittyy aanndd RaRattiioonnaallee

Selection of project size is really critical. After doing thorough market research, it is decided that the proposed pre-feasibility will be based on 30 machines. As it is assumed that all the production of the unit will be exported, a sizeable production is required. 30 machines production can be exported in one container. Each machine will be having a capacity of manufacturing 55 dozens pair of socks per 24 hours. The proposed project can always be started with more machines. This feasibility study is based on 30 machines which is the minimum viable size for a sock manufacturing unit.The project will be working on three shift basis.

22..66 PPrroojjecectt IInnvveessttmmeenntt

Total cost of the project is worked out in the table below:

Capital Investment CNY64,987,928Working Capital Requirement CNY5,376,606

Total Investment CNY70,364,533


TTaabbllee 22--11 PPrroojjecectt CoCossttss

The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity. However this composition of debt and equity can be changed as per the requirement of the investor.

TTaabbllee 22--22 PPrroojjecectt FFininaanncciningg

Debt 50% CNY35,182,267Equity 50% CNY35,182,267Total project Investment CNY70,364,533TTaabbllee 22--33 VViiaabibilliittyy

IRR 24%NPV @20% CNY15,610,58

3Pay Back Period (years.) 5.29

22..77 PPrrooppoosseedd PPrrooduducctt MMiixx

The proposed project will be producing both pouch socks and reel socks. The composition of production will be as follows:

TTaabbllee 22--44 PPrrooduducctt MMiixx

Product Production capacity per 24hours

PercentageProduction

Annual Production(Dozen pairs)

Pouch Socks 55 dozens pair of socks 60% 346,500Reel Socks 45 dozen pair of socks 40% 189,000

535,500

22..88 RRececoommmmeendndeedd PPrroojjecectt PPaarraammeetteerrss

Capacity Human Resource Technology/Machinery Location535,500 dozens

pair per year128 Imported Huangdao

22..99 PPrrooppoosseedd LLooccaattiionon

The said project can be started in any industrial area. It is recommended that an area should be selected which is near to the port and export of the manufactured product may become easy. Or otherwise it should be established in an area where raw material is easily available. It may have industrial area of Huangdao\Qingdao.

mailto:@20%25


22..1010 KKeeyy SuSucceccessss FFaaccttoorrss//PPrraaccttiiccaall TTipipss ffoorr SuSucceccessss

There are many units existing which are indulged in socks manufacturing but still they are not successful in catering the demand. So there is a potential for new entrepreneurs to enter the market. Key success factors will be:

Wastage ratio of production should be kept at minimum. Advance orders for sale can ensure the success of the business. Strong controls on purchase price of raw material Quality maintenance will play an important role as it is assumed that 100%

production will be exported.

33 SSEECCTTOORR && IINDUNDUSSTTRRYY ANAANALLYYSSIISS

33..11 SSececttoror CChhaarraacctteerriissttiiccss

Cotton sports socks manufacturing, which is a comparatively new phenomenon, has started since, last 40–50 years and its consumption has increased rapidly with the passage of time as more and more people became health conscious and adapted athletic life.

The socks production in general has been tradition since inception of China. Jiangsu and Zhejiang have been leading cities having family trade of socks manufacturing and marketing within China. Mostly socks in China are produced on old double cylinder dress socks machines and supplied to local distributors for local consumption as well as exported.

44 MMARARKKEETT IINNFFOORRMMAATTIOIONN

44..11 LLeeaadindingg EExxppoorrttiningg CoCoununttrriieess ofof CoCottttonon KKnniitttteedd SSoocckkss iinn tthhee WoWorrlldd

Italy is the leading exporter of cotton knitted socks in the world and exports majority of the product to countries like USA, Japan and Germany. The details of the major exporters in the world are given in the below table:


TTaabbllee 44--11 MMaajjoror EExxppoorrtteerrss ofof CoCottttonon KniKnitttteedd SSoocckkss iinn 2200003311

Countries Value in $ (000)Italy 930China 890USA 339Turkey 527Korea 343Germany 264Mexico 162France 103Taiwan 96Belgium 138

44..22 TTaarrggeett CCuussttoommeerrss

Socks are being exported mainly to USA, UK, France, Germany, Japan, Netherlands, andCanada. Export of socks is not subject to quota restrictions.

Due to increase in awareness of importance of adapting athletic life for a better health, the demand for sports socks have been increasing with every passing year in countries like USA, European countries and Middle East.

The leading importers of sports socks in the world are given in the below table:

TTaabbllee 44--22 LLeeaadindingg IImmppoorrtteerrss ofof SpSpoorrttss SSoocckkss iinn tthhee WoWorrlldd iinn 2002003322

Countries Value in $ millionUSA 1,148Germany 723Japan 501United Kingdom 467France 447Netherlands 243Belgium 173Mexico 102Italy 157


55 PPRROODUCDUCTTIOIONN PPRROOCCEESSSS

55..11 PPrrooduduccttiionon PPrroocceessss FFllowow

The following figure shows the production process flow of socks manufacturing unit:

FFiigguurree 55--11 PPrrooduduccttiionon PPrroocceessss FFllowow

55..22 PPrrooduducctt MMiixx OOffffeerreedd

The proposed project will manufacture knitted cotton sports socks especially to cater to the international market. The business will produce high quality sports socks for men, ladies and children.

The proposed project will produce the following types of cotton sports socks:1. Pouch Socks2. Reel Socks

55..33 RawRaw MMaatteerriialal RReequiquirreemmeenntt

China is a cotton growing country and has a major advantage of availability and lower prices. Cotton fiber produced in China is of middle or short staple and of relatively coarse grade. The cotton yarns produced by China cotton especially of counts 8s, 10s and 12s are appropriate and ideal to produce soft sports socks. This is the major reason that cotton sports socks quality produced by China’s cotton yarn is appreciated in the international market.

The weight of an average pair of socks will be approximately, 65 grams. Raw material used in cotton sports socks is about 70% cotton yarn and rest 30% is nylon, polyester, acrylic or lycra etc, which is available in Pakistan.


55..44 MMaacchinhineerryy RReequiquirreemmeenntt

A total number of 30 “Single Cylinder 4 Feed machines” will be installed, out of which18 machines will be used to manufacture pouch socks and 12 machines will be used for manufacturing reel heel socks. Second hand machinery is also readily available in the market and the price is approximately half the price of the new machines. Second hand machinery can also be used to manufacture both type of socks.Following table shows the machinery & equipment requirement:

TTaabbllee 66--1:1: MMaacchhiinneerryy && EEquipquipmmeenntt RReequiquirreemmeenntt

Machine Description Make No ofUnit

Total Amount in CNY

Lonati Single Cylinder 4Feed (pouch heel) Imported 18 24,683,033Lonati Single Cylinder 4Feed (Reel heel) Imported 12 16,455,355Rosso Automatic LinearLinking Machine Imported 4 2,742,559Bleaching machine Locally available 4 1,062,118Hydro extractor Locally available 2 212,395Dryer Locally available 4 637,329Boarding/Setting Machine Locally available 6 318,810Air Compressor Imported 1 1,223,867Diesel Generator Locally available 1 1,520,733Boiler 3 ton Locally available 1 1,593,322Transformer Locally available 1 477,924Socks Reversing Machine Imported 3 1,142,733Quality Control Machine Imported 1 304,729Electric wiring, Steam pipingEtc. per Machine Locally available 1 2,622,115Water Pump including bore Locally available 1 282,800Total 55,279,821

The freight & handling charges and installation cost of the machinery is estimated as below:

TTaabbllee 55--22 OOtthheerr EEquipquipmmeenntt CChhaarrggeess DDeettaaiillss

Freight & Handling Charges as % of CIF price 5%Installation Charges as % of Price 1%

55..55 FFuurrninittuurree && FFiixxttuurree

Following furniture and fixtures will be required for factory and management offices.


TTaabbllee 55--44 DDeettaaiillss ofof FFuurrninittuurree aanndd FFiixxttuurreess

Items No. of Items Total Cost (CNY)Computers 10 90,000Printers 1 25,000Photocopy Machine 1 100,000Fax Machine 1 10,000Telephone Sets 5 2,500Air Conditioners 2.00 40,000Office Furniture 1.00 150,000

417,500

55..66 MMoottoror VVeehihicclleess

The proposed project will also be using a Loader truck for transportation purposes. The truck will be costing Rs. 1,100,000 and the depreciation will be charged at the rate of20% on written down value basis.

66 HHUUMMAANN RRESESOOURCURCEE

RREEQQUUIIRREEMMEENNTT

Both skilled and unskilled labour will be required for the paper cone business. Some direct labor will be working on three shift basis and some will be working on one shift basis. Direct labour for the factory includes following human resources:

Description No. ofShifts

No. ofemployees

Salary perMonth

(CNY)

AnnualSalary (CNY)

Knitting Machine Operator 3 10 5,500 1,980,000Knitting Supervisor 3 1 5,000 180,000Bleaching Helper/ BleachingMachine

3 1 3,500 126,000

Quality/Linking/Pressing/Pac king Staff

3 20 3,500 2,520,000

Boiler Assistant 3 1 10,000 360,000Technician 3 2 3,500 252,000Janitorial Staff 3 2 2,500 180,000Total Direct Labor 5,598,000Production Manager 1 1 25,000 300,000Bleaching Master 1 1 25,000 300,000Boiler Engineer 1 1 15,000 180,000Knitting Master 1 1 25,000 300,000Technical supervisor 1 1 4,500 54,000Quality Incharge 1 1 25,000 300,000Other Direct Labor 1,434,000GM 1 1 50,000 600,000Finance Manager 1 1 25,000 300,000Accountant 1 1 10,000 120,000Purchase Officer 1 1 10,000 120,000Assistant Accountant 1 1 7,000 84,000Store Supervisor 1 1 7,000 168,000Office Boys 1 1 2,500 60,000Security Guard, Gate Keepers 1 1 3,000 108,000Total Indirect Labor 1,560,000Total Cost of HumanResource

8,592,000


TTaabbllee 66--11 HuHummanan RReessoouurcrcee

Salaries and wages are assumed to grow at 10% per annum.

77 LLANANDD && BBUUIILLDDIINNGG

RREEQQUUIIRREEMMEENNTT

77..11 LLaanndd RReequiquirreemmeenntt

Total land required for the socks knitting unit is approximately 22,449 -Sq. ft or 5 Kanal. Land price per kanal is taken to be CNY 500,000. The break up of the required area is given below.


TTaabbllee 77--11 CovCovereeredd AArreeaa DDeettaaiillss

Building & Civil works Space Requiredin Sq. ft

Construction Cost(CNY /Sq. Ft.)

Total Cost(CNY)

Socks Knitting area 1,680 400 672,000Bleaching & Dying area 1,064 400 425,600Drying Area 480 400 192,000Pressing Area 384 400 153,600Socks Reversing Area 210 400 84,000Linking Area 280 400 112,000Boiler Area 600 400 240,000Generator Area 600 400 240,000Air Compressor Room 600 400 240,000Packing area 1,200 400 480,000Management Office 1,200 500 600,000Accessories Store 600 400 240,000Yarn Store 217 400 86,793Dyes and ChemicalStore

600 350 210,000

Finished Goods Store 334 350 117,024Toilets 600 350 210,000Loading, unloading Bay 1,800 25 45,000Grounds 10,000Water Tank 350,000Total SpaceRequirement (sq.ft)

22,449 4,698,016

Boundary wall 1,520 100 152,000Total InfrastructureCost

4,850,016

77..22 RRececoommmmeendndeedd MMooddee

Building for the proposed business can be acquired on rent but it is recommended that it should be purchased or built as machinery will be installed. Construction cost of building is estimated as above.

77..33 UUttiilliittiieess RReequiquirreemmeenntt

Utilities required for a socks manufacturing unit are

Electricity Water Telephone


88 FFIINANCNANCIIAALL AANANALLYYSSIISS

88..11 PPrroojjecectt CoCossttss

13

Calculations Project Costs

Year Year Year Year Year Year Year Year Year Year0 1 2 3 4 5 6 7 8 9

Land 2,494,371Building 4,850,016MachinerOffice Equipment, Furniture 417,500 - - - - 430,811 - - -operating Costs 846,219Office Vehicle 1,100,000 - - - - - 1,771,561 - - -

Total Capital Cost 64,987,928 - - - - - 2,202,372 - - -

Raw Material Inventory 2,619,772Machine Spares 90,000Utilities (Fuel) Inventory 95,760Cash 2,571,074

Total Working Capital 5,376,606 - - - - - - - - -

70,364,533Financing Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

Year 10Project Financing 32,493,964 - - - - - - - - -- Working Capital Financing 2,688,303 -Total Debt 35,182,267 - - - - - - - - -- Equity Financing 35,182,267 - - - - - - - - -


88..22 PPrroojjecectteedd IInnccoommee SSttaatteemmeenntt

CalculationsIncome Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Revenue 86,136,561 97,826,523 110,609,189 124,573,599 139,815,545 156,438,059 165,824,343 175,773,804 186,320,232 197,499,446

Cost of SalesRaw Material Cost 61,128,007 66,804,180 72,682,947 78,770,144 85,071,756 91,593,924 93,425,802 95,294,318 97,200,205 99,144,209Direct Labor 7,032,000 7,735,200 8,508,720 9,359,592 10,295,551 11,325,106 12,457,617 13,703,379 15,073,717 16,581,088Direct Electricity 4,259,010 4,684,911 5,153,402 5,668,742 6,235,617 6,859,178 7,545,096 8,299,606 9,129,566 10,042,523Machine maintenance 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292Oil and Diesel Consumption 2,234,400 2,457,840 2,703,624 2,973,986 3,271,385 3,598,524 3,958,376 4,354,213 4,789,635 5,268,598

Total Cost of Sales 75,193,417 82,276,131 89,702,093 97,491,205 105,664,923 114,246,407 118,343,534 122,703,823 127,350,660 132,309,710Gross Profit 10,943,144 15,550,392 20,907,095 27,082,394 34,150,622 42,191,652 47,480,809 53,069,980 58,969,572 65,189,736

Administration expense 1,560,000 1,716,000 1,887,600 2,076,360 2,283,996 2,512,396 2,763,635 3,039,999 3,343,999 3,678,398Electricity expense 221,408 243,549 267,903 294,694 324,163 356,580 392,237 431,461 474,607 522,068Communications expense (phone, fax, mail, interne3t,1e2t,c0.0) 0 343,200 377,520 415,272 456,799 502,479 552,727 608,000 668,800

735,680Office expenses (stationary, entertainment, ja 156,000 171,600 188,760 207,636 228,400 251,240 276,364 304,000 334,400 367,840Professional fees (legal, audit, consultants, etc.) 129,205 146,740 165,914 186,860 209,723 234,657 248,737 263,661 279,480 296,249Depreciation expense 6,206,484 6,206,484 6,206,484 6,206,484 6,206,484 6,122,984 6,209,146 6,209,146 6,209,146 6,209,146Amortization of pre-operating costs 169,244 169,244 169,244 169,244 169,244 0 0 0 0 0Marketing Expenses 215,341 244,566 276,523 311,434 349,539 391,095 414,561 439,435 465,801 493,749Freight Out and Custom Clearance 1,722,731 1,956,530 2,212,184 2,491,472 2,796,311 3,128,761 3,316,487 3,515,476 3,726,405 3,949,989Office Vehicle Running Expense 78,000 85,800 94,380 103,818 114,200 125,620 138,182 152,000 167,200 183,920Subtotal 10,770,413 11,283,713 11,846,512 12,463,274 13,138,859 13,625,811 14,312,075 14,963,177 15,669,837 16,437,039

Earning before Interest and Tax 172,731 4,266,679 9,060,583 14,619,120 21,011,764 28,565,842 33,168,734 38,106,804 43,299,735 48,752,697

Interest on short term debt 437,563 485,068 253,703 - - - - - - - Interest expense on long term debt (Project Loan) 3,249,396 2,717,153 6,440,140 1,487,672 779,257 - - - - - Interest expense on long term debt (Working C 376,362 319,425 528,542 180,520 96,165 - - - - -

Subtotal 3,625,759 3,036,578 6,968,682 1,668,193 875,422 - - - - -Earning before Tax (3,453,028) 1,230,101 2,091,902 12,950,927 20,136,342 28,565,842 33,168,734 38,106,804 43,299,735 48,752,697

Tax - 978,265 1,106,092 1,245,736 1,398,155 1,564,381 1,658,243 1,757,738 1,863,202 1,974,994NET PROFIT/(LOSS) AFTER TAX (3,453,028) 251,836 985,810 11,705,191 18,738,186 27,001,461 31,510,490 36,349,066 41,436,532 46,777,703

Balance brought forward (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544Total profit available for appropriation (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544 211,303,247Balance carried forward (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544 211,303,247


88..33 PPrroojjecectteedd BBaallaannccee ShSheeeett

CalculationsBalance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Assets

Current AssetsCash & Bank 2,571,074 - - - 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280Raw Material Inventory 2,619,772 2,619,772 2,863,036 3,114,983 3,375,863 3,645,932 3,925,454 4,003,963 4,084,042 4,165,723 4,249,038Machine Spares Inventory 90,000 45,000 49,500 54,450 59,895 65,885 72,473 79,720 87,692 96,461 106,108Utilities (Fuel) Inventory 95,760 95,760 105,336 115,870 127,457 140,202 154,222 169,645 186,609 205,270 225,797Accounts Receivable 3,691,567 4,192,565 4,740,394 5,338,869 5,992,095 6,704,488 7,106,758 7,533,163 7,985,153 8,464,262

Total Current Assets 5,376,606 6,452,099 7,210,438 8,025,697 15,157,897 31,941,486 63,027,609 100,927,702 143,684,416 191,548,447 244,775,484Fixed AssetsLand 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371Building 4,850,016 4,365,015 3,880,013 3,395,011 2,910,010 2,425,008 1,940,007 1,455,005 970,003 485,002 - Machinery & Equipment 55,279,821 49,751,839 44,223,857 38,695,875 33,167,893 27,639,911 22,111,929 16,583,946 11,055,964 5,527,982 - Office Equipment, Furniture 417,500 334,000 250,500 167,000 83,500 - 430,811 344,649 258,487 172,325 86,162Office Vehicle 1,100,000 990,000 880,000 770,000 660,000 550,000 2,211,561 2,101,561 1,991,561 1,881,561 1,771,561Total Fixed Assets 64,141,708 57,935,225 51,728,741 45,522,257 39,315,773 33,109,289 29,188,678 22,979,532 16,770,386 10,561,240 4,352,094Intangible AssetsPre-operating Costs 846,219 676,976 507,732 338,488 169,244 - - - - - -Total Assets 70,364,533 65,064,299 59,446,910 53,886,442 54,642,914 65,050,775 92,216,288 123,907,234 160,454,802 202,109,687 249,127,578Liabilities & Shareholders' EquityCurrent Liabilities

Accounts payable 1,120,493 1,232,542 1,355,796 1,491,376 1,640,514 1,804,565 1,985,022 2,183,524 2,401,876 2,642,064Short term Debt 2,761,426 3,098,458 3,397,607 - - - - - - -

Total Current Liabilities - 3,881,919 4,331,000 4,753,404 1,491,376 1,640,514 1,804,565 1,985,022 2,183,524 2,401,876 2,642,064Other liabilities

Long term debt Project 32,493,964 27,171,534 21,316,862 14,876,722 7,792,569 0 0 0 0 0 0Long term debt (Working Capital) 2,688,303 2,281,607 1,817,973 1,289,431 686,893 0 0 0 0 0 0

35,182,267 29,453,141 23,134,836 16,166,154 8,479,462 0 0 0 0 0 0Shareholders' equity

Paid-up capital 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267Retained earnings (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544 211,303,247

Total Equity 35,182,267 31,729,239 31,981,074 32,966,884 44,672,075 63,410,261 90,411,722 121,922,213 158,271,278 199,707,811 246,485,514TOTAL CAPITAL AND LIABILITIES 70,364,533 65,064,299 59,446,910 53,886,442 54,642,914 65,050,775 92,216,288 123,907,234 160,454,802 202,109,687 249,127,578


88..44 PPrroojjecectteedd CaCasshh FFllowow SSttaatteemmeenntt

CalculationsCash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Operating activities

Net Profits - (3,453,028) 251,836 985,810 11,705,191 18,738,186 27,001,461 31,510,490 36,349,066 41,436,532 46,777,703Depreciation 6,206,484 6,206,484 6,206,484 6,206,484 6,206,484 6,122,984 6,209,146 6,209,146 6,209,146 6,209,146Raw Material Inventory (2,619,772) - (243,265) (251,947) (260,880) (270,069) (279,521) (78,509) (80,079) (81,681) (83,314) Machine Spares (90,000) 45,000 (4,500) (4,950) (5,445) (5,989) (6,588) (7,247) (7,972) (8,769) (9,646) Utilities (Fuel) Inventory (95,760) - (9,576) (10,534) (11,587) (12,746) (14,020) (15,422) (16,964) (18,661) (20,527) Accounts Receivable (3,691,567) (500,998) (547,829) (598,475) (653,226) (712,393) (402,269) (426,405) (451,990) (479,109) Accounts Payable 1,120,493 112,049 123,254 135,580 149,138 164,051 180,457 198,502 218,352 240,188Amortization 169,244 169,244 169,244 169,244 169,244 - - - - -

Cash Provided by Operations (2,805,532) 396,626 5,981,274 6,669,532 17,340,112 24,321,021 32,275,972 37,396,645 42,225,293 47,302,930 52,634,440Financing ActivitiesProject Loan-Principal Repayment (5,322,429) (5,854,672) (6,440,140) (7,084,154) (7,792,569) 0 0 (0) 0 0Working Capital Loan-Principal Repayment (406,696) (463,633) (528,542) (602,538) (686,893) 0 0 0 0 0Short term Debt Principal Repayment (2,761,426) (3,098,458) (3,397,607) - - - - - -

Addition to Project Loan 32,493,964 - - - - - - - - - - Addition to Working Capital Loan 2,688,303 - - - - - - - - - - Issuance of Shares 35,182,267 - - - - - - - - - -Cash Used for Financing Activities 70,364,533 (5,729,125) (9,079,732) (10,067,140) (11,084,299) (8,479,462) 0 0 (0) 0 0Investing activities

Capital expenditure (64,987,928) - 0 0 0 0 (2,202,372) 0 0 0 0

Cash used for/provided by Investing Activi(t6ie4s,987,928) - 0 0 0 0 (2,202,372) 0 0 0 0

NET CASH 2,571,074 (5,332,500) (3,098,458) (3,397,607) 6,255,813 15,841,559 30,073,600 37,396,645 42,225,293 47,302,930 52,634,440

Cash balance brought forward 2,571,074 - 0 0 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840Cash available for appropriation 2,571,074 (2,761,426) (3,098,458) (3,397,607) 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280Dividend - - - - - - - - - - - Cash balance 2,571,074 (2,761,426) (3,098,458) (3,397,607) 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280Cash carried forward 2,571,074 - 0 0 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280


99 KKEEYY AASSSSUUMMPPTTIOIONNSS

TTaabbllee 99--11 PPrroojjecectt AAssssuummppttiioonnss

Projected Life of The Project in Years 10Debt 50%Equity 50%Annual Mark Up Rate (Short Term & Long Term) 14%Debt Tenure 5

TTaabbllee 99--22 OpOpeerraattiningg AAssssuummppttiioonnss

No of Working Days in One Year 350No. of Shifts 3No. of hours in one shift 8Annual installed production capacity (dozen pairs) 535,500Initial year capacity utilization 70%Capacity growth rate 5%Maximum capacity utilization 95%

TTaabbllee 99--33 RReevveenunuee AAssssuummppttiioonnss

Sales price per dozen Pouch Heel US $ 3.50Sales price per dozen Reel Heel US $ 4.50Sales growth rate 6%

TTaabbllee 99--44 RawRaw MMaatteerriialal CoCossttss

Cost (CNY/Gram)Weight (grams per pair) 65.00Wastage Ratio (%age of raw material input) 12%Cotton %age 70% 0.09Nylon 8% 0.40Polyester 12% 0.17Acrylic 4% 0.13Lycra 6% 0.58

TTaabbllee 99--55 EExxppeennssee AAssssuummppttiioonnss

Salaries, wages growth rates (as %age of annualSalaries and Wages)

10%

Communication expense 20% % of administration expense

Office expenses (stationary, entertainment, janitorial 10% % of administration


services, etc.) expensePromotional expense 1% % of revenueMachinery & equipment insurance rate 5%Office vehicles insurance rate 5%Professional fees (legal, audit, consultants, etc.) 0.2% % of revenueMarketing Expenses 0.3% % of revenueFreight And Custom Clearance Charges 2% %age of Cost of

SalesOffice Vehicle Running Expense 5% %age of Admin

ExpenseDepreciation rate on Machinery 10% Written down valueDepreciation rate on furniture and office equipment 20% Written down value

TTaabbllee 99--66 TTuurrnnovoveerr AAssssuummppttiioonnss

Raw Material Inventory 15 daysStores and Spares Inventory 2 monthsFuel inventory 15 daysAccounts Payable 30 daysAccounts Receivable 15 days

TTaabbllee 99--77 GGeenneerraall AAssssuummppttiioonnss

Exchange Rate (CNY/Euro) 9.3Freight & Handling Charges as % of CIF price 5%Installation Charges as % of Price 1%

socks manufacturing unit waqar hussain

Business