Hollow Block Making

40

HOLLOW BLOCK MAKINGA Feasibility Study

Presented to the Faculty of the BSIT DepartmentSouthern Leyte State University San Juan

In Partial Fulfillment of the Requirements for the DegreeBachelor of Science in Industrial Technology

Nicko I. De CastroLloyd M. LicmoanRex O. LoquinteVerly P. Vales

March 2015Table of Contents1.0Executive Summary1.1Introduction1.2Brief Description of the Project1.3Brief Statement of Comprehensive Study Plan Supporting the Project1.4Summary of the Findings and Conclusion Regarding the following aspects:-Marketing Aspect-Technical Aspect-Management Aspect-Financial Aspect-Social Desirability of the Project2.0Marketing Aspect3.0Technical Aspect4.0Management Aspect5.0Financial Aspect6.0Social Desirability of the Project

IntroductionAccording to BSP, the share of construction industry to total GDP has been steadily increasing, a testament to the importance of this industry in sustaining growth in the domestic economy from 2006 to 2010. Construction sector has been registered with a growth rate of 7.9 percent according to NEDA Survey 2008. Housing and construction is one of the major drivers of growth in more than 40 allied industries and directly adds to the CONSTRUCTION HOLLW BLOCKS industry. In addition, for the building of roads, flyovers and bypasses there is a mass and consistent need of prefabricated blocks across the country. Various construction and real estate development projects are in progress and are continuously being commissioned which will have high demand of prefabricated construction material all over the country.

In order to make up the backlog and meet the shortfall in the next 20 years, overall housing construction industry has to be raised to the level of 500,000 housing units per annum. This is the extent of the annual housing market in the Philippines which positively predicts a permanent growth in construction sector which directly adds to the potential in prefabricated building blocks segment of the construction industry.Brief Description of the Project

The proposed project envisages the setup of a construction hollow blocks manufacturing project. Construction blocks industry is an important industrial sector in the country engaged in producing blocks used as prefabricated material for various construction activities i.e. construction of road side pave ways, garage and parking floorings, walls making, block paved driveways, and floor coverings of commercial buildings, etc.

It is easy to make a concrete block. The successful block yard must however make blocks of uniform quality and sell them at a price high enough to cover costs and make a reasonable profit. Before to start a block yard, it is essential therefore to investigate the economic feasibility of the venture. Determination of level of demand for blocks in the area (how many per month) and degree of competition from other block yards are important factors having a significant bearing on the feasibility of the venture. Then comes the cost estimation based on various methods of production and output.

Factors which influence unit cost include: Purchase price or rental of site Cost of site improvements: fencing, paved areas for production and stockpiles, pathways, roadways and buildings Cost of equipment: concrete mixer, block making machine and miscellaneous equipment Cost of services: water and electricity Material costs Wastage Maintenance costs of site and equipment Output: number of blocks per day dimensions of block, solid or hollow. Labor costs Cost of finance etc.

According to BSP, the share of construction industry to total GDP has been steadily increasing, a testament to the importance of this industry in sustaining growth in the domestic economy from 2006 to 2010. Construction sector has been registered with a growth rate of 7.9 percent according to NEDA Survey 2008. Housing and construction is one of the major drivers of growth in more than 40 allied industries and directly adds to the CONSTRUCTION HOLLW BLOCKS industry. In addition, for the building of roads, flyovers and bypasses there is a mass and consistent need of prefabricated blocks across the country. Various construction and real estate development projects are in progress and are continuously being commissioned which will have high demand of prefabricated construction material all over the country.

In order to make up the backlog and meet the shortfall in the next 20 years, overall housing construction industry has to be raised to the level of 500,000 housing units per annum. This is the extent of the annual housing market in the Philippines which positively predicts a permanent growth in construction sector which directly adds to the potential in prefabricated building blocks segment of the construction industry.

In Tacloban City alone due to impending disaster needs because of Typhoon Yolanda, there are 527,013 housing units are still need to be counted for concrete development which majority uses hollow blocks (DPWH, 2014.

Brief Statement of Comprehensive Study Plan Supporting the Project

Blocks making business depends on activity and movement in construction industry. Housing and construction plus government initiated development projects demand mass availability of blocks all over the year. Therefore, a block manufacturing unit could be established at any time of the year.The legal status of business tends to play an important role in any setup; the proposed block yard is assumed to operate on Partnership basis.Production capacity of the plant for the proposed construction hollow blocks making unit would be 2,000 blocks per day. It is estimated that Tacloban alone has a daily demand of 1,680; construction hollow blocks. However, as there are a variety of concrete based construction blocks i.e. hollow block, solid block, kerb block etc., cost will largely depend on the selection of block type. Estimated countrywide requirement of 500,000 housing units per annum and development works in construction and civil sector by the government; all these factors encourage a persistent high growth and mass demand of prefab construction blocks.Raw material to be used for the production of concrete based block is available in the local market at reasonable price. Main production material components include: cement and sand/crushed stone. A number of suppliers are available for Sand and Crush in each region and area of Leyte Islands and could easily be contacted, whereas, cement could be procured from any well known cement company. Cement suppliers could also be one of the sources for sand and crush supply reference. Low quality Chinese cement is also available in the local market which has been declared substandard for consumption.Volatility in cement prices is the biggest threat while working in construction industry. This risk can be minimized by making long term supply contracts with the cement manufacturers which is a common practice of large scale industrial consumers of cement.Php. 2 million is estimated to be the cost of the project. The working capital requirement is estimated around 0.9 million and 1.1 million would be the fixed investment.1. Solid Block 2. Hollow Block 3. Pavers

Marketing Aspect

In the manufacturing industry, marketing is considered to be of significant importance. In the construction hollow blocks industry, marketing parameters are very limited and largely associated with the construction sectors performance. Some of the marketing promotion activities which should duly be rendered are given below: Developing contacts with the building material suppliers, well known builders and contractors. Keep up to date 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. Emphasis on image development and building acquaintances across individual contractors who are serving private sector. Establish contacts with local civil engineering firms, individuals and professionals.

Construction sector is one of the largest economic sectors of Pakistan in terms of employment3. It directly and indirectly affects more than 40 allied industries which also includes prefab construction material industry. Block making has a significant position in the construction process particularly in the housing sector where prefabricated blocks are used extensively with more than 40% of the total structure of the building.

Traditional construction has been relying on hand made bricks rather than concrete block which has been a high cost option while selecting material for the house construction both in urban and rural areas of the country. Concrete based construction is comparatively new phenomena and historically has been employed in the urban areas where technology and machinery was introduced due to mass demand of building material and comparatively high average income.

Prefab construction block have different categories from smallest size of a brick to a huge sized pre-cast concrete bridges. However, for the purpose of this pre-feasibility, we have focused on the manufacturing setups where various types of blocks are manufactured with the help of automatic or semi-automatic plant and machinery. This sector is largely unorganized and no statistics are available in terms of how many block manufacturing units are working and their scale of operations. The prefab construction blocks manufacturing sector can be divided into three categories:

Organized sector constitutes only three major players in Go Trading (Tacloban) and Construction Supply, Arcillas Block (Carigara), Lunciana (Javier). Unorganized sector mainly includes block yards where hand operated mechanical machines are used to make concrete blocks which lay six and above blocks at a time. Therefore, their operations are limited and usually work on the basis of area to area demand. Hundreds of such setups could be seen in each area of the country where these setups are fulfilling the local housing construction demand of blocks of three different sizes and strengths depending upon the individual requirements of the customer. Standard blocks are generally available in the sizes of 6x8x12, 5x8x12 and 4x8x12. As far as PSI is concerned, no defined standard could be found; however, 400 PSI is normal in this sector.

Unorganized sector hand made blocks is gradually shrinking and now operating on a very small scale in the low income areas where concrete based structure is scarce. Single mold is used which lays only one block at a time. Such blocks are easily breakable; therefore they are generally not preferred even by the customers who have very limited capital to invest in house construction. The current scenario of this sector shows that most of such block yard operators are switching to machine made blocks option due to customer preference and production limitations of the hand made blocks making process.

Technical Aspect

Process Flow

Ordering &

Stockpiling

Material

Batching

Mixing

Molding

Curing

Storage &

Distribution

The production of concrete blocks consists of four basic processes: mixing, molding, curing, and cubing. Some manufacturing plants produce only concrete blocks, while others may produce a wide variety of concrete hollow blocks, flat paver stones, and decorative landscaping pieces such as lawn edging, etc.

The following steps are commonly used to manufacture concrete blocks.

MixingThe sand and gravel are stored outside in piles and are transferred into storage bins in the plant by a conveyor belt as they are needed. The Portland cement is stored outside in large vertical silos to protect it from moisture.

As a production run starts, the required amounts of sand, gravel, and cement are transferred by gravity or by mechanical means to a weigh batcher, which measures the proper amounts of each material.

The dry materials then flow into a stationary mixer where they are blended together for several minutes. There are two types of mixers commonly used. One type, called a planetary or pan mixer, resembles a shallow pan with a lid. Mixing blades are attached to a vertical rotating shaft inside the mixer. The other type is called a horizontal drum mixer. It resembles a coffee can turned on its side and has mixing blades attached to a horizontal rotating shaft inside the mixer.

After the dry materials are blended, a small amount of water is added to the mixer. If the plant is located in a climate subject to temperature extremes, the water may first pass through a heater or chiller to regulate its temperature. Admixture chemicals and coloring pigments may also be added at this time. The concrete is then mixed for six to eight minutes.

MoldingOnce the load of concrete is thoroughly mixed, it is dumped into an inclined bucket conveyor and transported to an elevated hopper. The mixing cycle begins again for the next load.

From the hopper, the concrete is conveyed to another hopper on top of the block machine at a measured flow rate. In the block machine, the concrete is forced downward into molds. The molds consist of an outer mold box containing several mold liners. The liners determine the outer shape of the block and the inner shape of the block cavities. As many as 15 blocks may be molded at one time.

When the molds are full, the concrete is compacted by the weight of the upper mold head coming down on the mold cavities. This compaction may be supplemented by air or hydraulic pressure cylinders acting on the mold head. Most block machines also use a short burst of mechanical vibration to further aid compaction.

The compacted blocks are pushed down and out of the molds onto a flat steel pallet. The pallet and blocks are pushed out of the machine and onto a chain conveyor. In some operations, the blocks then pass under a rotating brush which removes loose material from the top of the blocks.

CuringThe pallets of blocks are conveyed to an automated stacker or loader which places them in a curing rack. Each rack holds several hundred blocks. When a rack is full, it is rolled onto a set of rails and moved into a curing kiln.

The kiln is an enclosed room with the capacity to hold several racks of blocks at a time. There are two basic types of curing kilns. The most common type is a low-pressure steam kiln. In this type, the blocks are held in the kiln for one to three hours at room temperature to allow them to harden slightly. Steam is then gradually introduced to raise the temperature at a controlled rate of not more than 60F per hour (16C per hour). Standard weight blocks are usually cured at a temperature of 150-165F (66-74C), while lightweight blocks are cured at 170-185F (77-85C). When the curing temperature has been reached, the steam is shut off, and the blocks are allowed to soak in the hot, moist air for 12-18 hours. After soaking, the blocks are dried by exhausting the moist air and further raising the temperature in the kiln. The whole curing cycle takes about 24 hours.

Another type of kiln is the high-pressure steam kiln, sometimes called an autoclave. In this type, the temperature is raised to 300-375F (149-191C), and the pressure is raised to 80-185 psi (5.5-12.8 bar). The blocks are allowed to soak for five to 10 hours. The pressure is then rapidly vented, which causes the blocks to quickly release their trapped moisture. The autoclave curing process requires more energy and a more expensive kiln, but it can produce blocks in less time. CubingThe racks of cured blocks are rolled out of the kiln, and the pallets of blocks are un-stacked and placed on a chain conveyor. The blocks are pushed off the steel pallets, and the empty pallets are fed back into the block machine to receive a new set of molded blocks.

If the blocks are to be made into split-face blocks, they are first molded as two blocks joined together. Once these double blocks are cured, they pass through a splitter, which strikes them with a heavy blade along the section between the two halves. This causes the double block to fracture and form a rough, stone-like texture on one face of each piece.

The blocks pass through a cuber which aligns each block and then stacks them into a cube three blocks across by six blocks deep by three or four blocks high. These cubes are carried outside with a forklift and placed in storage.

Quality controlThree aspects should be monitored to ensure quality masonry units: strength, dimensions and shrinkage.

StrengthQuality of blocks should be controlled so that strengths are adequate (to avoid breakages or rejection by customers) and mixes are as economical as possible. Ideally, blocks should be regularly tested for strength and mixes and production processes modified if necessary. If testing is impracticable or unaffordable, block strength should be continually assessed by noting whether corners and edges, or even whole blocks, tend to break in handling. Strength can also be assessed by knocking two mature bricks together.

DimensionsThe length and width of the units are determined by the mould and will not vary greatly. However, the height can vary and should be monitored using a simple gauge. Units of inconsistent height will lead to difficulties in the construction of masonry and possible rain penetration.

ShrinkageConcrete masonry units shrink slightly after manufacture. In order to avoid this happening in the wall, blocks should be allowed to dry out for at least seven days before being used for construction.

Materials Sourcing Crushed Hard Lime Stone, Sand, Cement and Water will be used as raw material for manufacturing prefab construction blocks. Crushed raw stone and sand could be purchased directly from the excavator (quarry lease holder) or supplier, whereas, cement could be sourced from manufacturers by signing a regular supply contract which would lead to a controlled cost. For the purpose of this pre-feasibility, it is proposed to hold a supply contract with the three types of material suppliers to avoid any possible threat in procuring raw material as well as to keep the project economically stable.

Based on our discussions with the business operators, it has been estimated that 1 sq. ft. of loose aggregate will yield 0.7 sq. ft. of concrete volume. For the proposed project, a total of 5200 sq. ft. of aggregate would be required daily to produce 4000 sq. ft. of concrete blocks. Sand-Cement ratio will largely depend on the type and desired strength of blocks, however, for this pre-feasibility study, assumed ratio is 100:1 (one 50kg bag of cement for each 100 blocks) by loose volumes. Daily cement requirement for the said production would be around 50 bags of 50kg each. Machinery Requirement

Although small mixing and molding units are available in the local market, yet, complete mechanized plants are not available and organized setups are using imported plant and machinery for concrete block making. Machinery with the following specification has been proposed for the project which will cost around Php 3 million.

Detailed Plant DescriptionHCQ6-15III Concrete Block Machine:With a solid and robust welded steel frame, this machine is operated using an advanced control system. Has a compact size (6 x 3.5 x 2.95m), and overall weight of 9.6MT.Compulsory Mixer with Skip Elevator:The mixer consists of a solid mixing trough and alloy steel rotary mixing blade, 4 vertical supports with foot plates. The platform is adapted for service and working. To mix light weight and high density concrete with 0.5cbm per batch.

Elevator:As the pallet and fresh block convey to the elevator, they are stacked to a maximum height of 1metre which is equivalent to 2.2 ton.

Traveling Material Bin Feeder:Through the conveyor, the slightly moist concrete from the mixer is transported to traveling material bin feeder for separating temporary storage. The material bin is designed in a solid, rugged steel weldment and maintenance free track roller.

Face Mix Section:Specially designed for production of blocks or pavers with two layers (coloring). Equipped with loading hopper with adjustable feeding system. The section can elevate automatically to allow the blocks or pavers to pass through.Control Panel with Touch Screen:Heart of the control is a PLC with a touch screen color flat display. The operator can select the functions and change the parameter directly via the screen. The recipe can be stored and the statistics data can be downloaded.Vehicles for Transportation

The proposed setup would require three to four vehicles (new machinery has been considered for the proposed project) to carryout transportation of raw material and finished products. Besides, dumping and loading vehicles for the transportation of finished product to the stacking points would be a pre-requisite. Details of required vehicles have been provided in the following table:

S.Name of Vehicle/MachinePurpose of theNo. of UnitsTotal Cost

No.MachineRequired

1Dumper/TruckMaterial14,000,000

Transportation

2Fork LifterFinished goods21,000,000

transportation

3Other Tools & Equipment200,000

Total5,200,000

Machinery is expected to be serviced on an annual basis. During the projected period, maintenance expenses are estimated to be around 3% of the total cost of machine.LAND & BUILDING Location This should be considered in relation to: Supply of raw materials Market for blocks Location of the labor force Security of the area Availability of services, i.e. roads, water, sewerage, electricity, etc. Access The site must be accessible to trucks delivering aggregates and cement and collecting finished blocks. Ground slopeIdeally, the site should be level or nearly so. Steep slopes make handling and production difficult. Terracing a steep slope is expensive.

SizeThe site should be big enough for aggregate stockpiles, cement storage, production (slab or stationary machine) block stacking, staff facilities, an office and on-site access. With all provisions for the business, one acre would be sufficient for the project.Establishing the site The site should have provision for stockpiling aggregates and storing cement, a production area, a stacking area, staff facilities, an office, and access between different areas and facilities. Each of these is discussed below.

Aggregate stockpilesAggregates must be stockpiled in such a way that: they do not become contaminated by soil, leaves, etc; different aggregates are kept separate; and rainwater can drain away. Ideally therefore, aggregates should be stockpiled on a concrete slab. If this is not done, the layer of aggregates in contact with the soil should not be used for production. Aggregates must not be stockpiled under trees. Partitions should be erected between different types of aggregate. Stockpiles should be on a slight slope so that rainwater does not collect in the aggregates.

Cement storeThe best way to store cement is in a silo. For small scale block yards, however, cement will be delivered in bags. Cement in bags should preferably be stored in a weather-proof room. Bags should be stacked on a plastic tarpaulin or on closely spaced wooden strips so that they do not absorb damp from the floor. The storeroom should be big enough to hold at least a weeks supply of cement. If it is not possible to provide a storeroom, cement in bags should be stored in stacks raised above the ground and completely covered with tarpaulins.

The size of this area depends on the method of producing blocks. A stationary machine, which forms blocks on pallets, needs a relatively small area with space around it for operators. A mobile egg-laying machine needs a fairly large slab on which blocks are made. Details of such a slab are discussed below.

Construction of a production slabAreaA flat concrete slab, big enough for at least one days production, is required. To minimize breakages in cold weather, it is recommended to increase the cement content of the mix or the curing period before moving the blocks. As a guideline, an 80 x 80 ft. in area is suitable for a production of 6000 blocks per day.SlopeNormally block production is carried out in the open, and the concrete slab should have a minimum slope of 1 in 100 to ensure proper drainage.

ThicknessLarge production machines require a minimum slab thickness of 150 mm.

JointsTo prevent uncontrolled cracking of the slab, it should be divided into panels which should be square or as close to square as possible. The half round keyway prevents differential settlement of adjacent slabs. The maximum joint spacing depends on the thickness of the slab and should not exceed 6 m for slab thicknesses of 150 and 200 mm.

Stacking areaAn area big enough to stack two weeks production is needed for curing and drying blocks. It is normally not necessary to pave this area. To avoid muddy conditions, a layer of concrete stone, about 100 mm thick, should be enough.

Office and Staff facilitiesThese include toilets, ablutions, and possibly change rooms. An office should be provided for all but the smallest of yards.

Land and building requirements for the project would be as follows:

Size/AreaCivil WorksTotal

Details/ConstructionConstruction

(Sq. Ft.)

Cost/Sq. Ft.Cost

Production & Stacking Area15,0001502,250,000

Cement Store2500300750,000

Office & Staff facilities400300120,000

Storage Area (Sand/Crush)Not limited-0

Water Tank4000200800,000

Other Services (water plant, tool shop etc.)500300150,000

Total Covered Area18,4004,070,000

Management Aspect

Proposed Location Proposed location for setting up construction hollow blocks making unit largely depends on the availability of raw material and its transportation to the factory at low cost; however, factors like availability of manpower, utilities and easy access to the target markets should also be carefully examined. It shall be located in the nearby Abuyog town near the crossing area. Construction hollow blocks business is dependent on the pricing and margins given to builders, suppliers and retail customers. It also depends on efficient supply of blocks to the customer and communication facilities provided to the prospective clients, retailers and order booking agents.A block maker when setting up a block yard, institutes contacts with the construction material suppliers, retailers and signup a contract in order to appoint them as order booking agents. Generally, construction and building material supplier is the part of the whole chain, and brings together the customers and suppliers. Sometimes the supplier has his own delivery vehicles and in most of the cases, keeps arrangement with the commercial vehicle operators, material manufacturers, and buyer, having a significance of a pivoting point among them.

Ordering and Delivery Procedure:Block maker appoints order booking agents (building material suppliers) with in the locality who entertain the customer. Customers usually send someone or personally go to the booking office and place the order which includes details indicating quantity, quality, size and time of delivery etc. Booking agent gets the payment in cash (mostly) and issues an order / delivery slip to the customer, showing order details.

Buyer hires a truck or loading vehicle and goes to the block yard, where he produces the order slip (kanvaser) to the person responsible for the physical delivery of the blocks. That person renders the order as given on the slip. After loading the vehicle he hands it over it to the order booker and here ends the role of the block maker.

Construction hollow blocks producers also book direct orders at site office for the construction contractors, retail customers and builders on cellphone and supply directly to the identified delivery points; however, these types of facilities are provided only for bulk orders using hired delivery vehicles. Bulk deliveries typically account for around 30% of the total annual sales.

Construction hollow blocks making units across the country are working mostly as unorganized sector (about 80%) and no reliable data is available, precisely, for the installed capacity and the number of units working etc. However, since it is an allied industry of the construction sector, growth in construction sector may be considered as a close proxy for the growth in prefab construction blocks sector which is 7.9% (NEDA 2006).Construction and allied industry is a labor intensive industry; therefore, a total 18 persons will be required to handle the production operations of a prefab construction blocks making unit. The business unit will work on one shift basis (8 hours daily). Technical staff with relevant experience will be required for operating production plant. The staff will be provided training by the plant & machinery supplier. Total approximate manpower required for the business operations along with the respective salaries are given in the table below:

(PhP)

Staff TitleNo of PersonsMonthlyAnnual

SalarySalary

Owner (Business Unit Manager)

Production Staff (Quarry/Excavation Site)

2.Forklift Operator18,00096,000

3.Dumper/Truck Driver18,00096,000

4.Helper/Laborer28,00096,000

Production Staff (Crushing Factory)

5.Production Incharge / Plant Operator110,000120,000

6.Assistant Production Plant Operator15,00060,000

7.Production Laborers832,000384,000

Total Production Staff1471,000852,000

General Administration/ Selling Staff

8.Office Assistant15,00060,000

9.Security Staff210,000120,000

Total G A /S Staff315,000180,000

TOTAL1786,0001,032,000

One to two year of experience on mechanized block making plant would be necessary for the person who will operate the prefab construction blocks plant. It is also suggested that preference should be given to literate persons so that they could understand the significance of undertaking health and safety measures.

Financial Aspect

The project cost estimates for the proposed Construction blocks business have been formulated on the basis of discussions with industry stakeholders and experts. The projections cover the cost of land, machinery and equipment including office equipment, fixtures etc. Assumptions regarding machinery have been provided, however, the specific assumptions relating to individual cost components are given as under.

Land & Building Land for setting up the proposed prefab construction blocks unit would be purchased which will incur a cost of approximately Rs. 1.2 million. Construction and renovation of site will cost around Rs. 4 million which has been assumed to depreciate at 10% per annum using diminishing balance method.

Overall Factory & Office Renovation To renovate the factory / office premises in Year 5 and Year 10, certain expenses will be incurred for which an amount equivalent to 5% of the total site/office construction cost is estimated.

FixturesA lump sum provision of Php. 60,000 for procurement of office/factory furniture is assumed. This would include table, desk, chairs, and office stationery. The breakup of Factory Office Furniture & Fixtures is as follows:

ItemNumberTotal Cost

Table & Chair for Owner15,000

Tables & Chairs for Admin. Staff13,000

Waiting Chairs46,000

Curtains & Interior Decoration for office-5,000

Chairs for Workers/Labor65000

Electrical Fittings & Lights-30,000

Others-6,000

Total60,000

Depreciation Treatment

The treatment of depreciation would be on a diminishing balance method at the rate of 10% per annum on the following. The method is also expected to provide accurate tax treatment.

1. Plant & machinery 2. Land & Building Construction and Renovation 3. Vehicles 4. Furniture and Fixtures etc.

UTILITIES Construction hollow blocks plant will be operated using electricity for production purposes. This would draw considerable amount of electricity. Likewise, heavy vehicles i.e. Fork lifter, truck/dumper, etc would require huge quantity of fuel for which dieselwill be used. The cost of the utilities including electricity, diesel/fuel, telephone, and water is estimated to be around Rs. 2 million per annum. Approximate cost of utilities has been given below:

UtilityTotal MonthlyTotal AnnualAnnual %age

Increase

Cost (Php.)Cost (Php.)

1.Electricity58,000696,0005%

2.Furnace Oil, Lubricants etc.5,00060,0003%

3.Diesel for Vehicles and Machinery28,500342,0005%

4.Water70,200842,4005%

5.Telephone5,00060,0005%

Total166,7002,000,400

Working Capital Requirements It is estimated that an additional amount of one million rupees (approximately) will be required as cash in hand to meet the working capital requirements. These provisions have been estimated based on the following assumptions for the proposed business.

Utilities - (Office & Factory)87,140

1.Electricity - 01 Month58,240

2.Oil, Lubricants & Other consumables - 01 Month5,000

3.Water - 07 days18,900

4.Telephone - 01 Month5,000

Salaries - Three Months (Production Staff)213,000

Raw Material Inventories (Cement & Sand/Crushed Stone)238,380

Cement 01 Month325,000

Sand and Crushed Stone 07 Days31,500

Misc. Expenses - Three months (@ 5000 /month)15,000

Total Working Capital910,020

Plant & Machinery Installation Plant and machinery installation and trial run expenses has been assumed to be around Php. 100,000/-. It has been included in the plant and machinery cost.

Vehicle for Support and Maintenance Services An additional light loading vehicle would be required for providing services for the maintenance, communication of machinery spare parts, labor etc. For this purpose, a transportation vehicle has been proposed and an amount of Rs. 400,000 is assumed to be required to purchase the vehicle.

Preliminary Expenses and Contingency Provision A lump sum provision of Php. 300,000 is assumed to cover all preliminary expenses which will be amortized over the 5 year period.

Selling & Distribution Expenses (Order Booking Agents) For the purpose of this pre-feasibility, it has been assumed that the block maker would work in association with building material suppliers and will appoint 5 to 6 suppliers as booking agents. These arrangements would raise the selling costs for the business for which an amount equivalent to 2% of the annual sales has been assumed which also covers the distribution cost of bulk supplies, entertained directly by the owner.

Miscellaneous Expenses Miscellaneous expenses of running the business are assumed to be Php. 5,000 per month. These expenses include various items like office stationery, daily consumables, traveling allowances etc. and are assumed to increase at a nominal rate of 10% per annum.

Finished Goods Inventory

The proposed setup is assumed to maintain a Finished Goods Inventory of 7 days of the total annual production.

Revenue Projections

For the revenue projections, prefab construction blocks are assumed to be produced as follows:

S.Size/ProductionSelling

NoBlock TypeStandard (as % ofColor

DimensionPrice/ unit

.Total)

1Masonry Block

Solid Block4x8x12600-800 psi10%Natural Grey15



Hollow Block5x8x16600-800 psi10%Natural Grey23

Fair Face Blocks

Solid Block90x190x390 mm600-800 psi15%Natural Grey28

2Pavers300x300x40mm4000 psi5%Natural Grey40

3Kerb Stone/Block6x12x125000 psi30%Natural Grey90

Working with the proposed plant and machinery, the project will be capable of producing 4,000 sq.ft. of concrete blocks at 100% capacity utilization with single shift of 8 hours a day. It has been assumed that it will take some time for the business to reach the optimal capacity utilization point for the projected period. Therefore, the first year production of prefab construction blocks has been estimated with 70% capacity utilization. Annual increase of 3% in capacity utilization is assumed over the projection period. All projections are based on 8 working hrs a day with 26 days a month.Accounts Receivables

Considering the industry norm, particular to the construction sector and all of its allied industries, it has been assumed that 70% of the sales will be on cash. Whereas, remaining 30% sales will be on credit to the builders and construction contractors. A collection period of 60 days is assumed for the credit sales.

All of the above assumptions are based on our findings during the discussions with the industry experts and stakeholders. A provision for bad debts has been assumed equivalent to 2% of the annual credit sales.

Financial Charges

It is assumed that long-term financing for 5 years will be obtained in order to finance the project investment cost. This leasing facility would be required at a rate of 15% (including 1% insurance premium) per annum with 60 monthly installments over a period of five years.

Taxation The business is assumed to be run as a sole proprietorship; therefore, tax rates applicable on the income of an individual tax payer are used for income tax calculation of the business.

Cost of CapitalThe cost of capital is explained in the following table:ParticularsRate

Required return on equity20%

Cost of finance15%

Weighted Average Cost of Capital17.5%

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

Land2,000,000Plant & machinery35,300,000Concrete Blocks Making Plant (Imported)30,000,000Transportation Machinery/Vehicles5,200,000Plant & machinery Installation & trial run expenses100,000Vehicle for support and maintenance services - One light vehicle400,000Site/Office Renovation & Contruction4,070,000Factory / Office Furniture60,000Preliminary Expenses300,000TUtilities - (Office & Factory)87,1401.Electricity - 01 Month58,2402. Oil, Lubricants & Other consumables - 01 Month5,0004.Water - 07 days18,900Water Requirement (Quantity)66,0005.Cellphone - 03 Month5,000

Salaries - Three Months (Production Staff)213,000Raw Material Inventories (Cement & Sand/Crushed Stone) - 07 Days238,380Cement - 26 Days325,000Sand and Crushed Stone - 07 Days31,500Misc. Expenses - Three months (@ 5000 /month)15,000TOTAL PROJECT COST43,040,020Loan Finance21,520,010Equity Financing21,520,010Debt:Equity Ratio (50:50)50.00%PROJECT RETURNS AND OTHER FINANCIALIRR26%NPV14,127,743Payback Period (Years)4 YearsDebt Equity Ratio50:50'Required return on equity20%Cost of finance15%Weighted Average Cost of capital17.50%OTHER ASSUMPTIONSDepreciation10%Plant and Machinery Annual Repair & Maintenance (as %age of total cost of plant)3.00%Selling & Distribution Expenses2.00%

INCREASE IN PRICE AND GROWTHIncrease in Raw Material Price (Cement & Sand/Crushed Stone)5%Increase in other consumables price3%Factory & Office Renovation (in Year 5 & 10)5%Capacity Utilization at the beginning of the period50%Increase in capacity utilization (Annual)5%Maximum Capacity UtilizationRunning on single shift basis but double shift can be initiated if demand increasesAnnual sales price increase5%Operational Hrs./day8Operational Days / Month26Operational Months12Annual Operational Days312Economy related assumptionsElectricity charges growth rate5%Increase in Salaries10%Oil/Diesel and other consumables price growth rates10%Increase in Misc. Expenses10%Cash Flow AssumptionsSales on Credit - as %age of total30%Sales on Cash - as %age of total70%Accounts Receivable period (days) - only for 30% credit salesProvision for bed debts (only on 30% credit sales)2%Inventory (Raw Material)7Finished Goods Inventory (Days)7COST AND REVENUE SHEET

REVENUE CALCULATION

ProductionRated capacity of the Block Making Plant500 sq.ft. of concrete / hr.No. of Operating Hours - Single Shift Basis8 Hrs / DayEstimated Optimal Production4,000 sq.ft. of concrete / dayExpected Capacity Utilization (At the beginning of the project)50%Annual Capacity Utilization Growth Rate5%Expected Concrete Production at the beginning of the project2,000 sq.ft. of concrete / dayExpected Blocks Production at the beginning of the project

No. of Blocks Produced (Approximately)SizeMasonry Block4x8x12Solid Block4505x8x12Solid Block8406x8x12Solid Block3005x8x16Hollow Block225

Fair Face Blocks90x190x390 mmSolid Block30528300x300x40mmPavers144406x12x12Kerb Stone/Block60090Total Blocks Produced2,864Construction Block CategoryProduction AssumptionsMasonry BlockSolid Block15%Solid Block28%Solid Block10%Hollow Block10%Fair Face BlocksSolid Block2%Pavers5%Kerb Stone/Block30%100%

Construction Blocks Produced / Day Production in Block Category PesosMasonry BlockSolid Block450 6,750Solid Block840 13,440 Solid Block300 5,100 Hollow Block225 5,175Fair Face BlocksSolid Block305 8,533 Pavers144 5,760 Kerb Stone/Block600 54,000Total Value of Blocks Produced per Day98,758Total Value of Blocks Produced per Month2,567,717Gross Annual Sales30,812,600Provision for Finished Goods Inventory7 Days

Estimated Finished Goods Inventory at the end of the Year 396,695Sales on Credit30% of the totalSales on Cash70% of the total2. COST CALCULATION - for 4000 blocksRaw MaterialRaw Material Required/BlockQuantityCostWater16.5660002700Cement0.650 bags12500Sand1.1847204500Crushed stone0.29511803500Total Raw Material Cost23200 Php/day

Other ConsumablesForklift approximate Fuel Consumption50Liter/hr.Dumper/Truck approximate Fuel Consumption75Liter/hr.Electricity Charges (including all taxes)1 K.W.H*7.00Ph. / KWHBlock Making Plant approximate Electricity Consumption40KW / hr.

Approx. Number of operational hours for block making machinery/vehiclesPlant & Machinery8hr.Vehicles-6hr.Electricity Consumption320KW/dayFuel & Other Consumables750Liter/dayTotal Other Consumables30,740Php./dayTotal Cost / day53,940Php. / dayTotal Cost / Month1,402,440 Php. / month

TOTAL ANNUAL COST16,829,280 Php. / annum

Total Annual Sales23,812,600

Total Annual Cost of Raw Material and other consumables16,829,280

Difference 6,983,320

Return of Investment

23,812,600 16,829,28016,829,280

0.4146 x 100%

41.46%

Social Desirability of the Project

Establishing a building materials production like hollow block making will facilitate scaling up of the stabilized hollow block technology by providing social emphasis on:

(a) Enhance housing construction, rehabilitation and upgrading of settlements and basic services for easier reintegration of internally displaced persons, ex-combatants and returnees.

(b) Facilitate expansion of environmentally friendly commercial production, marketing and application of affordable building materials.

(c) Support supply of hollow blocks of small-scale businesses and revolving funding mechanisms for commercialization of stabilized soil block technology.

Transfer of technology for local building material production can be achieved when there is an adequate local capacity and the means to sustain the proposed technology

Documents

Hollow Block Making