ABC Auto Bricks Ltd.

Energy Efficient Hybrid Hoffman Kiln

 Summary of the Project

1 Name of the M/S………………..

project
2 Location of the
project
3 Registered Office
4 Name of
Proprietor
5 Nature of the Bricks Manufacturing Unit Using HHK Technology
project
6 Brief Description The project envisages setting up of an automatic brick-making factory
of the Project of HHK technology to manufacture high quality, technically sound and
marketable solid bricks. The machine’s manufacturing capacity would
be 1,00,000 pcs per day capacity with 8 hours per day and 300 days per
year operation capacity. The Government has recently ordered to the
bricks manufacturers to follow eco-friendly technology in their project to
protect the country from de-forestry and environment pollution. Keeping
this view in mind the sponsor has taken initiative to set up auto bricks
manufacturing plant based on HHK technology. The project design
combines a highly efficient kiln technology, the Hybrid Hoffman Kiln
(HHK) with a unique technique of forming green bricks: granulated
coal is injected for internal combustion. This approach results in lower
energy usage, higher quality bricks and reduced pollution. Machinery
and equipment for the project will be imported from china. The project is
expected to go into commercial operation within 12 months from the
date of starting of civil construction. 3114.98 Lac (including IDCP
Tk.246.95), and total estimated initial working capital of the project is
Tk.386.87 Lac.

7 Concept of HHK Brick making in Bangladesh is a highly energy-intensive and carbon-

emitting activity and is one of the largest sources of greenhouse gas
emissions in Bangladesh. The technology of HHK has been selected
considering its advantages of energy efficiency over the other
technologies and also related low emission. HHK technology combines
fuel injection and external firing in highly insulated kilns. This energy
efficient Hybrid Hoffman Kiln (HHK) firing process developed in
China and is now widely used there. HHK is a hybrid version of the
Hoffman Kiln technology that was developed in Germany in the mid-
nineteenth century. Since then it has been redesigned to improve heat
retention in the kilns and to capture waste heat for recirculation in the
drying tunnel.. The original round Hoffman kiln is no longer in use,
having been replaced by the more modern version, which takes the
form of two parallel tunnels built side by side, connected by curved
tunnels at either end. With such an arrangement, the chimney is built
outside the kiln structure and may be connected to more than one kiln.
Sixteen chambers are about the minimum for effective working;
twenty-two chambers are preferable. Although the burning time is only
about three days, the bricks are in the kiln for about ten days to allow
for raising the temperature and, after burning, subsequent lowering of
the temperature before unloading the chambers
 -02-
8 The advantages of Aesthetically attractive and structurally sound
the HHK : Compact, less land than FCK and yet produces 6 times more bricks
Weather Proofed : production is for12 months
Highly energy efficient, uses about 12-14 Tons per 100,000 bricks
Very low pollution
Economically viable, low production costs, good quality products
 -03-
09. Product Mix and Production capacity:
The product mix and annual production capacity of the proposed project based on two shift operation per
day, 8 hours each, and 300 working days in a year is shown below:
Item of Product UNIT Daily Annual
1. Solid Bricks No. 100,000 300,00,000
Total No. 300,00,000

10 Cost of the Project

SL Item Tk Cost in lac
01 Land & Land Development (500 dec) (Total price of land 500decimal @ Tk.5.00 370.00
Lac/Decimal which totals BDT 2500.00 Lac. But as per bank rule land equity value is not more
than 15% of total fixed cost of the project)
02 Factory steel structure & Civil Works 1035.96
03 Machinery & Equipments(Including L/C commission, Inter.freight etc.) 610.56
04 Local Machinery with installation , Air compressor, Quality control, 330.76
Laboratory, Safety & Workshop equipments, Different types of cables,
Cable Distribution System, Deep tube Generator …….KVA, Sub
Station -----KVA, others
05 Furniture, Fixture & vehicles (Excavator cm pcs Dumping Truck Pcs, 40.00
Pay Loader pcs)
Erection & installation & Security deposit for utilities 67.88
Interest during construction period 246.95
Preliminary and startup expenses 26.00
Total fixed cost of the project : 2698.11
Working capital requirement : 386.87
Total cost of the project : 3114.98

11 Cost of The Project Equity Bank Loan Total

a) Project Land 350.00 0.00 350.00
b) Land development 20.00 0.00 20.00
c) Factory building & civil construction 235.96 800.00 1035.96
(Construction of kiln, dryer, chimney, machine room etc.)
d) Imported machinery(C&F Cost) 116.00 460.00 576.00
e) Misc charges for Imported machineries 34.56 0.00 34.56
f) Local machinery, equipment & vehicles 213.08 111.92 325.00
g) Internal freight(Local transportation charge for machineries) 5.76 0.00 5.76
h) Furniture & Fixture 10.00 30.00 40.00
i) Erection & installation 42.88 0.00 42.88
j) Security deposit for utilities 25.00 0.00 25.00
k) Development cost :
i. Interest during construction period 0.00 246.95 246.95
ii) Preliminary and startup expenses 26.00 0.00 26.00
(Consultancy, feasibility, promotional & legal fees, documentation fees,
commercial operation testing etc.)
Total fixed cost of the project : 1079.24 1648.87 2728.11
Working capital requirement : 154.75 232.12 386.87
Total cost of the project : 1233.99 1880.99 3114.98
 -04-
12. Means of Finance:
Local Currency Foreign Currency Grand Total
Sponsors’ Equity 1077.67 156.32 1233.99
Long term loan 941.92 460.00 1401.92
IDCP 246.95 0.00 246.95
Short term loan 232.12 0.00 232.12
Total 2498.66 646.32 3114.98
Debt-Equity Ratio 60:40

Assumption

(1) Working day 300

(2) Annual Rated Capacity of producing bricks is 30.00 million (assuming 100000 per day).
(3) 95% is saleable
(4) Number of bricks made per cft of clay is 08.
(5) Annual requirement of clay to produce 30 million bricks is cft. Assuming 5% wastage.
(6) 14 M. T. coal is needed for each 1.00 lac brick
(7) Unit price of Clay ....../cft
(8) Unit price of Coal Tk ....../MTon
(9) Selling price of Brick Tk. ......00
(10) Repayment period ...... quarterly installment

13. Brief Description of the Project:

An incredibly hard wearing building material, clay brick is able to take the knocks of everyday life as well
as the weather extremes sometimes experienced. They won’t fade, twist or warp, rot or decay, erode or
dent and termites can’t eat them. For hundreds of years, no material shows so few signs of ageing. Brick
is renowned as a long lasting material, as can be seen from Roman aqueducts and Gothic brick churches.
Brick buildings require little maintenance to preserve their elegant looks and this enhances their
desirability to future owners. The proposed project in the name and style of ABC Auto Bricks Ltd.
envisages for setting up an auto bricks industries. The proposed project will adopt Hoffman Kiln
Technology for producing bricks.

No resettlement is necessary for this proposed project. The project will located at ----------------------. The
project will not only play a role for meeting the demand of bricks in the local market but also give an
opportunity to the local investors for the economic development of the country. Total fixed cost of the
project has been estimated at Tk.3084.98 Lac (including IDCP Tk.246.95), and total estimated initial
working capital of the project is Tk.386.87 Lac. It is expected that the project will run at 70%, 75% and
85% at 1st year, 2nd year and 3rd year respectively and will generate net profit of Tk.1444.89 Lac,
Tk.1899.26 Lac and Tk.2340.67 Lac respectively.

14. Marketing Aspects:

Most of the countries of the world use their natural resources like hard rock stone, limestone and other
types of stone for construction works. Unfortunately, Bangladesh has serious shortage of the purpose by
using cubic shaped burnt clay known as brick. Bricks more or less are used for construction work all
over the world. The tensile and other construction on-supportive properties of brick depend upon such
factors as its dimensional parameters, constituent elements/compound of clay and technology of
thermal treatment. Continuous improvement of firing technique and innovative geometry of brick has
adding new dimensions to the usages of brick in construction work. Due to rapid urbanization, the
demand of bricks and ceramics is being increased at an alarming rate.
 -05-
15. Economic Aspects:
The project will create job opportunity for 133 persons in different units. So it is sure that the project
will bring contribution to GDP. The project will contribute about Tk.4287.92 Lac per year (from 3rd
year) to GDP at a market value. The macro-economic effect will change the socioeconomic condition of
directors, the employee and the country. According to the ADB Safeguard Policy Statement the
proposed project is doable.

16. Break-Even Analysis:

Break-even analysis is carried out on the basis of cost and sales of 3rd year of operation. The project is
expected to break-even 17.21% of assumed capacity utilization with sales revenue of Tk.1180.59 Lac.

17. IRR and BCR: The expected IRR (Internal Rate of Return) is above 33.34% and BCR (Benefit-Cost
Ratio) of the project is 1.45: 1.00.

18. Debt-Service Coverage Ratio: The service coverage ratio of the project is to be expected at 1.83
times, 1.97 times and 2.08 times for 1st year, 2nd year and 3rd year respectively.

19. Financial Institutions applied for Loan: Commercial Bank/Financial Institution (ADB Refinance
Facility Scheme (BB).

20. Management of Project:

Designation of the % of Shares of each
Name of the subscribers
Subscribers subscriber
Chairman % Shares
Managing Director % Shares
Director % Shares
Director % Shares
Director % Shares
Total % Shares

21. Conclusion & Recommendation:

The detail financial forecast shows that the project is viable considering all aspects. The sponsors are
educated and experienced in various leading national and international business. They are also financially
sound and have the real capacity to control over all aspects and efficiency in management. The demand
of bricks is very high in the local market. Therefore it can be concluded that the project has the
potentials for investment and the Bank/Financial institutions may consider loan assistance for the
implementation of project successfully so that the sponsors can contribute for the ultimate development
of the country.
 -06-
Annex-2: Profitability of the Project Tk. In Lac

Operating Year 1st year 2nd year 3rd year

Capacity utilization 75% 80% 85%
Sales revenue 2055.72 2237.15 2377.20
Gross profit 646.52 762.70 832.14
Gross profit to sales revenue (%) 31.45% 34.09% 35.00%
Operating profit 588.87 697.34 759.25
Operating profit to sales (%) 28.65% 31.17% 31.94%
Net Profit 365.11 505.58 605.50
Net profit to sales (%) 17.76% 22.60% 25.47%
Net profit to equity (%) 29.59% 40.97% 49.07%
Debt/Equity Ratio 60:40
Debt service coverage (times) 1.67 x 1.83 x 1.88 x
Internal rate of return (IRR) 29.40%
Benefit cost ratio 1.23:1.00
Break even capacity of operation 58.09% 47.22% 39.58%
Break even sales (in Tk.) 1194.22 1056.34 940.93
Contribution to GDP (in Tk.) 784.92 927.71 1024.83
Per Capita Investment & Employments Tk.19.90 Lac 133 Nos.
 -07-
Annex-3 Income Statement Tk. In Lac

Operating Year: 1st year 2nd year 3rd year

Capacity Utilization 75% 80% 85%
Sales Revenue 2055.72 2237.15 2377.20
Cost of Production
* Raw material 610.50 651.20 691.90
* Direct labor 113.40 127.01 141.69
* Manufacturing overheads 439.37 482.13 524.89
* Depreciation 245.93 214.12 186.58
Cost of Production 1409.20 1474.46 1545.06
Inventory adjustments (+/-) 0.00 0.00 0.00
Total Cost of Sales 1409.20 1474.46 1545.06
Gross Profit 646.52 762.70 832.14
Operating Expenses
* Administrative & general expenses 37.10 42.99 49.11
* Selling expenses at the rate 1% 20.56 22.37 23.77
Total Operating Expenses 57.65 65.36 72.88
Operating Profit 588.87 697.34 759.25
Non-Operating Expenses
* Interest o: Long & short term debt. 219.85 187.85 149.85
* Amortization of preliminary expenses 3.90 3.90 3.90
Total Non-Operating Expenses 223.75 191.75 153.75
Net Profit 365.11 505.58 605.50
 -08-
Annex-4: Repayment Schedule of Long Term Loan

Principal 1,401.92 Implementation period 18 Months

IDCP 246.95 Grace Period 06 Months
IDGP 82.32
Total 1,701.19
1st Inst 27th Months
Rate of Int. 12.00%
No. of Inst. 20
Inst.Per year 4
Tk. In Lac
Month After Residual Principal Interest Total
Ins No
Disbursement Principal Repayment Repayment Installment
1 27 1,701.19 63.00 51.00 114.00
2 30 1,638.19 65.00 49.00 114.00
3 33 1,573.19 67.00 47.00 114.00
4 36 1,506.19 69.00 45.00 114.00
5 39 1,437.19 71.00 43.00 114.00
6 42 1,366.19 73.00 41.00 114.00
7 45 1,293.19 75.00 39.00 114.00
8 48 1,218.19 77.00 37.00 114.00
9 51 1,141.19 80.00 34.00 114.00
10 54 1,061.19 82.00 32.00 114.00
11 57 979.19 85.00 29.00 114.00
12 60 894.19 87.00 27.00 114.00
13 63 807.19 90.00 24.00 114.00
14 66 717.19 92.00 22.00 114.00
15 69 625.19 95.00 19.00 114.00
16 72 530.19 98.00 16.00 114.00
17 75 432.19 101.00 13.00 114.00
18 78 331.19 104.00 10.00 114.00
19 81 227.19 107.00 7.00 114.00
20 84 120.19 120.19 4.00 124.19