Pre-Feasibility Study

INJECTION MOLDING PLASTIC

PRODUCTS

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor, LDA Plaza, Egerton Road, Lahore
Tel: (042) 111-111-456, Fax: (042) 6304926, 6304927

[email protected]
REGIONAL OFFICE
PUNJAB
.
Tel: (042) 111-111-456
Fax: (042) 6304926, 6304927
[email protected]

REGIONAL OFFICE
SINDH

REGIONAL OFFICE
NWFP

REGIONAL OFFICE
BALOCHISTAN

5TH Floor, Bahria

Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
[email protected]

Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
[email protected]

Bungalow No. 15-A

Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
[email protected]

March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

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.
SMEDA does not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. Therefore, the content of this
memorandum should not be relied upon for making any decision, investment or otherwise.
The prospective user of this memorandum is encouraged to carry out his/her own due
diligence and gather any information he/she considers necessary for making an informed
decision.

The content of the information memorandum does not bind SMEDA in any legal or other
form.

DOCUMENT CONTROL
Document No.

PREF-7

Revision

Prepared by

SMEDA-Sindh

Approved by

Provincial Chief - Sindh

Issue Date

March, 2005

Issued by

Library Officer

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Pre-Feasibility Study

Injection Molding Plastic Products

PROJECT PROFILE
Purpose of the Documents

1. 1

This document is developed to provide the entrepreneur with potential investment

opportunity in setting up and operating an Injection & Blow Molding Plastic Good Plant
manufacturing a variety of household items. This pre-feasibility gives insight into various
aspects of an injection and blow molding setup including both technical and general
information. The document is designed to provide relevant details to facilitate the
entrepreneur in making the decision by providing various technological as well as business
alternatives. The document also allows flexibility to change various project parameters to
suit the needs of the entrepreneur.
Project Brief

1. 2

Plastic is a common name for Polymers: materials made of long strings of carbon and other
elements. Each unit in a string is called a monomer, and is a chemical usually derived from
oil. There are many different types of plastic, depending on the starting monomer selected,
the length of polymer chains, and the type of modifying compounds added. Each plastic is
developed for a special purpose. However the varied use of plastic in our everyday life has
made it an integral component in almost everything. Plastic is used in everyday items like
ballpoint pen, buckets, cups, glasses, water pipes, plastic bags to items of engineering
excellence like cars and airplanes. According to some experts, around 350 kilograms
plastic is used in every car manufactured in Germany. With such a high ratio of usage in
developed countries, plastic has become a cheap but an important commodity
Opportunity Rationale

1. 3

The manufacturing of household durables through the plastic injection and molding
business is a viable business provided that it is operated with a good business acumen that
involves having a thorough knowledge and experience of the product range, technical
requirements, operational procedures and also managing the jobs with the right type of
technical manpower. When these factors combine with good and effective business
development skills, the business is expected to give considerable profits which are
expected to grow over the years.
1.3.1

Properties of Plastics

The numerous properties of plastics have made it possible to virtually make every product
conceivable. Some properties of plastic that distinguishes them from other materials are:

Attractive

Hard

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Soft and rubbery

Easy to clean

Flexible

Good insulators of heat or electricity

Light weight

Hygienic

Easy to shape and color

Economical

Apart from some of the properties of plastics mentioned above, one important feature of
plastic is that it is a non-rusting material which makes it a very usable commodity
especially in coastal areas where there is a lot of humidity.
As stated earlier, the use of plastics is increasing all the time as they replace materials such
as metal, wood, paper, ceramics and glass in a wide variety of uses. More over the overall
demand and local supply gap that prevails in the market remains largely unmet which also
provides opportunities for entering in to this business.
The following table gives an overview of some of the applications of plastics
POLYMER

PROPERTIES

TYPICAL APPLICATIONS

ABS

Toughness, Electroplatable

Home appliances, TV and computer

parts, etc

POM

Low friction, low wear. Little change in

impact strength with temp. Resistance to
fatigue, free from biological attack but
susceptible to UV radiation.

Bearing applications, gears, digit

wheels, sprocket, chain, cams,
carburetor body, aerosol parts etc.

PMMA

Excellent clarity ∓ transparency

Dimensionally rigid, Resistant to outdoor
weathering.

Lamp covers, lenses, reflectors knobs,

transparent panel knobs, covers.

PPO

Excellent electrical properties flame resistant,

good toughness, dimensionally rigid, resistant
to detergent.

Electrical parts, TV back covers, car

dashboards, and washing machine
parts.

PA

Wear resistant, tough, low friction, low

fatigue, withstand temp. Electrical insulation
property.

Bearings, gears, electrical socket plug,

cooling fan, power tool housing, safety
belt parts, bathroom fittings, etc.

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POLYMER

Injection Molding Plastic Products

PROPERTIES

TYPICAL APPLICATIONS

PC

High impact strength, excellent clarity, good

dimensional stability good weathering
resistant, low moisture absorption, high heat
deflection temperature.

Replacement for glass, Transparent

covers for instrument panel, lighting
application, safety helmet, car lamp
housing, goggles, lenses, food mixer
parts, computer parts, connectors.

PES

Lower flammability, excellent electrical

properties, excellent long term load bearing
properties at elevated temperature, good
toughness.

Aircraft parts, electrical parts,

automobile parts, microwave, dishes,
grills, dishwasher parts, hair drier parts,
projector fan.

PBT

High rigidity, ultra-low water absorption,

excellent electrical properties, withstands high
temperature under load.

Electrical components, lamp housing,

fuse cases, pump housing, toaster parts,
and hairdryer parts.

PPS

Excellent electrical properties, arc resistant,

withstand high temperature. good dimensional
stability,

Connectors, terminal blocks, socket,

coil former, relay parts, lamp holder,
switches, carburetor parts, ignition
plate.

PETP

High stiffness, excellent dimensional stability

at elevated temperature, good electrical
properties.

Rotary switches, contactors, circuit

boards.

PP- Co
polymer

High impact strength, Improved heat stability,

Luggage, housewares, toys, interior

parts of car, washing m/c parts, bottle
caps, disposable syringe, crates, battery
boxes, bobbins, dyeing cones.

PEEK

Excellent long term bearing properties at high

temperature of 200 degree C., strong, rigid,
tough, excellent abrasion resistant.

Wire coating, parts for aerospace

application.

SAN

Excellent optical properties, tough, no weather

resistant,

Cup, picnic items, tray, cutlery,

cassette storage racks, dials, cosmetics
containers,

TPU

Flexible, durable, oil resistant.

Seal, washers, rollers, watch straps,

shoes soles.

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Injection Molding Plastic Products

Some most common applications of commodity plastics in our everyday life are:

APPLICATION OF COMMODITY PLASTICS

1. 4

HDPE

High Density
Polyethylene

Bottle crates, containers, house ware

LDPE

Low Density
Polyethylene

Toys, bottle caps, lids, bowls, shopping bags

PS

Polystyrene

Toys, containers, tape cassettes, disposable cups, transistor

cabinet, appliance housing

CA

Cellulose
Acetate

Toys, pen, handles for tools

RPVC

Rigid Polyvinyl
Chloride

Pipe fittings, guttering, plumbing items

SPVC

Soft Polyvinyl
Chloride

Washers, soft tubes, soles, heels, footwear

Plastic Industry & Market Overview

The per capita consumption of plastic in Pakistan is 3.1 kilograms, while this is 3.3 kg in
India and 7 kg in China. The highest per capita consumption of plastic is in United States
and Germany, where per capita consumption is 120 kg per annum. Globally, the per capita
plastic consumption works out to be around 24 kg per annum1. The consumption of plastic
is less in Pakistan as the local industries are not developing as rapidly as they are growing
in the other parts of the world.
1.4.1

Market Players

There are some 6,000 plastic manufacturers in the country and 600,000 people are directly
and indirectly engaged with this business. The plastic industry falls in cottage industry and
there are some manufacturers, who are medium-sized industries.2

1
2

Daily Times, Pakistan; Monday, September 27, 2004

ibid.

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1.4.2

Injection Molding Plastic Products

Consumption & Imports

Pakistan imports 80-90 percent raw material for plastic making from different countries,
and at present there is only one company producing raw material for the industry. Engro
Asahi is producing 100,000 tonnes raw material providing 70,000 tonnes to the local
plastic industry and the remaining 30,000 tonnes are exported. There are some small scale
raw material manufacturers as well, who are producing 25,000 to 30,000 tonnes annually.
The total consumption of raw material used in the plastic industry in the country is around
450,000 tonnes. The country imports 70 percent raw material from UAE and Far Eastern
countries. The special grade raw material is imported from Germany and USA, which is 20
percent of total raw material consumption. India is also a major producer of plastics raw
material.3 The total consumption of plastic raw material in India is two million tonnes
annually.
The prices of raw material of plastic industry depend on international scenario. During Iraq
war, the prices shot up by 70 percent. The raw material of plastic industry is a by-product
of crude oil. The prices are directly related to crude oil prices as the raw material is made
from Naphtha, which is a by-product of crude oil.
Moreover, the recent penetration of cheap Chinese products into Pakistan has made the
competitive situation in the local plastic industry very intense. Local manufacturers have to
import raw material which is a substantive cost of their total produce while Chinese
products offering a large variety at affordable rates have made survival difficult for the
local industry.
However many plastic manufacturers still enjoy good business since they are able to
anticipate and understand the market dynamics that helps them to relate to the demand
supply gap quickly than the rest of the producers. Some critical success factors are
discussed below that need to be considered for the successful operation / viability of the
business.
1. 5

Key Success Factors/Practical Tips for Success

The three main critical success factors that affect the decision to invest in the proposed
business setup are:
i) Related Experience
The entrepreneur must have considerable experience of the plastic industry wherein
he / should be able to identify the changing environment both at the demand and
3

Daily Times, Pakistan; Monday, September 27, 2004

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the supply side and react accordingly. Molds are very expensive; therefore the
entrepreneur needs to choose molds only for those products for which demand is
expected to rise in the future.
Related industry experience is also required where purchase of raw material is
being considered. Prices of HDPE / PP plastic resins are directly related to
petroleum prices which are very dynamic.
ii) Marketing Skill
Another critical factor is that the entrepreneur must have effective PR & marketing
skills. These marketing skills will enable the entrepreneur to carryout business
development activities to target his potential customers and also to maintain his
existing client base. Contacts with relevant distributors and major wholesale / retail
outlets and markets play a crucial role in business development.
iii) Toll Manufacturing / Contract Manufacturing
Considering the price competition and the possibility of decreasing margins at retail
level, many plastic good manufacturers have adhered to toll manufacturing where
they are subcontracted by large companies to manufacture product parts like
refrigerator parts, AC vents, grills etc. Although the margins received initially
might not be significant but the volume of business is considerably large which
makes up for the low margins. The margins tend to be very significant if the
manufacturer possesses an expensive mold which is not available quite easily in the
market. A strong referral base needs to be established in order to get such contracts.
1. 6

Proposed Business Legal Status

Although the legal status of business tends to play an important role in any setup, the
proposed plastic good manufacturing business is assumed to operate on a sole
proprietorship basis which may extend to partnership in case of addition of new products
that might add significant business to the existing setup.
1. 7

Project Investment

This section will provide the total cost of the project.

Item
Construction Cost
Office Furniture

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Cost (Rs.)
5,928,000
100,000

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Injection Molding Plastic Products

Item

Cost (Rs.)

Injection Molding
Machinery Refurbished)

6,800,000

Metal Molds

2,125,000

Advance Rent

600,000

Preliminary Expenses

50,000

Working Capital

19,952,278

Raw Material Inventory

4,302,569

Vehicles

800,000

Resin Coloring Machine

850,000

Total

41,507,847

Proposed Product Mix

1. 8

The proposed project is assumed to manufacture the following items using HDPE / Co - PP
(Yuplene) plastic Injection Grade:

Water Buckets

Wash Tubs

Waste Bin

Bathing Tumbler

Toll Manufacturing

It desirable to have a vast array of products where most of the plastic manufacturers have
at least 20 to 25 different product categories running in their production line, but initially
the entrepreneur, needs to be careful in choosing the product mix of the right type and size
that has the greatest acceptability such that the sales volume generated is able to cover the
mold costs required for each separate item.

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Considering this factor, it is proposed that the entrepreneur produces plastic goods for the
above mentioned product categories with the following details:
ITEM

Water Buckets

Bucket Handles

Wash Tubs

Bathing Tumbler

Waste Bin

SIZE

COLOR VARIANT

20 liters

Blue & Red

24 liters

Blue & Red

16 liters

Blue & Red

20 liters

Blue & Red

24 liters

Blue & Red

30 liters

Blue & Red

Normal Size (1
liter)

Blue & Red

Normal Size

Black & Grey

It is proposed that water colors be used for blue and red shades which give a translucent
look to the product and are the most preferred option for the consumers.
One important factor to consider here is that the entrepreneur must have the requisite skills
to decide on whether to introduce a new product or add a new size to the existing product
both of which require the purchase of an additional mold. Hence the experience of the
entrepreneur will play an important role in determining the course of action.
1. 9

Recommended Project Parameters

Yearly Capacity
80% Capacity
Utlization

Human Resource
Management Staff (6)
Techincial Staff (35)

Equipment
Local / Eurpoean /
Chinese

Location
Industrial Area

Financial Summary
Project Cost

IRR

NPV

Payback Period

41,507,847

25%

Rs. 12,546,621

2.5 Years

PREF-7/March, 2005

Cost of Capital
(WACC)
17.5%

Pre-Feasibility Study

1. 10

Injection Molding Plastic Products

Proposed Location

The recommended area for the proposed business setup will be in an Industrial Area. The
main reason for such a location is dependent on the availability of all provisions necessary
for the production process.

MACHINERY & EQUIPMENT

Injection molding is a method to obtain molded products by injecting plastic materials

molten by heat into a mold, and then cooling and solidifying them. The method is suitable
for the mass production of products with complicated shapes, and takes a large part in the
area of plastic processing.
A typical injection molding machine is divided into 2 units i.e. a clamping unit and an
injection unit.

Clamping Unit: The functions of the clamping unit are opening and closing the die,
and the ejection of products. There are 2 types of clamping methods, namely the
toggle type shown in the figure below and the straight-hydraulic type in which a
mold is directly opened and closed with a hydraulic cylinder.

Injection Unit: The functions of the injection unit are to melt plastic by heat and
then to inject molten plastic into a mold. The screw is rotated to melt plastic
introduced from the hopper and to accumulate molten plastic in front of the screw
(called metering). After the required amount of molten plastic is accumulated,
injection process is stared. While molten plastic is flowing in a mold, the machine
controls the moving speed of the screw, or injection speed. On the other hand, it
controls dwell pressure after molten plastic fills out cavities. The position of change
from speed control to pressure control is set at the point where either screws
position or injection pressure reaches a certain fixed value.

It is however important to note that all flow speeds, injection speed, shot lead time, screw
rotation speed and other particulars need to be controlled by the machinery operator. The
entrepreneur may also appreciate that the time allowed for the plastic to cool down also has
an effect on the end product properties which requires considerable know-how and skilled
handling of production line processes.
The diagram on the following page gives a cross-sectional view of the injection molding
machine (note: this is just a theoretical representative diagram for the injection molding
machine, as machines may vary according to their makes, brands, products produced etc.).

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Tips for Purchasing a Mold

2. 1

The mold is the most expensive component requiring considerable investment which is
sometimes higher than the cost of the machinery itself. Therefore as discussed earlier, the
molds need to be carefully chosen based on product acceptance production ease. Some of
the following points should be considered when selecting the mold:

Cavity Size of the injection molding machine is the major factor when deciding on
the mold. The larger the cavity capacity the greater the adjustability of large sized
molds for large products. For example an injection mold machine with 75 ounce
cavity capacity cannot accommodate a 100 ounce mold. It is preferred that the mold
should be at least 10 ounce less than the cavity size.
Mold Area & Structure is another important factor to consider since it is not
necessary that the mold size fits in the cavity as the dimensions of the mold also
need to be in congruence with the cavity dimensions. The length width and depth of
the mold needs to be in line with the cavity dimensions.
Tie Bars are the strongholds that firmly grip the mold such that it remains
unmoved during the impact. The distance between the tie bars which holds the
mold and their relative properties need to be considered in order to avoid mismatch
and errors during the injection molding process.
Mold Opening Space is the space required by the ejector mechanism to eject the
product, in case the mold opening space is smaller than the mold, the ejector will
not be able to eject the cooled product within the available space.

PROCESS FLOW

Injection molding is a powerful and comprehensive manufacturing process. However, it

can also be a complicated and costly experience. The entrepreneur and the product
designer must not only consider part performance requirements, but process and material
constraints as well as well as market accessibility. Effective management of these

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constraints in a time efficient manner can yield significant product cost savings and a quick
time-to-market.
Much savings can be realized by making informed decisions early in the product design
process. The product designer should have several tools and forms of knowledge at his
disposal. In the early stages of design, and throughout much of the design process, the
designer can employ qualitative knowledge in the form of personal experience and
tabulated rules of thumb. Hence a brief overview of what things to consider while
developing the product requires to be deliberated upon.
3.1

Product Design & Basics

Of critical importance to a good product design practice is the product under consideration
which directly impacts on the raw material and the features of the molds to be used. The
following schematic diagram depicts some of the basic requirements:
Cost Model
Material Cost
Process Cost

Tolerance Feasibility

Product Design
Material
Geometry
Process

Product Requirements
Load / Deflection
Time / Temperature
UV Stability
Transparency
Chemical Compatibility

Product Properties
Part Thickness
Material Properties
Rib Geometry
Fillability Analysis

Based on the above product requirements the molds are to be carefully chosen since they
are the most costly component of the Injection Molding Machine.
The geometric variable has the largest impact on mechanical performance of the product,
of which wall thickness is the most critical. Since wall thickness is so strongly coupled
with processibility, any design technique must also consider material and process

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constraints on wall thickness configuration. There are a number of factors that influence
the choice of wall thickness, including:

Mechanical Requirements: Nominal wall thickness must meet basic part

requirements such as static, dynamic, and impact loading.

Material and Process: Higher-flow materials will permit thinner wall designs, while
thinner wall designs will in general require higher injection pressures.

Production rate: Thicker parts will require longer cooling times and increase the
cycle time.

Part Geometry: Assembly and functional surface protrusions will require variations
in the nominal wall. These may cause uneven cooling, part distortion, and residual
stresses.

Agency Requirements: Electrical and flammability considerations place certain

restrictions on part thickness.

From a design perspective, the part mechanical performance will place certain (and very
important) restrictions on wall thickness and part geometry. In many engineering
applications, such mechanical performance concerns include strength & stiffness, impact
strength, fatigue, and creep and stress relaxation. Good engineering practice suggests that
the designer optimize the material, geometry, and process design to meet the mechanical,
process, and production constraints to the extent possible. However, these parameters and
technical details must be finalized and decided by the product designer (engineer) and
machine operators. The use of computers in Computer Aided Designing (CAD) and
Computer Aided manufacturing (CAM) has made it easy for the product designers to reach
optimal and best suited solutions before starting the manufacturing process.
Production Process

3. 2

The theory of injection molding can be reduced to four simple individual steps:
Plasticizing, Injection, Chilling, and Ejection. Each of those steps is distinct from the
others and correct control of each is essential to the success of the total process.

i.

Plasticizing - describes the conversion of the polymer material from its normal hard
granular form at room temperatures, to the liquid consistency necessary for
injection at its correct melt temperature.

ii. Injection - is the stage during which this melt is introduced into a mold to
completely fill a cavity or cavities.

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iii. Chilling - is the action of removing heat from the melt to convert it from a liquid
consistency back to its original rigid state. As the material cools, it also shrinks.
iv. Ejection - is the removal of the cooled, molded part from the mold cavity and from
any cores or inserts.
3. 3

Process Description

The solid polymers are added into the injection unit by way of the hopper, which are then
crushed by a motor propelled screw in a heated cylinder, the molten polymer on reaching
the desired temperature levels is introduced into the mold through a pressure valve (at the
desired pressure level). The molten plastic then fills the cavities inside the mold until the
core is completely filled. Once completely filled, the plastic is allowed to cool down at the
desired temperature for a certain time period (this also affects the plastic properties). After
cooling, the plastic product is ejected out of the mold through ejection pins operating from
an ejection plate placed behind the mold.
A mold is a hollow metal block into which molten plastic is injected to form a certain fixed
shape. Although they are not illustrated in the figure shown above, actually there are many
holes drilled in the block for temperature control by means of hot water, oil or heaters.
Molten plastic flows into a mold through an aperture and fills cavities by way of runners
and gates. Then, the mold is opened after cooling process and the ejector rod of the
injection molding machine pushes the ejector plate of the mold to further eject moldings.
The following diagram gives a common illustration of a mold:

3. 4

Color Pigmentation

Attractive plastic products are key elements that appeal to the customer, since similar
products vary nominally amongst various manufacturers. Usually the production manager
decides on the color in consultation with the owner and then develops the pigment mix in

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terms of quantity and quality to meet the desired color schemes. The color pigments are
then bought from the market and added to the plastic resins which are then churned in the
coloring machine. Once the resins are colored according to the desired intensity, they are
dried and cooled before being subsequently poured into the injection molding machine.
3. 5

Raw Material Requirement

The raw materials required for the manufacturing of plastic goods are Injection Grade
HDPE / PP Plastic resins. These plastic resins are usually bought as Co-Propylene
Polymers (Yuplene). The main supplier of this plastic resin is SK CHEM., which has
considerable presence in the Pakistani Market and is easily available. Moreover the color
pigments are also easily available from the local market according to the color mix as
desired by the manufacturer. There are recycled plastic resins available in the market and
one has to be careful to check the plastic resins to ensure that they are not recycled since
they diminish product quality and outlook.
3. 6

Production Capacity

The production capacity for each of the machines depends on two main things

Cooling Cycle Time

Raw Material Injection Weight

Based on the above two factors and keeping in view the products to be produced, the
yearly production output (based on 80% capacity utilization)for the proposed project will
be as follows:
ITEM

SIZE

UNITS

Water Buckets

20 Liters

74,880

Water Buckets

24 Liters

74,880

Wash Tubs
Wash Tubs
Bathing Tumbler

24 Liters
30 Liters
1 Liter

74,880
49,920
599,040

Normal size

199,680

Dustbin

The production of the two types of water buckets is assumed to be based on a rotating
cycle of six months. The cost of deploying a single machine for a single product becomes
very high; therefore a single machine would be used to produce the two sizes of water
buckets. (Please see Revenue and Cost Sheet for details).

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Apart from the above production schedule, it is suggested that at least two machines be
deployed for toll manufacturing purposes on which the margins tend to be relatively
higher. Such contract manufacturing orders can be easily secured for various commodities
like AC grills, road posts, and plastic containers for various FMCG products, automobile
parts etc. For costing purposes, it is assumed that the two machines would be producing
products requiring a shot weight of 500 grams and 1,000 grams respectively. The size and
shape of the mold would depend on the product. (Please see Revenue and Cost Sheet for
details).

4
4. 1

LAND & BUILDING REQUIREMENT

Land Requirement

The land requirement is around 10,000 sq feet in an industrial area where all utilities and
facilities are properly available. The plot will easily allow the accommodation of the
recommended machines and also allow space for further expansion in future, if required.
The land will also allow ample spaces for the raw material and finished good warehouses
and a properly built office building.
4. 2

Covered Area Requirement

The proposed setup is assumed to be totally covered with around 95% of the total area to
be utilized for construction work. It is recommended that the office and warehouses be
built on the production hall to allow maximum utilization of space. It is also suggested that
minimum space be utilized for office to allow maximum space available for storage of raw
materials and finished goods inventory. The allocation of space would be as follows:

4. 3

Details

Size
(Sq. Feet)

Civil Works
(Cost in Rs / square feet)

Total Construction
Cost (Rs)

Production Hall

9,500

400

4,750,000

Factory Office
& Tool Shop

256

500

128,000

Warehouse

3,000

350

1,050,000

Total

12,756

1,250

5,928,000

Recommended Mode

The proposed premises will be acquired on a rental basis with 3 month deposit and 3
months advance rent after which rent will be payable on a monthly basis.

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Office Furniture & Equipment

4. 4

A total of Rs 100,000 is required for purchase of office furniture and related equipment.
The following table gives an assumed breakup:
Office Furniture
NUMBER

ESTIMATED COST
(RS.)

Table & Chair Set (Owner)

10,000

Table & Chair Set (Customer Service)

5,000

Table & Chair Set (Office Staff)

20,000

Air Conditioner (Split Unit)

30,000

Waiting Chairs

10

10,000

Sofa Set for Customers

15,000

Curtains / Interior Dcor

10,000

ITEM

Total

100,000

The Office Furniture & Equipment will be depreciated at the rate of 10% per annum
according to the diminishing balance method for the projected period.

MACHINERY & EQUIPMENT

Based on the number and type of products to be produced by the proposed injection
molding setup, the following machinery and molds will be required:

ITEM

Machine

Price
(000)

Mold

Price
(000)

Total
(000)

1,000

P
Q

200
250

1,200
250

300

100

400

Water Buckets
20 Liters
24 Liters
Bucket Handles
20 Liters
24 Liters

PREF-7/March, 2005

Pre-Feasibility Study

ITEM

Injection Molding Plastic Products

Machine

Price
(000)

Mold

Price
(000)

Total
(000)

1,000

S
T

250
300

1,250
300

750

125
300

875
300

E
F

1,000
1,000

X
Y

300
300

1,300
1,300

10

6,800

10

2,125

8,925

Wash Tubs
24 Liters
30 Liters

Tumbler & Dust Bin

I Liter
Dustbin

Toll Manufacturing

Total

The above table gives the details of the machinery and molds required along with their cost
for each commodity to be produced. In case of Bucket Handles, a multi mold is used
wherein the two sizes can be produced within the same large mold. These molds are locally
available and can be customized according to the customer requirements. Apart from
bucket handle, every other product requires a separate mold which corresponds with the
size of the product; hence it has a direct impact on the cost of the machine and mold
according to the product size.
Injection Molding Machine

5. 1

The injection molding machine is available in Pakistan with local suppliers dealing in used
/ refurbished machinery. However since the life of this machinery is very long (15 to 17
years) many people prefer using used machinery which requires a greater maintenance but
the capital investment is very much low than the new machines. These machines usually
come in two technological formats

Computerized

Analog

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

The most common brands for injection molding machinery are Jet Master, Super Jet,
Mitsubishi, BM Biraghi, Engel, Horizon, Sintesi etc. The machines proposed for this setup
are computerized machines of Japanese / American origin. Although Chinese machines are
also available but locally the former (Japanese / American) machines are preferred.
Injection Mold

5. 2

The molds are very costly and need to be carefully picked. Some molds are locally made
but people usually prefer Chinese molds that are usually robust and refined. Used molds
are also available in the market, which are proposed for this setup since they are cheap and
efficient in delivering the desired products.
Coloring Machine

5. 3

The coloring machine is a round shaped mixer which is similar to the common cement
mixing machines mostly found near construction sites. The coloring machine is easily
available from the local market.
Office Vehicles

5. 4

Two small (second hand) trucks acting as light carrier vehicles are also needed for
transporting raw materials to the warehouses. These vehicles can also be used for office
use.

HUMAN RESOURCE REQUIREMENT

The human resource requirement for the general and management staff are as follows:
GENERAL MANAGEMENT
DESIGNATION / TYPE

NUMBER

MONTHLY SALARY (RS.)

Owner

Accountant

7,500

Purchaser

5,000

Office Assistant

3,500

Store / Warehouse Keeper

4,000

Guard (24 Hour)

12,000

Total

32,000

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

Considering the size of the proposed establishment it is assumed that the owner would be
managing the overall affairs of the plastic molding setup. An accountant is required to
process and check bills, invoices, receivables management, maintain accounts, etc. for
external and internal reporting. The accountant is required to update records and ensure
safe custody of store keys.
The purchaser would be primarily responsible for making daily purchases; raw material
purchases and other purchases as and when required. The purchaser would also assist the
accountant in the safe custody of all inventories in the storeroom. The office assistant
would be responsible for handling customers & complaints, following-up on bills and
managing all day to day activities. Two round the clock security guards would be required
for ensuring security for the overall premises.
The following table gives the details for the proposed technical labor that forms the
integral part of the total employee payroll:
TECHNICAL MANPOWER
DESIGNATION / TYPE

NUMBER

MONTHLY SALARY (RS.)

Production Manager

18,000

Production Assistant

12,500

Shift Supervisor

30,000

Color Operator

6,000

Electrician

10,000

Hydraulic Technician

6,000

Machine Operators

11

55,000

Helpers

15

52,500

Total

35

190,000

The Production Manager and Production Assistant should have considerable knowledge
about polymer technology and properties preferably with diploma in plastic technology
with 5 to 7 years experience for the former and 2 to 3 years for the latter. The machine
operators should also have relevant experience of handling and operating injection molding
machines and plastic processing.

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

FINANCIAL ANALYSIS & KEY ASSUMPTIONS

The project cost estimates for the proposed Injection Molding Setup have been formulated
on the basis of discussions with relevant stakeholders and experts. The cost projections
cover the cost of land, building, inventory, equipment including office furniture etc. The
specific assumptions relating to individual cost components are given as under:
7. 1

Revenue & Cost Projections

The Sales are expected to increase by 7.5% every year while the cost of raw materials is
assumed to increase by 5%. The 7.5% annual increase in revenue is expected to result from
a part increase in capacity utilization and part increase in product price. However the price
of the plastic resins (Co-PP) is usually linked with the petrochemical prices, therefore the
entrepreneur is required to carefully negotiate the purchase price and manage the inventory
level in coordination with the production personnel.
The prices used to calculate the gross revenue earned are based on the selling rate at which
the entrepreneur will charge the distributor. These basic prices do not include the selling
and distribution margins and the since these would depend on the negotiation with the
distributor. The prices are also exclusive of the General Sales Tax.
7. 2

Rent Cost

The rent for the assumed premises will be Rs. 100,000/- per month. It is assumed that Rs.
600,000 will be given in advance before possession of premises. This will include 3
months deposit and 3 month advance rent. The rent would be payable on a monthly basis
and is expected to increase at the rate of 10% per annum for the projected period.
7. 3

Utilities Requirement

The following table presents the assumed breakup of utilities on a monthly basis:
Utility

Monthly Charges (Rs.)

Electricity

350,000

Water

10,000

Telephone

3,500

Total

363,500

As depicted above the machines require considerable power during the injection molding
process. The preheating procedure of the machine before commencement of production
consumes a lot of time and electricity. Therefore it is advisable that the machines are kept

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

on continuously for 24 hours and only shut down when the mold needs to be changed. It is
assumed that utilities expenses will increase by 10% every year.
7. 4

Depreciation on Building & Equipment

Depreciation on Building, Machinery and Office Furniture & Fixtures is assumed to be at

the rate of 10% per annum based on the diminishing balance method for the projected
period.
7. 5

Machine Maintenance

The Injection Molding Machines and molds have a long life however the maintenance cost
of the machines are usually very high since they need to be oiled and cleaned regularly
specially before installing a new mold or starting a fresh production process. The yearly
maintenance cost has been taken to be 2.5% of the written down value of the machine.
Furthermore is it is anticipated that the machines and the molds would require an overhaul
after every five years therefore it is assumed that approximately 10% of the cost price of
the molds and machines would be incurred in Year 5 and Year 10 as major overhauling
costs.
7. 6

Working Capital & Pre Operating Costs

It is estimated that an additional amount of approximately Rs. 19,952,278 will be required

as cash in hand to meet the working capital requirements / contingency cash for the initial
stages. The requirement is based on the rent, utilities and salaries expenses for at least four
months and four months raw material inventory. The following table gives the break up.
Item

4 Months Cost (Rs.)

Utilities

1,454,000

Salaries

888,000

Raw Material Inventory

17,210,278

Rent

400,000

Total

19,952,278

The provision for pre operating costs is assumed to be Rs. 50,000 which will be amortized
equally over a 5 year period.

PREF-7/March, 2005

Pre-Feasibility Study

7. 7

Injection Molding Plastic Products

Account Receivables

A collection period of 45 days is assumed for sales. Further provision for bad debts has
been assumed equivalent to 1.25% of Gross Sales.
7. 8

Traveling & Miscellaneous Office Expenses

A monthly figure of Rs. 15,000 (500 per day) is assumed to be incurred for traveling
expenses and office purchases which are expected to increase at the rate of 10% per annum
for the projected period.
7. 9

Financial Charges

It is assumed that long-term financing for 5 years will be obtained in order to finance the
Auto Workshop setup which would mainly include Construction of Building, Masonry
work, Purchase of Equipment etc. This facility would be required at a rate of 15%
(including 1% insurance premium) per annum with 60 monthly installments over a period
of five years. The installments are assumed to be paid at the end of every month.
7. 10

Taxation

The tax rate applicable to sole proprietorship is the same as that of the salaried individual.
Therefore, we are assuming that the tax rate would be the same for the proposed injection
molding setup.
7. 11

Cost of Capital

The cost of capital is explained in the following table:

Particulars
Required return on equity
Cost of finance
Weighted average cost of capital

Rate
20.0 %
15.0 %
17.5 %

The weighted average cost of capital is based on the debt/equity ratio of 50:50.
7. 12

Owners Withdrawal

It is assumed that the owner with withdraw from the business once the desired profitability
is reached from the start of operations. The amount would depend on business
sustainability and availability of funds for future growth.

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

Key Assumptions
Item

Assumption(s)
Sales Increase
7.5 % per year
Increase in Cost of Raw Materials
05 % per year
Increase in Staff Salaries
10 % per year
Increase in Utilities (Electricity / Water / 10 % per year
Gas)
Increase in Rent
10 % per year
Increase in Office Expenses
10 % per year
Debt / Equity Ratio
50 : 50
Depreciation
o Plant Building
10 % per annum (Diminishing Balance)
o Machinery & Molds
10 % per annum (Diminishing Balance)
o Office Furniture & Equipment
10 % per annum (Diminishing Balance)
o Vehicles
10 % per annum (Diminishing Balance)
Machine Overhauling Cost
10 % of Cost Price (Year 5 & Year 10)
Machine Annual Maintenance Cost
2% of Written Down Value
Receivables
45 Days
Bad Debts
1.25% of Gross Sales
Finished Goods Inventory
45 Days
Raw Materials Inventory
30 Days
Lease Period
5 Years
Lease Installments
Monthly
Financial Charges (Lease Rate)
15 % per annum
Tax Rate
Income Tax on Salaried Individuals

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

PROJECTED INCOME STATEMENT

Projected Income
Year 1
Statement (Rs.)
Revenue
72,090,812
Receivables
9,011,351
Beginning Finished
Goods Inventory
0
Ending Finished Goods
4,830,935
Inventory
Bad Debts
901,135
Net Sales
66,358,742
Raw Material Cost
51,630,833
Production Labor
2,280,000
Utilities
4,362,000
Cost of Sales
58,272,833
Gross Profit
8,085,909
General Administrative & Selling
Expenses
Salaries
384,000
Rent Expense
1,200,000
Off & Misc Expenses
180,000
Amortization Expenses
10,000
Depreciation Expense
1,660,300
Maintenance Expense
160,650
Subtotal
3,594,950
Operating Income
4,490,959
Financial Charges (15%
Per Annum)
2,911,497
Earnings Before Taxes
1,579,462
Tax
428,312
Net Profit
1,151,150
Monthly Profit After
Tax
95,929

PREF-7/March, 2005

Year 2
77,497,623
9,687,203

Year 3
83,309,944
10,413,743

Year 4
89,558,190
11,194,774

Year 5
96,275,055
12,034,382

Year 6
103,495,684
12,936,960

Year 7
111,257,860
13,907,232

Year 8
119,602,199
14,950,275

Year 9
128,572,364
16,071,546

Year 10
138,215,292
17,276,911

4,830,935

5,314,028

5,845,431

6,429,974

7,072,971

7,780,269

8,558,295

9,414,125

10,355,538

5,314,028
968,720
76,045,809
54,212,375
2,508,000
4,798,200
61,518,575
14,527,234

5,845,431
1,041,374
81,737,167
56,922,994
2,758,800
5,278,020
64,959,814
16,777,354

6,429,974
1,119,477
87,854,170
59,769,143
3,034,680
5,805,822
68,609,645
19,244,524

7,072,971
1,203,438
94,428,619
62,757,601
3,338,148
6,386,404
72,482,153
21,946,466

7,780,269
1,293,696
101,494,690
65,895,481
3,671,963
7,025,045
76,592,488
24,902,202

8,558,295
1,390,723
109,089,110
69,190,255
4,039,159
7,727,549
80,956,963
28,132,147

9,414,125
1,495,027
117,251,342
72,649,767
4,443,075
8,500,304
85,593,146
31,658,196

10,355,538
1,607,155
126,023,797
76,282,256
4,887,382
9,350,334
90,519,973
35,503,825

11,391,091
1,727,691
135,452,047
80,096,368
5,376,121
10,285,368
95,757,857
39,694,190

422,400
1,320,000
198,000
10,000
1,494,270
144,585
3,589,255
10,937,979

464,640
1,452,000
217,800
10,000
1,344,843
130,127
3,619,410
13,157,944

511,104
1,597,200
239,580
10,000
1,210,359
117,114
3,685,357
15,559,168

562,214
1,756,920
263,538
10,000
1,089,323
123,252
3,805,248
18,141,219

618,436
1,932,612
289,892
0
1,069,641
110,927
4,021,507
20,880,695

680,279
2,125,873
318,881
0
962,676
99,834
4,187,545
23,944,602

748,307
2,338,461
350,769
0
866,409
89,851
4,393,797
27,264,399

823,138
2,572,307
385,846
0
779,768
80,866
4,641,925
30,861,900

905,452
2,829,537
424,431
0
701,791
90,629
4,951,840
34,742,349

2,427,093
8,510,886
2,854,310
5,656,576

1,864,819
11,293,126
3,828,094
7,465,032

1,212,156
14,347,012
4,896,954
9,450,058

454,575
17,686,643
6,065,825
11,620,818

0
20,880,695
7,183,743
13,696,952

0
23,944,602
8,256,111
15,688,492

0
27,264,399
9,418,040
17,846,359

0
30,861,900
10,677,165
20,184,735

0
34,742,349
12,035,322
22,707,027

471,381

622,086

787,505

968,402

1,141,413

1,307,374

1,487,197

1,682,061

1,892,252

Pre-Feasibility Study

Injection Molding Plastic Products

PROJECTED BALANCE SHEET

Projected
Balance Sheet
(Rs.)
Assets
Current Assets
Cash & Bank
Balance
Account
Receivable
Raw Materials
Inventory
Finished Goods
Inventory
Prepaid Rent
Total Current
Assets
Fixed Assets
Machinery &
Molds
Plant
Office Vehicles
Office Fixtures
Total Fixed
Assets
Preliminary
Expenses
Total Assets
Owner's Equity
Long Term
Liability
Total Equity &
Liabilities

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

19,952,278

5,918,126

8,207,179

11,483,231

15,838,238

20,463,998

33,359,225

47,987,529

64,513,133

83,112,246

103,069,802

9,011,351

9,687,203

10,413,743

11,194,774

12,034,382

12,936,960

13,907,232

14,950,275

16,071,546

17,276,911

4,302,569

4,302,569

4,517,698

4,743,583

4,980,762

5,229,800

5,491,290

5,765,855

6,054,147

6,356,855

6,674,697

0
600,000

4,830,935
600,000

5,314,028
600,000

5,845,431
600,000

6,429,974
600,000

7,072,971
600,000

7,780,269
600,000

8,558,295
600,000

9,414,125
600,000

10,355,538
600,000

11,391,091
600,000

24,854,847

24,662,982

28,326,108

33,085,988

39,043,748

45,401,152

60,167,744

76,818,912

95,531,680

116,496,183

139,012,502

9,775,000
5,928,000
800,000
100,000

8,797,500
5,335,200
720,000
90,000

7,917,750
4,801,680
648,000
81,000

7,125,975
4,321,512
583,200
72,900

6,413,378
3,889,361
524,880
65,610

6,664,540
3,500,425
472,392
59,049

5,998,086
3,150,382
425,153
53,144

5,398,277
2,835,344
382,638
47,830

4,858,449
2,551,810
344,374
43,047

4,372,605
2,296,629
309,936
38,742

4,827,844
2,066,966
278,943
34,868

16,603,000

14,942,700

13,448,430

12,103,587

10,893,228

10,696,405

9,626,765

8,664,088

7,797,680

7,017,912

7,208,620

50,000
41,507,847

40,000
39,645,682

30,000
41,804,538

20,000
45,209,575

10,000
49,946,976

56,097,557

69,794,509

85,483,000

103,329,360

123,514,095

146,221,122

20,753,924

21,905,074

27,561,650

35,026,681

44,476,739

56,097,557

69,794,509

85,483,000

103,329,360

123,514,095

146,221,122

20,753,924

17,740,608

14,242,888

10,182,894

5,470,237

41,507,847

39,645,682

41,804,538

45,209,575

49,946,976

56,097,557

69,794,509

85,483,000

103,329,360

123,514,095

146,221,122

PREF-7/March, 2005

Pre-Feasibility Study

Injection Molding Plastic Products

PROJECTED CASH FLOW STATEMENTS

(Rs.)
Year 0
Cash Flow From Operating Activities
Net Profit
0
Add: Depreciation Expense
0
Amortization Expense
0
(Increase) / Decrease in
Receivables
0
(Increase) / Decrease in RM
Inventory
0
(Increase) / Decrease in FG
Inventory
0
Net Cash Flow From
Operations
0
Cash Flow From Financing Activities
Receipt of Long Term Debt
20,753,924
Repayment of Long Term
Debt
Owner's Equity
20,753,924
Net Cash Flow From
Financing Activities
41,507,847
Cash Flow From Investing Activities
Construction Cost
(5,928,000)
Machinery & Mold
(8,925,000)
Office Furniture
(100,000)
Advance Rent
(600,000)
Preliminary Expenses
(50,000)
Raw Material Inventory
(4,302,569)
Office Vehicles
(800,000)
Coloring Machine
(850,000)
Net Cash Flow From
Investing Activities
(21,555,569)
NET CASH FLOW
19,952,278
Cash at the Beginning of
the Period
Cash at the End of the
Period

PREF-7/March, 2005

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

1,151,150
1,660,300
10,000

5,656,576
1,494,270
10,000

7,465,032
1,344,843
10,000

9,450,058
1,210,359
10,000

11,620,818
1,089,323
10,000

13,696,952
1,069,641
0

15,688,492
962,676
0

17,846,359
866,409
0

20,184,735
779,768
0

22,707,027
701,791
0

(9,011,351)

(675,851)

(726,540)

(781,031)

(839,608)

(902,579)

(970,272)

(1,043,042)

(1,121,271)

(1,205,366)

(215,128)

(225,885)

(237,179)

(249,038)

(261,490)

(274,565)

(288,293)

(302,707)

(317,843)

(4,830,935)

(483,093)

(531,403)

(584,543)

(642,997)

(707,297)

(778,027)

(855,830)

(941,413)

(1,035,554)

(11,020,836)

5,786,773

7,336,047

9,067,663

10,988,497

12,895,227

14,628,305

16,525,604

18,599,113

20,850,056

(3,013,316)

(3,497,720)

(4,059,994)

(4,712,657)

(5,470,237)

(3,013,316)

(3,497,720)

(4,059,994)

(4,712,657)

(5,470,237)

(892,500)

(892,500)

0
(14,034,152)

0
2,289,053

0
3,276,053

0
4,355,007

(892,500)
4,625,760

0
12,895,227

0
14,628,305

0
16,525,604

0
18,599,113

(892,500)
19,957,556

19,952,278

5,918,126

8,207,179

11,483,231

15,838,238

20,463,998

33,359,225

47,987,529

64,513,133

83,112,246

19,952,278

5,918,126

8,207,179

11,483,231

15,838,238

20,463,998

33,359,225

47,987,529

64,513,133

83,112,246

103,069,802

Pre-Feasibility Study

PREF-7/March, 2005

Injection Molding Plastic Products

Pre-Feasibility Study

PREF-7/March, 2005

Injection Molding Plastic Products