2012ST Textile Mills Ltd.
Sarfaraz Ahmed Khan (8057) Tauqir Ahmed Khan (9300)
[PROJECT APPRAISAL]The objective of the study is to appraise the
setting up of a TEXTILE SPINNING unit in Pakistan which will be
producing and exporting yarn, throughout this study we will be
looking at various aspects that are to be considered while setting
up a Spinning unit.
SNO TITLE
PAGE NO
1 EXECUTIVE SUMMARY 2 TEXTILE INDUSRY OUTLOOK 3 THE PROJECT
INTRODUCTIONa Objective b Scope c Methodology and Approach
2 3 6 6 6 6 7 7 7 8 9 10 10 10 10 11 12 17 18 18 19 19 20 20 22
23 23 24 24 25 26 27 28 29 29
4 MANAGEMENT APPRAISALa b c d e f
Sponsors Sponsors Objective Proposed Management Structure
Organizational Chart How objectives will be developed at a Vogue
Textile? Competitors
5 ENVIRONMENTAL ANALYSISa Corporate Social Responsibility b
Environmental Health and Safety Policy
6 MARKETING ASPECT AND ANALYSIS 7 TECHNICAL ANALYSIS a Location
analysisb Technical Assumptions c Process layout d Machinery and
Equipment for Processing
8 FINANCIAL ANALYSIS:a b c d e f g h i j k l
Total Project Cost Key Assumptions Key Financial Assumptions:
Annual Loan Payment schedule Depreciation Schedule in Millions:
Sales Realization Working Capital Requirements in Millions: Income
Statement in Millions: Cash flow Statement in Millions: Projected
Balance Sheet in Millions: Free Cash Flow Statement in Millions:
Project NPV
1
m n 9 a b c d e 10 11 12 13
Project IRR (Internal rate of return) Sensitivity Analysis
ECONOMIC ANALYSIS Increase in National Income Contribution to tax
Economic Stability Agricultural Development Greater Employment
CONCLUSION RECOMMENDATION APPENDICES BIBLOGRAPHY
30 30 31 31 31 32 32 32 33 34 36 43
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1. Executive Summary:Pakistan is a land with a lot of potential
and hidden natural resources that are yet to be explored and put to
use. Textile sector generates more than 50% of export earnings and
comprises of 2% of worlds total trade but is one of those
undervalued and underutilized sector which needs to be taken care
of. The textile industry of Pakistan has the potential to perform
better both in production as well as in export by virtue of its
inherent competitiveness on account of its conventional products.
However, to sustain its position and increase its share and to move
into high value added products, large investments in machinery
equipment and new technology are essential. The spinning sector is
the most important segment in the hierarchy of textile production.
At present, as per the record of Textile Commissioner Organization
(TCO), it is comprised of 521 textile units (50 composite units and
471 spinning units) with 9.99 million spindles and 116 thousand
rotors in operation with capacity utilization of 89 percent and 60
percent respectively, during July March 2011-12. Looking at the
potential of this sector our sponsors have decided to set up a
cotton spinning unit at Nooriabad near Karachi with an annual
capacity of 48,000 bags. Total cost is estimated to be Rs 110
million which would be financed 66% from debt and 44% of the funds
would be provided by sponsors. The company will face issues like
fluctuating cotton prices, global and domestic competition and
increasing interest rates which can be resolved by cotton hedging
to save ourselves from volatile cotton prices, aggressive marketing
and targeting potential market in European countries and borrowing
funds at fixed interest rates respectively.
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2. TEXTILE INDUSRY OUTLOOK:Pakistans textile industry ranks
amongst the top in the world. Pakistan is World's fourth largest
cotton producer and the third largest consumer of the same. Cotton
based textiles contribute over 60% to the total exports, accounts
for 46% of the total manufacturing and provide employment to 38%
manufacturing labor force. The availability of cheap labor and
basic raw cotton as raw material for textile industry has played
the principal role in the growth of the Cotton Textile Industry in
Pakistan. With the advent of Textile could be termed as the
backbone of Pakistan's economy. It is not only the largest industry
in the country but it is the greatest source of foreign exchange
earnings in Pakistan. The Textile sector critically depends on the
supply of raw material from agriculture sector and therefore,
whatever happens to cotton crop is likely to affect the performance
of textile sector. The quota free global regime spear headed by the
WTO it has become imperative for a rapidly developing country like
Pakistan to further explore potential new markets both in its
neighboring territories as well as distant ones. In this context,
Pakistan has signed a Free Trade agreement (FTA) with China. This
FTA is predicted to bring around $5 billion increase in our trade
volume with China which is going to consist mostly of textile
related commodities. Economic analysts have already dubbed this
pact as the Cotton Road to China. In order to fully avail the
concessions under the agreement the Government is strongly
committed to further strengthening the textile sector in the
country. However the Garment Sector especially the Knitwear Garment
Sector needs special support.
The profile of various components of the textile industry are
given below:
Performance of Ancillary Textile Industry.
Cotton Spinning Sector Weaving & Made-ups Sector Filament
Yarn Manufacturing industry Art Silk and Synthetic Weaving
Industry
Neighboring India, even after an extreme slowdown, is still
growing at more than 6 percent per year; whereas, Pakistans growth
average during the past four years has been barely 2.50 percent. At
least two million new workers enter our labor market every year,
which means that if we cannot match this with corresponding growth,
the problems with unemployment and poverty will
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compound. The sad reality at present, however, points to a
climate where our industry is instead operating at about 30 to 40
percent below capacity. The textile sector accounts for
approximately 38 percent of our entire labor force and an operating
level of 60 percent basically means a job loss in this sector alone
of about one million workers. Ironically, in textiles, not
international demand or global management, inefficiencies have been
the main culprits, but the sheer choking of power (electricity) and
energy (natural gas) has forced closures resulting in the loss of
global market share. Comparing this with 2007, when the industry
was operating on full capacity, it means: Whereas, in four years an
extra 3.20 million fresh young employable workers should have been
absorbed in the textile sector, it is at present accommodating one
million than its peak back in 2007! Running an industry per se is
becoming untenable, especially in Punjab, where it is forced to
close for nearly 170 days a year for want of power and energy.
Little wonder that our textile exports are falling, rather than
registering an increase. Based on the figures recently released by
the Ministry and verified by the respective Chambers, if we compare
January 2011 to January 2012 in quantity terms, the total textile
exports have registered a decline of 15.37 percent, and the sector
wise decrease reads as textiles and clothing by 16.81 percent,
knitwear by 34.79 percent, bed wear by 30.24 percent, towels by
21.76 percent, readymade garments by 24.46 percent, art silk and
synthetic textiles by 44.29 percent and other made-ups by 28.16
percent. Even more disturbing is the trend that the exports of
higher value items have fallen at a much higher rate than the less
valued ones and, alarmingly, the products that in competing
manufacturing economies are regarded as raw materials, have
actually gained their share of exports! For example, raw cotton
exports have registered an increase of 397.42 percent, cotton yarn
one percent and yarns other than cotton yarn by 2,287.50 percent.
Value addition as we know has been a weakness of Pakistani textile
exports, as we continue to operate at one of the lowest per
kilogram values amongst the principal textile manufacturing
countries of the world.
And it is this very weakness, which our Textile Ministry needs
to guard against and strategize to somehow overcome. The Indian
Ministry as we know goes to great lengths in policy formation to
ensure that the operational framework supports a culture where the
industrial potential of value addition gets maximized - in spite of
no real global or domestic shortage of cotton, we saw India place a
ban last month on its cotton export to see to it that priority lies
with conversion of the basic commodity into finished cum made-up
goods - this in order to generate both additional foreign exchange
revenues and employment. At our end, one is not too convinced that
our policymakers are even thinking through this aspect of our trade
dynamics. Recent key decisions on enhancing trade with India seem
to have been taken in haste and without ensuring the fair element
of reciprocity. While it is understandable to grant the MFN (Most
Favored Nation) status to India, in doing so we needed to protect
our industrial strengths by guaranteeing fair
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access to the Pakistani products where we add good value and
enjoy a competitive edge over India, e.g. home textiles, toweling,
cement, sports goods, surgical instruments, specialized consumer
products, processed meat, livestock, etc. Even the EU concessions
package does not seem to be that exciting when one takes into
account that the majority of their concessions apply to items that
fall in the category of feeding cheap raw materials to the European
manufacturing, instead of promoting value addition in Pakistan.
Also, the strong growth items for us like bed linen, bulk of home
textiles, towels, etc have either been excluded or have been placed
under the ceiling of tariff related quotas.
3. THE PROJECT INTRODUCTION:a. Objective The objective of the
study is to appraise the setting up of a TEXTILE SPINNING unit in
Pakistan which will be producing and exporting yarn, throughout
this study we will be looking at various aspects that are to be
considered while setting up a Spinning unit. b. Scope The scope of
the study is to undertake, need assessment, marketing aspects and
analysis, technical aspects and evaluation, assessment of
organizational structure, financial and economic evaluation of the
project, on the basis of which recommendations are to be made about
setting up the project. The study is based upon what we have
learned in our Project Appraisal course.
c. Methodology and approach The methodology used while making
this report is as under: The primary data was collected from visit
to local textile mill in Nooriyabad, discussions with the experts
in spinning mill regarding various aspects of the industry.
Secondary data was collected from government publications, journals
and magazines, internet and other sources. Prices of machinery and
technical know-how were again obtained from experts in spinning
mill
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4. MANAGEMENT APPRAISALa. Sponsors: Sarfaraz Ahmed Khan ( CEO,
Zegatron. Inc) Tauqir Ahmed Khan ( CEO, Pak Dewaan Transport
Company) b. Sponsors Objective: The objectives of sponsors may vary
from one kind to another. Our prime objective is to maintain the
companys position as a leading manufacturer of quality products
that surpass both national and international standards. Growth,
expansion and consistent profitability are the main focus, however
to retain our lines of processes at highest level of operational
efficiency, we as sponsors have analyzed cost, benefit and risk of
the project before investing. c. Proposed Management Structure:
Management of the group is professionally qualified.
The business of the company is to be managed under the
directions of the board of directors. The board will be responsible
for establishing broad corporate policies for the overall
performance of the company. The boards corporate governance
committee will review the principles and rules regularly in the
light of prevailing best practices and forward suggestions for
improvement to the full board for approval and the boards corporate
governance committee will be responsible for considering matters of
social responsibility and matters of significance in areas related
to corporate public affairs and the companys employees and
stakeholders. The boards job would be to create and maintain a
structure that will ensure harmony and cooperation between
management and the employees in pursuing the goals and objectives
of the organization rather than simply rubber stamping the actions
of management. The paramount duty of the board of directors is to
select chief executive officer and to oversee the CEO and the other
senior management for the competent and the ethical operation of
the company.
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The board would identify and periodically update the qualities
and characteristics necessary for an effective CEO of the company.
With these principles in mind, the board would periodically monitor
and review the development and progression of potential internal
candidates against these standards. The CEO is in charge of day to
day management operations, and is responsible for ensuring that the
management and companys functions are organized, run and developed
in accordance with the law, articles of association and decision
adopted by the board, and the annual general meetings of the
shareholders. d. Organizational Chart:
CEODirector Marketing Director Finance Director Production
Chief Financial Officer
Co-Secratary
Finance Manager
Export Marketing Manager
Production Manager
Assistant Finance Manager
Process Department Manager
Stiching Depatment Manager
Store Manager
Process supervisor
Packing Incharge
Stock Incharge
Machine Operators and assistants
Packing Staff
Store Assistants
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e. How objectives will be developed at a Vogue Textile? The
objectives will be developed with the help of companys vision and
mission. The objectives will be defined within the organization so
that management and employees agree to the objectives and
understand what their position in the organization is.
Participative goal setting is being practiced in the organization.
The employees actual performance will be measured and compared with
the standards set by the organization. As participative goal
setting is applied so it is more likely that employees will fulfill
their responsibilities. f. Competitors Dewaan Textile Mills Faisal
Spinning Mills Feroze Textile Pvt Ltd Nishat Spinning Mills Saphire
Spinning Mills Stallion Textile Mills
5. ENVIRONMENTAL ANALYSIS:a. Corporate Social Responsibility The
company is socially responsible and committed to conduct its
business ethically and with responsibility. The company considers
itself accountable to its stakeholders and has identified three
dimensions of performing the social responsibilities which are
contribution to economy, environment and society.
The management pursues the strategy by following strategic
guidelines to be a good corporate citizen: Execute and implement
projects to alleviate the poverty. Providing civic, health,
education and housing facilities. Support social causes.
Continuously striving to improve greenery, maintain a clean
environment around the factory and better housekeeping. Encouraging
women employment. Encouraging employment of special people.
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On the corporate social responsibility front the company has
launched a program of women empowerment and the employment of
special people. At Vogue we believe women are our countrys largest
dormant asset which can be absorbed into the national workforce to
yield significant gains. The company has provided its labor force
with free services of doctor, free medicine in dispensary and
ambulance service. Upcountry workers are provided with the housing
facility at manufacturing locations helping them to reduce their
cost of living. In infrastructure the company is helping the
government in building new roads and repairing the old ones near
the manufacturing locations.
b. Environmental Health and Safety Policy The company believes
that performance is directly related with the healthy employees
working in clean, green and unpolluted environment and that all the
accidents/injuries are preventable. Therefore they incur cost of
health, safety and environment considering it as an investment. The
company has designed and structured its work place so as to
minimize the accidental risks, provided medical facilities like
ambulances and dispensary having full time doctor. We continuously
strive to improve greenery, maintain a clean environment around the
factory and better housekeeping. Fire fighting, first aid and
emergency quick response drills are undertaken as routine. Adhering
to energy conservation policy, the company is committed to a
minimal carbon footprint.
6. MARKETING ASPECTS & ANALYSISThe global cotton and textile
communities are facing historically volatile times, regardless of
which part of the supply chain they belong to. Without question,
the problem our industry faces are significant - but they are by no
means insurmountable. In spite of that Cotton spinning companies
were encouraged towards home textiles seeing further growth. Most
of companies were operating at full capacity. Countries operating
at full capacity would increase their capacity if there was no
change in the situation. The spinning sector had grown with export
demand and growth in cotton production. Weaving and processing
sector follows are valued added sectors which utilize the yarn. The
major concentration of industry is in Karachi, Hyderabad, Multan,
Lahore and Faisalabad. At present, there are 11.28 million spindles
and 198 thousand rotors are installed and nearly 9.85 million
spindles and 115 rotors are in operation. The capacity utilization
has stagnated at 87% in10
spindles and 58% in rotors during 2010-11. Installed and working
capacity of spinning units are given in Table-1Table 1: Installed
and production capacity of yarn Spindle Hours Year Loom Hours
Worked (Million) Worked (Million) 2000-01 8,954 7,105 59,219 34.1
2001-02 8,967 7,078 61,267 36.3 2002-03 9,216 7,623 64,274 38.7
2003-04 9,592 8,009 70,214 32.6 2004-05 10,906 8,817 72,255 30.3
2005-06 11,292 9,754 74,884 24.8 2006-07 11,266 10,057 76,892 21.7
2007-08 11,834 9,960 75,405 21.5 2008-09 10,514 9,375 56,300 24.0
2009-10 10,101 9,450 75,405 20.15 2010-11 11,280 9,850 76,300 22.19
Source: (i) Federal Bureau of Statistics, Government of Pakistan.
(ii)Textile Commissioners Organisation, Government of Pakistan.
Installed Capacity Working Capacity
The production of yarn significantly increased from 1.72 billion
Kg in 2000-01 to 2.94 billion kg in 2010-11, thus showing an
average increase of 6% per annum. Production of yarn is given
inTable-3.Table 3: Production of yarn Year 2000-01 2001-02 2002-03
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Consumption of Cotton Total Yarn Produced Surplus (Million .Kg)
(Million.Kg) (Million.Kg) 2,070.1 1,721.0 1,652.7 2,155.2 1,808.6
1,731.2 2,371.3 1,934.9 1,855.4 2,407.6 1,938.9 1,845.8 2,622.8
2,280.6 2,175.2 2,932.6 2,556.3 2,460.5 3,143.5 2,727.6 2,623.2
3,159.2 2,809.4 2,764.4 2,648.2 2,913.4 2,328.2 2,535.3 2,787.4
1,980.5 2,589.8 2,939.0 2,125.3 Yarn
Source: Federal Bureau of Statistics, Government of
Pakistan.
However stronger export order books for some segments of the
textile industry from around November last year, especially for
cotton yarn, have contributed in the performance of manufacturing
sector. If external demand for exports remains strong in the
markets ahead, the overall manufacturing sector may benefit
further. Internationally some economic recovery has taken place
which has been termed as fragile and with reference to the regions
and countries as uneven. Globally raw material prices have been
11
shooting up. We saw some dampening of the buying power of our
major export destinations across the globe and there was tremendous
resistance from our customers to absorb price increases. In the
later part of the year we have seen some improvement in overseas
orders along with price adjustments, though partially, to cover the
increased costs. Pakistani companies have managed to grab a
significant share in the world market thanks to latest efficient
high-end technology. Lots of the other companies would like to
acquire the new and latest machines. This would give the Pakistani
spinning industry further boost, there is significant scope for
yarn exports from Pakistan, but only if we can manufacture the
right products (count). Further on, Turkey has been processing and
converting loads of grey fabric imported from Pakistan into home
furnishings and other similar goods, exporting them to Europe at
high profit margins, claims an exporter, showing great potential in
European export market. To international entrepreneurs, Europe is
potentially one of the most profitable markets in the world. At the
same time it is also a competitive, sophisticated and dynamic
market. To be successful at the European market requires insight in
consumer demand for design, quality, presentation and
communication. Prices have dropped due to the rise of bulk-order
textile, but at the same time, this has increased demand for
exclusive and authentic Home Textiles with high quality finishing
and (eco) friendly production. USA is a extremely huge market of
textile and 60pct of textile are exported to USA alone. Hence with
the depreciation of rupee Pakistan would be more competitive with
countries like China, India and Bangladesh. Few agents in Europe
have already been contracted who will be placing orders according
to the requirement of market and production will be based according
to their demand. Export of yarn increased from 545 million kg worth
US$1.08 billion in 2000-01 to 533 million kg worth US $2.18 billion
in 2010-11. Average unit price realization of Pakistani cotton yarn
in the international markets is very low compared to that of its
competitors. Average unit price of cotton yarn increased from
$1.97/kg in 2000-01 to $ 4.10/kg in 2010-11. Export of cotton yarn
is given inTable-4.
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Table 4: Export of cotton yarn Quantity Value Year (000Kg) (000
US $) 2000-01 545,134 1,076,063 2001-02 544,217 942,359 2002-03
519,329 928,358 2003-04 499,071 1,126,878 2004-05 504,722 1,056,535
2005-06 671,697 1,382,874 2006-07 665,525 1,428,041 2007-08 554,817
1,300,968 2008-09 523,733 1,114,821 2009-10 625,418 1,433,094
2010-11 532,756 2,185,491 Source: Trade Development Authority of
Pakistan.
Unit Value ($/ Kg) 1.97 1.73 1.79 2.26 2.09 2.06 2.15 2.34 2.11
2.26 4.10
Pakistan's leading buyers are Hong Kong, South Korea, China,
USA, Bangladesh, Japan, Turkey, and Portugal. Export of cotton yarn
is given in Table-5.Table Country China Hong Kong Bangladesh Korea
Republic Portugal Japan Italy U.S.A Turkey Egypt Bahrain Malaysia
Belgium All other countries Total 5: Country 2010-2011 914,594
281,113 193,430 135,954 77,927 68,134 62,350 38,305 71,697 24,726
18,274 26,313 11,996 276,682 2,201,405 wise Export of Cotton Value:
US $ 000 2009-2010 634,029 257,025 99,190 65,469 52,133 30,167
36,162 28,386 33,621 5,566 12,622 14,522 8,471 154,731 1,433,094
2008-2009 366,295 233,181 92,946 60,406 53,698 43,518 31,754 28,587
28,051 17,505 14,221 9,925 9,340 124,755 1,114,182 Yarn
Source: Trade Development Authority of Pakistan.
Pakistan has finally succeeded in securing a European Union
preferential trade deal nearly two years after the EU proposed a
relaxation of tariffs to help the South Asian country's economy
recover after devastating floods. The World Trade Organization
(WTO) approved the muchdelayed package covering 75 items at a
meeting of its Council for Trade in Goods (CTG) in Geneva. The deal
was scheduled to come into effect in January last year, but it was
delayed after countries such as Argentina, Brazil, India,
Bangladesh and Indonesia raised objections. The tariff changes will
enter into force after formal approval by the WTO General Council
in March, 2011.
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Under the package, the total export value of the 75 tariff lines
is estimated at US$1.03 billion and the average tariff on these
products is around 8.86%, or less than a quarter of the $3.80
billion value of the country's total global exports. The Pakistan
Cotton Ginners Association (PCGA) has expressed hope that cotton
consumption in Pakistan would increase to 13 million as the
European Unions waiver of 75 exportable items of Pakistan has
enhanced cotton consumption of mills and spinners will need
additional 2 million bales (13 million bales), against 11 million
bales per season, due to increase in export orders for cloth and
yarn. Pakistan will get benefit from access to the market of the
EU, which allows exports to more than 3,000 tariff lines duty-free,
besides enjoy reduced duties on another 3,000 tariff lines. Exports
from Pakistan are currently worth around 3.5 billion Euros per
annum, 921 million euros of which comes from these 75 lines. The
consumption of cotton by textile mills in Pakistan would increase
following decision of World Trade Organization (WTO) to allow
duty-free exports of 75 Pakistani items to European Union (EU)
markets for a two-year period. Pakistan Cotton Ginners Association
PCGA Chairman, Amanullah Qureshi said cotton consumption by textile
mills in the country is likely to surge to 13 million bales of 170
kg each, compared to current consumption of around 11 million bales
per season. The approval of EU package for Pakistan by WTOs Council
for Trade in Goods (CTG) would boost export orders for yarn and
fabrics, which would in turn, raise cotton consumption of spinners
and textile mills across the country. Effective demand in the past
and present: Production + Imports Exports Changes in Stock
level
Year 2006 2007 2008 2009 2010 2011
Effective Demand in 000 Kg455,567 372,233 401,188 462,209
443,544 465,77914
Data Taken and formulated From www.Pbs.com.pk
7. TECHNICAL ASSESSMENTThe spinning is the most important and
the initial step in fabric manufacturing. The major and main goals
of spinning is to produce the quality yarn from raw material, then
remove the process faults and later winding the short length
bobbins on big packages (Cones) according to the market/customer
demands. There are different types of spinning, the most commonly
forms of spinning commercially available are: Ring spinning, Rotor
spinning, Air Jet spinning, Friction spinning, etc. Spinning in
conversion of fibers into yarn, these fibers can be natural fibers
(cotton) or manmade fibers (polyester). Spinning also entails
production of manmade filament yarn; however, final product of
spinning is yarn.
The most suitable location for setting up Vogue Spinning Mill
would be Nooriabad near Karachi. Major trade activities are taking
place in this city, and our main objective of exporting is easily
achieved with its large textile making industry and availability of
sea port that assists in the exports. Faisalabad is an alternative
location that can be chosen, as there are large numbers of textile
units set up there. a. Location Analysis The Textile Unit at
Nooriabad near Karachi is proposed of 5 acres for setting up the
plant for the following reasons: A market for the sale and purchase
of cotton (Raw Material) already exists in Karachi (Punjab for
Faisalabad).
Many suppliers of cotton are available in Karachi market to help
in the production of yarn.
Infrastructure for export like international airport and seaport
already exists.
Skilled labor is already available in Nooriabad Land for
construction is appropriate as various textile units are already
established. Cheap Land is available
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Availability of Gas for power Generation. b. Techincal
Assumptions
Raw material: 450,000Kg of Cotton Waste per Month - 1 month
buffer(storage) 5 acres land - 70pct area will be utilized for
Processing and 30pct for storage Total electricity required 1 mega
watts - 700 KVA for processing - 1 generator required - These are
gas generators Cooling Tower for power generation Plant will be in
operation for 360 days a year. Machines will be imported in 3
months time. 3 Months Installation time for machinery. Agreement
with the machine suppliers have been made regarding the warranty
period, and has been set to one year after the initial operation of
machines. Blow room
Production ProcessMost spinning is done using break or open-end
spinning, this is a technique where the staples are blown by air
into a rotating drum, where they attach themselves to the tail of
formed yarn that is continually being drawn out of the chamber.
Other methods of break spinning use needles and electrostatic
forces. This method has replaced the older methods of ring and mule
spinning. It is also easily adapted for artificial fibers. The
spinning machine takes the roving, thins it and twists it, creating
yarn which it winds onto a bobbin. In mule spinning the roving is
pulled off a bobbin and fed through rollers, which are feeding at
several different speeds. This thins the roving at a consistent
rate. If the roving was not a consistent size, then this step could
cause a break in the yarn, or could jam the machine. The yarn is
twisted through the spinning of the bobbin as the carriage moves
out, and is rolled onto a cop as the carriage returns.
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Mule spinning produces a finer thread than the less skilled ring
spinning.
The mule was an intermittent process, as the frame advanced and
returned a distance of 5ft.It was the descendant of a 1779 Crompton
device. It produces a softer, less twisted thread that was favoured
for fines and for weft.
The ring was a descendant of the Arkwright water frame of 1769.
It was a continuous process, the yarn was coarser, had a greater
twist and was stronger so was suited to be warp. Ring spinning is
slow due to the distance the thread must pass around the ring, and
similar methods have improved on this; such as flyer and bobbin and
cap spinning.
Sewing thread was made of several threads twisted together, or
doubled. The pre-industrial techniques of hand spinning with
spindle or spinning wheel continue to be practiced as a handicraft
or hobby, and enable wool or unusual vegetable and animal staples
to be creatively used.
Checking
This is the process where each of the bobbins is rewound to give
a tighter bobbin.
Folding and twisting
Plying is done by pulling yarn from two or more bobbins and
twisting it together, in the opposite direction from that in which
it was spun. Depending on the weight desired, the yarn may or may
not be plied, and the number of strands twisted together
varies.
c. Process layout
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d. Assumption and processing Capacity of plant: 4000 Bags 18
Single (400000 LBS) per month e. Expected production: 3000 Bags 18
Single (300000 LBS) Cotton Waste used -450,000 Kgs approximately
Machinery and Equipment for Processing Carding Machine Drawings
(Machine) Open End Machine (R and N)
RAW MATERIAL REQUIREMENT:The raw material required for a
Spinning unit is: Raw Cotton Some chemicals
Packaging Requirements: Packaging requirements for the end
consumers will be done manually. Yarn produced will be packed in
Plastic bags, each bag will be designed to hold 45.36kg of yarn In
the initial stage the unit will start with bulk supply to
processors, hotel industry and will gradually move to retail sales.
Availability of Raw Material: Farmers and wholesale market
commission agents are the major suppliers of raw material in the
local processing industry. The average Raw material prices (cotton)
are about PKR.150 per Kg. The expected yield from the raw material
means the percentage of output as compared to the input. Yield is
mainly dependent on the following factors: Strict quality control
on raw material and production process Type of plant Processing
methodology
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The expected yield from cotton is 90%. It can vary from 4 to 16%
but we expect on average 10% of waste. As far as the waste
management is concerned the project has no environment hazards and
wastewater to be drained out by its connection with the main
drain.
Man power: The total man power requirement for our textile unit
is 300 as illustrated below:
# 1 2 3 4 5
Designation Managers & Assistants Technical supervisors
Skilled labor Semi Skilled Security staff
Number 10 10 170 95 15
Total
300
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8. FINANCIAL ANALYSIS: Cost of the ProjectRupees
In millions
Land Building Plant and machinery* Miscellaneous fixed assets
Preliminary expenses Pre-operative expenses Contingency margin
Working capital margin Total Cost
20 42 65 12 6 22 14 23 204
Means of FinanceRupees
In million 74 110 20 204
Share capital Term loans Incentive loan Total Finances
*includes registration and legal charges and test runInterest on
Term Loan Is assumed to be 14% whereas on the Incentive Loan it is
7%, debt financing is done via term loan is to be paid off in 8
years.
a. Financial Appraisal: Construction time: Estimated to be one
year Proposed Financial Plan: 64% Debt, 36% Equity
(Debt= Rs 110 M, Equity = Rs 74 M , Incentive Loan : Rs 20 M)
Interest on Term Loan Is assumed to be 13% whereas on the Incentive
Loan it is 7%, debt financing is done via term loan is to be paid
off in 8 years.
20
b. Key Assumptions: Raw material: Basic raw material required
for producing cotton yarn is mixing of cotton waste with different
chemicals. Different chemicals are purchased from the market and
then mixed internally to get our basic raw material. Raw cotton
will cost Rs 150/kg and chemicals will cost Rs. 5/kg of cotton. The
cotton to yarn yield will be around 90%. Land & building
requirement: Total land required for this project is 5 Acres. 3
acres of land would be would be utilized for installation of the
machinery and offices and the remaining area would be left for
further expansion and for free movement of transport. The land
would cost Rs 20 Million. Building would cost 42 million rupees
which will include Utilities: All utilities i.e. water, gas and
electricity are required, gas and water are easily available where
as electricity would be self generated through gas generators which
will require 460800 cubic which will cost Rs 2.5 million /month,
which will amount to 30 million a year. With additional 4 million
as maintenance of the generator, Water Supply would cost Rs 2
million a year. Total cost of electricity produced would be Rs 6
per unit. Capacity Utilization 60% in first 70% in second and third
year, 80% in 4th and fifth, 90% after that Price per bag of yarn
will be 12000 rupees and 1 bag is 45.36kg of yarn Raw material % of
sales Salaries and wages is 66%
will be Rs. 12 million and will grow at 10% after that
Utilities will cost approximately Rs. 36 million a year and will
increase 5% per year. F.O.H % of sales is 1% Admin % of sales is 4%
and Selling expense is 2%
Depreciation expense of Fixed assets will be Item Building Plant
and Machinery Miscellaneous fixed assets Depreciation rate 5% 10%
10%
21
The Requirement for working capital is: Item Raw material Stock
in Progress Finished goods Book debts Margin for working capital is
25% Months 1 0.05 0.5 1
Workers Fund is 6%. Tax rate is 35%.
Key Financial Assumptions: Dividend is 12% and will increase
every alternative year by 2 %. Cost of equity is 20% Incentive loan
is 7% Interest on bank borrowing is 15% Interest on term loan is
13%
c. Annual Loan Repayment Schedule The loan was approved and
issued on 1st July 2012. However, our 8 annual installments will
begin from July 1st 2013, falling due on the June 30th of every
year.
Term loan schedulePeriods 1 2 3 4 5 6 7 8 Opening Balance
110,000,000 96,250,000 82,500,000 68,750,000 55,000,000 41,250,000
27,500,000 13,750,000 Interest 14,300,000 12,512,500 10,725,000
8,937,500 7,150,000 5,362,500 3,575,000 1,787,500 Principal
Repayment 13,750,000 13,750,000 13,750,000 13,750,000 13,750,000
13,750,000 13,750,000 13,750,000
Rupees Ending Balance 96,250,000 82,500,000 68,750,000
55,000,000 41,250,000 27,500,000 13,750,000 0
22
d. Depreciation Schedule in Millions:Basic Cost20 42 65 12
139
Asset Land Building Plant and machinery Miscellaneous fixed
assets Total
Share of Preoperative Cost3.17 6.65 10.29 1.90
Share of Contingency Margin2.01 4.23 6.55 1.21
Total25.18 52.88 81.83 15.11 175
Depriciati on rate5% 10% 10%
Depreci ation2.64 8.18 1.51 12.34
Contingency margin and preoperative expense are allocated to
fixed assets on Pro-Rate basis
e. Sales Realization
Sales Realization in Million RupeesYearTotal Capacity(Bags)
Utilization Utilized Capacity(bags) Utilized Capacity (kg) Sales
Realization Sales Realization(mil lion)
201311904 0 1 59520 26998 27 71424 0000
201411904 0 1 71424 32397 93 85708 8000
201511904 0 1 71424 32397 93 85708 8000
201611904 0 1 83328 37797 58 99993 6000
2017119040 1 95232 431972 4 114278 4000
2018119040 1 95232 431972 4 114278 4000
2019119040 1 95232 431972 4 114278 4000
2020119040 1 95232 431972 4 114278 4000
2021119040 1 95232 431972 4 114278 4000
714
857
857
1000
1143
1143
1143
1143
1143
23
f. Working Capital Requirements in Millions:
ItemRaw material Stock In progress Finished goods Book debts
Total Current Assets Less: Margin for Working capital Less: Trade
credit for raw material Bank Finance for Working Capital Interest
on bank borrowing
Mont hs1 0 1 1
201 339 2 22 60 123 31 39 53 8
201 447 3 26 71 147 37 47 63 9
201 547 3 26 71 147 37 47 63 10
201 655 3 30 83 172 43 55 74 11
201 763 3 34 95 196 49 63 84 13
201 863 3 35 95 196 49 63 84 13
201 963 3 35 95 196 49 63 84 13
202 063 3 35 95 196 49 63 84 13
202 163 4 35 95 197 49 63 85 13
0 1
0
g. Income Statement in Millions:
PROJECTED INCOME STATEMENTYear 2013 2014 2015 20161142. 8 754.2
-17.6 -42.1 -11.4 1142. 8 754.2 -19.3 -43.8 -11.4
In million Rupees
2017 2018 2019 2020 20211142. 8 754.2 -21.3 -45.6 -11.4 1142. 8
754.2 -23.4 -47.4 -11.4 1142. 8 754.2 -25.7 -49.3 -11.4
A) SALES B) Cost of Production Raw material Salaries and wages
Utilities Factory overhead C) Adminstration & Selling expenses
ADMIN EXPENSES Selling Expense Gross Profit before Interest
DEPRECIATION
714.2
857.1
857.1 565.7 -14.5 -38.9 -8.6
999.9
-471.4 -12.0 -36.0 -7.1
-565.7 -13.2 -37.4 -8.6
-660.0 -16.0 -40.5 -10.0
-21.4 -35.7 130.6 -12.3
-25.7 -42.9 163.6 -12.3
-25.7 -42.9 160.8 -12.3
-30.0 -50.0 193.5 -12.3
-34.3 -57.1 226.0 -12.3
-34.3 -57.1 222.6 -12.3
-34.3 -57.1 218.9 -12.3
-34.3 -57.1 214.9 -12.3
-34.3 -57.1 210.7 -12.3
24
Interest on term loan Interest on bank borrowing Interest on
incentive loan Operating Profit Preliminary Expense Profit Before
Tax Workers Fund Taxation at 35% Profit after Tax Dividend Retained
Earnings
-14.3 -7.9 -1.4 94.6 0.7 93.9 -5.6 -32.9 55.4
-12.5 -9.5 -1.4 127.9 0.7 127.2 -7.6 -44.5 75.1
-10.7 -9.5 -1.4 126.8 0.7 126.2 -7.6 -44.2 74.4
-8.9 -11.1 -1.4 159.8 0.7 159.1 -9.5 -55.7 93.9
-7.2 -12.6 -1.4 192.5 0.7 191.8 -11.5 -67.1 113.2
-5.4 -12.6 -1.4 190.8 0.7 190.2 -11.4 -66.6 112.2
-3.6 -12.6 -1.3 189.1 0.7 188.4 -11.3 -65.9 111.2
-1.8 -12.7 -1.1 187.0 0.7 186.4 -11.2 -65.2 110.0
0.0 -12.7 -1.0 184.7 0.7 184.0 -11.0 -64.4 108.6
-8.9 46.5
-8.9 66.2
-10.4 64.1
-10.4 -11.8 -11.8 83.5 101.3 100.4
-13.3 97.8
-13.3 96.6
-14.8 93.8
h. Cash flow Statement in Millions:Constr uction period
Year Sources of Funds Share Capital PBT and Interest added
Depriciation Preliminary expenses Increase in term loan Increase in
bank borrowing Increase in Incentive loan Total Disposition of
Funds Capital expenditure
2013
2014
2015
2016
2017
2018
2019
2020
2021
74.0 116.2 12.3 0.7 110.0 52.9 20.0 204.0 182.1 172.6 159.5
202.5 235.0 221.3 217.8 214.0 209.9 10.3 0.1 10.4 10.4 0.1 0.1 0.1
0.1 149.2 12.3 0.7 146.4 12.3 0.7 179.1 12.3 0.7 211.6 12.3 0.7
208.2 12.3 0.7 204.6 12.3 0.7 200.8 12.3 0.7 196.7 12.3 0.7
175.0
25
Increase in working capital Preliminary expenses Decrease in
term loan Interest on tern loan Interest on bank borrowing Taxation
Dividend Workers Fund Total Opening Balance Net Surplus/Deficit
Closing Balance
83.7 6.0 13.8 14.3 7.9 32.9 8.9 5.6 181.0 167.0
16.4
0.1
16.4
16.4
0.2
0.2
0.2
0.2
13.8 12.5 9.5 44.5 8.9 7.6 113.2
13.8 10.7 9.5 44.2 10.4 7.6 96.2
13.8 8.9 11.1 55.7 10.4 9.5 125.8
13.8 7.2 12.6 67.1 11.8 11.5 140.4
13.8 5.4 12.6 66.6 11.8 11.4 121.7
13.8 3.6 12.6 65.9 13.3 11.3 120.7
13.8 1.8 12.7 65.2 13.3 11.2 118.1
0.0 0.0 12.7 64.4 14.8 11.0 103.1
23.0 23.0 23.0 15.1 38.1
38.1 59.4 97.4
97.4 63.3 160.7
160.7 76.7 237.4
237.4 94.5 332.0
332.0 99.6 431.5
431.5 97.0 528.6
528.6 95.8 624.4
624.4 106.7 731.2
i.
Projected Balance Sheet in Millions:
PROJECTED BALANCE SHEETIn million Rupees
Year
Constructi on Period175
2013175 12.34 162.6 6
2014175 24.68 150.3 2
2015175 37.01 137.9 9
2016175 49.35 125.6 5
2017175 61.69 113.3 1
2018175 74.03 100.9 7
2019175 86.37 88.63
2020175 98.71 76.29
2021175 111.0 4 63.96
AssetsFixed Assets Less: Accumulated Depriciation Net fixed
assets Current Assets Raw material Stock In progress
175
39.28 2.19
47.14 2.60
47.14 2.62
55.00 3.03
62.85 3.44
62.85 3.45
62.85 3.47
62.85 3.49
62.85 3.50
26
Finished goods Book debts Cash and cash balance Preliminary
expenses Total
21.94 59.52 23 6 38.05 5.33
26.04 71.42 97.42 4.67
26.15 71.42 160.7 3 4.00
30.27 83.33 237.4 3 3.33
34.39 95.23 331.9 6 2.67
34.53 95.23 431.5 4 2.00
34.69 95.23 528.5 9 1.33
34.85 95.23 624.4 3 0.67
35.03 95.23 731.1 6 0.00
204
328. 98
399. 62
450. 05
538. 03
643. 85
730. 58
814. 79
897. 81
991. 73
Year
Constructi on Period74
201374 46.53 96.25 52.92
201474 112.7 1 82.50 63.26 20 47.14
201574 176.8 0 68.75 63.36 20 47.14
201674 260.3 2 55.00 73.72 20 55.00
201774 361.6 7 41.25 84.08 20 62.85
201874 462.0 3 27.50 84.20 20 62.85
201974 559.8 6 13.75 84.33 20 62.85
202074 656.4 9 0 84.46 20 62.85
202174 750.2 7
LiabilitiesShare capital Reserves and surplus Term loans Bank
borrowing Incentive loan Trade credit Total
110
84.61 20 62.85
20
20 39.28
204
328. 98
399. 62
450. 05
538. 03
643. 85
730. 58
814. 79
897. 81
991. 73
RatiosCurrent ratio Quick ratio Return on Assets Return on
Equity Gross Profit Margin Net Profit Margin Debt -Equity Ratio
Interest Coveragex x % % % % x x 2.32 1.84 17% 75% 18.3 % 7.8% 1.76
5.52 2.33 2.67 19% 101% 19.1 % 8.8% 1.76 6.99 2.33 3.66 17% 101%
18.8 % 8.7% 1.76 7.44 2.33 4.35 17% 127% 19.4 % 9.4% 1.76 9.04 2.33
5.08 18% 153% 19.8 % 9.9% 1.76 10.68 2.33 6.26 15% 152% 19.5 % 9.8%
1.76 11.48 2.33 7.40 14% 150% 19.2 % 9.7% 1.76 12.52 2.33 8.52 12%
149% 18.8 % 9.6% 1.76 13.80 2.32 9.77 11% 147% 18.4 % 9.5% 1.76
15.41 27
Ratio OCF/Sales Ratio DSCR
%
9.5% 2.86
10.2 % 3.80
10.1 % 4.05
10.6 % 5.23
11.0 % 6.60
10.9 % 7.16
10.8 % 7.84
10.7 % 8.66
10.6 % 9.69
WACC:The weighted average cost of capital considering 36% of
equity 54% of term loan and 10% of incentive loan is calculated to
be 12.5% , provided a tax rate of 35%.
j. Free Cash Flow Statement in Millions:Year NOPAT Deprecia tion
Change in fixed assets Change in Net working capital FCFF Wacc
Discount ed Cash Flow 2012 201384.86 12.34
2014106.3 6 12.34
2015104.5 3 12.34
2016125.7 9 12.34
2017146.9 1 12.34
2018144.6 7 12.34
2019142.2 8 12.34
2020139.7 1 12.34
2021136.9 6 12.34
83.65 13.55 1.125
16.41 102.2 9 1.266
0.13 116.7 4 1.424
16.43 121.7 0 1.602
16.44 142.8 1 1.802
0.16 156.8 5 2.027
0.17 154.4 5 2.280
0.18 151.8 7 2.565
0.19 149.1 0 2.886
(204.00)
12.04
80.82
81.99
75.98
79.26
77.38
67.73
59.20
51.66
NPV IRRWACC
382.0 7 41.93 % 141.9 3% 954.6 3% 0.04
201.4 4% 5077. 77%
285.9 1% 4083. 11%
405.7 9% 2999. 01%
575.9 3% 2479. 60%
817.4 2% 1918. 86%
1160. 16% 1331. 23%
1646. 62% 922.2 9%
2337. 05% 637.9 9%
Discou nted CFNPV
28
k. PROJECT NPV Net Present Value (NPV) analysis is the process
of taking a current investment and projecting the future net income
from this investment. It is used in capital budgeting to analyze
the profitability of an investment or project.
The NPV calculated for the project is positive 382.07 million
which makes the project viable and acceptable.
l. PROJECT IRR (Internal rate of return) The discount rate often
used in capital budgeting that makes the net present value of all
cash flows from a particular project equal to zero is IRR.
Generally speaking, the higher a project's internal rate of return,
the more desirable it is to undertake the project.
Here IRR of our Project is 41.93% which is quite high and makes
the project attractive. m. SENSITIVITY ANALYSIS:
SalesOptimistic Normal Pessimistic NPV 454 382 309 IRR 46.30%
41.93% 37.34% Change of 10%
Raw materialNPV IRRChange of 5% of sales Optimistic Normal
Pessimistic 549 382 214 53.43% 41.93% 29.90%
Even after an increase of some cost associated with the project,
it still indicates a slight change in the NPV and IRR.
9. ECONOMIC ANALYSIS:Textile products are a basic human
requirement next only to food. Textile industrys share in Pakistans
economy in terms of GDP, exports, employment, foreign exchange
earnings, investment and contribution to the value added industry;
make it the single largest determinant of the growth in
manufacturing sector.
29
Textile share of over all manufacturing activity is 46 % Export
earning is 68% Value addition is 9% of GDP As a provider of
employment 38%.
Pakistans textile industry is a major contributor to the
national economy in terms of exports and employment. Pakistan holds
the distinction of being the worlds 4th largest producer of cotton
as well as being the 3rd largest consumer of the same. In December
2010, textile exports were US$ 10.62 Billion and accounted for 55%
of the total exports.
Any development in the country does not restrict its effects to
one or two sectors rather; the implications of any such development
can be felt across multi-sector ways. Our project will have a
positive effect on the economy in the following aspect. a. Increase
in National Income Textile sector alone contributes 9.5% to the
GDP. Development in industrial sector increases the number of
investment, employment and production and hence has a higher
contribution towards GDP. b. Contribution to tax The textile
industry's overall contribution of taxes in 2012-13 is expected to
reach Rs. 23.5 billion, including payments of withholding taxes and
applicability of lower rate of sales tax of 4%-6% on local
supplies. Our project will have a positive contribution in the
current tax structure. c. Economic Stability The rapid growth of
the textile sector has contributed towards the stability of the
country. When finished goods are domestically available, it helps
keep prices down and fluctuations due to international market
influences are less likely to strike populace. It will also bring
about a positive change in the balance of payment of the country,
as textile sector has been able to bring about structural changes
in the foreign trade since years. d. Agricultural Development
Textile sector development is directly related to the agricultural
development. Increased demand of cotton contributes towards better
life of farmer by offering greater market for the raw material. It
is evident from the fact that if number of textile mills increased
from 3 to 600 and spindles from about 177,000 to 805 million
respectively in 1947 to 2010 then cotton 15bales increased from 1.1
million bales in 1947 to 10 million bales by 2010.30
e. Greater Employment The project will contribute toward the
employment of the people as it has been already mentioned that the
textile sector employs more than 38% of the total workforce of the
country. Collateral Industrial Development The development of one
industry gives birth to the expansion of the other related
industries. Our project will be viable enough to help to develop
more industries like colors and dies, plastics, printing, machinery
etc. Enhanced Government Revenues Any industrial development is
bound to increase government revenues. Though textile sector is
still zero rated for the purposes of sales tax on exports yet the
tax on domestic supply and income tax contribute greatly to
government revenues.
10.Conclusion:Textile sector of Pakistan has suffered great
losses in terms of closures of local suppliers of textiles and
apparels, also a great decrease in revenues since the global
financial crunch. There is still room for growth in the textile
sector, the government of Pakistan is making efforts to help the
industry move forward. Although, the numbers look good, IRR is
52.47% while NPV is positive, the current political and law and
order situation makes investment in Pakistan fragile. People
perceive Pakistan as a corrupt state also evident from Pakistans
high ranking by Transparency International in its recent survey of
Worlds most corrupt state. Moreover, Pakistan is in the grip of
terrorist activities that has severely impacted the law and order
situation in the country. Economically, Pakistan is facing the
problems of high inflation, budget deficit resulting in high
government borrowing and GDP growth rate falling for the past two
consecutive years. In addition, interest rates have been raising
making financing more and more expensive. Since the project is
highly profitable and there is no problem at all as far as demand
is concerned, doing this project is a must. We conclude that on the
basis of survey of spinning Mill that the Yarn is necessary product
so its demand increases day by day. There is no chance to decrease
the demand of Yarn. Pakistan is an agricultural country and it
plays a very important role in our economy. Availability of raw
material is very easy. So, conclusion is that the spinning Mill is
a profit motive business because no chance of decrease of demand.
Our recommendation to new investors is that they must invest in
spinning Mill. So, they take step forward to comeand invest or to
start this business, and also contribute in theeconomic as well as
social growth of Pakistan.
31
32
11.RECOMMENDATIONTextile sector is responsible for more than 50%
of countrys total export earnings but unfortunately due to lack of
attention, poor governmental policies and power crisis this sector
has been neglected and is almost on verge of a permanent shutdown
if no measures are taken to secure this sector. Nevertheless
textile industry has a lot of potential which can be explored and
if right decisions are made it could flourish again in coming time.
We have come up with such measures and recommendations that related
to our project and could be very useful for the industry if
properly implemented and executed. Cotton prices has always been a
threat to textile sector and as mentioned earlier that an inventory
of one month will be maintained at all times to cater market needs
and demands we have proposed a solution to counteract the inventory
losses which will occur due to fluctuating cotton prices. For that
the board will be contacting Pakistan Mercantile Exchange to
provide us a platform for hedging our cotton inventory. Through
this platform we will be able to enter into an agreement to buy
cotton at a future date and specified price which will save us from
unforeseen disasters and floods which typically raises cotton
prices. Cotton can also be imported from India to meet our raw
material needs and decrease the burden on companys expenditures
-
-
Textile exports have suffered due to increased global
competition and poor domestic performance. Although high quality
products are manufactured in Pakistan but due to poor packaging and
bad marketing decisions creates a negative impact on the potential
customers in foreign countries. As Eurozone offers trade concession
and India has also opened its doors for trading our executives
should go and visit the potential markets in order to create
awareness about our company and do direct marketing to market our
products. On import of cotton deals can be made to export or sell
yarn to the same country or use barter system to market our
products and target the potential market
-
Our company should be more focused on importing state of the art
machinery which would reduce the manufacturing costs and improve
efficiency by reducing the amount of cotton used and give the
maximum output. No index entries found.As per our policy total
outlay is financed by 66% debt which also poses a threat to
companys financial expenditure. Double digit inflation and
depreciating currency
33
affects the monetary policy which usually results in higher
interest rates. This step could increase the interest costs and
thus lead to higher financial burden for a new venture. Debt from
banks and financial institutions should be borrowed on fixed
interest rate rather than floating rates to save ourselves form
future costs
Above mentioned recommendations are expected to yield some
benefit to the company and its sponsors which would result in
higher growth and profitability in the future. So what is the way
forward? First and foremost, we (the Pakistani textile industry) in
guidance from the policymaker (the Textile Ministry) need to be
more proactive in our decision making by focusing on long-term
positioning, instead of current or short-term profit taking.
Turkey, India and China started basing their textile policies on
such a premise, way back in the 80s and see where they are today.
Their textile sector continues to grow in all its dimensions and
the sheer strength of product value addition over time has
supplemented the development of their domestic markets and in
helping them to evolve as leading textile machinery suppliers of
the world. Pakistan in this regard still has a long way to go.
Further, going forward our industry needs enhanced transparency,
predictable government policies, better supply chain management and
an awareness, both within the government and the private sector, of
using the newly developed global hedging instruments to achieve
stability in cotton and MMF (Man-made Fiber) supplies, boost
production, and to alleviate possibilities on future tight stock
situations. Second, all participants in the industry can show
leadership by advocating that the government/Ministry does a better
job of statistical reporting. Companies can also lead by
participating in surveys of production, consumption and stocks when
such data is requested. Common use of metric measures can help all
stakeholders to speak one language of statistics that the
bureaucracy can understand. Third, we need to remember that there
have been notable improvements in the efficiency of trade in
textiles since the ending of the Multifibre Arrangement (MFA) in
2005, and attempts by anyone (association, lobby group, etc.) to
take it backward through requests to the government for trade
protection should be strongly discouraged. Finally, the Textile
Ministry should take its cue from their Indian, Chinese and
Bangladeshi counterparts by actively collaborating with the World
Bank to make use of its initiative to deliver training to industry
managements, trade associations and the regulatory body on how to
effectively use various hedging mechanisms and devise
intra-industry policy frameworks to ensure smooth and long-term
functioning of the entire industrys supply chain process.
34
12.APPENDICES:
Source: TCO All Right Reserve By APTMA Last Updated July 09,
2012
35
36
37
38
13.Bibliography www.aptma.org.pk www.tradingeconomics.com
www.finance.gov.pk www.pakboi.gov.pk www.pbs.gov.pk
www.textile.gov.pk www.pbs.gov.pk
39