- Country: Kenya
- Industry: Construction, Engineering, Architecture
- Stage: Expansion/Growth
- Years in operations: 7, Employees: 6
- Investment size: $57,520 / min. $57,520
- Type of investment: Debt
The business will bring a total of 1,107,000 shillings per month. Assuming a high downtime of 15 days a month, this will generate a net profit of 553,500 per month.
In coral stone block cutting one starts off by either buying or leasing land. Both options are readily available. Kilifi, Kenya is the proposed area of operation.
An acre of land in Kilifi goes for about 200,000 shillings. More often than not, most sellers are selling parcels of land measuring either 6 acres or 12. Leasing land costs 3 shillings per stone harvested. It makes more sense to lease land and pay only for actual stones harvested.
Next is the machinery. A set of machinery consists of one vertical cutter and one horizontal cutter. Locally made, each machine costs 800,000 shillings. Importing from India, Italy and China are other options. Though the costs of travelling to ascertain quality and the lack of after sales service might reduce the gains of money saved on initial purchase from any of these countries.
Then there is the generator, with an ideal one having a capacity of 200 to 250 KVA. A second hand one can go for approximately 2,500,000 shillings. A new one, depending on the make, costs between 3,000,000 to 4,000,000 shillings. There is also need for an excavator for clearing the ground before starting to harvest in each successive sector. This one can initially be leased at a rate of about 7,000 shillings per hour. This can be done till we can afford to buy ours.
Labour is reasonably cheap, with machine operators earning an average of 600 shillings per day. Loaders earn a current rate of 1shilling per stone. Routine maintenance costs will be a big factor as the circular saw blades will occasionally wear out the diamond studs and also sometimes crack the metal plates.
The business is very labour intensive as a close watch needs to be done on the machinery and quantity of blocks produced. Sales are in cash.
I have been in the construction industry for the last 6 years. Over this period, I have always been intrigued at the lead time in ordering and receiving machine cut coral stone blocks for construction. In order to understand this phenomenon, I have been making frequent visits to the stone quarries in Kilifi. At every quarry that I visit, I find lorries queuing, waiting for stones to be harvested for them to load. My quarry visits reveal that there is a correspondingly low number of machine cut block quarries, compared to the demand for the blocks. The supply is well below the demand. This is what has inspired me to venture into this project. Having a quarry also has the advantage of widening one’s customer base to include walk-in customers out to bridge the supply and demand gap in the entire market.
Rationale for the deal
One set of machine produces anywhere between 3,000 and 8,000 blocks per day. This varies, depending on the coral properties at any given sector. Current prices are 25 shillings per stone. On the lower side, total sales come to 75,000 shillings per day. At a lease rate of 3 shillings per stone, 3,000 blocks will cost 9,000 shillings per day. Generator will take about 100 litres of diesel per day. At the current price of about 104 shillings per litre, that comes to about 10,400 shillings per day. Loaders take 3,000 shillings per day. That leaves 52,600 shillings per day. Labour will, on the higher side, take 5,700 shillings per day. Maintenance and any other unforeseen operating expenses will take about 10,000 shillings per day. That leaves us with 36,900 shillings per day. Total of 1,107,000 shillings per month.
Assuming a high downtime of 15 days a month, this will leave us with a net profit of 553,500 per month. Taking the above parameters and working with the higher figure of 8,000 blocks a day, the net profit comes to 2,128,500 per month.
With this kind of income, we will be able to expand and acquire another set of machinery after one year and a third set after two years. We can then easily save and diversify into other areas in this industry, including acquiring trucks to transport our blocks, hence increasing our profits. And ultimately getting into acquiring land and constructing houses for sale. And anything else we might think of.
Use of financing
Here is an overview of what we need to get started a and what we have achieved so far.
Machine Vertical - 1 unit, rate 800,000.00, amount 800,000.00
Machine Horizontal - 1 unit, rate 800,000.00, amount 800,000.00
Generator - 1 unit, rate 3,450,000.00, amount 3,450,000.00
Licenses - 1 item, rate 70,000.00, amount 70,000.00
Cable - 200 Lm, rate 1,200.00, amount 240,000.00
Excavator Hire Per Hour - 3 Hr, rate 7,000.00, amount 21,000.00
Workshop Tools - 1 item, rate 108,000.00, amount 108,000.00
Shed, Workshop, Office - 1, rate 200,000.00, amount 200,000.00
Downpayment On Stone Lease - 1, rate 300,000.00, amount 300,000.00
Total amount: 5,989,000.00
Amount invested so far: 1,100,000.00 shillings.
Deficit: 4,889,000.00 shillings
Opportunity for the investor
I am looking for debt investment. As per attached business plan, debt period and interest are to be discussed and mutually agreed.
Looking for similar investment opportunities