The business plan of the enterprise for the production of ash blocks

* The calculations use the average data for the World

1. SUMMARY OF THE PROJECT

The purpose of the project is the organization of a manufacturing enterprise (products - ash blocks) in the city of Nalchik, rep. Kabardino-Balkaria. Ash block is a building material of regional importance, produced from volcanic ash. The advantage of the material is low thermal conductivity, low price, high strength compared to foam and gas blocks.

It is advisable to organize the production of ash blocks in the immediate vicinity of the raw material deposit. To date, deposits have been explored in the Kamchatka Peninsula, in Transcaucasia and in the North Caucasus. Organization of production in Nalchik is justified for several reasons:

  • distance to the ash field - no more than 150 km

  • high level of demand for ash blocks due to low solvency of the population

  • ash block allows you to reduce housing heating costs, which is important for residents of the region

  • a significant number of residential buildings in the region today are in disrepair or close to it, which suggests the need for major repairs or new construction

Invested funds are spent on the purchase of production equipment, on the formation of a working capital fund, marketing, etc. The initiator of the project is KBR-Stroyresurs LLC, a trading company (construction materials). The project involves the diversification and expansion of the existing business. Market - Kabardino-Balkarian Republic. Distribution channel - own retail network.

The main indicators of the project are given in Table. one.

Table 1. Key project indicators

No.

Indicator

Value

one

Investment costs, rub.

1 505 000

2

Revenue 1 year, rub.

39 066 300

3

Net profit 1 year, rub.

12 160 323

four

Revenues for subsequent years, RUB

45 887 400

five

Net profit of subsequent years, rub.

14 883 037

6

Net present value (NPV), rub.

2 944 299

7

Payback period (PP), months

five

eight

Discount payback period (DPP), months

five

9

Internal rate of return (IRR), %

41.65

ten

Return on Investment (ARR), %

80.86

eleven

Profitability Index (PI)

1.96

2. COMPANY DESCRIPTION AND INDUSTRY

The difficult economic situation in Russia has a direct impact on all markets and sectors of the economy. This also applies to the building materials market. Since its volume directly depends on the volume of construction and repair work, it is advisable to consider the real estate market as well.

The dynamics of housing commissioning reflected an almost continuous increase in construction volumes since 2000 (Fig. 1). In 2015, the first recession occurred after 2010. The fall was 0.5% compared with the previous year. Experts attribute such a slight drop primarily to the effect of deferred demand, when the buildings, the construction of which began 2 or more years ago, are commissioned. Thus, in subsequent years, a more significant decline in indicators should be expected.

Figure 1. Dynamics of putting housing into operation in 1991 - 2015, million square meters m

The main factors of influence are: the stoppage of construction of a number of facilities, the transfer of commissioning, the stoppage of the mortgage market (due to an increase in the key rate), the increase in the cost of construction, the drop in demand for housing (due to a decrease in the solvency of the population).

A significant impact was exerted by the increase in prices for construction materials, primarily imported ones. In general, in 2015, price growth averaged 10.4%. The use of imported building materials in business and premium segments can reach 30% of the total, in the economy segment they account for less than 10%. Thus, investing in the local production of cost-effective building materials seems most appropriate.

The depreciation of the ruble against foreign currencies has a positive effect on the competitiveness of domestic products. Nevertheless, against the backdrop of this favorable factor, production volumes of building materials decreased:

  • brick production in 2015 decreased by 8%

  • cement production in the same period - by 9.9%

  • output of concrete wall blocks - by 39.2%

  • production of ceramic wall blocks - by 9%.

Thus, it should be assumed that in the coming years, while maintaining this trend, a shortage of building materials should be expected. As a result, the organization of their production, especially in the economy segment, is advisable.

Directly at the CBD in November 2016, the government of the republic adopted a development program until 2030. According to this program, the production of building materials, along with agriculture, tourism and high-tech industries, is one of the priority areas of development.

The Republic has significant potential for the development of the building materials industry. On its territory there are large reserves of minerals and mineral resources: iron ore, feldspar, gypsum, sand, building limestone, volcanic ash, etc. Large enterprises and combines are leading the production of traditional building materials such as bricks and prefabricated reinforced concrete structures. In the segment of production of ash blocks, mainly small businesses are engaged.

In connection with the peculiarities of the sharply continental climate of the republic (and the whole of the North Caucasus Federal District as a whole), one of the most important requirements during construction is increased thermal insulation of the building. In this regard, at the federal level, changes were introduced in SNIP II-3-79 “Construction Heat Engineering”, which provides for an increase in the thermal insulation performance of building envelopes by 3.5 times. When using traditional materials, their consumption is more than doubled to achieve the required thermal insulation values. This, in turn, leads to a significant increase in the cost of construction. High thermal insulation characteristics of ash blocks effectively solve this problem.

Kabardino-Balkaria is a republic within the Russian Federation, part of the North Caucasus Federal District. The total area is 12.5 million km2, the population is 862, 254 people. The territory of the republic is divided into three main zones (plain, foothill and mountain), each of which has its own type of climate. The humid continental climate prevails in the lowland and foothill zones, subarctic and alpine in the mountains. The capital of the republic, the city of Nalchik, is located in its central part, which makes it as accessible as possible from a logistics point of view.

The project involves the expansion and diversification of the existing enterprise - LLC “KBR-Stroyresurs”. The main activity is the sale of building materials: crushed stone, sand, lumber. It has its own trading base with an area of ​​150 m2. The company's turnover in 2015 amounted to 67 million rubles. It is planned to purchase equipment for the production of ash blocks and their retail sale through its own trading facilities.

Table 2. Investment costs for the project

NAME

AMOUNT, rub .

The property

one

Industrial equipment

50, 000

Equipment

2

Set of equipment

470, 000

Intangible assets

3

Web site

45, 000

Current assets

four

Current assets

640, 000

five

Raw material purchase

300, 000

Total:

1 505 000 ₽

Own funds:

850 000, 00 ₽

Required borrowed funds:

655 000 ₽

Rate:

18.00%

Duration, months:

36

3. DESCRIPTION OF GOODS AND SERVICES

The main products of the project are foam blocks for the construction of residential buildings. Ash block is a building material made from a naturally occurring material - volcanic ash. Volcanic ash is a loose fine-clastic rock with particle sizes less than 5 mm, consisting of volcanic glass and crystals of various rocks, mainly small grains of volcanic slag and pumice. Volcanic ash is also used as a fine aggregate in expanded clay concrete, in dense and porous ash concrete, in stucco mortars.

In comparison with traditional materials, ash blocks have several advantages (Table 3). In particular, they are 4.24 times warmer than bricks, 2-3 times stronger than foam and gas blocks, 2-2.5 times cheaper than other building materials.

Table 3. Comparison of technical and economic characteristics of various building materials

Material

Heat conductivity, W / m.s

Frost resistance cycles

Strength

The average cost of 1 m 3 , rubles.

Brick

0.5

15 - 50

100 - 200

5500

Foam block

0.14 - 0.22

15 - 35

15 - 25

4500

Gas block

0.1 - 0.14

15 - 35

25 - 45

4500

Ash block

0.115

25

30 - 75

2000

Reinforced concrete

1, 69

-

-

-

Ash blocks have an optimum combination of strength and density in comparison with other materials, they are distinguished by high bearing capacity. In the case of using the structural design of a building with load-bearing walls, ash blocks can be used in buildings of up to three floors; during the construction of frame buildings - without limiting the number of storeys. The material is not combustible, fireproof, environmentally friendly, not subject to decay, frost-resistant.

An assortment of rulers with characteristics is given in Table. four.

Table 4. Assortment line

No.

Name

Description

Price for 1m 3 , rub.

one

Ash block wall

Blocks for the installation of wall structures according to GOST 6133-99 "Concrete wall stones" (from light concrete, aggregate - volcanic ash)

-

2

Hollow block

Wall stone with through or through vertical voids (emptiness more than 13%)

1800

3

The block is full-bodied

Wall stone without voids or with technological voids for convenient grip of the product

1995

four

Private block

Wall stone intended for masonry walls of buildings and structures, usually with external decoration

2128

five

Front block

Wall stone intended for masonry and simultaneous wall cladding and having one or two face faces

2340

Table 5. Production costs

GOODS / SERVICES

COSTS UNITS, rub.

TRADING VALUE, %

UNIT COST, rub.

one

Hollow block

1, 000

80%

1 800

2

The block is full-bodied

1, 050

90%

1 995

3

Private block

1, 120

90%

2 128

four

Front block

1, 200

95%

2, 340

Production costs (variable costs) include the costs of the acquisition and transportation of raw materials, as well as the costs of electricity spent in the production process, and equipment maintenance.

Finished products are packed on wooden pallets and wrapped in thick film to prevent debris, moisture, damage to the blocks and for their additional fixation.

4. SALES AND MARKETING

Since the company is active, there is a well-developed client base, special measures to promote a new product are not required. The investment costs include the costs of developing your own website in addition to the main site of KBR-Stroyresurs, which provides a detailed description of the material, its advantages compared to other materials.

Distribution channel - own trading base. Target audience - leaders of construction crews (foremen), individual developers.

To date, three enterprises are engaged in the production of ash blocks in the region, two of which have low quality products and an inconvenient location in terms of logistics. The prices of the main competitor are 10-15% higher than those stipulated by the project. For regular customers of the company discounts are provided depending on the purchased volume.

Demand is influenced by the seasonality factor and completely coincides with the construction season: peaks occur in the warm season (spring, early fall), and demand is minimal in winter. To compensate for cash flow failures in the low season, forward contracts are concluded, according to which the buyer purchases the goods at the current price (which is fixed in the contract) and receives the goods at the required time (for example, at the beginning of the construction season). Thus, the company receives the necessary working capital, and the buyer fixes the price, insuring himself against future price increases.

5. PRODUCTION PLAN

The production facility is located in the industrial zone of Nalchik, in the immediate vicinity of the KBR-Stroyresurs trading base, which greatly facilitates logistics. The area of ​​the room is 60 m2. The room has all the connected communications, it requires strengthening the floor, a little roof repair and additional electrical wiring.

The equipment is being purchased partially new, partially used. The production line and process are simple. The technological process includes the following sequential operations:

  1. Volcanic ash mining in quarries (not relevant to the project)

  2. Ash delivery to the production warehouse (carried out by the supplier)

  3. Loading ash into the first hopper, sieving and crushing ash

  4. Loading the second hopper, dosing and moving the cement mortar into the mixer

  5. Mixing with water

  6. The mixture in the mold

  7. Vibrocompressing the mixture in the mold

  8. Transfer raw to the steam room

  9. Steaming foam block to achieve the required brand strength

  10. Transfer of finished products to the warehouse (on the territory of the trading base)

  11. Delivery to the customer (pickup)

The production plan corresponds to the forecast sales plan. Before the start of mass production, raw materials are purchased for the development of technology, the production of prototypes and the formation of the first stage of stock. A detailed production plan is given in App. one.

6. ORGANIZATIONAL PLAN

The project implementation process can be divided into three main phases: preparatory, pilot production and mass production. The preparatory phase includes the purchase of equipment, the preparation of the production premises, the conclusion of an agreement with suppliers, the selection of personnel; Duration - 3 weeks. At the pilot production stage, the first batch of raw materials is purchased, equipment is installed and configured, and prototypes are produced; Estimated duration is 2 weeks. At the serial production stage, the project’s operational activities are carried out directly.

Since the project is based on the basis of an operating profitable enterprise, the issue of providing managerial personnel can be considered partially resolved. All leadership functions are carried out by the project initiator, who has all the necessary knowledge and skills in the field of entrepreneurship, accounting, civil law, etc.

As the legal form selected IP. Form of taxation - STS with the object of taxation “income minus expenses”, rate of 15%.

The most serious requirements for hiring are presented to the production technologist, since the quality of the products depends on his competence. For this reason, only candidates with experience in a similar position in the production of building materials for at least 3 years are considered.

Table 6. Staffing and payroll

Position

Salary, RUB

Number of people

PHOT, RUB

Administrative

one

Accountant

25, 000

one

25, 000

Industrial

2

Technologist

27, 000

one

27, 000

3

Production line operator

25, 000

one

25, 000

four

Maintenance worker

20, 000

2

40, 000

Trade

five

Sales Manager

25, 000

one

25, 000

Auxiliary

6

Storekeeper

23, 500

one

23, 500

7

Loader

20, 000

one

20, 000

Total:

₽ 185 500, 00

Social Security contributions:

$ 55, 650.00

Total deductions:

241 150, 00 ₽

7. FINANCIAL PLAN

The financial plan is designed for a five-year period. Despite the fact that, theoretically, the project is not limited in time, a decision on its continuation or termination should be made on the basis of the current analysis of the market situation and economic conditions. For a more detailed analysis, simple and discounted cash flows are used.

The financial plan takes into account all the income and expenses of the project. The volume of investment costs is 1, 505, 000 rubles. The main expense items are the acquisition of equipment, the formation of a working capital fund to compensate for losses before the enterprise returns to payback, as well as for the purchase of the first batch of raw materials (Table 2). Own funds of the project initiator - 850, 000 rubles. It is planned to cover the deficit by attracting a bank loan for a period of 36 months at 18% per annum. Loan repayment is carried out by annuity payments, credit holidays - three months.

Variable costs take into account the cost of raw materials, its transportation and production costs (Table 5). Fixed costs are given in Table. 7. In addition to other types of costs, they include depreciation charges, the amount of which is calculated by the linear method with a useful life of fixed assets of five years.

A detailed financial plan is provided in App. 2.

Table 7. Fixed costs

NAME

AMOUNT PER MONTH., Rub.

one

Industrial premises for rent

21, 000

2

Advertising

10, 000

3

Communal payments

7, 000

four

Telephony and Internet

2, 000

five

Depreciation

8 580

6

Selling expenses

7, 000

7

Management expenses

5, 000

Total:

60 580 ₽

8. EVALUATION OF EFFICIENCY

Assessment of the effectiveness of the project is based on the analysis of the financial plan, simple and integrated indicators. The main data are given in Table. one.

To account for changes in the value of money over time, the discount method is used. The discount rate is 20%. At the same time, the simple and discounted payback period of the project is 5 months. Net present value (NPV) - 2.9 million rubles. The internal rate of return (IRR) is 80.86%, and the profitability index (PI) is 1.96. All this testifies to the high efficiency and investment attractiveness of the project.

9. WARRANTIES AND RISKS

KBR-Stroyresurs LLC acts as a guarantor in obtaining a bank loan by the organization being created, guaranteeing the return of borrowed funds with its assets.

When implementing the project, all possible risks must be taken into account. Risks are understood both internal and external factors of influence. The first include failure to achieve established sales plans for reasons such as:

  • poor quality sales staff

  • poor product quality

  • downtime due to production line failures.

The poor work of sales specialists is fully compensated by the personal connections of the project initiator in the construction market and the popularity of the KBR-Stroyresurs trading base. Product quality is subject to continuous monitoring by the technologist and project initiator; in case of an inadequate level of quality, measures are taken to improve it - a change in technology, the selection of new suppliers. The equipment is also constantly tested, ongoing maintenance and repair.

External factors include:

  • a drop in demand due to rising prices for products amid falling solvency or amid rising sales prices with rising commodity prices

  • increased competition when new players enter the market.

Constant monitoring of the market and level of demand is necessary. A long drop in demand can be partially offset by the high profitability of the project, however, it is necessary to make a decision on exit from the market in time if the drop is too long.

10. APPLICATIONS

Production Plan and Financial Plan

Denis Miroshnichenko

(c) www.clogicsecure.com - a portal to small business business plans and guides

08/18/2019

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