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31/05/2018

MAKING WIRE NAILS BUSINESS IN UGANDA

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Written by: wmutenza

Introduction

This business idea is for manufacturing and marketing of wire nails. The nails consist of hard drawn bright mild steel wire with a head, which helps in driving the nail inside. They are made in various sizes. Wire nails are used for roofing, fastening in carpentry and woodwork, fencing, etc. With the rise in construction activities, both commercial and private, the demand for wire nails is bound to increase. Setting up a plant to make wire nails would thus meet this demand. This business idea is premised on manufacturing 769 kilograms of three inch wire nails per day which translates into 239,928 kgms of wire nails per annum. The revenue potential is estimated at US$55,583 per month translating into US$ 667,000 per annum with a sales margin of 33% and total investment requirement of US$ 71,300 for the first year of project operation.

Production Capacity

The plant at the onset of production has a minimum capacity of 20 tones of nails each month. As a bigger segment of the market is captured, output can be increased.

 

Manufacturing Process Description and Technology

The manufacturing technology involves feeding steel wire in the form of coil into a wire nail-forming machine. At first, cold heading forms the head and then the point takes shape. The nails are tumbled in a tumbling barrel with sawdust or similar materials to remove burrs. The finished nails are weighed and packed for marketing.

Investment Scale Capital Requirements and Equipments

The Investment scale depends on the set goals and objectives of the project and the market for the products.

 

The Capital Investment Requirements in US$

Capital Investment Item Units Qty @ Amount
Automatic Wire Nail making machine No 1 25,000 25,000
Grinding machine with 1-horse power Motor and four Grinding Stones No 2 12,000 24,000
Steel Polishing Drums No 4 700 2,800
Wire Drawing Machine with 5-horse power Motor No 2 4,500 9,000
Delivery Van No 1 8,000 8,000
Other Tools 2,000 2,500
Total 71,300


Production and operating costs in US$

Cost Item Units Unit cost Qty/ day cost/ day cost/ month cost/ year
Direct Costs
Iron and steel oar tone 680 1 680 17,680 212,160
Lubricant Oil Liter 3.2 200 640 16,640 199,680
Cotton Waste Kg 0.3 200 60 1,560 18,720
Packing materials No 2.4 10 24 624 7,488
Sub-total 411 1404 36,504 438,048

General Costs (Overheads)

Other materials 1,000 12,000
Rent 750 9,000
Labour 1,000 12,000
Utilities (Power $ water) 250 3,000
Preliminary Costs 250 3,000
Miscellaneous costs 250 3,000
Depreciation (Asset write off)Exp 1,485 17,825
Sub-total 4,985 59,825
Total Operating Costs 41,489 497,873
  1. Production costs assumed are for 312 days per year with a daily capacity of 769 Kilograms of 3 inch wire Nails. But other nails like 1 inch nail, 2 inch nail etc, can also be manufactured using the same production process.
  2. Depreciation (fixed asset write off) assumes _4_ years life of assets written off at _25% per year for all assets.
  3. Direct Costs include materials, supplies and other costs that directly go into production of the product.
  4. A production month is assumed to have 26 days

 

Project Product Cost and Price Structure

Item Qty/ day Qty/yr Unit cost Pdn cost/day Unit cost T/rev
Wire Nails of 3 inches 769 239,928 2 497,873 2.78 667,000

Profitability Analysis in US$

Profitability Item Per day Per Month Per Yr
Revenue 2,138 55,583 667,000
Less: Production and Operating Costs 1,596 41,489 497,873
Profit 542 14,094 169,127

Market Analysis

The market for wire nails is high throughout the year both in rural and urban areas.

Source of Supply of Machinery and Equipments

Equipments and Machinery are imported from Chain and Japan while raw materials are imported from Iran or South Africa

Government Incentives Available

There can be a saving in terms of taxes since there is no VAT charged on raw materials.

 






 
 

 

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