Suez University
Faculty of Petroleum and Mining Engineering
Petroleum Refinery and Petrochemical Engineering Department
Department
Project
about Feasibility study to produce polypropylene
pipes, special parts, and fittings.
Prepared by
Raed Hany Tawfeek Ibraheem
Section 1
Supervisor
Dr. Walaa Shehata
`
The technical study:
Production Stages in a PPR Pipe and Fittings Factory:
1. Extrusion Stage:
In this stage, the extruder is used to introduce and mix polypropylene pellets with
the desired color.
The pellets are melted and transformed into moldable dough.
The dough is shaped using standardized molds with specific diameters and sizes.
2. Calibration and Cooling Stage:
After completing the first stage, the pipes are cooled using water.
The pipes take their final shape using special molds to achieve the desired final
dimensions.
3. Drawing Stage:
In this stage, the pipes are drawn after cooling.
The pipes are cut into fixed lengths, typically "4 meters," or according to customer
preferences.
Specifications of the pipes and the company name are printed on them using a
dedicated printer.
4. Production Stage for Fittings and Connectors:
Fittings and connectors specific to these pipes are produced using an injection
machine with specific molds and shapes.
This production ensures the accurate and uniform shaping of fittings and
connectors according to their intended use.
Required Machines and Equipment:-
A PPR pipe production line with diameters ranging from 20 to 63 mm, equipped
with a printer, boasts a production capacity of 120 to 140 kg/hour.
The injection machine used has a force of 260 tons, achieving an average daily
production of 500 kg.
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33 forming molds for connections - and this number may increase over time .
Location and Electricity Requirements for the Project:
The project requires an average space of 1000 square meters equipped for
production lines, raw material storage, and administrative offices.
It needs a 3-phase electrical connection suitable for the required capacity to
operate the machinery, with an average power consumption of around 250 kW.
Raw Materials Used in the Production Line:
1. Polypropylene Pellets:
These are the primary raw materials for manufacturing.
The average price of raw materials is
approximately 41,000 Egyptian pounds
per ton.
It's important to note that raw material
prices are highly volatile during these
periods, so caution is advised to avoid
discrepancies in the calculated results.
2. Coloring Material:
Consumes around 10-15 kg per ton and is
used to add color to the products.
Copper Inserts for Connectors:
3. The price of these copper inserts varies significantly and is linked to the price of
copper ore.
4. Packaging Bags and Packing Tools
Final products:
polypropylene pipes
PP Fittings
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The Data of Project:
❖ PPR pipe production line = 928000 EGP.
❖ BS260 injection machine = 928000 EGP.
❖ 33 molds for shaping the insides = 3680000 EGP.
❖ License fees = 80000 EGP.
❖ Shipping and customs = 320000 EGP.
❖ Technical and administrative workers ( Labors)
Position Number Average monthly salary Total
Factory manager 1 10000 10000
Accountant 1 5500 5500
sales representative 2 5500 11000
Purchases Representative 1 6000 6000
Technicians 2 5500 11000
Distributors 5 3500 17500
Storekeeper 1 3500 3500
Total monthly salaries 64500
❖ Transportation and distribution per month = 20000 EGP.
❖ Rent a site per month = 60000 EGP.
❖ Electricity and bills per month = 60000 EGP.
❖ Raw material consumed during the month is 41,000 EGP tons = 3895000 EGP.
(Average capacity 95 tonnes per month)
❖ Initially 5 thousand copper pieces/month( 6.5 EGP/ piece ) = 32500 EGP.
❖ Packaging per month = 4000 EGP.
❖ Maintenance and repairs per month = 20000 EGP.
❖ Supervision per month = 9675 EGP.
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❖ Insurance and Licenses per month = 4000 EGP.
❖ The original value of depreciable = 5700000 EGP.
❖ Assumed Salvage value = Zero.
❖ Project life = 20 Years.
❖ Total production per year = 1140 Tonne.
❖ Selling price = 65000 EGP/Tonne.
❖ Income taxes = 25 % profit.
( Feasibility Study )
Fixed Capital Investment (F.C.I) = PPR pipe production line + License fees
BS260 injection machine + Shipping and customs + 33 molds for shaping
928000 + 928000 + 3680000 + 80000 + 320000 = 5936000 EGP.
Working Capital Investment (W.C.I) = 12*{Transportation and distribution per month
+ Rent a site per month + Total monthly salaries (Labors) + Electricity and bills per
month + Raw material per month + Packaging per month + Initially 5 thousand
copper pieces/month + Supervision per month + Insurance and Licenses per month
+ Maintenance and repairs per month}
12*[ 20000 + 60000 + 64500 + 60000 + 3895000 + 4000 + 32500 + 9675 + 4000
+ 20000 ] = 50036100 EGP.
Total Capital Investment = Fixed Capital Investment + Working Capital Investment
5936000 + 50036100 = 55972100 EGP.
𝑽𝒐 −𝑽𝒔 𝟓𝟕𝟎𝟎𝟎𝟎𝟎− 𝟎
Depreciation ( Straight line method ) = = = 285000 EGP/Year
𝐧 𝟐𝟎
Direct cost = 12 [ Raw material per month + Electricity and bills per month +
Maintenance and repairs per month + Total monthly salaries (Labors) +
Supervision per month + Initially 5 thousand copper pieces/month ]
12 ( 3895000 + 60000 + 20000 + 64500 + 9675 + 32500 ) = 48980100 EGP/Year
Fixed cost ( Including depreciation ) = 12 * Transportation and distribution per
month + 12 * Rent a site per month + Depreciation + 12 * Insurance and Licenses
per month + 12 * Packaging per month
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12 * 20000 + 12 * 60000 + 285000 + 12 * 4000 + 12 * 4000 = 1341000 EGP.
Fixed cost ( Excluding depreciation) = Fixed cost ( Including depreciation ) – Depreciation
1341000 – 285000 = 1056000 EGP
Total Product Cost ( T.P.C ) = Direct cost + Fixed Cost ( Including depreciation )
48980100 + 1341000 = 50321100 EGP/Year ( Including depreciation )
Total Product Cost ( T.P.C ) = Direct cost + Fixed Cost ( Excluding depreciation )
48980100 + 1056000 = 50036100 EGP/Year ( Excluding depreciation )
Total sales ( T.S ) = Total production per year * Selling price
1140 * 65000 = 74100000 EGP/Year
Profit ( Including depreciation ) = T.S – T.P.C ( Including depreciation )
74100000 – 50321100 = 23778900 EGP
Taxes = 0.25 * Profit ( Including depreciation )
0.25 * 23778900 = 5944725 EGP
Profit ( Excluding depreciation ) = T.S – T.P.C ( Excluding depreciation )
74100000 – 50036100 = 24063900 EGP
Net Profit = Profit ( Excluding depreciation ) – Taxes
24063900 – 5944725 = 18119175 EGP
𝐓𝐨𝐭𝐚𝐥 𝐬𝐚𝐥𝐞𝐬 𝟕𝟒𝟏𝟎𝟎𝟎𝟎𝟎
Turnover ratio ( T.O.R ) = = = 12.5
𝐅𝐢𝐱𝐞𝐝 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝟓𝟗𝟑𝟔𝟎𝟎𝟎
At Break Even Point :
𝐓𝐨𝐭𝐚𝐥 𝐬𝐚𝐥𝐞𝐬 𝐃𝐢𝐫𝐞𝐜𝐭 𝐂𝐨𝐬𝐭
* PBEP = * PBEP + Fixed cost
𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧
𝟕𝟒𝟏𝟎𝟎𝟎𝟎𝟎 𝟒𝟖𝟗𝟖𝟎𝟏𝟎𝟎
* PBEP = * PBEP + 1341000
𝟏𝟏𝟒𝟎 𝟏𝟏𝟒𝟎
PBEP = 61 Tonne/year
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𝐍𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭
Return on investment ( R.O.I ) = * 100
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭
𝟏𝟖𝟏𝟏𝟗𝟏𝟕𝟓
* 100 = 32.4 %
𝟓𝟓𝟗𝟕𝟐𝟏𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝟏
Pay Back Period ( P.B.P) = =
𝐍𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭 𝐑𝐞𝐭𝐮𝐫𝐧 𝐨𝐧 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭
𝟓𝟓𝟗𝟕𝟐𝟏𝟎𝟎
= 3 years
𝟏𝟖𝟏𝟏𝟗𝟏𝟕𝟓
000000
Optimization ( Analytical method )
Annual production (Tonne) Profit (EGP/Year)
800 19750000
950 21000000
1000 22000000
1140 24063900
1200 28876680
1250 29000000
1400 32000000
1500 30500000
1650 29000000
1800 28000000
1950 26000000
35000000
Profit ( EGP/Year )
30000000
25000000
20000000
15000000
Profit = 1E-04x4 - 0.5463x3 + 1098.5x2 - 919777x + 3E+08
10000000
5000000
Annual Production ( Tonne )
0
0 500 1000 1500 2000 2500
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Profit = 0.0001 P4 – 0.5463 P3 + 1098.5 P2 – 919777 P + 3 * 108
𝐝 (𝐩𝐫𝐨𝐟𝐢𝐭)
= 0.0004 P3 – 1.6389 P2 + 2197 P – 919777
𝐝(𝐏)
𝐝 (𝐩𝐫𝐨𝐟𝐢𝐭)
At = zero
𝐝(𝐏)
Optimum production = 819 Tonne/year
Maximum Profit = 28413942 EGP/year.
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Mechanism of Product Marketing:
Initially, as with any new venture, it is expected that significant sales may not be
achievable in the early stages of production, given the presence of established
competitors in the polypropylene pipes market. However, with effective marketing
management, sales rates are anticipated to rise due to the increasing demand for
this product.
Therefore, investors in this field consistently focus their efforts on encouraging
consumers. It is advisable for the investor to pay attention to providing incentives
to plumbing technicians, as they often play a crucial role in selecting the type of
product to be installed in residential units. Additionally, companies involved in
finishing and contracting are targeted. Many manufacturers offer monetary and in-
kind incentives to these plumbing technicians, along with organizing events and
providing gifts to promote the product. This is achieved by establishing a
mechanism to document their purchases and thereby enhancing the marketing
capacity of the company's product.
The marketing and sales management of the investor plays a key role in achieving
greater aspirations, especially since the product experiences increasing demand
day by day, amidst widespread urban density and growing demand for all
construction and building tools.
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