Poultry Study

CONTENT

01. EXECUTIVE SUMMARY

02. INTRODUCTION

i

3

02.01 Project Background 02.02 Objective of Study 02.03 Methodology

03. MARKET ANALYSIS

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03.01 Overview 03.02 Product Market 03.03 Major Consumers 03.04 Demand Level 03.05 Projected Demand 03.06 Major Suppliers 03.07 Level of Supply 03.08 Projected Supply 03.09 Competition 03.10 Proposed Marketing Strategy

04. 04. TECHNICAL ANALYSIS 04.01 Operational Details and Structure 04.02 Machinery/Equipment Requirements 04.03 Housing 04.04 Raw materials and sources, 04.05 Infrastructural Requirements

Poultry facility Feasibility

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05. MANAGEMENT AND ORGANISATION

06. INVESTMENT COST ANALYSIS

07. REVENUE PROJECTION

08. FINANCING PLAN

09. 09.

FINA FINANC NCIAL IAL PROJE PROJECT CTIO IONS NS AND AND APPR APPRAI AISA SAL L OF COMMER COMMERCIA CIAL L

VIABILITY


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CHAPTER TWO

INTRODUCTION

Project Background

The livestock sub-sector is an important important component of the Botswana Agricultural Agricultural Economy. As in many developing countries, livestock plays many roles in the socio-cultural lives of Batswana including provision of cash, food, draft power and as well as poverty alleviation. Its importance derives derives from the fact that it is one of the the key key cont contri ribu buto tors rs to the the nati nation onal al econ econom omy. y. The The poul poultr try y indu indust stry ry has has experienced experienced phenomenal growth in the past 20 years. The poultry industry plays a significant role in employment employment creation creation and poverty alleviation. alleviation. In 2009 alone, the indust industry ry emplo employe yed d over over 4500 4500 peopl people e comp compare ared d to 3050 3050 in 2007/ 2007/8. 8. This This represents an increase of 47.5%. The industry contributes significantly towards povert poverty y allev alleviat iation ion and food food securi security ty throu through gh Lives Livestoc tock k Manage Manageme ment nt and and infrastructure Management (LIMID) and Culture and Youth Grant.

In terms of specific output, the livestock sub-sector can be broken into product sub-groups such as, poultry meat, goat meat, lamb/mutton, beef, pork, milk and eggs.

Table 1: Estimated Output of Livestock in Nigeria: 1994 – 2000 (‘000 tonnes)


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Product Poultry Eggs Goat meat Lamb/Mutton Beef Pork

199

199

199

199

199

199

200

200

2002

4 63 377 80 85 183 25

5 73 399 88 94 192 31

6 74 422 92 96 197 39

7 76 4 35 95 101 200 43

8 77 436 96 102 202 45

9 82 450 101 107 208 47 100

0 88 465 107 113 215 50 101

1 95 487 114 117 228 55 103

107 514 129 126 239 62 1046

Milk 951 961 972 989 9 91 0 2 8 Source: CBN Annual Report and Statement of Accounts (1998-2000)

However, it is noteworthy that the livestock sector has not provided sufficient volumes and the capacity to meet the demand of teeming Nigerians for protein. The annual growth rate has been low for most of the products, particularly for poultry and eggs sub-group, sub-group, whereas, the sub-group, sub-group, if properly managed, managed, could impact greatly greatly on the income and quality quality of life of the citizenry. This is because because poultry production production is a socio-economic socio-economic activity that has high rating for the reason that the net return on investment is relatively higher than that of other animal species and its contributing role to national economy cannot be overemphasized. Thus it is the major source of high quality protein that is necessary for the contin continued ued survi surviva vall of the fast fast grow growing ing human human popu populat lation ion of the the develo developin ping g economy.

Based on the foregoing, the proposed integrated poultry organisation intends to invest in comprehensive poultry farming which entails the production of day oldchicks, eggs, broilers and layers.

Objective of Study

The objec objectiv tive e of this this study study is to under underta take ke a detai detailed led inves investig tigati ation on of the the technical, market, and financial feasibility of the project, bearing in mind the size


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of the target target market market (potenti (potential al custome customers), rs), the existin existing g compet competition ition,, project project location, investment costs and financial returns of the project.

Methodology

In carrying out the study, we adopted the following methodology:

1.

A field survey of the market including potential consumers,

existing

competition, and marketing practices of competitors.

2.

Coll Collat atio ion n and and deta detail iled ed anal analys ysis is of data data so coll collec ecte ted; d;

3.

Appr Apprai aisa sall of of the the comm commer erci cial al viab viabil ilit ity y of of the the proj projec ect, t, and and

4.

Prep Prepar arat atio ion n of com compr preh ehen ensi sive ve Fea Feas sibil ibilit ity y Repo Report rt..

This feasibility report will, thus provide the necessary guide, to not only the project promoters in evaluating and carrying out their investment proposal, but also to the financiers to enable them determine determine the viability and feasibility feasibility of the project.


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CHAPTER THREE MARKET ANALYSIS Overview

Nigeria, with a population of about 130 million is grossly underprovided with the essential food component, which is protein. For example, data from the FOS, CBN, and FAO indicate that from cattle, less than 2kg of beef is available to an average Nigerian per year and just mere 4kg of eggs per annum is available to each Nigerian. In fact, milk production has been nose diving or at best has remained constant constant since 1994.This 1994.This scenario scenario is compounded more more so when the volu volume me of

egg egg suppl supply y is very very low, low, bein being g

10.5 10.56g 6g per per perso person n per day day as

compared with the usual recommendation that an egg should be consumed by an adult per day. This recommendation would imply a crate of 30 eggs per month. This story also holds for other meat products including, chicken.

To ameliorate this problem of low-level of protein intake, there is the need for concerted effort, among the various stakeholders to bring about the massive


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production of protein based food items at competitive costs so that they would be affordable to the general masses. Aside from the other necessary economic reforms, massive investment poultry farming is one way of resolving the problem.

What is poultry farming? farming? Poultry farming farming is the commercial commercial production of poultry poultry birds, which include chicken, turkey, geese, pigeon, guinea and gamebirds. They are easy to produce, and have a high meat to carcass ratio. Hence, they are excellent products for meeting the protein needs of the populace.

Chic Chicke ken n

cons consti titu tute tes s

abou aboutt

90% 90%

of the the

poul poultr try y

popu popula lati tio on

in Niger igeria ia..

Consequently, poultry farming is generically used to refer to chicken farming in the country.

Poultry Products

The main products of the proposed project include eggs, day-old chicks and poul poultr try y meat meat,, whic which h will will be gene genera rate ted d from from,, cull culled ed bird birds s (i.e (i.e.. laye layers rs and and breeders), breeders), and broilers. Poultry by-products by-products such as poultry poultry droppings, droppings, poultry offal offal and hatchery hatchery wastes wastes will will also provide provide additio additional nal income income to the project project.. Poultr Poultry y droppi dropping ng can can be used used as manur manure e for vege vegetab table le garde gardenin ning g and and feed feed ingredient in fish farming.

Indee Indeed, d, a wheel wheelba barro rrow w of fresh fresh poult poultry ry droppi dropping ngs s costs costs betwe between en N50.0 N50.00 0 – N80.00 N80.00 in some parts parts of Lagos Lagos State State at the moment. moment. Poultry Poultry offal offal and other hatchery wastes when grounded are good supply of calcium for growing birds. Hence, Hence, they can also be sold in their their re-cycled re-cycled forms. forms. In brief, brief, the proposed proposed products of the projects will include:

(a)

Main Products


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(b)

•

Day-Old Chicks

•

Farm Eggs

•

Poultry Meat -

From Culled birds (Layers and Breeders)

-

Broilers

By-products

•

Poultry droppings

•

Poultry Offal and other hatchery wastes.

PROPOSED CAPACITY

5000 – Birds per production cycle is the minimum economic size to commence a poultry farm, as the operational operational and and fixed costs are justifiable. justifiable. This is even more relevant for a non-automate non-automated d poultry farm. For a fully automated automated and integrated integrated farm, the recommended minimum economic size is between 8,000 and 10,000 birds.

The proposed project, which is an automated and integrated poultry farm, is proposed to commence with 10,000 to 15,000 birds per production cycle in the poultry section and 10,000 birds in the Hatchery Section. However, However, the output of the farm is proposed to increase to 20,000 birds in the poultry section and 15,000 day-old chicks within the first five years of the production period.

In the poultry section, the ratio of layers to broilers is proposed as 70%: 30% or 7: 3, while 40% to 60% is proposed for the hatchery section.


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PROPOSED CAPACITY (%) OF THE INTEGRATED POULTRY FARM (a) Poultry Section

Broilers 30%

7000 - 14,000 Birds

3,000 - 6,000

B

Birds Layers 70%

(b)

Hatchery Section

4,000- 6,000 Chicks

Layers 40% 3000- 4000 Chicks

Broilers 60%

CONSUMERS OF POULTRY PRODUCTS

Generally, there are few taboos, religious or cultural practices that prohibit the use of poultry products in human diet. Hence, nearly all members of the Nigerian populace are potential consumers of poultry products.

Specifically, there is sustained high demand for live birds for home consumption or as gifts at the time of festivals such as Christmas, New Year, Easter, Id ElFitri, Id-El Kabir etc. Also fast food operators such as hotels, restaurants, and supermarkets also have very high demand for poultry products.


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Egg, in its own case, case, has a wide variety variety of utilisati utilisation. on. Thus, Thus, it is used in the preparation of products such as chicken burger, scotch eggs,salad, and egg soup soup among among others others..

Apart Apart from home home cons consum umpti ption on,, eggs eggs can be used as

leavening agent in baked foods, and as an ingredient in the manufacture of hair shampoo and for the production of egg powder that can later be incorporated into baby food.

Poultry farmers, especially the ones specializing in broiler and layer production, are the potential consumer’s of the day-old chicks produced by the hatchery section. Point of lay for egg production involves the raising of the pullet chicks from 0 – 18 18 weeks. Such chicks must be obtained from reputable hatcheries.

Nigeria’s Poultry Market

While some countries are reputed to be important exporters of poultry products after consistently meeting local demand, Nigeria’s main problem is meeting its local demand demand for poultry poultry products. products.

Nigeria’s poultry market problems start in in

1984 when the Federal Federal Government Government banned importation importation of maize. maize. This indeed contributed to steadily declining poultry production in addition to the effects of the structural adjustment programme.

But the Nigerian poultry market had seen more prosperous times for the two decades decades after after independ independenc ence e in 1960; 1960; poultry poultry producti production on grew substan substantial tially, ly, peaking in 1982, with with 40 million commercially commercially reared reared birds. Since then, the bird bird population population has dipped steadily, to an estimated estimated low of 6 million in 1997. The new political dispensation has brought about a little improvement to poultry farming. Hence, the poultry population increased to 20 million in 2003.

CURRENT SOURCES OF SUPPLY The bulk of current sources of supply of poultry products come from the informal sector, which is made up of farmers with smallholdings smallholdings of 50-700 birds’ capacity. capacity.


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However, there are some big suppliers especially in the southern parts of the country. Such suppliers include: 1.

Amo Farm Sanders Hatchery Ltd.,

2.

Anim Animal al Care Care Serv Servic ices es Kons Konsul ultt (Nig (Nig.) .) Ltd. Ltd.,,

3.

Cee-Jay Farms

4.

Harmony Projects Ltd.,

5.

Mayfield Farms Ltd.,

6.

Obasanjo Farms (Nig.) Ltd.,

7.

Richmond Fo Foods Ni Nigeria Lt Ltd.,

8.

Samr Samros ose e Agr Agro-In o-Indu dust stri ria al Compa ompany ny Lim Limited ited

9.

Tuns Farm Nigeria Ltd.,

10. 10.

U.O. U.O.O. O. Agri Agricu cult ltur ural al Indu Indust stri ries es

11. 11.

UAC UAC Food Foods s (In (Inte tegr grat ated ed Poul Poultr try y Far Farmi ming ng))

12.

Zartech Limited. 13.

Abiola Farms Limited

LEVEL OF SUPPLY In the course of our survey, we observed that production figures for poultry are not properly maintained by government agencies that are charged with the respo responsi nsibi bilit lity. y. Hence Hence,, we came came across across varie varietie ties s of produ producti ction on figur figures es from from different sources. However, we are able to come out with an estimated supply level by conducting a mini survey, and aligning the results with data from reliable sources such as the Federal Office of Statistics (FOS), Central Bank of Nigerian (CBN) and Food and Agriculture Organisation (FAO)

On the basis of the foregoing methodology we are able to estimate the supply level of poultry products in the country as follows: 50 million birds per annum 60 million eggs per annum 60 day old chicks


“

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Consi Conside derin ring g infra infrast struc ructur tural al cons constra traint ints s and and othe otherr limiti limiting ng factor factors, s, we may may estimate the projected level of supply of poultry products to increase by 5%. Hence the projected level of supply from 2003-2008 is provided hereunder: (‘Million) Chicken Eggs Day-old

2003 50 60 60

2004 52.5 63 63

2005 56.13 66.15 66.15

2006 57.88 69.46 69.46

2007 60.78 72.93 72.93

2008 63..81 76.58 76.58

Chicks

Estimated Demand for Poultry

There are very few taboos prohibiting the consumption of poultry products in Nigeria. Hence, nearly all the 129 million Nigerian are consumers of poultry products, in one form or the other.

In terms of the household population, Nigeria presently has about 22 million households. households. Assuming Assuming that each household household consumes consumes 20 chickens per per annum which which inclu include de the the ones ones consu consume med d durin during g the majo majorr festiv festive e perio periods ds such such as Christmas, Christmas, New Year and Easter for Christian; Christian; Idel Malud, Idel Kabir for Muslims and during the birthday celebration of members of the household or during any special occasion, these assumptions bring the estimated poultry consumption to about 440 millions chickens consumed by the households.

It should, however, be noted that the households are not the only consumers of chic chicke ken n and and poul poultr try y prod produc ucts ts.. The The othe otherr cons consum umer ers s incl includ ude e Fast Fast Food Food


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Companies, Companies, Hotels and other food processing processing companies. companies. Let us conservatively conservatively assume that demand from these groups is about 60 million chickens per annum. This brings the total estimate demand for poultry chicken to 500 million per annum. If we further assumed that this demand increase by 2.00% per annum, the projected demand for chicken is as as follows: (‘million) (‘million ) 2004 500

2005 510

2006 520.2

2007 530.60

2006 541.5

COMPETITION Competition is not so keen in Nigeria‘s poultry markets. The reasons for this is obvious: 1.

Pou Poultry ltry prod produc ucts ts,, in thei theirr prese resent nt form forms, s, are are not bran brande ded d produ product cts. s. Hence, what is essential in this respect is the effective positioning of the distribution outlets, at the appropriate times.

2.

As a result ult of the subs ubstan tantia tial short hortffall all in sup supply, ly, Nigeria ria’s pou poultry ltry market is a sellers’ market.

3.

Larg Large e propo proport rtio ions ns of the the produ product ctio ion n are bein being g sold sold thro throug ugh h infor inform mal channels. However, some degrees of competition exist between the locally locally produce produced d poultry poultry products products and the importe imported d ones. ones. A strong strong indication of this is the phenomenal rise of poultry products shipped in container’s container’s from the United States States to Nigeria between between 1995 and 1999 (see chart below)


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POULTRYP YPRO DUCTS IMPORTEDFROMUN ITED STATE S(1997 97---1999)

Poultry (TEUs)

Eggs &M ilk (TE Us)

33

T ( o g r a C

18

4

6

11997

8

9

1998 Ye2 ar

31999

Source: PIERS, Journal of Commerce, New York

To reduce the massive importation of frozen poultry products and to stimulate local production, the Federal Government placed embargo on the importation of poultry products in year 2002.

COMPETITORS MARKETING ANALYSIS As mentioned earlier, the distribution chain in Nigeria’s poultry industry tends to be short, with more than 80% of total production delivered delivered directly to the informal informal trade sector. The remaining 20% is normally distributed through a longer chain of the formal sector.

In this wise, the marketing practices of the operators in the market can be considered under the headings of quality of service, promotion, and pricing.

(a) In the area of distributio distribution, n, poultry poultry farmers farmers sell directly directly to operato operators rs in the informal sector. These include •

Butchers


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•

Restaurants

•

Boarding hotels

•

Small retail stores

•

Hawkers

•

Live chicken markets

•

Spent – hen depots

•

Individual consumers,

•

Hotels

However, a few big operators sell their farm products directly to operators in the formal market. Members of this group include •

Big retail outlets

•

Wholesalers

•

Franchise stores

•

Broiler processing plants

•

Egg processing plants

•

Exporters (Occasionally)

Pricing : Pricing in the informal sector of the industry is relatively stable. (b) Pricing: Howe However ver,, price price determ determina inatio tion n great greatly ly depe depends nds on the grade grade of the products. In the case of eggs, they are classified to the following three grades.

•

Grade 1

•

Grade 2

•

Under grade

PROPOSED MARKETING STRATEGIES The proposed integrated farm will strive to produce highest possible quality of the various products. The proposed farm will explore the following strategies: Poultry facility Feasibility

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1. SUPP SUPPLY LY TO MAJO MAJOR R HOTE HOTELS LS,, REST RESTAU AURA RANT NTS S AND AND CATE CATERI RING NG OUTLETS There are many tourist initiatives and developments in the cities that need to be catered for. Unfortunately, at the moment, they are under – serviced and still depend on the traditional distribution channels. The proposed farm will aim at meeting the needs of the outlets, initially in Lagos, and subsequently other parts of the country. 2. SUPP SUPPLY LY TO TO HAW HAWKE KERS RS Live chickens or egg will be sold registered to hawkers on a regular basis. As most most retai retailer lers s have have trans transpor portt proble problems ms,, the the farm farm could could entic entice e them them by delivering the chickens or eggs at their outlets

CONTRACTING The farm may enter into a contract with medium or large-scale broiler users to supply stipulated number of chickens or eggs at specified periods. This will, hopefully, provide a steady market for the farm

SUPPLY TO TOWNSHIP COLD STORAGE DISTRIBUTORS Some cold storage outlets have positioned themselves very well in the town to sell frozen food and meat products. The farm will endeavor to supply these distribution centers.


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CHAPTER FOUR 4.1

OPERATIONAL DETAILS AND STRUCTURE

The proposed project, which is to be sited in the Lagos urban periphery, will be a fully automated and integrated poultry production production farm, which will be made up of the following units.

•

Hatchery Unit,

•

Broiler grow-out facility,

•

Layer/breeder grow-out facility,

•

Table eggs production unit,

•

Broiler/culled birds processing plant,

4.11 Hatchery Unit

This is the unit where fertile eggs will be incubated to produce Day-Old Chicks (DOC). The proposed proposed hatchery Unit is expected expected to have a brooding capacity capacity of


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10,000 fertile eggs per production production cycle, and will be made up in the proportion proportion of 60% broilers and 40% breeders. The hatchery production line will include:

a)

A Setter Incubator

b)

A Hatchers Incubator

The process – flow of the proposed hatchery is as follows:

Fertile Eggs

Fumigations of Eggs

Day-Old Chicks (DOC)

Hatchers Incubator

4.12 Broiler Grow-out Facility

Setter Incubator

Candling Room

Broiler production production involves the raising of day-old chicks (DOC) from 0 – 50 days. The breed of such chicks should be such that has with excellent meat to carcass ratio. The proposed broiler production capacity is proposed to be between 3000 -6000 birds per cycle.

There There are some essential essential requirem requirements ents for growing growing broilers broilers successf successfully ully..

All

these requirements will be put in place before the proposed project commences.

The requirements include:

•

Adequate housing

•

Excellent brooding equipment

•

Feeding equipment

•

The modern watering equipment

•

Miscellaneous equipments

All these will be discussed under facility requirements. Poultry facility Feasibility

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4.13 Breeders/Layers Grow out Facility

The breeders breeders/lay /layers ers producti production, on, otherwi otherwise se known known as point point of lay product production, ion, involves the raising raising of pullet chicks chicks from 0 – 18 weeks. The point of lay birds birds are used for producing fertile fertile eggs in the process of producing replacemen replacementt stocks, or infertile eggs in the process of producing ordinary table eggs.

The proposed farm is expected to produce between 7,000 and 14,000 breeders per production cycle

The basic requirements for a typical breeder grow out facility are similar to that of broiler grow out facility.

4.14 Table Egg Production Pr oduction Unit

This involves the rearing of birds to sexual maturity, and then keeping them in lay for a yea year. r.

The The eggs eggs prod produc uced ed are are infert infertile ile and and

are call called ed tabl table e eggs. eggs. In

Nigeria, some producers begin their production process by raising the day – old pullets, while other buy point – of – lay pullets (e.g. 20 to 22 week old pullets) that are ready to begin production.

The proposed project would depend on its day-old pullets for egg production.

Since an average layer produces 2 eggs every 3 days, the table egg production capacity of the farm will depend on the number of layers deployed in the farm.

4.3 EQUIPMENT/MACHINERY REQUIREMENT


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The proposed integrated farm is expected to be fully automated with modern poultry equipment equipment and machinery. machinery. The equipment/mac equipment/machinery hinery requirements requirements will include.

a).

b)

Hatchery Unit •

Setter Incubator

•

Hatchers Incubator

•

Fumigation Equipment

•

Candling Lamb

Broiler, La Layer an and Br Breeder Un Unit •

Brooding Equipment

•

Feeding Equipment

•

Watering Equipment

•

Thermometer

•

De-beaking scissors

Setter Incubator The setter setter incub incubato atorr would would have have a minim minimum um capac capacity ity of 40,000 Eggs. Eggs. The dimension of a typical one, “ Chick Master 102” 102 ” is 22’length, 22’length ,12.6’ Width and 8.7’Height Hatchery The Hatchery that will be utilized will have a minimum of 30,000 Day -old Chicks per hatching cycle

Drinking systems


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An automatic water trough or drinking nipple system placed inside or preferably outside the shed will save labour and provide a constant supply of fresh water. It is important to provide shade in the hot season to keep the water cool. A low-pressure drinking system is ideal for adult birds. The water flows through the nipples only when they are touched or pecked. Poultry quickly learn how to operate the system. Drinking nipples are more hygienic and use less water than open troughs. Feeders In deciding which feeder should be used, it important to put into consideration the type and the class of chicken that is being reared. Basically, there should be Feeder for Pullets Feeder for Cockerels Feeder for Day –Old Chicks (DOC) One hanging ‘tube’ feeder with a pan 400 mm in diameter will provide about 1200 mm of feeding space, enough for 15 hens. Bulks feed

storage are also a necessary necessary part of the feeding equipment. equipment. The

bins (Silos) are located outside the house. Broiler Processing Plant A set of

poultry slaughtering slaughtering and broiler processing processing that has the capacity to

package 5000 broilers per day will be put in place.

Other Support Equipments

Other support equipments include:


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•

Electric Generator –Preferably 250 KV

•

Egg Lifter

•

Debeakers

•

Thermometer

•

Coldroom with the capacity to store about 20,000 processed chicken.

4.4 HOUSING

The first requirement requirement for growing commercial commercial poultry poultry is adequate housing. housing. This is because because broiler/ broiler/laye layerr producti production on is essentia essentially lly a chick chick brooding brooding operati operation. on. Hence the house should contain necessary equipment so that such factors as temperature, temperature, moisture, moisture, air quality and and light can be controlled controlled easily. easily. It should also provide for efficient installation installation and operation of brooding, feeding, watering and other equipment.

A poultry building should have the following general features:

*

Exce Excell llen entt vent ventil ilat atio ion, n, air air mov movem emen entt and and suff suffic icie ient nt lig light htin ing, g,..

*

Optimal use of floor space.

*

Should con contain ain all nec necessar sary equ equipm ipment such as brood ooding ing, feed eeding ing, watering and other equipment for efficient operation.

*

The ho house use sh shoul ould be be sit sited ed on a we well drai rained ned so soil.

*

Floo Floorr of of the the poul poultr try y hou house ses s mus mustt be be co concre ncrete ted d and and litt litter ered ed..

Three types of houses houses are utilised in the commercial commercial production production of broiler, layer layer and breeder. breeder. Thus Thus birds are transferr transferred ed to the various various houses houses dependin depending g on their age in the production cycle. These houses include:


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

Brooder House



Growers House



Deep Litter House



Cage.

Brooder House

This is the house where a day-old chick stays until the first 8 weeks of the chick’s life. life.

Broo Brooder der house house must must be maintai maintaine ned d proper properly ly and and kept kept warm warm always always..

Installation of brooder’s guards to confine chicks, flat feeders, drinkers and feed mash must always be available.

Grower House

After the first 8 weeks, weeks, chicks are transferred to the grower house. The purposes of this transference are to protect them and make them comfortable so that they can develop develop optimally. optimally. A well well ventila ventilated ted housing housing accommodat accommodation ion will suit the growe growers rs with enough enough floor floor spac space e for the number number of grow growers ers involv involved ed..

The The

recommended floor space for a flock of 250 birds is 125 square metres.

Deep Litter House The birds are transferred to the deep litter house after 20 weeks in the growers’ house.

In case of broiler production, production, this is where where the birds birds will domiciled domiciled until until

they reach the market weight of about 1.6kg in 3 -4 months.

Cage Poultry facility Feasibility

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This is the the final destination destination of layers layers and breeders. breeders. No litter is required. required. Cages are normally put under under the roofed house. house. The usual number number of birds required in a cell is 3 pullets or 2 layers.

Figure Figure 1. Mode Modern rn broile broilerr hous house, e, wh which ich uses uses two two feed bins. Houses should be capable of maintaining appropriate temperatures during the entire entire growing growing cycle, cycle, regardle regardless ss of the outside outside temperat temperature. ure. Colder Colder climates climates require additional insulation, whereas proper air speed becomes crucial in a hot environment. Most broiler houses are built 40 feet wide, usually with two lines of lighting fixtures arranged so that all areas of the floor are well lit. Low-wattage bulbs are place 8 to 10 feet above the floor to provide 0.5 to 1.0 foot candle of light at bird level.

4.5 UTILITIES REQUIREMENT AND SUPPLY

A number of utilities would be put in place in order to ensure smooth functioning of the farm. These utilities include:

a)

Water Supply,

b)

Supple pplem mentar tary Electric tricit ity y supp upply, ly,


24

c)

Paved Road Transportation,

d)

Drainage Facility

Water Supply

Clean water supply is a sine qua non of poultry business. Hence, there should be provi provisio sion n for an altern alternati ative ve source source of water water since since const constant ant and and clean clean water water supply can only be ensured through provision of an internal borehole and, a minimum of, one overhead water tank of 5000 litres capacity.

Electricity Supply

Since public power supply is not reliable, provision will be made for a 250 KVA generati generating ng set to supplem supplement ent Nationa Nationall Electric Electric Power Power Authorit Authority y supply, supply, and ensure uninterrupted supply of electricity.

4.6 RAW MATERIAL REQUIREMENT The basic raw materials of a typical Poultry farm include •

Feeds

•

Drugs

•

Vaccines

Feeds The The type types s of food food bird birds s feed feed on vari varies es as they they grow grow,, and and thes these e incl includ ude: e: Chicksmash, which ich is use used for for feed eeding chic chicks ks fro from a

“ day old” ld” to

8 weeks old; Growermash , which is used for feeding chicks from 8 weeks to 20 weeks old; Layermash , which is used from 20 weeks upwards . Broiler Startermash is used for feeding day old broiler chicks, while Broiler Finishermash is used from week 4 upwards.


25

The bulk of this this feed feed will will be sourc sourced ed locall locally y from from bulk bulk impo importe rters rs and and local local manufacturers of livestock feed. In the nearest future, the farm will explore the possibilities of producing its own feed.

Drugs

Some poultry drugs commonly used in the poultry farms are: Amprol Solube Powder, Tylan, Vitadol, Vibravet, Soluvita Stress, Teramycin eggs formular, Malathion insecticide, Vetox 85 insecticide.

Vaccines

Some Some popular popular vaccines vaccines include include:: Newcast Newcastle le disease disease vaccine vaccine,, Coccid Coccidants ants Vaccines, Gumboro Vaccine, Komoro Vaccine, Pox vaccine and Ant- C.R.D Vaccine

About 90% of these inputs are imported. These is why poultry production is highly sensitive to foreign exchange fluctuation In Nigeria

CHAPTER FIVE

MANPOWER REQUIREMENT, MANAGEMENT AND ORGANISATION

MANAGEMENT


26

For the successful operation of the integrated farm, the management should have adequate and appropriate knowledge in specific features of poultry farming. These important areas include:



Diseases control,



Housing and equipment ,



Feeding,



Genetic improvement,



Marketing,

Consequent upon the medium size of the farm, the management structure will not be too elaborate. Since a promoter will finance the farm, the composition of a board of directors may not be necessary, although it is advisable that this be put in place. place. The overall overall manage management ment functions, functions, which will will include include broad policy policy formulation, approval of budgets and strategic plans, will fall on the promoter who will also function as the Managing Director and Chief Executive Officer of the farm, although a lot of assistance and value can be derived from the constitution of a board of Directors.

PERSONNEL REQUIREMENT

Commercial poultry production involves the rearing of exotic breed of chicken that are highly sensitive to environmental changes, feeding pattern and diseases. Hence, its management requires highly skilled and experienced personnel.

The farm will to be a fully automated and integrated farm. Hence, there would not be need for too many staff. In this wise, the farm will require the following personnel: Poultry facility Feasibility

27

The Managing Director (1) The promo promoter ter will will assum assume e the the overa overallll super supervis visory ory respo respons nsibi ibilit lities ies as the Managing Director, carrying out (With the assistance of the key personnel), the function of the strategic policy formulation. He/She will draw monthly salary and allowance for performing this function.

Farm Hands

(2) Holders of Senior School Certificate

Security Men

(2) Relevant guards training

Driver(s)

(2) Holders of Nigerian professional driving license

ESTIMATED PERSONNEL COSTS The total estim estimate ated d annu annual al salar salary y and and allow allowanc ance e for the the six staff staff and and the Manag Managin ing g Direc Director tor is N 600,0 600,000 00.00 .00.. If it is assume assumed d that that the salar salary y would would increase by 10% per annum, then the salary for the next 5 years is as follows:

• • • • •

N N N N N

600,000.00--------Year 660,000.00--------Year 726,000.00--------Year 798,600.00--------Year 878,460.00--------Year

1 2 3 4 5

ORGANISATION STRUCTURE


28

Initia Initially lly,, the the farm farm will will maint maintain ain a lean lean struc structur ture e in the first five years years of its operation, during which it would enjoy full automation and the services of six staff. However, as the farm expands, in the nearest future, it will be imperative to put put in plac place, e, a very very good good stru struct ctur ure. e. Henc Hence, e, the the foll follow owin ing g stru struct ctur ure e is recommended.

The farm will be structured into four broad departments. The heads of these departments will report to the General Manager, who will serve as the overall Farm Manager of the integrated farm. He will report to the Chairman / Managing Director.

Hatchery Manager, who will supervise the hatchery operations of the farm, will head the Hatchery unit.

The Financ Finance e and and Admin Administ istra ratio tion n Depar Departm tment ent will will be headed headed by Financ Finance e & Admini Administ strat ration ion Manag Manager er and and will will super supervis vise e all all admi adminis nistra tratio tion n accou accounts nts and personnel matters.

The Livestock’s Livestock’s Departmen Departmentt will be headed headed by Livestoc Livestock k Manager, Manager, who will supervise the broiler, layers / breeder and egg production operations of the farm.

The The Busi Busine ness ss Deve Develo lopm pmen entt Mana Manage gerr will will head head the the Mark Market etin ing g and and sale sales s Depar Departm tment ent.. He will will be respo respons nsibl ible e for implem implement enting ing mark market eting ing and and sales sales strategies of the farm.

PROPOSED ORGANISATION STRUCTURE

Chairman/CEO


29

General Manager

Livestock Manager

Feed man


Veterinary Assistant

Hatchery Manager

Hatchery Assistants

Finance & Admin Manager

Business Development Manager

Admin Clerks Account Clerks

Business Development Executives

30

CHAPTER 6 INVESTMENT COST ANALYSIS The cost of the project are estimated under two main headings, viz: Capital/initial cost and operating/maintenance costs. 1.0

Capital/initial Cost

Based on the estimates gathered during the market survey as well as internet searche searches, s, the principa principall cost compone component nt of the project project are [1] land/bu land/buildin ilding g & Infrastructure, Infrastructure, [2] Plant & Machinery, [3] office furniture, [4] delivery vehicles and [5] the pre-operational expenses. These are summarized below:

Construction sheds/store rooms: Land acquisition

5,000,000

Broiler/grower shed

1,000,000

Hatchery shed

1,000,000

Layer Shed

1,000,000

Store room

850,000

Fencing

2,000,000

Sub-Total 1.2 1.2.

10,850,000

Mach achines/E s/Equipm ipment ent: Automated Watering System Automated feeding system Automated manure removal Incu Incuba bati tion on and and Hatc Hatch hery ery equip quipme ment nt Generator

(1 nos. 75 KVA)

6,500,000 12,000,000 2,750,000 15,0 15,000 00,0 ,000 00 2,500,000

Offi Office ce Equi Equipm pmen entt (see (see deta detail ils) s)

3,00 3,000, 0,00 000 0

Water bore hole equipment

1,000,000

Sub-Total


42,750,000

31

1.3

1.4

Delivery Ve Vehicles: a)

Saloon Car

(1 no.)

2,900,000

b)

Purc Purcha has sing/ ing/De Deli live very ry Van Van (1 no.) no.)

2,75 2,750, 0,00 000 0

Sub-Total

5,650,000

Furniture & Fittings: a)

Furniture (see details)

b)

Air conditioners (1 no.) c)

1,200,000 150,000

Telephone Installation

85,000

Sub-Total 1.5

1,435,000

Pre-Operating Expenses: a)

Company Incorporation & Legal Fees

-

500,000

b)

Feasibility Study

-

450,000

h)

Travel Expenses

-

150,000

I)

Accounting Systems Manual

-

500,000

j)

Personnel/Admin Policies Manual

-

k)

Staff Recruitment

-

650,000

I)

Sundry Expenses

-

250,000

Sub-Total

1.6

500,000

3,000,000

Raw Ma Material In Inputs a)

Day old Broilers

(1,500 no)

-

165, 000

b)

Day old Layers

(3,500 no)

-

385,000

c)

Feed stock

-

10,000,000

d)

Vaccines, Spray, Litter & consumables -

150,000

Sub-Total

10,400,000

The transfer price of day old chicks is put at N110 per DOC.


32

1.7

Working Ca Capital:

The working working capital capital is a sum that should should be available available to the business. business. The working capital for the first year of operation of the Poultry is estimated, on the basis of the operating expenses.

2.0 2.0

OPERA PERATI TING NG AND AND MAI MAINT NTEN ENAN ANCE CE COST COSTS S

The operating and maintenance costs are estimated on the basis of assumptions of usage rates for utilities – water, light, fuelling and sundry expenses on a daily basis. The total total is estimated estimated at N350, N350, 000 for two months. months. This is much much in line line with average rates for poultry facilities of similar standard.

2.1

Fuel Expenses

Given at least 2 vehicles and using average fuel expenses of N34/litre and 5 litres/day, the fuel consumption is estimated at N340/day. a)

Mai Mainte ntenan nance of othe ther machin hines/ es/equ equipmen pmentt is estim timate ated to cost ost N75,000 per annum.

b)

2.2

The The Veh Vehic icle les s wil willl be be mai maint ntai aine ned d at at N30 N300, 0,00 000 0 per per annu annum. m.

Management Management and Personnel Personnel Cost

We note that due to the automation of the Poultry, staff head count should be kept at a Minimum Minimum until the mature mature birds birds are due for sale/proc sale/processi essing. ng.

The

estimated cost of staff emoluments in the first year of operation operation is N5million, N5million, and an annual increase of 10% per annum is expected for the next five years.

Detail Detailed ed break breakdo down wn of manp manpowe owerr expen expense ses s can can be seen seen at the secti section on on manpower requirements and organization chart.

b.

Poultry Feed, Vaccination, Spray, litter, etc

The above are estimated based on a benchmarking with model poultry farms as well as industry industry best practices. practices. We have however however been a little little conservative conservative in this matter. matter. Vaccination Vaccination cost is put put at N30 per bird. Spray cost cost is put at N5, N5, 000 per flock, Feed cost is put at N1, 100 per bag of 25kg on average.


33

c. Utili ilitie ties

These have been estimated as follows:

N

i.

Telephone bills (Admin)

100,000.00

ii.

Electricity

200,000.00

iii.

Water

300,000.00

iv.

Diesel for generator

300,000.00

The period of time is for one operating cycle within a period.

d. Audi Auditt exp expen ense ses s These have been pegged at N250, 000 in the first two years, then it moved to N350,000 as from the third year.

e. Facilit Facilities, ies, Clea Cleanin ning g And Mainte Maintenan nance ce These These include include items such as manure manure equipment equipment clean-u clean-up, p, disposa disposall of birds’ birds’ litters and general material for the up keeping of the premises of the Poultry facility. It has been pegged at N300, 000.00 per annum and increases at the rate of 5% per annum.

2.3General 2.3 General Overhead: Overhead: The general overhead cost in the first year of operation is estimated as below: I)

Travel expenses

N 200,000

i i)

Printing/Stationery

100,000

iv)

Staff Uniform

100,000

v)

Sundry Expenses

250,000

2.4Depreciation Depreciation is estimated at N7, 304,625 on a straight-line basis on an annual basis, given a 10% salvage value, as indicated below: (note that building/poultry equipment is depreciated over a ten-year period).


34

DEPRECIATION SCHEDULE PLTRY.EQM ENERGY O/EQUIP.

VEHICLES

FURN./FIT

YEAR

1.27125 1.27125 1.27125 1.27125 0.000 5.085 0.565 5.650

0.322875 0.322875 0.322875 0.322875 0.000 1.2915 0.1435 1.435

1 2 3 4 5 TOTAL Salvage COST

T/ BUILDING 4.721 4.721 7.161 7.161 7.161 58.185 5.819 75.135

0.450 0.450 0.450 0.450 0.450 2.250 0.250 2.500


0.540 0.540 0.540 0.540 0.540 2.700 0.300 3.000

35

CHAPTER 7 REVENUE PROJECTION The main sources of revenue of the Poultry facility are:

i) Sale Sale of matur ature e bir birds ds ii) ii) Sale of of eg eggs iii) Sale Sale of bird bird litter litters/ma s/manure nure iv) Sale Sale of day-old day-old chicks chicks

i)

Reve Revenu nue e from from sal sale e of mat matur ure e bird birds s is bas based ed on on init initia iall capa capaci city ty of of 5,00 5,000 0 bird birds, s, given given a mort mortal alit ity y rate rate of betw betwee een n 6% - 10% 10% per per cycl cycle. e.

The The

production production capacity is expected expected to increase by 100% to 10,000 birds after the first two years of operation and to 20,000 birds beginning from year five, all other things things remaining remaining as assumed. assumed. Following Following the assumptions, assumptions, revenue from sale of mature birds should average N6.75million for a 5,000 bird capacity, N13.50million for a 10,000 bird capacity and N27.0million for a 20,00 20,000 0 bird bird capac capacity ity,, all all on a worst worst case case scen scenari ario. o.

The The estima estimated ted

industry growth rate is about 12.5% annually.

ii) ii)

Reve Revenu nue e from from the the sal sale e of eggs eggs is is base based d on proj projec ecte ted d numb number er of of laye layers rs,, which constitutes 70% of total bird count, the layers’ life cycle of 90 weeks, the laying period of 52 weeks, the ability to lay 2eggs in every 3 days during during the laying period, period, and given the assumed assumed mortali mortality ty rate earlier stated above as well as the growth in bird count over the planning period. The total estimated revenue from this segment should be N6.899million for a 5,000 bird capacity, N13.80million for a 10,000 bird capacity and N27.6million N27.6million for a 20,000 bird capacity capacity on an annual basis. basis. The average industry growth rate is 15% per annum.


36

iii) iii)

Reve Revenue nue from from sale sale of manu manure re and and bird bird litte litters rs is is bas based ed on on indus industry try avera average ge revenue estimates and given the strategic location of the poultry. It is estim estimate ated d that that N129 N129,00 ,000 0 – N492 N492,00 ,000 0 will will be reali realize zed d from from the above above sale sales, s, given iven capa capaci city ty util utiliz izat atio ion n of betw betwee een n 5000 5000 – 2000 20000 0 bird birds s respectively. The figure should grow by about 10% per annum

iv) iv)

Reve Revenu nue e from from sal sale e of day day old old chic chicks ks is is base based d on esti estima mate ted d avai availa labi bili lity ty of of hatchery systems, government policy on the importation of day old chicks and and give given n the the mort mortal alit ity y rate rate of the the day day old old chic chicks ks,, amon among g othe others rs.. There Therefor fore, e, it is estim estimate ated d that that N12. N12.408 408mi milli llion, on, N18.6 N18.612m 12mill illio ion n and and N24. N24.816 816mi milli llion on respe respecti ctive vely ly will will be realis realised ed on a capa capacit city y of 40,00 40,000, 0, 60,000 and 80,000 day old chicks. The estimated growth rate in sales should be 15% per annum.

On the basis of above assumptions, total revenue for years 1 - 5 should as shown below. below. The capacity capacity of 10,000 birds should should be installed in year year 3, while that of 20,000 birds birds should be installed installed in year 5. The average percent percent growth growth in revenue of 13% per annum is assumed as per general industry trend.


Year 1

N26.185 million

Year 2

N29.459 million

12.5% growth rate

Year 3

N46.167 million

56.72% growth rate

Year 4

N51.938 million

12.5% growth rate

Year 5

N79.902 million

53.84% growth rate

37

CHAPTER 8 FINANCING PLAN Traditionally, any projects that have been found to be commercially viable are financed through equity contribution of sponsors and loans – term loans and bank bank overd overdraf rafts. ts.

Our Our vario various us discu discuss ssion ions s with with the the promo promoter ter show that the

financin financing g structur structure e and pattern pattern should follow follow above above path. path.

Conseque Consequently ntly,, the

Poultry facility’s capital cost of N68.135 million is recommended to be financed as follows: N’Million

%

i)

Equity Contribution

15.027

20.00

i i)

SMIES Loan

50.000

66.55

iii)

Start-up funding

10.108

13.45

N75.135

100.00

Total

i.

Equi Equity ty con contr trib ibut utio ion n will will cov cover er the the cos costt of init initia iall acqu acquis isit itio ion n of lan land and and as well as for the construction and completion of the Poultry facility building. The sum should also cover the construction and part-furnishing of the administrative office and store rooms.

ii) ii)

SMIE SMIEIS IS Loa Loan n of N60 N60.0 .00 0 mill millio ion n will will be be used used to to fina financ nce e subs substa tant ntia iall part part of of the automated poultry and hatchery equipment and start-up operational expenses.

It is our view that the project will not have difficulties in securing term loans that can be achieved through Loan syndication with one of the leading commercial banks as a lead banker. United Bank for Africa (UBA), Union Bank of Nigeria (UBN), First Bank of Nigeria (FBN), Afribank and Wema Bank. The other buoyant commercial/merchant banks should be willing to participate.

Another viable source of financing the project is by lease finance. Once the viability analysis has indicated project acceptance, the question of whether to Poultry facility Feasibility

38

finance by leasing or borrowing becomes secondary since the project will do well whate whatever ver the choic choice e of financ financing ing.. Howe However ver,, lease lease financ financing ing is parti particu cular larly ly attractive on the following grounds: i) It allows allows 100% 100% debt debt financin financing, g, as equity equity contribu contribution tion is not not require required. d. ii) It is easie easierr and quicke quickerr to obtain obtain a lease lease than than to obtai obtain n a loan loan iii) iii) Lowe Lowerr equ equity ity taxes taxes are are paid paid iv) It has has greate greaterr tax savings savings over a buy buy decisi decision on

The SMIES loan is expected to reduce the pains of servicing a regular bank revolving loan with periodic interest and principal repayments.


39

CHAPTER 9 FINANCIAL PROJECTIONS AND APPRAISAL OF COMMERCIAL VIABILITY This chapter undertakes the financial projection of the project by relating the projected streams of costs and revenue for the first five years of its operations. Thereafter, standard appraisal techniques are used to evaluate the feasibility or commercial profitability of the project.

1.

Projected Pr Profit an and Lo Loss Ac Account The projected Profit and Loss statements of the company for 5 years shows that the project will post net profit after tax of N4.896million in the first year of operation. operation. In the second year, year, net profit after tax is expected expected to be N2.735million. N2.735million. Beginning Beginning from year three, the project project should begin to realize substantial profits of N7.379million, falling to N4.192million in year four due to expansion costs incurred in the latter part of year three. In the fifth year, it will rise to N14.461million N14.461million.. The high equipment equipment costs at the beginning of the project as well as additional increases in capacity utilization by means of more birds and Day old chicks account for the fluctuations in revenue and cost structure. The range of annualized return on investment should be between 4.0% and 21.22% year over year as shown in the income statement.

2.

Cash flow Projection The cash flow projection indicates that the project will have a reasonable financial position over the five-year period. Almost all the Poultry facility’s services should be sold on a near-cash basis, except for a few corporate customers customers that might ask for short-term short-term credit. credit. As a result, the projected projected net cash flow is positive positive throughout throughout the period, period, except for year year two. This position is further strengthened by the fact that company operates little credit extension, has a proportionately huge SMIES debt portfolio and is managed professionally. The cash flow projection is attached.


40

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD All Figures are in Millions of Naira BALANCE SHEETS Year

1 Cash and Near Cash items Due from related parties Prepaid Expenses Inventory and WIP Other Accounts Receivable Total current assets Gross property, plant & equipment Less accumulated depreciation Net property, plant & equipment Total assets Accounts payable Taxes Payable

2 14,296,7 96 10,274,5 00 18,421,4 99 652,90 9 43,645,7 05 58,185,0 00 (6,854,6 25) 51,330,3 75 94,976,0 80 513,72 5 2,098,20 0

Dividends Payable Current Portion of LTD

3 17,442,25 5

0

Total current liabilities Long-term debt Common Stock - Paid up Net Income Shareholders equity Total long-term debt and equity Total Liabilities Current Ratio Total Liabilities/Equity Liabilities/Equity


14,053,2 81 61,000,0 00 15,027,0 00 4,895,79 9 19,922,7 99 80,922,7 99 94,976,0 80 3.1 1 3.8 3

0

0

7 91,977,78 4

58,185,00

58,185,00

0 (13,709,25 0) 44,475,75 0 99,461,30 1 749,85 0 1,172,12 0

0 (23,003,89 5) 35,181,10 5 112,670,73 5

10,931,43

819,852 12,079,24

56,211,05 7

1,298,44

54,985,55 1

0

5 1,154,175 77,489,63

39,284,50

36,538,29

1,822,11 0

27,218,88 4

29,164,50

32,478,48 5

58,185,00 0

1,997,55 0 124,711,99 1 58,185,00 0 (41,593,18 5) 16,591,81 5 141,303,80 6 1,967,54 0 6,886,08 9 1,606,75 4 14,749,05 4 6,405,00 0 31,614,43 8 61,000,00 0 15,027,00 0 14,460,78 7 48,689,36 9 109,689,36 9 141,303,80 6

4

4

61,000,000 15,027,00 0 2,734,94 8 22,657,74 7 83,657,74 7 99,461,30 1

61,000,000 15,027,00 0

1 112,670,73 5

(32,298,54 0) 25,886,46 0 117,864,24 4 1,459,76 8 1,996,27 2 465,79 7 13,347,56 1 5,366,26 6 22,635,66 3 61,000,00 0 15,027,00 0 4,192,17 1 34,228,58 2 95,228,58 2 117,864,24 5

3.48

3.58

4.06

3.94

3.92

3.01

3.07

2.24

9

1

2

0

7

5 24,976,54

19,944,50

20,724,18

1,548,65 Other Accruals

1 14,997,00

9,892,70 5

4 23,912,47

1,003,118 3,513,650

0 2,950,14

5

4,218,465 21,634,32

15,803,55

7,378,664 30,036,41 1 91,036,41

41

PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD INCOME STATEMENTS Year

All Figures are in Millions of Naira 1

Sales

2 26,185,500

Growth rate (%)

-

Less COGS

(10,274,500)

Growth rate (%) Gross profit

15,911,000

Growth rate (%) Less SG&A expenses

(513,725)

Growth rate (%) Earnings before Interest, Tax & Deprec. Less depreciation Earnings after depr. b/4 Interest & Tax Less SMIES repayment accrual Pre-tax income Cumulative income (NOL) Taxes Pre-tax income

15,397,275

3 29,458,688 12.50%

4 46,167,000 56.72%

(14,997,000)

(19,944,500)

5 51,937,875 12.50% (29,164,500)

79,902,000 53.84% (39,284,500)

31.49% 14,461,688

24.81% 26,222,500

31.61% 22,773,375

25.76% 40,617,500

-10.02% (749,850)

44.85% (997,225)

-15.15% (1,458,225)

43.93% (1,964,225)

31.49%

24.81%

31.61%

25.76%

13,711,838

25,225,275

21,315,150

38,653,275

(9,294,645)

(9,294,645)

(9,294,645)

(6,854,625)

(6,854,625)

8,542,650 -

6,857,213 -

(1,548,651)

(2,950,145)

6,993,999

3,907,068

11,712,165

6,654,239

22,953,630

6,993,999 2,098,200 6,993,999

10,901,067 1,172,120 3,907,068

22,613,232 (3,513,650) 11,712,165

29,267,471 (1,996,272) 6,654,239

52,221,101 (6,886,089) 22,953,630

(3,513,650)

(1,996,272)

(6,886,089)

(465,797)

(1,606,754)

15,930,630 -

12,020,505 -

29,358,630 -

int. (4,218,465)

(5,366,266)

(6,405,000)

pre-tax

Less taxes

(2,098,200)

Less Proposed Dividend Net income

(1,172,120)

4,895,799

Growth rate (%)

2,734,948

(819,852) 7,378,664

4,192,171

14,460,787

-79.01%

62.93%

-76.01%

71.01%

Return on Investment Return on Sales

7.19% 18.70%

4.01% 9.28%

10.83% 15.98%

6.15% 8.07%

21.22% 18.10%

Return on Equity

19.48%

10.88%

29.36%

16.68%

57.53%


42

CASH FLOW STATEMENT FOR THE 5-YEAR PLANNING PERIOD STATEM STATEMENT ENTS S OF CASH CASH FLOWS All figures are in Millions of Naira Year

1 Net income Plus depreciation Less Less incr increa ease se in inve invent ntor ory y Plus Interest on Investments Less increase in accounts receivable Plus increase in accounts payable Cash Cas h flo flow w fro from m ope operat ration ions s Less investment Cash flow from operations and invests Plus net new equity capital raised Current year Interest Less dividends paid Inc. Inc. (Decr. (Decr.)) in long-t long-term erm debt Inc. (Decr.) Other borrowings Cash flow from ops, invests, and fin Begi Beginn nnin ing g cash cash bala balanc nce e Endi Ending ng cash ash balan alance ce


2

3

4

4,895,799 6,854,625

2,734,948 6,854,625

7,378,664 9,294,645

10,1 10,171 71,7 ,755 55

(7,4 (7,499 99))

6,76 6,761, 1,18 186 6

(130,928) 2,054,900 23,846 23, 846,15 ,152 2 (75,135,000) (51,288,848) 15,027,000 (1,548,651) 51,107,295 -

-

-

5 4,192,171 9,294,645 (262 (262,4 ,481 81))

(46,167)

4,934,098

4,499,100 17,027 17, 027,04 ,043 3

19 199,445 23,587 23, 587,77 ,773 3

2,085,262 20,243 20, 243,69 ,695 5

17,027,043

23,587,773

3,92 3,928, 8,45 450 0

-

2,945,869

-

14,460,787 9,294,645

(3,859,267) 1,178,535 25,003 25, 003,15 ,150 0

-

-

20,243,695

25,003,150

(2,950,145) -

(4,218,465) (819,852)

(5,366,266) (465,797)

(6,405,000) (1,606,754)

(10,931,439)

(12,079,240)

(13,347,561)

(14,749,054)

-

-

-

-

13,296,796

3,145,459

6,470,216

1,064,072

2,242,342

1,00 1,000, 0,00 000 0 14,2 14,296 96,7 ,79 96

14,2 14,296 96,7 ,796 96 17, 17,442, 442,2 255

17,4 17,442 42,2 ,255 55 23,91 3,912 2,471 ,471

23,9 23,912 12,4 ,471 71 24,9 24,976 76,5 ,542 42

24,9 24,976 76,5 ,542 42 27,2 27,21 18,88 8,884 4

43

‘’WHAT IF’’ ANALYSIS FOR THE FIRST YEAR OF OPERATION

Manure/Litters

YEAR 1 SCENARIO Pessimistic Planned 70% 100% 4,725,00 6,750, 0 000 4,828,95 6,898, 0 500 8,685,60 12,408,0 0 00 90,30 129, 0 000

Optimistic 120% 8,100,0 00 8,278,2 00 14,889,6 00 154,8 00

Net Sales

18,329,850

26,185,500

31,422,600

Costs of Goods Sold Variable Cost of Goods Sold Fixed Costs Reclassified to Variable Costs Total Variable Costs

2.000 20,549,000

1.000 10,274,500

0.500 5,137,250

0 20,549,000

0 10,274,500

0 5,137,250

Fixed Costs of Goods & Services Total Costs of Goods Sold

1.100 0 20,549,000

1.000 0 10,274,500

0.900 0 5,137,250

Gross Profit % of Total Sales

-2,219,150 -12.11%

15,911,000 60.76%

26,285,350 83.65%

Operating Costs Sales & Marketing

1.200 308,235

1.000 256,863

0.900 231,176

G & A (without Depreciation)

308,235

256,863

231,176

Depreciation

6,854,625

6,854,625

6,854,625

Fixed Costs Reclassified to Variable Costs Total Expenses

0 7,471,095

0 7,368,350

0 7,316,978

Income From Operations

-9,690,245

8,542,650

18,968,373

Interest Income (Expense) - "Fixed" Income Taxes - "Variable"

-1,548,651 0

-1,548,651 -2,098,200

-1,548,651 0

Net Income After Taxes

-11,238,896

4,895,799

17,419,722

"WHAT IF" ANALYSIS Sales Mature birds Eggs Day old Chicks

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD


44

BREAK EVEN ANALYSIS (N'MILLIONS) YEAR 1

2 26,185,50

Sales

0

3 29,458,

688

4 46,167,00

0

5 51,937,8

75

79,902, 000

Variable Costs 10,274,50 Material & Labor

0

Commissions

-

14,997, 000

Fixed Costs (calc as % of sales) Fixed Cost of Goods & Services Sales & Marketing (w/o Commissions) G & A (without Depreciation) Total Fixed Costs (calc as % of sales)

29,164,5 00

10,274,50

Total Variable Costs

19,944,50 0

14,997,

19,944,50

39,284, 500 -

29,164,5

39,284,

0 0.392

000 0.509

0 0.432

00 0.562

500 0.492

0.000%

0.000%

0.000%

0.000%

0.000%

2.500% 2.500%

2.500% 2.500%

2.500% 2.500%

2.500% 2.500%

2.500% 2.500%

5.000%

5.000%

5.000%

5.000%

5.000%

Fixed Costs (fixed amounts) Fixed Cost of Goods & Services Sales & Marketing (w/o Commissions)

-

256,8

63

,925 256,8

G & A (without Depreciation)

63

Costs

(fixed

7,368,35

Interest Income (Expense) - "Fixed"

51)

Income Taxes - "Variable"

00)

Net Income After Taxes

9

Analysis Income from Operations Contribution Margin

0.608

4,895,79

0.491 12,126,44


9

15,490, 437

14,059,05 1

13,968, 251

(5,366,2

(3,513,65

2,734

29,358, 630

66)

0)

,948

12,020,5

(4,218,46

(1,172, 120)

11,258, 870

05

5)

9,294 ,645

10,752,8

15,930,63

(2,950,

,113

70

0

145) (2,098,2

Break-Even Sales Sales Volume Above BreakBreakEven

10,291,87

6,857

982

9,294, 645

0

,213 (1,548,6

113

5

982 ,113

729,

9,294,64

7,604

8,542,65 0

113

13

,475

729,

498,6

6,854 ,625

0

Income from Operations

13

,925

5

498,6

374

6,854,62 Depreciation Total Fixed amounts)

374

(6,405, 000)

(1,996,2 72)

8,198,51

(6,886, 089)

4,657,

6

967

0.568 18,119,73 5 28,047,26 5

0.438

16,067, 541

0.508 24,523,4

28

22,148, 242

27,414,4 47

57,753, 758

45

SUMMARY OF ASSUMPTIONS

The accompanying financial projections are based on a number of assumptions made made in the the proc process ess of forec forecast asting ing future future events events and circu circums mstan tances ces..

The

assumptions disclosed below are those that are considered to be significant to the preparation preparation of its financial projections. projections. Some assumptions, assumptions, regardless regardless of the amount of study or analysis, will not materialize, and unexpected events and circums circumstanc tances es may occur after after the date date of the financial financial project projections ions..

Thus, Thus, it

should should be expec expected ted that that actua actuall resul results ts will will vary, vary, to some some degre degree, e, from from the the projected results and the variations could be material.

STRATEGIC DIRECTION To finance growth, the Company requires N50 million SMIES term financing in the first quarter of 2005, as well as N10.108million start-up expenses funding. This financing financing would would enable enable the Company Company to develop develop a world-c world-class lass Poultry Poultry facility, to strengthen the management team and to provide for:

•

Increases in sales and other staffing;

•

Increases production capacity from 5,000 birds to 20,000 birds;

•

Purchase of ancillary items.

OPERATIONS - 2004 -- 2008

1. The projecti projections ons include include actual actual results results from a 12-mont 12-month h time span, beginni beginning ng early 2005 through to early 2006.

2. Turn Turnov over er will will rang range e from from N26. N26.2 2 mill millio ion n to N79. N79.9m 9mil illi lion on,, over over the the 5-ye 5-year ar planning period, assuming assuming gross turnover remain steady, on a growth path of 13% per annum.

3. The The cost cost of turn turnov over er is expe expect cted ed to peak peak at 68% 68% of the sale sale price price of the the Poultry Poultry facility facility products products and services services,, leaving leaving 32% of revenu revenues es to cover cover Poultry facility Feasibility

46

operating and and other expenses. expenses. This is much in line with the cost cost structure of the Poultry and egg industry in Nigeria at the time of this report.

4. The The focus focus on reven revenue ue from sales sales of mature mature birds birds and eggs eggs is expec expected ted to incre increas ase e such such that that a signif significa icant nt porti portion on of the the total total reven revenue ue shou should ld be generated generated from these sources. sources. The projection projection is that up to 80% of revenue revenue should be from the sale of mature birds and eggs, leaving the balance of 20% to be from sales of day old chicks and manure/litters.

5. During During the same same perio period, d, spend spending ing on start start-u -up p cost costs s such such as mark marketi eting ng,, advertising and promotion, general administration and consulting activities is expected to peak in order to launch the Poultry facility on a sound footing.

OPERATIONS - 2005 -- 2008 1. A major capital capital expenditure expenditure of of N50.0million N50.0million is expected expected to be incurred incurred in order order to complete work on the construction phase of the Poultry facility and to purch purchase ase critic critical al autom automat ated ed poult poultry ry and and hatch hatchery ery equipm equipmen ent. t.

Major Major

recruitment is also expected to be undertaken during the start-up phase.

2. Operati Operating ng expenses expenses especi especially ally salarie salaries s and wages are expect expected ed to rise as a result of the need to retain motivated workers over the long haul. Annual rate of growth in salaries and wages are to peak at 10%.

3. The productivity productivity of of Sales/marketing Sales/marketing staff staff is expected expected to improve, improve, riding on on the general acceptance of the Poultry facility products and services.

4. Headcount Headcount should should increase from 2 to about 5 within within the the planning planning period. The high degree of automation makes the need for new hires to be minimal.

5. Annual salaries (except sales staff) staff) increase increase 10% 10% annually annually beginning beginning 2005. 2005.


47

6. Intere Interest st expens expense e for borro borrowe wed d funds funds are acqu acquire ired d is provide provided d at 30% per annum, and interest income on deposits is earned at 2%.

7. Depreciation Depreciation is calculated using the the straight-line straight-line method over 5 years.

8. Federal Federal incom income e taxes taxes are are provide provided d at 30% 30%

INVESTING - 2004 – 2008 1. Equipme Equipment nt purchases purchases are projected projected at between between N43.0m N43.0millio illion n and N63mill N63million. ion. This may be staggered over a two period cycle to take account of expansion in number of birds. Taxation and Capital Allowances Annual Taxation Taxation on corporate corporate body takes takes into consideration consideration 30% 30% of profits. In computing this taxation, allowances on assets have been allowed as follows: Description: Land

Plant

Furniture

Motors

Building

Machinery

Fittings

Vehicles

Initial

5%

20%

15%

25%

Annual

10%

12.5%

10%

20%

FINANCING - 2004 -- 2008 1. An overall overall ratio ratio of about 37:63 37:63 is maintained maintained betwee between n equity equity and debt, such such that that dilut dilution ion of owner ownersh ship ip and control control is deep deeply ly affect affected. ed.

In 2005 the

Company raises N50million N50million SMIES loan and N15.057million N15.057million of equity to fund investin investing g and financin financing g cash flow requireme requirements. nts.

In year 2007, addition additional al

equity of N10million is introduced to finance growth in number of birds.

2. There There are no provisi provisions ons for further further bank loans, loans, accounts accounts receivab receivable le financing financing or additional loans from stockholders stockholders after the first operating operating cycle, beginning beginning in 2005. Poultry facility Feasibility

48

ASSUMPTIONS BEHIND PROJECTIONS AND CALCULATIONS

S/N PARTICULARS 1 Number of Birds in lay 2 Rearing Period (weeks) Broodin oding g cum gro growing ing perio riod Laying period (weeks) 3 Number of batches or cycle 4 Space requ requir irem eme ent per per bird ird (s (sq.f q.ft.) t.) Brooder cum grower period Layer period Hatchery Period 5 Cost of of Co Construction (N/sq.ft) Broiler cum grower shed Layer shed Hatchery shed Store room and admin office 6 Mortality rate (%) Broiler cum grower stage Laying stage Day old chicks (DOCs) 7 Total mortality loss (birds) 8 Total number of birds laying eggs 9 Rate of egg laying 10 Egg price (N/egg) Egg Production capacity per year 11 Average bo body we weight of of ma mature bi birds 12 Feed eed req require uireme ment nt (kg/ (kg/bi bird rd)) Brooding cum growing stage Laying stage Hatchery/Day old chicks


SIZE/COST/% 5,000 – 20,000 72 – 90 18 – 20 52 1-3 1 0.8 0.35 1000.00 1000.00 1000.00 650.00 6% - 10% 3% - 5% 4% - 6% 500 3500 – 12,600 2 eggs every 3 days (avg.) 9.00 766,500 eggs 1kg – 2.5kg 4.5 – 7.5 kg/bird 35 – 40 kg/bird 0.35 – 1 kg/bird

49

REVENUE ASSUMPTIONS:

Sale of mature Birds:

No. of Broilers/Layers

5,000 – 20,000

[a] Broilers

Mortality rate (%)

10%

[b] Layers

Available for sale

4,500

Average sale price

N450.00

Frequency Hatchery Capacity

2-3 times/year 10,000 DOCs

[a] Broilers

Mortality rate (%)

6%

[b] Layers

Available for sale

9,400

Average sale price

N110.00

Frequency

3-4 times/year

Initial No. of layers

3,500 – 14,000

Layer Mortality rate

10%

Effective no. laying eggs

3,150 – 12,600

Laying Period

52 weeks

Rate of lay

2eggs every 3 days

Total eggs laid/year

766,500 eggs

Egg Price/dozen

N108.00

Selling price/flock

N5000.00

Feed bags selling price

N15.00

Frequency

Twice/year

Sale of Day old Chicks:

Sale of Eggs:

Sale of Manure and Litters

EXPENSE ASSUMPTIONS:


50

PARTICULARS Admin Overhead as a % of sales

ASSUMPTION 12.5%

Transfer price of Day old chicks

N110.00

Weight of feed bag (Kg.)

50kg

Feed Cost/Bag

N850.00

Rearing Period Feed use/bird/yr (Kg)

0.95kg

Rearing Period cost of Feed/bird/yr.

N1,400.00

Laying Period Feed use/bird/year (Kg)

1.5kg

Laying period Cost of Feed/bird/year

N3,000.00

Vaccination Cost per bird

N5.00

Spray Cost per Flock

N1,500.00

Litter Cost per Flock

N1,350.00

Growth rate in input prices

6.5%


51

Poultry Study

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