Detailed analysis of spinning mill setup, cost of production, investments, return on investment, profit calculation, ideal production output calculation etc.

Introduction

The success of a spinning mill depends on the loan, personal investment, interest rates, raw material cost, count and category of mill production, selling price, daily expenses and revenue. An efficient and dexterous command of all these factors will result in a profitable return. The below analysis is based on investing in a spinning mill in China:

Loan and per Spindle Price

Recurring expenses such as main spinning machine, air conditioning, subsidiary machine accessories and electricity will occupy about 55% - 65%. This calculates to be:

Loan Sum x Recurring expenses ÷ Total Spindle = Unit Price per Spindle

Example:

Loan amount (USD) Recurring charges Number of spindles Price per spindle (USD)
120,000,000 x 0.55 ÷ 150,000 = 440
120,000,000 x 0.65 ÷ 150,000 = 520
60,000,000 x 0.65 ÷ 75,000 = 520
60,000,000 x 0.65 ÷ 37,500 = 520

Interest Rate

If the loan is in US Dollars with a 5% - 7% yearly interest rate, this exposition will use a 6% interest rate in the calculations.

Because of the need to buy machines, construct the factory etc, the capital will only be repaid at the beginning of the third or fourth year, for a period of 7 to 8 years. The interest, however, will be paid from the end of the first year, for a period of 10 years.

Assets

• Buying property will utilize about 5% - 8% (around 120,000m2 – 130,000m2)
• All construction, medical services, employee welfare, warehouses and hostels will cost about 12.5% - 16%
• Training, transportation, environment and road improvements, and stationery will absorb about 2.5% - 3.5%
• Raw materials for 3 months will take up about 12.5% - 15%
• And cash reserves of about 2.5%

Personal Investment

For those with related experience, such as in knitting or textile mills, clothing factories, or as yarn distributors, or other expertise in successful enterprises, public or private investment foundations, financial banks, or even those with the wealth and aspiration to become an elite entrepreneur, may invest in spinning mill.

It’s possible to have a personal investment of 10% - 30% with a loan comprising of the other 70% - 90%, and no matter what is the percentage, both personal and bank loans must be repaid together with the interest rate.

Price of Raw Material

Raw materials include raw cotton, chemical fibers, polyester, rayon and the following are estimates for the per unit price:

• 20's: USD 1.54/kg – 1.76/kg (USD 0.7 – 0.8/pound)
• 30's: USD 1.76/kg – 1.98/kg (USD 0.8 – 0.9/pound)
• 40's: USD 1.98/kg – 2.2 /kg (USD 0.9 – 1.0/pound)
• Polyester: USD 1.25/kg
• Rayon: USD 1.6/kg

The reason for using the various counts is because each count requires different fiber length and the choice of raw material depends on the final product category. For example, mixed cotton requires the specific length and properties of chemical fiber of 38mm. The foundation of success depends on an understanding of raw material production, their peculiarities and virtues and an accurate forecast on stock required.

Count, Production Volume and Category

In considering production volume, other factors such as material count, efficiency and speed cannot be excluded, and furthermore, count also depends on the weight. For example, 20's yarn is 120 yards long and weighs 50 grain (because 1's = 840 yard = 1 pound = 7000 grain).

Therefore 0.5's spins 19.5's and weighs 51.28 grain, hence there exists an inverse ration between count and weight.

For ring frame efficiency, 20's count will be at 90% - 91%, 30's count will be at 91% - 92%, while 40's count will be at 92% - 93%. The remaining percentage is mostly used for maintenance, and a small portion is for doffing and change of roving and broken ends.

The ring frame speed depends on the front roller diameter (FRF), twist per inch (TPI) and the spindle speed. If FR∅ = 1” (25.4mm), then

FR∅ x n x TPI = Spindle Speed

And TPI (twist per inch) directly influences FRS.

The formula reveals that weight, speed, efficiency, time, count and twist per inch all have direct relationships, and investors or management should not disregard or disparage this common formula, as it contains profound and intricate implications.

Below are the count, category and production values employed in this thesis.

Count 30,000
Spindles
30,000
Spindles
30,000 Spindles 30,000
Spindles
30,000 Spindles
Carded Combed TC CVC RC PE 100% RY 100%
20's 2,728B 2,976 1,736 1,674 3,224 1,736 1,614
30's 1,984 2,083 1,364 1,302 2,232 1,240 1,116
40's 1,587 1,736 992 955 1,860 992 868

Remarks:

• Production values using B = Bale = 181.44kg = 400 pound. Efficiency percentage is already included and the above table adopts a standard of 30,000 Spindles yarn bundle/month.
• Carded: Roving range of 8% - 12%, using 10% as benchmark
• Combed: Roving range of 18% - 22%, using 20% as benchmark
• Chemical fiber: Roving range of 2% - 2.5%, using 2% as benchmark
• TC, CVC, RC percentages are smaller, changeable depending on demand
• Count can vary from 16's – 45's, and the above table uses 20's, 30's, 40's as average count, and the same calculations can be used for counts of above 40's.
• Assume 30 days for every month.
• Polyester and rayon utilizes 1.5D x 38mm as gauge.
• Amount of doffing waste percentage depends on cotton’s short fiber percentage.
• Can also produce TR.
• And 50's – 100's needs another array of settings.

Sale Price

The table below illustrates the selling price range of every bale, using high quality knitting yarn with high speed weaving yarn.

in USD > Carded Combed TC CVC RC PE 100% RY 100%
20's 500-540 590-630 540-580 560-600 580-620 400-440 440-480
30's 580-620 670-710 590-630 640-680 660-700 450-490 490-530
40's 660-700 760-800 680-720 720-760 740-780 500-540 540-580

Remarks: The export price of each category can be adjusted by ±10% of the selling price, and the next table displays the unit price used in subsequent calculations.

Table III

in USD > Carded Combed TC CVC RC PE 100% RY 100%
20's 520 610 560 580 600 420 460
30's 600 690 610 660 780 470 510
40's 680 780 700 740 760 520 560

Daily Expenses

Expect factory to be running 24 hours every day, and estimate that if 150,000 Spindles uses non-automatic ring frame machines, more manpower will be required.

• 20's carded 30,000 Spindles
• 20's combed 30,000 Spindles
• 20's TC + CVC each 15,000 Spindles to 30,000 Spindles
• 20's RC 30,000 Spindles
• 20's PE + RY each 15,000 Spindles to 30,000 Spindles
• 20's every month produces 15,686 Bale x 16 = 2,614 people, 30,000 Spindles = 523
• 30's every month produces 11,321 Bale x 15 = 2,264 people, 30,000 Spindles = 453
• 40's every month produces 8,990 Bale x 14.8 = 1,873 people, 30,000 Spindles = 375

Different production count involve different numbers of personnel, including 3 shifts (or 4 shifts), off-day rotations, technical labor and management level. Every 50,000 Spindles amount to 10 people for warehouse, 6 people for office, 10 people for canteen and hostels, 15 people for packaging tasks, 6 people for security, 8 people for miscellaneous duties (drivers or odd jobs) for a total of 55 people and an aggregate of 165 people for 150,000 Spindles.

• If 150,000 Spindles spins entirely 20's equals 2,614 + 165 = 2,779 people
• If 150,000 Spindles spins entirely 30's equals 2,264 + 165 = 2,429 people
• If 150,000 Spindles spins entirely 40's equals 1,873 + 165 = 2,038 people
• If monthly average wages (including canteen, hostels, transport, shift allowance, uniforms, staff welfare etc.) are USD 250/person, then every month
• If 150,000 Spindles spins entirely 20's, expenses will be USD 250 x 2,779 = USD 694,750
• If 150,000 Spindles spins entirely 30's, expenses will be 250 x 2,429 = USD 607,250
• If 150,000 Spindles spins entirely 40's, expenses will be 250 x 2,038 = USD 509,500
• In addition, tax, insurance, machine parts, electricity etc:
• If 20's, monthly expenses of around USD 500,000
• If 30's, monthly expenses of around USD 450,000
• If 40's, monthly expenses of around USD 400,000

In summary, total monthly expenses

• for 20's will be around USD 1,194,750
• for 30's will be around USD 1,057,250
• for 40's will be around USD 909,500