COMMUNITY BASED LIVELIHOOD RECOVERY PROGRAM (CBLRP)

FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR

AND NWFP

CBLRP-UNIDO

INVESTMENT OPORTUNITY PROFILE

FOR
STONE CRUSHING UNIT
IN
NWFP

SEPTEMBER 2007
SUBMITTED TO
AYESHA KHAN
CHIEF TECHNICAL ADVISOR
Community Based Livelihood Recovery Program (CBLRP)
United National Industrial Development Organization (UNIDO)

BY
Sardar Shahid Farid
Chartered Accountant

Disclaimer
All material included in this document is based on data/information gathered from various sources and certain
assumption. Due care and diligence has been taken to compile this document. The document may contain
human, mechanical error or non accuracy of the information at the source. No liability for error, or omission or
unintentional misrepresentation will be accepted. We reserve the right to make correction and changes
wherever
desired
in
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document
or
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subsequent
versions

1.

PROJECT EXECUTIVE SUMMARY

1.1

PROJECT BRIEF
The project objective is to set a stone crushing plant in the surrounding of Manshera. The plant will be able
produce crushed stones of various sizes that can be used in various construction and road projects. The product
will be hard lime stone crush of different sizes as required. Working with the proposed plant and machinery,
the project will be capable of producing 30,000 C.ft. of crushed stone at 100% capacity utilization with single
shift of 8 to 12 hours a day.
The total capital cost of the project is Rs. 21.324 million. For crushed stone manufacturing purposes, the
majority of the crushing units use Hard Limestone, the reason lies in its extreme hardness and it also gives
maximum strength to the building structure. Another reason is that it is easily available across the country in
large quantities although granite could also be used for this purpose, as it is used by many other countries,
though its excavation is comparatively difficult. Hard Lime Stone is found almost in every part of the country;
so proposed sites and the availability of raw material are in abundance. According to extraction data for
industrial minerals for FY 2002-03 the reserve of Lime Stone in NWFP are 4,921 million tons which are
fairly large. However, in case of Granite, so far known sources of workable granites in the country which
could be used for crushing purposes are available in Manshera in the North (NWFP). Gilgit Region (Northern
Areas) does indicate great potential of variety, quality and quantity of granites that according to geological
evidences have superiority over other granites in Pakistan (Source Expert Advisory Cell Digest of Industrial
Sectors 2003)
Approximately 19 employees will be employed directly on the project. The civil works and installation of
plant is estimated to complete in 3 months.

1.2

FINANCIAL SUMMARY

Sales

Rs 49Million

Gross Profit Margin

60%

Net Profit

51%

Internal Rate of Return

48%

Foreign collaboration sought

Joint Venture
Loan
Market access
Sub contracting
Buy back arrangement
Equipment purchase

Management expertise
Technical expertise
Marketing expertise
Technology transfer
Joint R&D
Other :-

Studies Available

Feasibility study
Other Specify

Project description

Date:

25 October 2007

2.

PROJECT RATIONALE
Stone crushing industry is an important industrial sector in the country. The crushed stone is
then used as raw material for various construction activities i.e. construction of roads,
bridges, buildings and canals.
Over the last 10 years, the Construction sector has been registering strong growth rates in
the range of 7-8%. Housing and construction is one of the major drivers of growth in more
than 40 allied industries including STONE CRUSHING. In addition, for the building of
roads, flyovers and bypasses, there is a mass and consistent need of crushed stone across the
country. Several projects are in progress and are being commenced shortly which will have
high demand of crushed stone all over the country. In order to make up the backlog and
meet the projected requirements for the next 20 years, overall housing construction has to
raise 500,000 housing units per annum. The area under consideration is badly affected by
the earthquake and rehabilitation and reconstruction is in process. This process leads to
construction of roads, bridges, new houses , markets , etc resultantly gear up construction
activities and more use of crushed stones. Construction of Diamir-Basha Dam and Kohala
Hydro Electric Project are also synergic factor for this project. The aforementioned facts
and statistics provide enough evidences, assuring a steep and continuous growth vis a vis
investment opportunity in the STONE CRUSHING business.
There are increasing allocations from budget in the Public Sector Development Projects of
Pakistan. There is sufficient skilled labor available at less cost to run the project. The raw
material is abundantly available. If the machinery needs to be imported there are less import
duties. The availability of initial depreciation made the project pragmatically five years tax
free. There is need to employ latest and modern exploration techniques and machinery.
The lack of coordination among various mineral sector agencies is also point of concern for
the stone crushing industry.

3.

MARKET OPPORTUNITY
Since it is an allied industry of the construction sector, growth in construction sector may be
considered as proxy for the growth in stone crushing sector, i.e. around 7-8%.
Crushed stone has a very minor share among the exports of non-metallic mineral products
of Pakistan. It is observed that during the year 2000-03, total export volume of the crushed
stone has been US $ 8,222, whereas, Marble with the highest share of US $ 5,968,232
remained at the top. The market scope for crushed stone is found to be encouraging in local
market with the increased demand from building industry & construction fields. There is
also a sufficient demand from Govt. Contractors for lying of roads and construction of
industries etc. The entry in the target market is easy and there is a narrow gap in the supply
and demand, which is expected to grow in the coming years.

BUSINESS PLAN
The business opportunity to fill the demand and supply gap would be quite profitable. The
plant will be made to operate to the maximum capacity possible. Good quality products of
high strength will be used

4.1

Product Sales
Working with the proposed plant and machinery, the project will be capable of producing
30,000 C.ft. of crushed stone at 100% capacity utilization with single shift of 8 to 12 hours a
day. All projections are based on 22 working days a month.
STONE CRUSHING SALES
Sr No.

Product Name

% age share in

Selling Price/
C.ft.

Qt c.ft

AMOUNT

1 inch crush

25%

7,500

60,000

inch crush

25%

7,500

60,000

inch crush

30%

9,000

54,000

Stone Powder

20%

6,000

12,000

30,000

186,000

Daily sales

Working days in a year

Total annual
sales

264
49,104,000

4.2

Raw Material
Hard Lime Stone will be used as raw material for manufacturing crushed stone. Raw stone
could be purchased directly from the excavator (quarry lease holder) or crusher may hold
his own quarry lease to produce raw stone. It is recommended to obtain a quarry lease
holding to avoid any possible threat in procuring raw stone as well as to keep the project
economically stable. For the proposed project, a total of 15,000 C.ft. of Hard Lime Stone
would be the daily requirement. This requirement could sufficiently be fulfilled from the
obtained quarry site over a period of years.
Availability of raw material in the region is as follows: NWFP - 4921Million tons. This is
mostly available in and around Manshera

4.3

PRODUCT MANUFACTURING PROCESS

The main machinery involved in the stone crushing industry is Hammer Crusher, Screen,
Conveyers etc. The process involved is to feed the stone in to the Hammer Crushers to make
it further smaller in size as required by the customer. In the hammer crusher, the stone is
crushed. The crushed stone is screened to separate the produce in different sizes by the
separator. The crushed stone is conveyed by the conveyors to trucks for transport to the
market place or storage area. Process flowchart of a stone crushing unit has been given

4.4

PRODUCT MARKETING CHANNELS

In the manufacturing industry, marketing is considered to be of significant importance. In
the Stone Crushing industry, marketing parameters are very limited and usually in some
degree associated with the construction sector. Some of the marketing promotion activities
which should duly be rendered are given below:
-Connection development with the building material suppliers, well known builders
and contractors.
-Update information on civil and construction works initiated by local, provincial
and central government.
-Draw linkages with material suppliers to the housing industry at town level.
-Establish contacts with local civil engineering firms, individuals and professionals.

4.5

HUMAN RESOURCE REQUIREMENT

Construction and allied industry is a labor intensive industry; therefore, a total of 19 persons
will be required to handle the production operations of a stone crushing unit. The business
unit will work on one shift basis (8 hours daily). Total approximate manpower required for
the business operations along with the respective salaries are given in the table below:

4.6
4.7

PROJECT FINANACIALS

4.7.1

OPERATIONAL DATA
The plant is to start production at 70% of capacity thereby increased by 10% in the next
three years till the plant operates at 100% which is to be maintained for the next seven
years.

4.7.2

FIXED COSTS
Land and Building (Note)
Plant & Machinery
Furniture & Fixtures & Office Equipment
Vehicles

1,530,000
4,000,000
905,000
14,040,000

Total Project Investment

20,475,000

Note: Land for setting up the proposed stone crushing unit would be acquired on lease for a
period of 30 years. Lease concession would be granted by the Mineral Development
Authority of the concerned Area.

4.7.3

WORKING CAPITAL
Following are the initial working capital requirements, for the stone crushing unit.
Description
First Three Months Salaries (Production staff)
First Three Months Utilities Charges (Other
then fuel/diesel)\
Fuel Inventories (Diesel) - 15 Operational Days
First Three Months Misc. Expenses
Annual Quarry Lease Charges for first year
Cash balance required
Total

4.7.4

Amount in Rs.
312,000
124,500
343,000
15,000
100,000
40,000
934,500

OVERHEAD COST
Following Overheads are assumed to occur in the first year of production.
Expense
Utilities
Depreciation
Maintenance
Selling and Distribution
Miscellaneous
Total

Year amount
120,000
2,000,600
261,600
450,244
550,000
3,381,844