Packaging Requirements - Gharbia

The General Authority for Investment
GAFI Translation Department

and Free Zones
General Authority for Investments and Free Zones

Economic Performance Sector
A Preliminary Feasibility Study

for the Production of Packaging Requirements (Cartons)
Prepared by
Economic Performance Sector
Central Department of Feasibility Study
General Department of Economic Feasibility Studies
Page 1 of 13
GAFI Translation Department–Tel. + 2026736900-5. Ext: 2745 – 2748, Fax: 2745. -Mob. 201114650550 Email: m.fayez@gafinet.org.eg
and Free Zones
I. Basic Information
Production of Packaging Requirements

Project
(Cartons)
Kafr Al-Abaida village, affiliated to the local
Project Location unit of Al-Jabriya village, Al-Mahalla Al-
Kubra Markaz, Gharbia Governorate
Land Area 872 m2
Permited Act of
Usufruct
Disposition
Annual Usufruct Cost
EGP50/m2 per annum (indicative price)
Buildings on an area of 600 m2
Buildings Area In addition to 172 m2 storage areas and
spaces
Project Economic Life
5 years
Expectancy
Targeted Products Carton and duplex boxes
Expected Labour 15 (workers and administrative officers)
Expected Investment
EGP19,321,600
Costs
Return on Investment
23%
(RoI)
Payback Period Three years and nine months
Feasibility Study Date March 2021
II. An Overview on the Business explored in this Study:

The urgent need to develop and diversify the carton industries emerged due to the need
of factories and production companies to protect their goods and commodities during
their transportation and arrival to the consumer. The boxes made of cardboard provided
the best way to package and protect these goods during transportation due to their
rigidity, shock resistance and lightness in weight. It is environment friendly so that it
can be recycled to produce new types of cardboard. Magazines, newspapers, books, and
notebooks are used in making cardboard by recycling and using them again. Other
products can be manufactured from kraft paper and fluting, such as bags and other paper
products.
III. Marketing Study
1. Demand Volume
 Egypt is the most importing country for paper in Africa and the second most importing
country in the Middle East, as its imports exceeded $500 million in 2019, according to
data issued by the Federation of Egyptian Industries (FEI).
 Egypt's imports of cardboard are $150 million per year.
Page 2 of 13
and Free Zones
 Egypt's imports of paper during the year 2019 amounted to $500 million from US,
Brazil, Finland, Indonesia, Uruguay, Austria, Portugal, Chile, France, Sweden, and
some other countries.
 Egypt imports about 60% of its annual needs of white paper and more than 90% of its
daily newsprint.
 The local annual consumption of paper is around 600,000 tonnes/year.
 The price of a tonne of kraft paper and fluting is approximately EGP7000 per tonne.
 Industrial zones such as 6th of October City, the 10th of Ramadan, Al-Obour, Burj Al-
Arab, Sadat are zones in which paper is manufactured and heavily use carton packages,
since most of the factories that need paper for packaging and cartons are located in the
industrial areas.
2. Supply Volume
 Egypt's exports of kraft paper, fluting and cardboard in various forms to the importing
countries amounted to more than $200 million in 2019, and the most importing
countries were Britain, Saudi Arabia, Kenya, Pakistan, US, Morocco, Lebanon, Libya,
Uganda and Iraq. These exports include carton packages, kraft paper bags and duplex
cartos, other than the Egyptian products that are exported in carton packages.
 The total production of kraft writing and printing paper is about 190,000 tonnes per
year, as its manufacture depends mainly on factories: Misr Edfu, and Qena Paper
Industry Company.
 The paper that was previously used is recycled by 50% of the total paper that was
consumed in the local market during the year. This paper is used in the manufacture of
kraft and fluting paper that is used in the manufacture of cartons and packaging
materials.
 The estimated amount of agricultural waste in Egypt ranges between 28 and 30 million
dry tonnes annually. The five crops that contain the largest amount of waste are corn,
rice, sugarcane, sugar beet and cotton, which constitutes the raw materials used in the
manufacture of paper.
 Sugarcane waste enters the production of 150,000 tonnes of local leaf pulp, and the
environmental damage caused by the production of pulp from sugarcane is less when
compared to the production of pulp from rice straw, as it is easier to control the chemical
properties of solid waste than its liquid counterpart.
3. Market Gap
 There is a gap between the volume of demand and the quantity of supply estimated at
300,000 tonnes, which is imported from abroad.
4. Targeted Markets
 Domestic/international markets such as Britain, Saudi Arabia, Kenya, Pakistan, US,
Morocco, Lebanon, Libya, Uganda, Iraq, and other countries.
5. Distribution Outlets:
 Export
 Factories that use carton packages to pack their products
 Wholesalers
Page 3 of 13
and Free Zones
 Shops that use cardboard boxes to pack their products

6. Marketing Study Results:
From the marketing perspective, it is evident from the above-mentioned study that there is
a demand to export the product abroad as well in the local market, which assures the
marketing feasibility of the project.
IV. Technical Study:
1. Project Location:
Kafr Al-Abaida village, affiliated to the local unit of Al-Jabriya village, Al-Mahalla Al-
Kubra Markaz.
2. Land: 872 m2 (usufruct)
3. Buildings: The construction is being carried out on an area of 600 m2, a steel truss
with a height of 6 m, including an administrative building part.
4. Labour Required:
Post Number
Factory Director 1
Production Supervisor 2
Accountant 2
Industrial Safety Officer 1
Driver 2
Security Guard 2
Storekeeper 2
Production Worker 11
Total 23
5. Main Raw Materials and Supplies:
 Kraft and fluting paper
 Inks for printing on the carton
 Solvents, chemicals and zinc films
 Glue for the final stages of carton production
6. Main Machinery and Equipment:
 Production line of duplex cartons from kraft paper
 Color printing machine on boxes
 Duplex crushing machine called tank
 Net making machine
 Ink mixing device
Page 4 of 13
and Free Zones
7. Production Phases:
 Manufacturing of raw cardboard and duplex from kraft and fluting paper.
 Designing the final shape of the package, and this depends on both the size and
dimensions of the carton.
 Printing on packaging.
 Cutting and shaping.
 Pasting and folding the carton.
 Final product packaging.
8. Production Capacity
Thousand tonnes/year
Page 5 of 13
and Free Zones
V. Financial Study
Financial feasibility study is a tool that assists the investor to decide on the investment. In
order to facilitate making such decisions, all costs related to investment and production must
be clearly and accurately determined, taking into account that profitability of the project
depends on the volume and components of investment and production costs.
1. Fundamentals and Hypotheses of the Financial Study
 The data used in the study and the expected revenue estimates of the volume and value
of sales have been estimated according to results of the market study.
 Investment spending values and other elements of costs and expenses have been
estimated according to results of the technical study.
 The annual depreciation installment for buildings and machinery is estimated
according to results of the technical study, assuming that the sales value at the end of
the period is according to its book value.
 The estimated value of the fixed assets mentioned in this study is related to a specific
period according to the prevailing circumstances at the time of preparing this study;
and that this value may change with the change of circumstances by the limitation
period of the report or by the change of the economic climate in general.
 Incorporation and pre-commencement expenditure have been assumed that they are
fully depreciated with the first year of revenue as per the Egyptian Accounting
Standards.
 The estimated income statements have been prepared on the assumption that there is
no fundamental change in the revenue values and expected annual costs during the
study period.
 The annual cash flows were estimated using the indirect estimation method by making
the necessary adjustments to the results of the estimated income statements for the
years under study.
 The study assumed that all purchases include VAT.
Page 6 of 13
and Free Zones
2. Annual Sales:
 The expected sales for the first year were estimated according to the
market study after estimating the volume of demand and the technical
study after estimating the production capacity as follows:
Sales/
Product Unit Price Total
Tonne
Duplex boxes
1000 16,000,00 16,000,000
and kraft bags
Total 1000 16,000,000
3. Project Investment Costs:

 Investment costs mean all money spent on the project from the
moment of serious thinking about its establishment until the end of
the first operating cycle. Those costs are related to the construction
period, which duration varies from one project to another; where the
construction period can reach several years in some projects and can
be a moment (zero) in others.
 Investment costs can be explained as follows according to the data
specified in the technical study of the project:
3-1 Land:
A land with an area of 872 m2 (usufruct) EGP50/m2 per annum. The total
value of usufruct would be EGP43,600.
3-2 Buildings, Constructions, and Finishes:
At the beginning of the project, the construction will be initially on a surface area of 600 m2
of the land. The building consists of an office block and a plant that includes a production
facility and warehouse, with a construction cost of EGP 3000/m2 including the cost of
utilities and finishes; thus the cost of buildings will be EGP 1,800,000, to be depreciated
over 20 years.
3-3 Machinery and Equipment
The value of the production line was estimated at EGP 5,000,000, to be
depreciated over 20 years.
3-4 Lorries
The cost of two jumbo transport car was estimated at EGP 700,000, to be
depreciated over five years.
3-5 Forklifts
The cost of two forklifts was estimated at EGP500,000, to be depreciated
over five years.
Page 7 of 13
and Free Zones
3-6 Legal and Incorporation Expenses:

Expenses was estimated at EGP500,000, to be spent during the first year of
business operation.
3-7 Raw Materials:
The required amount of materials is estimated at a total cost of
EGP8,000,000 including the cost of raw paper and chemicals needed.
3-8 Payroll costs:
The cost of payroll is estimated at a total of EGP1,278,000 for the first
year.
3-9 Marketing Expenses
The marketing campaign is estimated as per the marketing study at
EGP500,000.
3-10 Other Running Costs
For example, electricity, water, and maintenance were estimated at EGP1
million.
3-11 Annual depreciation
Production Annual
Item Asset Cost
Years Depreciation
Buildings, Finishes, and
1,800,000 20 90,000
Infrastructure
Machinery and equipment 5,000,000 10 500,000
Lorries 700,000 5 140,000
Winches and forklifts 500,000 5 100,000
Incorporation Expenses 500,000 1 500,000
Total 8,500,000 1,330,000
Accordingly, the total value of the investment costs is as follows:
Item Value
Buildings, Finishes, and Infrastructure 1,800,000
Land 43,600
Machinery and equipment 5,000,000
Lorries 700,000
Winches and forklifts 500,000
Incorporation Expenses 500,000
Materials 8,000,000
Payroll 1,278,000
Marketing Expenses 500,000
Other Running Costs 1,000,000
Total 19,321,600
Page 8 of 13
and Free Zones
4. Project Financial Statements and Indicators, and Expected

Profitability Ratios:
 The financial statements and indicators, and profitability ratios are
among the most important tools used to assess the economic viability
of projects. The assessment comes upon calculating the net income
of the project and the project net cash inflows, as well as the net
present value of money resulting from an increase in the inflation
rate using the prevailing interest rate.
 Financial indicators are also used to make a comparison between the
available investment options, and used to compare between the
average return on investment and the payback period for each project
separately.
4-1 The projected income statement for the first five years of activity:
With 10% estimated annual increase in production.
Item Year 1 Year 2 Year 3 Year 4 Year 5
Total Sales 16,000,000 17,600,000 19,360,000 21,296,000 23,425,600
Sales Cost
Usufruct 43,600 43,600 43,600 43,600 43,600
Materials 8,000,000 8,800,000 9,680,000 10,648,000 11,712,800
Payroll 1,278,000 1,405,800 1,546,380 1,701,018 1,871,120
Other running costs 1,000,000 1,100,000 1,210,000 1,331,000 1,464,100
Marketing Expenses 500,000 550,000 605,000 665,500 732,050
Depreciation 1,330,000 830,000 830,000 830,000 830,000
Total cost 12,151,600 12,729,400 13,914,980 15,219,118 16,653,670
Profit before Tax
3,848,400 4,870,600 5,445,020 6,076,882 6,771,930
(PBT)
Tax 865,890 1,095,885 1,225,130 1,367,298 1,523,684
Profit after Tax (PAT) 2,982,510 3,774,715 4,219,890 4,709,584 5,248,246
Page 9 of 13
and Free Zones
4-2 The projected cash flow statement for the first five years of activity:
Item Year 1 Year 2 Year 3 Year 4 Year 5
Cash inflows 16,000,000 17,600,000 19,360,000 21,296,000 23,425,600

Cash outflows
Usufruct 43,600 43,600 43,600 43,600 43,600
Materials 8,000,000 8,800,000 9,680,000 10,648,000 11,712,800
Payroll 1,278,000 1,405,800 1,546,380 1,701,018 1,871,120
Other running
1,000,000 1,100,000 1,210,000 1,331,000 1,464,100
costs
Marketing
500,000 550,000 605,000 665,500 732,050
Expenses
Tax 865,890 1,095,885 1,225,130 1,367,298 1,523,684
Total cash
11,687,490 12,995,285 14,310,110 15,756,416 17,347,354
outflows
Net cash flows 4,312,510 4,604,715 5,049,890 5,539,584 6,078,246
4-3 Net present value (NPV) of cash inflows

This is according to a discount factor of 10%, which is the simple interest
rate at the time of preparing the study:
Year Cash flow Discount factor 10% NPV
Year 1 4,312,510 0.909 3,920,072
Year 2 4,604,715 0.826 3,803,495
Year 3 5,049,890 0.751 3,792,467
Year 4 5,539,584 0.683 3,783,536
Year 5 6,078,246 0.621 3,774,591
Total 25,584,945 19,074,160
Page 10 of 13
and Free Zones
4-4 Calculating Average ROI

The average return on investment is calculated by deducing the annual rate of return
for five years and calculating the average rate for the five years.
Annual Net
Year ROI/ annum
Profit
Year 1 2,982,510 15%
Year 2 3,774,715 20%
Year 3 4,219,890 22%
Year 4 4,709,584 24%
Year 5 5,248,246 27%
Investment Costs 19,321,600
Average ROI 22%
4-5 Payback period

The payback period is calculated in two steps. The first is to calculate the cash inflows
during the first five years of the project, until the amount of investment costs are
covered as follows:
Year 0 1 2 3 4 5
Annual
(19,321,600) 4,312,510 4,604,715 5,049,890 5,539,584 6,078,246
cash inflow
Cumulative
- )15,009,090) (10,404,375) (5,354,485) (185,099) 6,263,345
cash flow
The second step is carried out in accordance with the following law to determine the
payback period
Number of years of Absolute value of last negative cumulative cash flow
+
negative cash flow Cash inflow of the following year
5,354,485
3 +
5,539,584
3 + 0.9
Payback period = 3.9
Thus, the payback period is estimated at three years and nine months.
Page 11 of 13
and Free Zones
5. Financial Study Conclusions

 The project achieves 22% return on investment.
 The estimated payback period of the project is three years and nine months.
VI. Project Legal Feasibility Study
 Carton industry is one of the activities subjected to the Investment Law
provisions where the State encourages and provide incentives to it.
 Companies incorporated for such purpose may be incorporated in accordance
to the provisions of the Investment Law, Companies Law, and Commerce Law
as per the desire of the owners.
 The project may have the legal structure of sole proprietorship, partnership, limited
liability company, or joint stock company.
 There are some legal determinants that should be considered in respect of obtaining
the license-to-operate from certain entities, namely:
- The Governorate having the jurisdiction over the land, and the local units
affiliated thereto or the Government Office.
- Licenses of Industrial Development Authority.
- The requirements of Civil Defense Authority.
 In the event of exportation, the project shall obtain the Import and Export Card,
specifying the nature and specification of the products dealt with, or exportation
shall be made through an intermediary company that undertakes the export and
customs release procedures on behalf of the project.
VII. Project Environmental Feasibility Study:

 The environmental feasibility study is defined as the study that explains the degree of
protection and maintenance achieved for the environment, by taking into account its
absorptive capacity or its maximum capacity to withstand human activities aimed at
exploiting environmental resources without the occurrence of environmental
degradation or depletion on the short and long term, whether directly or indirectly.
 Environmental feasibility studies are one the pillars of environment protection and
maintenance. Since sustainable development is the one considering the environmental
dimension in addition to the economic and social dimensions, then paying attention
to environmental feasibility studies for different development projects is an absolute
necessity to achieve sustainable development, along with economic feasibility studies
that ensure that the project achieves the greatest amount of material benefits without
taking into account the conditions of the environment or its potential and the possible
negative effects for this project on it.
 The paper industry is considered one of the environment friendly industries, as paper
is recycled several times to be reused and does not pollute the environment
Page 12 of 13
and Free Zones
VIII. Project Social Feasibility Study:

 Investment projects are one of the main pillars of the State's economic development
process and a mean to achieve the economic, social and development goals to be
realized, which eventually results in achieving high levels of well-being.
 The project helps in directly employing different types of labors by working in the
project itself, and indirectly through the supply and distribution chains that the project
deals with starting from the obtainment of raw materials needed for production to sale
outlets and customers.
 The project helps in increasing the State's tax revenue, which is ultimately beneficial
to the society.
 In case the project will export its products, this will contribute in increasing the State's
foreign exchange earnings, thus bridging the balance of payments deficit.
 The project decreases the unemployment rates especially for uneducated labors whom
the project needs and provides them with an income that ensure a decent life for them
and make them productive for the society.
In light of the aforementioned, the project is socially feasible.
IX. Conclusions and Recommendations
It is obvious from the previous study that:
 The project can achieve profits in the short term.
 Potentials are available to set up the project, starting with the availability of raw
materials required to produce the final product in Egypt, the ease of providing
machinery and the current climate that encourages investment in Egypt.
 Therefore, the study concluded the following:
- The investment costs are estimated at EGP 19,321,600
- The project achieves a positive net present value of money during the first five
years of the project at an amount of EGP 19,074,160
- The project achieves an annual ROI estimated at about 22%.
- The estimated Payback Period of the project is three years and nine months.
Accordingly, establishment of the project is feasible.
Page 13 of 13

Packaging Requirements - Gharbia

Uploaded by

Copyright:

Available Formats

You might also like

Packaging Requirements - Gharbia

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Packaging Requirements - Gharbia

Uploaded by

Copyright:

Available Formats

The General Authority for Investment

GAFI Translation Department

General Authority for Investments and Free Zones

A Preliminary Feasibility Study

Production of Packaging Requirements

II. An Overview on the Business explored in this Study:

 Shops that use cardboard boxes to pack their products

3. Project Investment Costs:

3-6 Legal and Incorporation Expenses:

Accordingly, the total value of the investment costs is as follows:

4. Project Financial Statements and Indicators, and Expected

Item Year 1 Year 2 Year 3 Year 4 Year 5

Cash inflows 16,000,000 17,600,000 19,360,000 21,296,000 23,425,600

4-3 Net present value (NPV) of cash inflows

4-4 Calculating Average ROI

Average ROI 22%

4-5 Payback period

5. Financial Study Conclusions

VII. Project Environmental Feasibility Study:

VIII. Project Social Feasibility Study:

You might also like