PROJECT PROFILE AKWAN

45
© Moshiur Rahman PROJECT PROFILE OF AKHWAN JUTE SPINNING MILLS LIMITED Factory: Tongi, Gazipur Office: Akram Tower, 5th floor, 15/5 Bijoy Nagar, Dhaka - 1000 PREPARED BY: Business & Credit Development Services Ltd. Moshiur Rahman - Financial Analyst May, 2011

Transcript of PROJECT PROFILE AKWAN

Page 1: PROJECT PROFILE AKWAN

© Moshiur Rahman

PROJECT PROFILE OF

AKHWAN JUTE SPINNING MILLS LIMITED

Factory: Tongi, Gazipur

Office: Akram Tower, 5th floor, 15/5 Bijoy Nagar, Dhaka - 1000

PREPARED BY:

Business & Credit Development Services Ltd.

Moshiur Rahman - Financial Analyst

May, 2011

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Table of Content Sl. No. Particulars Page No.

01 Executive Summary 3-4

Location of the Project

Project Overview

Cost of the Project

Means of Finance

Loan Proposal

02 Management Aspects 5-6

Organogram

03 Technical Aspects 6-16

Schedule of Implementation

04 Marketing Aspects 17-32

Introduction

The Environmental Benefits of Jute

Prospects of Jute and Jute goods in the Global Market

Over View of Jute Manufacturing Industry of Bangladesh

Uses of Jute Yarn & Twine

Jute Yarn & Twine Importing and Exporting Countries

Demand & Supply Analysis of Jute Yarn & Twine

World Demand for Jute Yarn

Domestic Demand of Jute Yarn

Total Demand For Jute Yarn

Gap between Demand and Supply

Export of Jute Yarn from Bangladesh and Existing Capacity

Projected Export from Bangladesh

Distribution Channel and Availability of raw materials

Prospective Importer of Jute Yarn & Twine

Opportunities and Threats

Conclusion and Recommendation

05 Financial Aspects 33-46

Production Capacity & Capacity Utilization

Projected Balance Statement

Projected Income Statement

Projected Retained Earnings Statement

Projected Cost of Goods Sold Statement

Working Capital Assessment

Break Even Analysis

Projected Cash Flow Statement

Ratio Analysis

Calculation of Payback Period

Calculation of IRR

Loan Repayment schedule

Fixed Assets and Depreciation Schedule ( projected 5 Years )

Projected Operating expenses

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EXECUTIVE SUMMARY

NAME OF THE PROJECT: AKHWAN JUTE SPINNING MILLS LTD.

LOCATION OF THE PROJECT:

Factory: Tongi, Gazipur

Office: Akram Tower, 5th floor, 15/5 Bijoy Nagar, Dhaka - 1000

THE PROJECT:

The project envisages setting up of a 100% export oriented Jute Yarn/Twine manufacturing

unit of 5440 MT per annum production capacity. Bangladeshi Jute Yarn/Twine demand is

mounting steep day by day, so that Jute Yarn/Twine manufacturing is a green herald of titanic

exporting sector in future. Jute sector with prominent support of Jute Yarn/Twine kept its

promise in this regard already by proclaiming second position in top export product of the

country after ―RMG sector‖ by surpassing ―frozen food sector‖. The project is thus designed

to get full utilization of market opportunity with the strength of Akhwan Groups long and

wide experience of multifarious business. Proposed product of the project is a specialized

item which may be considered as diversification approach having wide scope for further

capacity development. The sponsors intend to implement the scheme with financial assistance

from Bank/Financial institution for acquisition of state of the art capital machinery, operating

with efficient and expert management team along with their skilled workforce and a vision to

excellence. It is anticipated that the project will go into commercial operation within 12

months from the date of opening of letter of credit for imported machinery. Total fixed cost

of the project has been estimated at Tk 282,039,495 and a debt-equity ratio of 48:52 with a

promising payback period of 3 years 9 months.

THE PROPOSAL:

Proposal to the Bank for sanction of term loan amounting to Tk. 220,000,000

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COST OF THE PROJECT:

The total cost of the project has been estimated at Tk. 338,521,300.

Cost of the project and means of finance has been explained as follows:

Particulars Total

Land

Building & Civil Work

Imported Machinery & Equipment

Local Machinery & Equipment

Erection and Installation

Vehicles

Furniture, Fixture & Equipment

Preliminary & Startup Expenses

65,421,300.00

55,700,000.00

182,984,980.00

23,815,020.00

1,500,000.00

5,100,000.00

2,500,000.00

1,500,000.00

Total Cost of the Project 338,521,300.00

MEANS OF FINANCE:

Particulars Total

Bank loan 220,000,000.00

Sponsor‘s equity 2,500,000.00

Share Money deposit 178,641,161.00

Total equity 181,141,161.00

Total loan and Equity 401,141,161.00

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MANAGEMENT ASPECTS

BOARD OF DIRECTORS:

The proposed project will be promoted by the following three directors. The status and the

share of each director are stated below:

Name of the sponsors

Status No. of Shares holding

by each subscriber

Md. Nurul Amin Chairman 1000

Md. Sirajul Amin Managing Director 8000

Md. Fakrul Amin Director 8000

Md. Fazlul Amin Director 8000

TOTAL 25000

CORPORATE SET UP:

The sponsors have formed a Private Limited Company registered with the Register of Joint

Stock Companies in the name and style of AKHWAN JUTE SPINNING MILLS LTD on

29th

August 2010 with authorized capital of BDT 50,000,000 (Taka Five Crore) divided into

5,00,000.00 ordinary shares of BDT 100/- (Taka One hundred each) and paid up capital of

BDT 2,500,000.00

ORGANIZATION SET UP:

The overall management of the company would be vested to the board of Directors. The

Chairman will be the chief executive and will be responsible to keep the board and

management organized, informed and on task. As CEO he would be the spokesperson of the

company and lead the management and administration of the company under the board

policy/guidelines of the board of directors. He will exercise those powers which will be

delegated to him by the board of directors from time to time. Besides, the management of the

company will be assisted by a team of qualified and experienced professional personnel

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ORGANOGRAM:

DIRECTOR MGT

& ADMIN

DIRECTOR

ACCOUNTS

GENERAL MANAGER

MANAGING DIRECTOR

BOARD OF DIRECTORS

Chief Accountant Sales Purchase

Manager Production

Manager

Administration

Security, Labor,

Welfare

Maintenance,

Production,

Quality Control

Accounts, Finance,

Costing, Budget,

Salary, Wages

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TECHNICAL ASPECTS

PRODUCTION PLANNING AND OPERATION MANAGEMENT:

The project envisages setting up of a 100% export oriented Jute Yarn manufacturing unit.

The demand for Bangladesh origin Jute Yarn is increasing day by day. Proposed product of

the project is a specialized item which may be considered as diversification approach having

wide scope for further cavity development. The sponsors intend to implement the scheme

with financial assistance form Bank/ Financial institution with acquisition within 12 months

from the date of opening of letter of credit for imported machinery. Total fixed cost of the

project has been estimated at BDT 469,737,922.00.

PRODUCTION CAPACITY:

The annual production capacity of Jute Yarn of the project based on three shifts operation of

16 hours each per day and 300 working days in a year and the annual production capacity is

5440 MT. The unit will be designed to produce Jute Yarn/ Twine and will have adequate

flexibility to produce yarn ranging from 4 lbs to 72 lbs.

LAND AND LOCATION:

The project has been proposed to be located at Tongi, Gazipur, 20 Km away from Dhaka city.

The proposed site is very near to power and gas line which passes by the side of the project.

The area of land measures 198 decimals amounting BDT 65.22 million. The sponsors

themselves own the title of the land and have a plan to transfer the land in the name of

AKHWAN JUTE SPINNING MILLS LTD. The land has been selected considering its

suitability for setting up such a project. The land is to be developed and Tk. 198,000 in this

regard has been estimated. The site has all the logistical support like Power, Water, Drainage

and Communication for setting the project having economical labor and raw jute available

around the adjacent areas.

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BUILDING & CIVIL WORKS:

The entire civil works of the project comprises 65,000 sqft constructions; it has been

designed and will be supervised by a group of highly qualified Architect and Engineers. The

project will include factory building, office building, guard room and store room, workshop

building, prayer room, raw jute warehouse, assorting shed, security guard colony, etc. the

building will be made of prefabricated steel structure with necessary civil works. The total

cost of civil works has been estimated at BDT 55.7 million.

IMPORTED MACHINERY:

For implementation of the scheme, the project will require state of the art capital machinery.

It will be a complete set of composition of basic operating machinery along with supporting

unit including of machinery and equipment. In selection of machinery, the quality and the

cutting edge technology has been given priority. The plan consists of buying machinery for

Batching, Carding, Spinning, Winding, and Twisting of yarn, Precision winding and Packing.

The machinery of the project has been proposed to be imported. The cost of imported

machinery has been estimated at BDT 182,984,980.

LOCAL MACHINERY:

The unit will require some machinery and equipment that could be bought from local market

directly and no need of importing like generator, sub-station, deep tube well with pump and

motor, material handling trolley, workshop equipment, etc. But here also the plan is to buy

superior quality machinery that estimated to cost around BDT 23,815,020.

ASSEMBLY, INSTALLATION AND TRIAL RUN:

The machinery will be installed, commissioned and will put into trial run under the

supervision of foreign experts deputed by the machinery suppliers. They will be assisted by a

team of a local technicians and skilled workers. The sponsors will bear all the expenses of

commissioning with an estimating expenditure of approximately BDT 1.3 million in local

and foreign currency. Foreign technicians will also provide training to local technical

personnel for smooth operation and maintenance of the plant. Moreover, an amount of BDT 2

million has been estimated for civil, mechanical and electrical installation commissioning.

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MANUFACTURING PROCESS:

Manufacturing of Jute Yarn consists of the following stages:

a) BATCHING:

Batching of the different grades of high quality raw jute are fed in the spreader and the

softener and then sprayed emulsion, the mixture of oil, water and emulsifier during

processing the jute through spreader or softener machine for softening and to acquire flexible

properties of the fiber for the subsequent process.

b) PILING:

After the batching process, Jute is kept in pile for condition up to 72 hours for bacterial action

which is required for processing the best quality yarn/twine and to minimize the wastage.

c) CARDING:

Jute fiber is carded in two stages: (I) Breaker Card (II) Finisher Card. Softened jute is fed in

B/C machine first and the delivered jute from B/C is fed in F/C machine. The main function

of card is to convert the reed of jute into a uniform supply of fibrous material which can then

be drafted and finally twisted into yarn. Another function of is to reduce the jute sliver as

required to easy the next process.

d) DRAWING:

The carded fibers are now fed into drawing process for straightening of individual fibers and

make it ready for spinning in the final stage. This is done in three stages i.e. 1st, 2

nd and 3

rd

drawing.

e) SPINNING:

Drawn fibers are now fed in spinning frames for production of single yarn.

f) WINDING:

Single yarns are will into spools or cone as desired in the winding machine.

g) TWISTING:

Single yarn when required by the buyers is twisted in 2 ply/3 ply or 4 ply as per specification.

h) PRECISION WINDING:

As per specification of the buyers, the single or twisted yarn is wound in precision winding

for more compacting.

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i) INSPECTION, PACKING & MARKETING:

The Manufactured jute yarn/ twine will be finally inspected/checked and packed for export

marketing. The process flow diagram is detailed below:

PROCESS FLOW DIAGRAM of AKHWAN JUTE SPINNING MILLS LTD

Breaker Card

Finisher Card

1st Drawing

2nd

Drawing

2nd

Drawing Intermediate

3rd

Finisher Drawing

Spinning

Mackroll Winding

Precision Winding

Packing

(Pallet packing machine)

Twisting

Raw Jute from Market

Raw Jute in Mill Godown

Raw Jute in Factory as

Required

Software/Spreader

Raw Jute in Pile

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TECHNICAL SERVICE AND QUALITY CONTROL:

Bangladesh over the past two decades gained expertise in jute yarn manufacturing industry.

So the technical competence, operational expertise and expert in the relevant industry are at

hand today. The jute technologists of the country are fully conversant with the technology

involved in various stages involved in manufacturing of yarn. So that recruiting of

experienced and skilled technical personnel would not be a mammoth task. Besides, the

project will have its own quality control equipment to maintain proper quality control

measures for exporting the quality products.

In order to manufacture High Quality Jute Yarn/Twine, it would be necessary to pay

particular attention to the following quality factors:

Given proper treatment, jute yarn can be mixed with major synthetic/woolen/ acrylic/ cotton

yarn in the twisting / weaving/ finishing process which can be used for the manufacture of

fabrics, backing cloth and other upholstery materials. Production on the use of quality of raw

jute will primarily depend on the use of quality of raw jute and the application of proper

technology subject to strict control of following manufacturing variable etc.

1. Uniformity in the yarn count and evenness of the yarn.

2. Appropriate tensile strength of yarn and uniformity of strength throughout the

yarn length.

3. Minimum hairy surface of yarn.

The quantity of Jute Yarn/Twine to be produced would primarily depend upon the quality of

raw jute to be used in the batch and secondarily depend upon the stillness of the operations,

appropriate machine control and imposition of quality control measures.

In order to control quality and to produce quality product our strategy is to procure quality

jute and adopt cutting edge technology in Jute Yarn/Twine machinery. The back process and

frontward process machinery will be selected in a balanced way and the key machinery has

been planned to import from reputed manufacturer so that production harmony and quality

control assurance could be checked thoroughly.

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RAW MATERIALS:

The project will be based on 100 % local raw materials such as raw jute, Jute Batching oil,

emulsifier, etc. The requirements of raw materials are as under:

Year 1st year 2

nd year 3

rd year 4

th year 5

th year

Raw materials 199299840 130790520 155703000 166083200 183521936

Inventory 90

days

61949034 51250507 58129120 62004395 67338433

Sl. No ITEM UNIT QUANTITY

01 Raw Jute MT 3986

02 Jute Bashing oil Lt/Kg 99127

03 Soap Kg 3304

04 Main label Dozen 310989

05 Core label Dozen

06 Printed polybag Dozen 92325

07 Tag pin Dozen

08 Sewing thread Cone

09 Tissue paper Dozen

10 Scotch tape Roll 821

11 Gum tape Roll 1232

12 Pp brand Roll 411

13 Carton Pcs 38874

14 Soda ash Kg

15 Packing materials Lot (poly) 0.5

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UTILITIES:

POWER:

The project will require a connected load of 450 KW for production process and domestic

use. The Maximum demand would be 450 KW. Required power will be met from REB.

Moreover, the project will procure Diesel generators for supply of power in case of power

failure. The cost of generator has been considered with the cost of local machinery.

Power

Connected Load(KWH) 450

Maximum Demand(KWH) 450

Peak Hour 6

Off-Peak Hour 18

WATER:

The project will require 6,000 liters of water per day for domestic and factory use. The

required water will be available premises. The cost of deep tube well has been incorporated in

the local machinery cost.

TRANSPORT:

The project will procure 9 sited microbus and 2 covered van (3 MT carriers Lorry) for

carrying raw materials and officials. The cost of transport vehicles has been estimated BDT

5100000.

FUEL AND LUBRICANTS:

The annual requirement of fuel and lubricating oil and gas has been estimated BDT 113800.

SAFTY PROVISION OTHER ASSETS:

The project will require furniture office equipment and first aid box cost of which has been

estimated at BDT 1.3 million. As Jute Manufacturing unit is susceptible to firefighting

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equipment and accessories will be required, cost of which has been estimated BDT 1.2

million.

STORES AND SPARES:

The stores & spares cost has been estimated at TK 169415.97, 338831.93, 38831.933,

338831.93 and 338831.93 of its machinery cost for the 1st, 2nd, 3rd, and 5th year of

operation respectively for a 90 days tried up period.

POLLUTION CONTROL AND WASTE DISPOSAL:

Jute is a green product so that Jute Yarn unit will not pose any pollution and subsequently

there would not be any waste problem. Rather various wastages of the unit will be sold

locally.

WORKFORCE:

The project would require 480 personnel for its operation.

The requirement of technical and other personnel based on three shifts per day has been

estimated as follows:

A. TECHNICAL:

NAME OF THE POST NO OF THE POST

1. MANAGER PRODUCTION

2. MECHANICAL ENGINEER

3. ASST. MECHANICAL ENGINEER

4. ELECTRICAL ENGINEER

5. SENIOR PRODUCTION OFFICER

6. QUALITY CONTROL OFFICER

7. MECHANICAL SUPERVISOR

8. PRODUCTION OFFICER

9. ASST. PRODUCTION SUPERVISOR

10. QUALITY CONTROL SUPERVISOR

11. QUALITY CONTROL ASSISTANT

12. JUTE SUPERVISOR

13. FINISHING SUPERVISOR

14. STORE ASSISTANT

15. TIME KEEPER

01

01

01

01

02

01

02

01

02

01

02

01

01

03

02

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16. SUB STATION ATTENDAN

17. LABOUR OFFICER

18. SECURITY OFFICER

19. KOYAL (JUTE)

20. JACHANDER (JUTE)

21. GUARD

22. SWEEPER

02

01

01

01

10

02

01

TOTAL 40

B. WORKER:

NAME OF THE POST NO OF THE POST

1. SKILLED WORKER

2. UN SKILLED WORKER

300

120

TOTAL 410

C. GRENERAL AND ADMINISTRATIVE:

NAME OF THE POST NO OF THE POST

1. GENERAL MANAGER

2 MANAGER (ADMIN & PERSONNEL)

3. MANAGER (MARKETING)

4. CHIEF ACCOUNTANT

5. MANAGER (COMMERCIAL)

6. PURCHASE OFFICER

7. STORE OFFICER

8. ASST. STORE OFFICER

9. ASST. PURCHASE OFFICER

10. COMMERCIAL OFFICER

11. ASST. ACCOUNTANT

12. P.A. TO M.D.

13. ACCOUNTS CLERK

14. SECURITY INSPECTOR

15. CASHIER

16. WAGES CLERK

01

01

01

01

01

01

01

02

01

02

02

02

02

01

01

01

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17. TELEPHONE OPERATOR

18. DRIVER

19. PEON

20. SWEEPER

01

04

02

02

TOTAL 30

Total: 40 + 410 + 30 = 480 Persons.

SCHEDULE OF IMPLEMENTATION:

The project will start commercial operation within 9 months from the date of opening of

Letter of Credit for machinery.

1. LAND AACQUISITION/ TRANSFE

2. STARTED OF LAND DEVELOPMENT

3. COMPLETION OF LAND DEVELOPMENT

4. START OF CONSTRUCTION OF BUILDING

5. COMPLETION OF HALF CONSTRUCTION

6. ESTABLISHMENT OF LETTER OF CREDIT

7. COMPLETION OF FULL CONSTRUCTION

8. ARRIVAL OF MACHINERY AT PORT

9. ARRIVAL OF MACHINERY AT SITE

10. ERECTION & INSTALLATION

11. ELECTRIFICATION & SANITATION

12. UN FORESEEN DELAY

13. TRIAL RUN

14. COMMERCIAL OPERATION

1st month

1st month

1st month

2nd

month

8th

month

3rd

month

10th

month

10th

month

10th

month

11th

month

11th

month

11th

month

12th

month

12th

month

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MARKETING ASPECTS INTRODUCTION:

Jute is a valued natural fiber with unique characteristics and long standing end-use

applications. It played an even stronger role in the post second world war recovery and

growth with traditional end-uses such as sacking, hessian and carpet backing. Increasing

production was, in fact, unable to meet the needs of rapidly expanding demand, resulting

shortages in and for which manufacturers of synthetic substitutes were able to compete with a

far larger potential capacity, budgets for promotion and lower prices. The demand for jute in

export markets for the traditional products declined in the face of this competition with carpet

backing the first to suffer in the United States, followed by sacking, loss of markets due to the

collapse of the former USSR and most recently a sharp decline in Europe.

The decline in world markets and falling real values led to a substantial reduction in

production in China and Thailand and a gradual reduction in hectarages and volumes in

Bangladesh. These factors were, however, more than compensated by the increase in

consumption of jute sacking in India, where it enjoys a measure of regulatory support and in

production due mainly to higher yield rates, but not in hectarages devoted to jute. Indian

production of jute has not kept pace with increasing demand and India is now a major fiber

importer from Bangladesh. Global production and consumption of jute has therefore become

and is increasingly concentrated in Bangladesh. Diversified or non-traditional jute products

production has been growing in Bangladesh in addition to that of yarn.

A general consensus was expressed in different workshops that jute could once again

compete for export markets provided that action were taken to increase productivity of higher

quality fiber together with a decrease in costs of conversion. This was based on the facts that:

synthetic substitute prices were rising due to higher oil costs and were likely to continue to do

so; that technology allowed production today of higher quality yarn and fabrics; and that the

scope for increased competitiveness was substantial. There have been positive developments

in the form of a growing market for yarn used in woven carpets and end-user preference for

food grade sacks for carrying some commodities. Jute yarn and twine, produced from raw

jute was being used domestically since long. However, Bangladesh started exporting jute

yarn and twine from 1978.due to eco-friendly to the environment, its demand in increasing

day by day.

Source: Jute Market Report -1- June 9th, 2009 Bangladesh

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The Environmental Benefits of Jute

Jute is a versatile, natural fiber that has been used for thousands of years to make things such

as rope, twine, hessian bags, rugs, and much more.

While it‘s still being used extensively around the world, it‘s not as popular as it could (or

should) be - especially considering its outstanding environmental benefits. Given the

increasing focus on environmental issues these days, jute might just be in for a crack at the

big-time.

Here are the major environmental benefits of jute:

Jute cleans the air: Studies indicate that, one hectare of jute plants can consume up

to 15 tons of carbon dioxide and release 11 tons of oxygen during the jute growing

season (about 100 days).

Less fertilizer, herbicides, & pesticides: Relatively modest amounts of fertilizer,

herbicide, and pesticides are required for jute cultivation - especially in comparison to

cotton.

Improves soil conditions: During jute cultivation, large portions of leaves and roots

remain with the soil. This results in improved soil fertility.

Improves other crops: When jute is rotated with other crops, it can improve the

health of those other crops and reduce their risk of attracting pests and disease.

Jute has high biological efficiency: Jute can be harvested within 4 to 6 months and

can produce 20 to 40 ton of dry stem per hectare. In comparison, the fastest growing

trees take between 10 and 14 years to mature. Also, trees will only produce 8 to 12

ton, per hectare, annually.

Sound agricultural practices: Studies have found that typical jute agricultural

practices are environmentally sound - they cause minimal impact to the natural

environment.

Biodegradability: Jute products are 100% biodegradable and recyclable. They can

also be disposed of without causing environmental hazards.

As long as the processing of jute is done in an eco-friendly way, jute has enormous potential

as an eco-friendly alternative to its mainstream rivals such as cotton and trees.

Source: The Environmental Benefits of Jute Natural Environment Blog

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PROSPECTS OF JUTE AND JUTE GOODS IN THE GLOBAL MARKET:

According to a report published by the FAO, global demand for jute and jute goods declined

by 16 per cent from 3.4 million tones of fiber equivalent in 1988-90 to 2.9 million tons

during 1998-2000. This happened because of the influence of two interrelated factors, such

as the intensity of competition with, and the displacement by, synthetic fibers and extension

of commodity bulk handling facilities. The decline of jute demand, in the period under

consideration, was much higher in developed countries (40 per cent) compared to that in the

developing countries (10 per cent). Competitiveness of jute and jute goods relative to

polypropylene is determined by both price and non-price factors. Between 1988-90 and

1998-2000, prices for polypropylene fiber decreased on an average by 2 per cent per year in

real terms, while world demand grew at approximately 8-10 per cent each year between

1988 and 2000. During the same period, world consumption of jute fiber and jute products

declined by 1.54 per cent per year to 2.9 million ton in 2000. It is important to examine how

strong the substitutability of jute and polypropylene would be in the coming years. 2

Prospect of increasing the global demand for jute and jute goods largely depend on the

extent of use of jute goods for different purposes, as well as its relative competitiveness vis-

à-vis synthetic products. Polypropylene, which is the end product of petroleum, has become

more expensive in recent years, mainly due to substantial rise of petroleum price. This was

likely to lead to the rise in the consumption of various substitutes of polypropylene,

including jute goods, at the international level. Analysis shows that substitutability of jute

and jute goods vis-à-vis polypropylene has been declining over time, as shown in Table 5.

One could infer from the figures presented that the demand for artificial fibers will be

gradually fulfilled by natural fibers. However, a low substitutability of polypropylene

indicates that global jute market would keep growing approximately at the current level in

the upcoming years.

Table 5: Trend of Production Change under Different Scenarios

Period Polypropylene Jute Goods Total

1980-2003 10.14 0.18 6.98

1985-2003 7.62 0.88 5.95

1990-2003 5.96 -2.82 4.14

1995-2003 5.52 -0.71 4.47

2000-2003 -0.18 -0.33 -0.20

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Source: Authors‘ own estimation based on Industrial Commodity Statistical Year Book,

United Nations According to FAO (2003), although bulk handling is getting popular in the case of food and

other items, due to the substantial amount of capital required for developing such facilities,

bulk handling has not been widespread in developing countries where infrastructure

facilities have often been poor. Utilization of jute as a diversified product has been on the

rise though its share in the total production is still insignificant.

The United Nations (UN) has declared 2009 as the ‗Year of Natural Fiber‘ in order to

popularize the use of natural fibers in manufacturing goods. Consumers of developed

countries have started to show increasing interest in buying more environment-friendly

products. From this perspective, jute is considered as demandable items because of its

biodegradability and environment-friendly nature. Besides, anti-polythene movement is also

getting popular in developed countries. Under such circumstances, jute and jute goods have

considerable prospect and potentialities in the coming years. 4

In the case of Bangladesh, there is ample scope for the development of use of jute and jute

goods at the domestic level. Government regulations as regards ban on polythene, if

appropriately implemented, would enhance the use of jute goods in the country. There is a

huge amount of unutilized capacity in most of the jute mills. If those machines can be

utilized effectively by using a part of the raw jute, which is at present exported without any

substantial value addition, production and income from jute goods could be substantially

increased. In this context, duty free market access in India, accorded to Bangladesh under

the South Asian Free Trade Area (SAFTA), should create prospects for more exports to the

Indian market. Thus, given the discernible market signals, there is considerable room to

enhance both production and export of jute goods.

Government of Bangladesh is trying to rejuvenate the jute sector through various activities

and policy decisions. Introduction of High Yielding Variety (HYV) jute seed, popularizing

the use of modern agricultural practices, encouraging cultivation of good quality fiber,

promotion of jute diversified products (JDPs) etc. are the major areas of intervention of the

Government of Bangladesh. A huge demand for various diversified jute products viz.

carry/shopping bags, shoes, composite materials, geo-textiles, home textiles, handicrafts, gift

items, pulp and paper etc. is continuously increasing in both local and foreign markets. The

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future prospect of this eco-friendly natural fiber-jute is expected to increase day by day with

effective support from the national governments of the producing countries through adoption

of appropriate policies like banning of synthetic packaging materials and enactment of

regulations favorable towards its cultivation, diversification and marketing.

The most recent statistics on jute is in current fiscal year of 2010-2011 in eight months the

country earned 7344000 USD which is 51% more than preceding year. During this time raw

jute of 240,000,000 USD, 334,000,000 USD of jute yarn/twine and 128,700,000 USD of jute

bag and other jute product have been exported that lead the sector in second position after

RMG by overtaking frozen fisheries sector in export earnings. Source: Daily ―Prothom-Alo‖

8th

and 10th

March 2011.

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OVERVIEW OF JUTE MANUFACTURING INDUSTRY OF BANGLADESH:

Jute manufacturing sector is one of the oldest traditional manufacturing sectors of

Bangladesh, which emerged in erstwhile East Pakistan in the early 1950s. During the 1960s

and 1970s major share of the manufacturing sector in national income and manufacturing

employment was accounted for by this sector. Exports of jute and jute goods were the two

most important sources of foreign exchange of Pakistan during the 1960s. However, both

share and importance of jute and jute goods in manufacturing, export and overall foreign

exchange earnings, and the Gross Domestic Product (GDP) have gradually declined over

time. The sector currently accounts for a more 3.9 per cent of the country‘s total export,

which is of extremely low significance when compared to its contribution in the overall

export observed during the1970s (89.9 per cent in 1973). The ascendancy of the export-

oriented readymade garments (RMG) was a major reason. However, this was also the result

of successive policies pursued by Bangladesh alongside decline in the demand for jute goods

in both domestic and international markets over time.

In July 2007, Government of Bangladesh took a number of decisions as regards public sector

jute mills and their poor performance including closing down mill, downsizing workers

resulting 50% downsize of workforce of BJMC. The government agreed to provide Tk. 2000

million to finance procurement of raw jute of which Tk. 1380 million was to be financed

from banks through issuing of government bonds. Procurement target was set at 5.5 million

ton of raw jute from 58 procurement centers for the 18 jute mills. Government also took the

initiative to sell 120 acres of land (out of BJMC‘s 1,200 acres of land) to generate more funds

for the industry.

Production trend of the jute manufacturing sector can be broadly categorized into four

periods: first phase (1950-1970); second phase (1972-1981); third phase (1982-1990); and

fourth phase (1991-onward) (Figure 1). During these four phases, jute manufacturing sector

had experienced various changes in policies, and also in the pattern of utilization of jute and

jute goods. In the pre-independence period, jute mills were owned by a small number of

private entrepreneurs. During this phase, average hessian production was 155,586 metric ton

(MT) per year, of which 87 per cent was exported; the comparable figures for sacking were

267,614 MT and 78 per cent respectively (Table 1). Production reached its peak in 1969, with

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an output of 5.74 lakh MT. Due to political instability and damages caused during the year of

Liberation in 1971, operations of jute mills were interrupted. Consequently, production

declined in 1971 and 1972. Thereafter, production started to increase. In the second phase

(1972-1981), government decided to nationalize the jute manufacturing sector, and took

control of all the private sector jute mills. During the 1970s, average level of production of

hessian was about 165,000 MT, of which 94 per cent was exported, while comparable figures

for sacking were 225,460 MT and 86 per cent respectively. Growth in the production of jute

goods between 1960 and 1980 can be attributed to the growth in production of hessian,

sacking and carpet backing cloth (CBC) products.

Table 1: Periodic Trend of Jute Goods Production, Periodic Average (in Metric ton)

Period Hessian Sacking CBC Yarn/Twine

Upto 1970

155,586 267,614 23,929 0

(86.9) (78.2) (96.7) (0.0)

1972-80

165,033 225,458 63,578 1,953

(93.7) (86.3) (95.5) (73.3)

1981-91

219,048 270,556 80,415 61,090

(94.8) (83.7) (97.0) (69.1)

1992-05 87,968 196,839 39,777 163,830

(99.5) (71.7) (89.7) (90.8)

Note: Figures in parentheses indicate export as percentage of total production of that period. Source: Based on BJMC (1979-80 – 2005-06), BJMA (1972-73 – 1978-79), BJMC as cited

in IDRL (1992) (1960-61 – 1971-72), Alim (1978).

Production of yarn/twine accounted for a small share of total production during the 1970s.

During the 1980s (third phase), the then government decided to denationalize a number of

jute mills in line with the initiative of economic liberalization. A mixed trend is observed in

the production of jute goods during this phase, which reached its peak in 1990 with a

production of 5.96 lakh MT. Production of yarn gradually increased in the 1980s. Most

importantly, production of hessian and sacking — two major traditional products gradually

declined, especially since the late 1980s. Production of CBC declined as well. In the fourth

phase (1990-onward), following the suggestions of the World Bank, government started to

denationalize a number of other public sector jute mills which resulted in the shutdown of

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many jute mills as well. However, production of jute goods has not picked up even after

adoption of various policy measures. Indeed, production of traditional products such as

hessian, sacking and CBC has continued to decline with the exception of growth in the

production of yarn and twine. Yarn/twine now accounts for the major portion of jute goods

and over time, its production has also been on a steady rise. During 2006, Bangladesh‘s share

in the global production of jute goods was approximately 18 per cent.

Both public and private sector jute mills sell their products in either the domestic market or

the international market (Figure 2). Although overseas export comprised major share of

Bangladesh‘s jute goods production, domestic sale has been posting a rise, which now

accounts for 38 per cent of the total production. Bangladesh is the leading exporter of jute

goods in the world and her share in the global market is gradually increasing—which

accounted for 60 per cent of the global exports in 2006. If export of raw jute is taken into

account, total export would reach more than 75 per cent. According to Bangladesh Jute

Association (BJA), Bangladesh exports about 25 lac bales of jute goods which accounted for

about 56 per cent of the total raw jute grown in the country. It is worth noting here that

Bangladesh and India currently meet more than 90 per cent of the global export demand for

jute and jute goods; to compare, this share was 79 per cent in 1970.

USES OF JUTE YARN & TWINE:

Jute Yarn and twine have got multi various uses. Jute sacks, bags, carpet backing cloth, mats,

carpets, decorative fabrics, rope, upholstery and packing materials, etc. are manufactured

from jute yarn and twine. Generally medium and low quality jute is used for manufacturing

yarn and twine. Because of easy sewing (either by hand or machine), no fragility of jute

packing/binding as well as for environment friendliness, uses of jute yarn/ twine (side by side

jute goods) are increasing in developed countries of Europe, USA, Canada, Australia& Japan.

The dyed and waxed jute yarn and twine i.e. Geo- jute (a very good binder) is used to protect

erosion of soil. They are further used in reinforced plastic of plastic laminated with jute and

the manufacture of propylene yarn. The propylene yarn is manufactured by mixing one ply

each of jute yarn, wool yarn, cotton yarn and synthetic yarn.

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JUTE YARN & TWINE IMPORTING AND EXPORTING COUNTRIES:

Bangladesh is the main jute yarn and twine exporting Country. India is the second largest

exporter. Thailand and China also export smaller amount of jute yarn and twine as well as

jute goods. India and china have their vast domestic markets for using jute goods. India also

imports raw jute from Bangladesh. Historically, Bangladesh has advantage for production of

jute. In future, Bangladesh may become the monopolist exporter of jute yarn and twine

because of her edge on price consciousness in the developed countries, jute is gradually

regaining its lost ground. Almost all the European and African countries are the major

importers of jute yarn and twine. Besides, many Asian countries including Japan and USA

import jute yarn and twine. EU and other European countries shares almost 65% of the total

export followed by Africa which share is about 15% and USA which in capturing about 10%.

Demand and Supply Analysis of Jute Yarn & Twine

WORLD DEMAND FOR JUTE YARN:

The demand for jute yarn and twine in the international market particularly in Europe and

Africa is increasing. Following reasons may be mentioned in this regard.

i) In Europe easy availability of alternative jobs has restricted supply of labor to the

jute industry. Moreover, wages have also increased in European Jute mills. Thus

production of jute yarn and twine decreased in the past giving rise to the import of

the same from the jute producing countries.

ii) The demand for jute yarn in mainly due to its use in the carpet manufacturing

industries. It is felt that cost of production of synthetic, Substitute of jute has

increased considerably along with the tremendous price like of petro-chemical

based compounds. Thus the use of Jute yarn/Jute goods is expected to increase in

future, than what it was in the past.

iii) Over and above, intensive and extensive objective tests conducted by jute and

textile Engineering Institutes in Europe & USA revealed the technical superiority

of jute carpet backing over synthetic carpet backing in respect of quality and

durability are congenial to health. In Europe, environmentalists also favor natural

fibers as household items than synthetic fibers.

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On the basis of the above and considering price rise of petroleum based products and

worldwide movement for pollution free environment, we may reasonably and conservatively

assume that the world trade demand for conservatively assume that the world trade demand

for jute yarn (as other jute goods) may increase at the rate of 5% per annum in the coming

year.

It has been gathered from the officials of Bangladesh jute Spinners Association (BJSA) that

during the past few years, Bangladesh claimed about 60% to 65% of the total world export of

jute yarn and twine. The approximate world demand of jute yarn and twine in the last 5 years

ranged between 220000 and 250000 MT (2000-2001)

Calculated on the basis of the above, projected world trade demand for jute yarn and twine

(assuming 5% increase) in the coming years will be as under:

Table - III

Projected world Demand for Jute Yarn & Twine

Year World Demand in MT

2002-2003 262,000

2003-2004 275,000

2004-2005 289,000

2005-2006 303,000

2006-2007 318,000

DOMESTIC DEMAND:

Jute Yarn and twine have also local consumptions. It meets domestic demand for making

carpet, carpet backing cloth, bags, ropes, etc. local consumption of jute yarn and twine for the

last 5 years was around 20,000 MT to 25,000 MT. The local demand for jute yarn and twine

may increases substantially due to Govt. ban of polythene goods on health and environment

pollution grounds. Assuming 10% growth of domestic demand of jute yarn and twine in the

changed circumstances, the projected demand is shown in table V.

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Table – V

Projected domestic demand of jute yarn

Year Local consumption in MT

2002-2003 27,500

2003-2004 30,250

2004-2005 33,275

2005-2006 36,600

2006-2007 40,260

It may be noted that apart from the mill‘s requirement of jute yarn for producing jute tape,

carpet, etc. there is evidently an increasing need for rope to be used in various developing

sectors including water transport and so on. Jute yarn in an intermediary product used as raw

materials in the jute goods and other manufacturing industries.

TOTAL DEMAND FOR JUTE YARN:

The estimated total demand for jute yarn and twine can be represented as under in table –VI

Table –VI

Estimated total demand for jute yarn and twine

(In metric tons)

Year Export Demand Local Demand Total Demand

2002-2003 262,000 27,500 289,500

2003-2004 275,000 30,250 305,250

2004-2005 289,000 33,275 322,275

2005-2006 303,000 36,600 339,600

2006-2007 318,000 40,260 358,260

GAP BETWEEN DEMAND AND SUPPLY:

Assuming 5% increase of share of Bangladesh in the world market, year wise projected world

supply gap for jute yarn and twine has been estimated and presented in table vii.

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Table- VII

Estimated Gap between Demand and Supply

Year Export Demand Bangladesh‘s Supply Supply Gap

2002-2003 262,000 168,000 94,000

2003-2004 275,000 176500 98,500

2004-2005 289,000 185,000 104,000

2005-2006 303,000 194,000 109,000

2006-2007 318,000 204,000 114,000

It may be seen from Table- vii that the estimated supply gap may be increase from 104,000

MT to 114,000MT in 2007.

EXPORT OF JUTE YARN FROM BANGLADESH AND EXISTING CAPACITY:

Data in respect of export of Jute yarn from Bangladesh during the period from 1998-1999 to

2002-2003 are presented in table - I.

Table - I

Export of Jute Yarn

Year Quantity in MT Value in Crore TK.

19998-1999 130,562 358.23

1999-2000 144,400 405.52

2000-2001 160,916 469.89

2001-2002 183,625 557.71

2002-2003 189,679 584.00

Export of Jute yarn has increased from 130,562 MT in 1998-1999 to 189-679 MT in 202-

2003. The annual growth of export during the last five years was 11 percent. The average

export made during the periods was 133.036 MT. In terms of value, the export of Jute Yarn

has risen from Tk. 358.23 crore in 1998-1999 to Tk 584.00 crore in 2002-2003 showing a rise

of 16 percent.

At present, there are 50 export-oriented jute yarn and twine manufacturing mills in the

country. All these units are in the private sectors. Total installed capacity per day and 300

working days in a year stands at about 3.00 lac MT. However, from BJMA it is known that 6

units are closed since long due to various reasons having capacity of about 30.000 MT.

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Considering that and assuming optimum capacity Utilization of the remaining mills (an

average rate of 65%), the effective capacity of these units may be considered at about 176000

MT.

PROJECTED EXPORT FROM BANGLADESH:

It appears from Table – I that in terms of quantity, export of jute yarn from Bangladesh has

increased @11% while in term of value, the same has risen 16% which was quite

encouraging and substantial. To be on the conservative, the export of jute yarn from

Bangladesh may be projected @10% per annum as depicted in table-II.

Table II

Projected export of Jute yarn

Year Quantity in MT

2002-2003 189,679

2003-2004 202,735

2004-2005 215,791

2005-2006 228,847

2006-2007 241,903

DISTRIBUTION CHANNEL AND AVIALABILITY OF RAW JUTE:

The proposed unit will be on 100% export oriented one and entire product will be exported to

abroad through the following distribution channel:

FACTORY

COMMISSION AGENT IMPORTERS

END USERS IMPORTERS

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The basic raw material is raw jute. The other raw materials are jute batching oil and

emulsifier. Raw jute is abundantly available in Bangladesh for supply to the jute spinning

mills. Other raw materials are also locally available.

The proposed project will procure its raw materials from the local market as per its

requirement at current market prices and will not face any problem in procurement of raw

materials.

The availability of raw jute and internal consumption in the country is given next:

Product of raw jute 42.77 lac bales

Plus carry over 8.00 lac bales

Total 50.77 lac bales

Average internal consumption of raw jute: 32.00 lac bales.

/a BJSA, /b 1 bale = 180 Kg.

PROSPECTIVE IMPORTER OF JUTE YARN AND TWINE:

The product will mainly be sold through the following principles:

01. N. V. Spinning Blanquaert. BELGIUM

02. Bealieu of America Inc. USA

03. Anmaha services Ltd. UK

04. Marubeni Corporation, OSAKA. JAPAN

05. Balta Industries B. V. BELGIUM

06. NJL Group B. V. HOLLAND

07. REB Wilcox. UK

08. Biggrefier

09. Comtrade Ltd.

10. Feltex Carpet. NEW ZEALAND

11. W. G. Clasen. GERMANY

12. Weitex Co. Ltd. CHAINA

13. Sonvigo S. A. SWITZERLAND

14. Codefine S. A. SWITERLAND

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OPPORTUNITIES AND THREATS:

Due to worldwide movement for green

product demand for natural fiber instead of

synthetic fibers in households is growing

again, especially in developed countries

Export schedule may be disrupted due to

unfavorable circumstances like political

instability, power problem, inadequate

shipping facility etc, But these are

manageable.

Bangladesh enjoys comparative cost

advantage of producing jute and jute goods

from its comparators, As such; export

potential in future is still prospective.

Price of raw jute is increasing sharply from

year to year which may result in increasing

cost of raw materials.

Mini Jute spinning mills has advantage of

handing smaller number of workers side by

side manageable amount of exportable jute

goods.

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CONCLUSION AND RECOMMENDATION:

In view of the world trade and export of Jute Yarn and twine, as depicted in the report, the

following conclusion and recommendation may be drawn.

a) Jute yarn and twine have, no doubt, a growing global demand as because the

developed countries in recent times have reverted to using natural fibers in the

households on environment and health grounds.

b) Mini jute spinning mills having annual capacity of 2,000 MT to 5,500 MT may be

considered for financing. Only the entrepreneurs possessing good business

experiences and capacity to explore international markets should be encouraged. In

fact, experience and marketing competence of the sponsors are the essential pre-

requisite for running an export- oriented jute yarn and twine project successfully.

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AKHWAN JUTE SPINNING MILLS LTD.

Financial Aspects

01 Production Capacity & Capacity Utilization

02 Projected Balance Statement

03 Projected Income Statement

04 Projected Retained Earnings Statement

05 Projected Cost of Goods Sold Statement

06 Working Capital Assessment

07 Break Even Analysis

08 Projected Cash Flow Statement

09 Ratio Analysis

10 Calculation of Payback Period

11 Calculation of IRR

12 Loan Repayment schedule

13 Fixed Assets and Depreciation Schedule (For projected 5 years)

14 Operating expenses (For projected 5 years)

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AKHWAN JUTE SPINNING MILLS LIMITED Production Capacity and Capacity Utilization

The 100% Capacity Of this Project Total 5440 Unit in (M.T.), based on two shifts of

operation 16 hour each and 300 days in a year and the market price will be Tk 76,325 per

M.T.

This capacity will be increased up to 85%

Particulars YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Installed Capacity in unit 5,440 5,440 5,440 5,440 5,440

Capacity Utilization in unit 60% 70% 75% 80% 85%

Production in unit: 3,264 3,808 4,080 4,352 4,624

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AKHWAN JUTE SPINNING MILLS LIMITED

Projected Balance Sheet Amount in BD

PROPERTY AND ASSETS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

NON-CURRENT ASSETS

Fixed assets- at cost

337,021,300

337,021,300

337,021,300

337,021,300

337,021,300

Preliminary and Pre-

operating exp.

1,500,000

1,200,000

900,000

600,000

300,000

IDCP

13,200,000

9,900,000

6,600,000

3,300,000

-

CURRENT ASSETS

Bill Receivables

41,520,800

48,440,933

51,901,000

55,361,067

58,821,133

Closing stock

61,949,034

51,250,507

58,129,120

62,004,395

67,338,433

Cash and cash equivalent

14,546,788

14,983,192

15,432,687

15,895,668

16,372,538

TOTAL

469,737,922

462,795,932

469,984,107

474,182,429

479,853,405

CAPITAL AND LIABILITIES

CAPITAL AND RESERVE

Shareholders' equity

2,500,000

2,500,000

2,500,000

2,500,000

2,500,000

Retained Earnings

12,605,930

29,552,783

48,940,508

67,875,249

85,919,338

Share money deposit

178,641,161

171,390,936

175,835,326

188,802,910

213,318,893

NON-CURRENT LIABILITIES

Accumulated depreciation

24,182,796

48,365,592

72,548,388

96,731,184

120,913,980

Term Loan

217,353,218

174,500,083

124,758,112

67,019,896

(0)

CURRENT LIABILITIES

Creditors

16,608,320

10,899,210

12,975,250

13,840,267

15,293,495

Liability for expenses

7,041,414

7,819,929

8,209,186

8,598,444

8,987,701

Provision for income tax

10,805,083

17,767,399

24,217,337

28,814,480

32,919,998

TOTAL

469,737,922

462,795,932

469,984,107

474,182,429

479,853,405

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AKHWAN JUTE SPINNING MILLS LIMITED Projected Income Statement

Amount in BDT

Particulars

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Turnover

249,124,800

290,645,600

311,406,000

332,166,400

352,926,800

Less: Cost of goods sold

174,719,526

185,085,887

195,535,287

212,032,885

231,126,917

Gross profit

74,405,274

105,559,713

115,870,713

120,133,515

121,799,883

Less: Operating expenses

28,443,886 28,443,886 28,443,886 28,443,886 28,443,886

Operating profit

45,961,389

77,115,828

87,426,827

91,689,629

93,355,997

Less: Financial expenses

17,147,834

29,736,097

22,847,262

14,851,016

5,569,336

Net profit before tax

28,813,555

47,379,731

64,579,565

76,838,614

87,786,661

Less: Income Tax @ 37.5%

10,805,083

17,767,399

24,217,337

28,814,480

32,919,998

Net profit after tax

18,008,472

29,612,332

40,362,228

48,024,133

54,866,663

AKHWAN JUTE SPINNING MILLS LIMITED Projected Retained Earnings Statement

Amount in BDT

Particulars YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

As per last

Account

12,605,930

29,552,783

48,940,508

67,875,249

Add: Net Income /(Loss) during

the year

18,008,472

29,612,332

40,362,228

48,024,133

54,866,663

18,008,472

42,218,262

69,915,011

96,964,641

122,741,912

Less: Dividend paid 30%

5,402,541

12,665,479

20,974,503

29,089,392

36,822,574

TOTAL

12,605,930

29,552,783

48,940,508

67,875,249

85,919,338

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AKHWAN JUTE SPINNING MILLS LIMITED Projected Cost of goods sold Statement

Amount in BDT

Particulars YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Opening W/P - 7,971,994 5,231,621 6,228,120 6,643,328

Opening stock of raw material - 33,216,640 21,798,420 25,950,500 27,680,533

Add : Raw material purchase 199,299,840 130,790,520 155,703,000 166,083,200 183,521,936

at Tk 50,000 Per

M. Ton 199,299,840 171,979,154 182,733,041 198,261,820 217,845,797

Less: Closing stock of W/P 7,971,994 5,231,621 6,228,120 6,643,328 7,340,877

Closing stock of raw

material 33,216,640 21,798,420 25,950,500 27,680,533 30,586,989

158,111,206 144,949,113 150,554,421 163,937,959 179,917,931

Add. Manufacturing expenses 37,368,720 43,596,840 46,710,900 49,824,960 52,939,020

Cost of production 195,479,926 188,545,953 197,265,321 213,762,919 232,856,951

Add: Opening stock of finish

goods - 20,760,400 24,220,467 25,950,500 27,680,533

Less: Closing stock of finished

goods 20,760,400 24,220,467 25,950,500 27,680,533 29,410,567

Cost of goods sold 174,719,526 185,085,887 195,535,287 212,032,885 231,126,917

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AKHWAN JUTE SPINNING MILLS LIMITED Projected Cash Flow Statement

Amount in BDT

Particulars YEAR 2 YEAR 3 YEAR 4 YEAR 5

Net

Income 29,612,332 40,362,228 48,024,133 54,866,663

Adjustment to reconcile net

income………

Less: Increase in Current assets

Bill

Receivables (6,920,133) (3,460,067) (3,460,067) (3,460,067)

Closing stock

(6,878,613) (3,875,275) (5,334,039)

Add: Decrease in Current assets

Closing stock 10,698,527 -

Less: Decrease in current liabilities

Creditors (5,709,110) - - 1,453,228

Add: Increase in Current Liabilities

Creditors

2,076,040 865,017

Liability for expenses 778,515 389,258 389,258 389,258

Provision for income tax 6,962,316 6,449,938 4,597,143 4,105,518

Add: Depreciation exp 24,182,796 24,182,796 24,182,796 24,182,796

59,605,242 63,121,580 70,723,006 76,203,357

Decrease in preliminary exp 300,000 300,000 300,000 300,000

Decrease in IDCP 3,300,000 3,300,000 3,300,000 3,300,000

Dividend (12,665,479) (20,974,503) (29,089,392) (36,822,574)

Increase in Share money deposit - 4,444,390 12,967,584 24,515,983

Decrease in share money deposit (7,250,225) - -

Loan paid (42,853,135) (49,741,970) (57,738,217) (67,019,896)

436,403 449,496 462,981 476,870

14,546,788 14,983,192 15,432,687 15,895,668

Closing Cash and Cash equivalent 14,983,191 15,432,688 15,895,668 16,372,538

Page 39: PROJECT PROFILE AKWAN

© Moshiur Rahman Page 39 of 45

AKHWAN JUTE SPINNING MILLS LIMITED Projected Working Capital Assessment

Amount in BDT

Particulars

BLOCK

PERIOD YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Raw

Materials 2 Month 33,216,640 21,798,420 25,950,500 27,680,533 30,586,989

Wages 1Month 3,114,060 3,633,070 3,892,575 4,152,080 4,411,585

Other

Overhead 1 Month 1,557,030 1,816,535 1,946,288 2,076,040 2,205,793

Work in

Process 12 Days 7,971,994 5,231,621 6,228,120 6,643,328 7,340,877

Finished

Goods 1 Month 20,760,400 24,220,467 25,950,500 27,680,533 29,410,567

Receivables 2 Month 41,520,800 48,440,933 51,901,000 55,361,067 58,821,133

Payables 1 Month (16,608,320) (10,899,210) (12,975,250) (13,840,267) (15,293,495)

Total 91,532,604 94,241,836 102,893,733 109,753,315 117,483,450

AKHWAN JUTE SPINNING MILLS LIMITED Break Even Analysis

PARTICULARS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Capacity Utilization 60% 70% 75% 80% 85%

Sales 249,124,800 290,645,600 311,406,000 332,166,400 352,926,800

Total Variable Cost 174,719,526 185,085,887 195,535,287 212,032,885 231,126,917

Contribution Margin 74,405,274 105,559,713 115,870,713 120,133,515 121,799,883

Contribution Margin per unit 22,796 27,721 28,400 27,604 26,341

Fixed Cost 28,443,886 28,443,886 28,443,886 28,443,886 28,443,886

Beak Even (% on Utilization ) 22.94% 18.86% 18.41% 18.94% 19.85%

Break Even Sales In Quantity ( M.ton) 1,248 1,026 1,002 1,030 1,080

Break Even in Sales 95,236,223 78,316,717 76,443,792 78,646,688 82,418,876

Page 40: PROJECT PROFILE AKWAN

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AKHWAN JUTE SPINNING MILLS LIMITED Ratio Analysis

Financial Ratio

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Growth Ratio:

Net Income Growth

Ratio N/A 64.44% 36.30% 18.98% 14.25%

11,603,860 10,749,896 7,661,905 6,842,530

64.44% 36.30% 18.98% 14.25%

Total Assets Growth

Ratio N/A -1% 2% 1% 1%

(6,941,990) 7,188,175 4,198,322 5,670,975

-1% 2% 1% 1%

Networth Ratio 41% 44% 48% 55% 63%

469,737,922 462,795,932 469,984,107 474,182,429 479,853,405

193,747,091 203,443,719 227,275,834 259,178,159 301,738,231

0.41 0.44 0.48 0.55 0.63

Profitability Ratio :

Gross Margin 29.87% 36.32% 37.21% 36.17% 34.51%

Net Margin 7.23% 10.19% 12.96% 14.46% 15.55%

Operating

Margin 18.45% 26.53% 28.07% 27.60% 26.45%

Return on Investment 8.55% 14.06% 19.16% 22.80% 26.05%

Return on Capital

Employed 7.01% 12.54% 18.34% 23.56% 29.09%

28,813,555 47,379,731 64,579,565 76,838,614 87,786,661

411,100,309 377,943,802 352,033,946 326,198,055 301,738,231

0.070 0.125 0.183 0.236 0.291

Activity Ratio:

Receivable in Days 60 60 60 60 60

Payable in

Days 30 30 30 30 30

Liquidity Ratio:

34,454,817 36,486,538 45,401,773 51,253,191 57,201,194

34,454,817 36,486,538 45,401,773 51,253,191 57,201,194

1.63 1.74 1.48 1.39 1.31

Net Working Capital 29.19% 31.82% 36.19% 38.46% 40.13%

118,016,622 114,674,632 125,462,807 133,261,129 142,532,105

34,454,817 36,486,538 45,401,773 51,253,191 57,201,194

0.29 0.32 0.36 0.38 0.40

469,737,922 462,795,932 469,984,107 474,182,429 479,853,405

58.75% 56.04% 51.64% 45.34% 37.12%

Interest Cover (Times) 1.68 1.59 2.83 5.17 15.76

Page 41: PROJECT PROFILE AKWAN

© Moshiur Rahman

AKHWAN JUTE SPINNING MILLS LIMITED Fixed Asset & Depreciation Schedule (For Projected years)

Name of Asset Balance as on Addition During Total as on Rate of Acc. Dep. As on Dep. Charged Total

Accumulated

W/D/V as

on

the year (Closing Date) Dep. ( Opening Date) During the

year

as on (Closing

Date)

( Closing

Date)

Land

65,421,300 65,421,300 0% - - -

65,421,300

Building

55,700,000 55,700,000 5% -

2,785,000

2,785,000

52,915,000

Machinery

206,800,000 206,800,000 10% -

20,680,000

20,680,000

186,120,000

Furniture and Fixture

2,500,000 2,500,000 10% -

250,000

250,000

2,250,000

Errection and

Installation

1,500,000 1,500,000 15% -

225,000

225,000

1,275,000

Vehicle

5,100,000 5,100,000 10% -

242,796

242,796

4,857,204

Total 337,021,300 337,021,300 - 24,182,796 24,182,796 312,838,504

Page 42: PROJECT PROFILE AKWAN

© Moshiur Rahman

AKHWAN JUTE SPINNING MILLS LIMITED Calculation of payback period

Year Profit after

Depreciation Cash Flow Cumulative

Cash flow depreciation

YEAR 1

28,813,555

24,182,796 52,996,351

52,996,351

YEAR 2

47,379,731

24,182,796 71,562,527

124,558,877

YEAR 3

64,579,565

24,182,796 88,762,361

213,321,238

YEAR 4

76,838,614

24,182,796 101,021,410

314,342,648

YEAR 5

87,786,661

24,182,796 111,969,457

426,312,105

Payback period = 4 years + 337021300 - 314342648 x 12 months

111,969,457

4 years 2 months

AKHWAN JUTE SPINNING MILLS LIMITED Calculation of IRR

ARR = Average annual accounting profit

Initial investment

61079625

337021300

18%

So two third of ARR is 12%

Time Cash Flow Discounting PV Discounting PV

Factor 7%

Factor 10%

0 -337021300 1 -337021300 1 -337021300

1

52,996,351 0.934

49,498,591 0.909

48,173,683

2

71,562,527 0.873

62,474,086 0.826

59,110,647

3

88,762,361 0.816

72,430,087 0.751

66,660,533

4

101,021,410 0.762

76,978,314 0.683

68,997,623

5

111,969,457 0.712

79,722,253 0.62

69,421,063

4,082,031

-24657751

IRR = 7 % + 4082031 x 10% - 7 %

4082031+24657751

The IRR is, in fact exactly 8 %

Page 43: PROJECT PROFILE AKWAN

© Moshiur Rahman Page 43 of 45

AKHWAN JUTE SPINNING MILLS LIMITED Loan Repayment Schedule

Particulars

Amount

Principal Amount

220,000,000

IDCP

16,500,000

Total payable amount

236,500,000

Rate of Interest

15%

Grace

period 6 Months

Payback period

54 Months

Equal Monthly Installment (EMI)

6,049,103

No of Opening Balance Principal Interest Installment Closing

Balance

Installment of Principal Payment Payment of Principal

1 236,500,000 3,092,853 2,956,250 6,049,103 233,407,147

2 233,407,147 3,131,513 2,917,589 6,049,103 230,275,634

3 230,275,634 3,170,657 2,878,445 6,049,103 227,104,977

4 227,104,977 3,210,290 2,838,812 6,049,103 223,894,686

5 223,894,686 3,250,419 2,798,684 6,049,103 220,644,267

6 220,644,267 3,291,049 2,758,053 6,049,103 217,353,218

7 217,353,218 3,332,187 2,716,915 6,049,103 214,021,030

8 214,021,030 3,373,840 2,675,263 6,049,103 210,647,190

9 210,647,190 3,416,013 2,633,090 6,049,103 207,231,178

10 207,231,178 3,458,713 2,590,390 6,049,103 203,772,465

11 203,772,465 3,501,947 2,547,156 6,049,103 200,270,518

12 200,270,518 3,545,721 2,503,381 6,049,103 196,724,797

13 196,724,797 3,590,043 2,459,060 6,049,103 193,134,754

14 193,134,754 3,634,918 2,414,184 6,049,103 189,499,836

15 189,499,836 3,680,355 2,368,748 6,049,103 185,819,481

16 185,819,481 3,726,359 2,322,744 6,049,103 182,093,122

17 182,093,122 3,772,939 2,276,164 6,049,103 178,320,183

18 178,320,183 3,820,100 2,229,002 6,049,103 174,500,083

19 174,500,083 3,867,852 2,181,251 6,049,103 170,632,231

20 170,632,231 3,916,200 2,132,903 6,049,103 166,716,031

21 166,716,031 3,965,152 2,083,950 6,049,103 162,750,879

22 162,750,879 4,014,717 2,034,386 6,049,103 158,736,162

23 158,736,162 4,064,901 1,984,202 6,049,103 154,671,261

24 154,671,261 4,115,712 1,933,391 6,049,103 150,555,550

25 150,555,550 4,167,158 1,881,944 6,049,103 146,388,391

26 146,388,391 4,219,248 1,829,855 6,049,103 142,169,143

27 142,169,143 4,271,988 1,777,114 6,049,103 137,897,155

28 137,897,155 4,325,388 1,723,714 6,049,103 133,571,767

29 133,571,767 4,379,456 1,669,647 6,049,103 129,192,311

30 129,192,311 4,434,199 1,614,904 6,049,103 124,758,112

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31 124,758,112 4,489,626 1,559,476 6,049,103 120,268,486

32 120,268,486 4,545,747 1,503,356 6,049,103 115,722,739

33 115,722,739 4,602,568 1,446,534 6,049,103 111,120,171

34 111,120,171 4,660,101 1,389,002 6,049,103 106,460,070

35 106,460,070 4,718,352 1,330,751 6,049,103 101,741,719

36 101,741,719 4,777,331 1,271,771 6,049,103 96,964,387

37 96,964,387 4,837,048 1,212,055 6,049,103 92,127,340

38 92,127,340 4,897,511 1,151,592 6,049,103 87,229,829

39 87,229,829 4,958,730 1,090,373 6,049,103 82,271,099

40 82,271,099 5,020,714 1,028,389 6,049,103 77,250,385

41 77,250,385 5,083,473 965,630 6,049,103 72,166,912

42 72,166,912 5,147,016 902,086 6,049,103 67,019,896

43 67,019,896 5,211,354 837,749 6,049,103 61,808,542

44 61,808,542 5,276,496 772,607 6,049,103 56,532,046

45 56,532,046 5,342,452 706,651 6,049,103 51,189,594

46 51,189,594 5,409,233 639,870 6,049,103 45,780,361

47 45,780,361 5,476,848 572,255 6,049,103 40,303,513

48 40,303,513 5,545,309 503,794 6,049,103 34,758,204

49 34,758,204 5,614,625 434,478 6,049,103 29,143,579

50 29,143,579 5,684,808 364,295 6,049,103 23,458,771

51 23,458,771 5,755,868 293,235 6,049,103 17,702,903

52 17,702,903 5,827,816 221,286 6,049,103 11,875,086

53 11,875,086 5,900,664 148,439 6,049,103 5,974,422

54 5,974,422 5,974,422 74,680 6,049,103 (0)

Page 45: PROJECT PROFILE AKWAN

© Moshiur Rahman

AKHWAN JUTE SPINNING MILLS LIMITED

Projected Operating Expenses Operating expenses

28,443,886

Salary and allowance

2,045,000

Directors remuneration

450,000

Festival bonus

450,000

Office rent

360,000

Telephone bill

60,000

Documentation expenses

45,690

Travelling and conveyance

113,800

Advertisement

76,800

Sample expenses

94,010

Carriage outwards

197,500

Sales commission

140,000

Electricity bill

34,700

Miscelleneous expenses

71,300

Fees and renewals

23,700

Donation and subscription

16,000

Entertainment

45,600

Bank charge and commission

36,990

Depreciation expenses

24,182,796