Poultry Study 2w3646

CONTENT

01. EXECUTIVE SUMMARY 02. INTRODUCTION

i 3

02.01 Project Background 02.02 Objective of Study 02.03 Methodology

03. MARKET ANALYSIS

6

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. 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

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05. MANAGEMENT AND ORGANISATION 06. INVESTMENT COST ANALYSIS 07. REVENUE PROJECTION 08. FINANCING PLAN 09.

FINANCIAL PROJECTIONS AND APPRAISAL OF COMMERCIAL

VIABILITY

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CHAPTER TWO INTRODUCTION Project Background The livestock sub-sector is an important component of the Botswana 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 from the fact that it is one of the key contributors to the national economy. The poultry industry has experienced phenomenal growth in the past 20 years. The poultry industry plays a significant role in employment creation and poverty alleviation. In 2009 alone, the industry employed over 4500 people compared to 3050 in 2007/8. This represents an increase of 47.5%. The industry contributes significantly towards poverty alleviation and food security through Livestock Management and infrastructure Management (LIMID) and Culture and Youth Grant.

In 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 s (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, whereas, the sub-group, if properly managed, could impact greatly on the income and quality of life of the citizenry. This is because poultry production is a 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 continued survival of the fast growing human population of the developing 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 objective of this study is to undertake a detailed investigation of the technical, market, and financial feasibility of the project, bearing in mind the size

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of the target market (potential customers), the existing competition, 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.

Collation and detailed analysis of data so collected;

3.

Appraisal of the commercial viability of the project, and

4.

Preparation of comprehensive Feasibility Report.

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 the viability and 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 since 1994.This scenario is compounded more so when the volume of

egg supply is very low, being

10.56g per person per 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? Poultry farming is the commercial production of 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. Chicken

constitutes

about

90%

of

the

poultry

population

in

Nigeria.

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 poultry meat, which will be generated from, culled birds (i.e. layers and breeders), and broilers. Poultry by-products such as poultry droppings, poultry offal and hatchery wastes will also provide additional income to the project. Poultry dropping can be used as manure for vegetable gardening and feed ingredient in fish farming. Indeed, a wheelbarrow of fresh poultry droppings costs between N50.00 – N80.00 in some parts of Lagos State at the moment. Poultry offal and other hatchery wastes when grounded are good supply of calcium for growing birds. Hence, they can also be sold in their re-cycled forms. In brief, the 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 and fixed costs are justifiable. This is even more relevant for a non-automated poultry farm. For a fully automated and 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, 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

Layers 40% 3000- 4000 Chicks

4,000- 6,000 Chicks B

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

Apart from home consumption, 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 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 for poultry products.

Nigeria’s poultry market problems start in

1984 when the Federal Government banned importation of 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 after independence in 1960; poultry production grew substantially, peaking in 1982, with 40 million commercially reared birds. Since then, the bird population has dipped steadily, to an 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 of 50-700 birds’ 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.

Animal Care Services Konsult (Nig.) Ltd.,

3.

Cee-Jay Farms

4.

Harmony Projects Ltd.,

5.

Mayfield Farms Ltd.,

6.

Obasanjo Farms (Nig.) Ltd.,

7.

Richmond Foods Nigeria Ltd.,

8.

Samrose Agro-Industrial Company Limited

9.

Tuns Farm Nigeria Ltd.,

10.

U.O.O. Agricultural Industries

11.

UAC Foods (Integrated Poultry Farming)

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 responsibility. Hence, we came across varieties of production figures 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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Considering infrastructural constraints and other limiting factors, we 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 of the household population, Nigeria presently has about 22 million households. Assuming that each household consumes 20 chickens per annum which include the ones consumed during the major festive periods such as Christmas, New Year and Easter for Christian; Idel Malud, Idel Kabir for Muslims and during the birthday celebration of 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 chicken and poultry products. The other consumers include Fast Food

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Companies, Hotels and other food processing companies. Let us 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 follows: (‘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.

Poultry products, in their present forms, are not branded products. Hence, what is essential in this respect is the effective positioning of the distribution outlets, at the appropriate times.

2.

As a result of the substantial shortfall in supply, Nigeria’s poultry market is a sellers’ market.

3.

Large proportions of the production are being sold through informal channels. However, some degrees of competition exist between the locally produced poultry products and the imported ones. A strong indication of this is the phenomenal rise of poultry products shipped in container’s from the United States to Nigeria between 1995 and 1999 (see chart below)

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POULTRYPRODUCTS IMPORTEDFROMUNITED STATES(1997--1999) Poultry (TEUs)

Eggs &M ilk (TEUs)

Cargo (TEUs )

33

18

4

6

11997

8

9

1998 2r Yea

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 directly to the 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 distribution, poultry farmers sell directly to operators 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. of this group include •

Big retail outlets

•

Wholesalers

•

Franchise stores

•

Broiler processing plants

•

Egg processing plants

•

Exporters (Occasionally)

(b) Pricing: Pricing in the informal sector of the industry is relatively stable. However, price determination greatly depends on the 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

15

1. SUPPLY TO MAJOR HOTELS, RESTAURANTS AND CATERING 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. SUPPLY TO HAWKERS Live chickens or egg will be sold ed to hawkers on a regular basis. As most retailers have transport problems, the farm could entice them by delivering the chickens or eggs at their outlets CONTRACTING The farm may enter into a contract with medium or large-scale broiler s 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 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 hatchery Unit is expected to have a brooding capacity of

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10,000 fertile eggs per production cycle, and will be made up in the 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 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 are some essential requirements for growing broilers successfully. 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

18

4.13 Breeders/Layers Grow out Facility The breeders/layers production, otherwise known as point of lay production, involves the raising of pullet chicks from 0 – 18 weeks. The point of lay birds are used for producing fertile eggs in the process of producing replacement 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 Unit This involves the rearing of birds to sexual maturity, and then keeping them in lay for a year.

The eggs produced are infertile and

are called table 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 and machinery. The equipment/machinery requirements will include. a).

b)

Hatchery Unit •

Setter Incubator

•

Hatchers Incubator

•

Fumigation Equipment

•

Candling Lamb

Broiler, Layer and Breeder Unit •

Brooding Equipment

•

Feeding Equipment

•

Watering Equipment

•

Thermometer

•

De-beaking scissors

Setter Incubator The setter incubator would have a minimum capacity of 40,000 Eggs. The dimension of a typical one, “Chick Master 102” is 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 part of the feeding equipment. The

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

poultry slaughtering and broiler processing that has the capacity to

package 5000 broilers per day will be put in place.

Other Equipments Other 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 for growing commercial poultry is adequate housing. This is because broiler/layer production is essentially a chick brooding operation. Hence the house should contain necessary equipment so that such factors as temperature, moisture, air quality and light can be controlled easily. It should also provide for efficient installation and operation of brooding, feeding, watering and other equipment. A poultry building should have the following general features: *

Excellent ventilation, air movement and sufficient lighting,.

*

Optimal use of floor space.

*

Should contain all necessary equipment such as brooding, feeding, watering and other equipment for efficient operation.

*

The house should be sited on a well drained soil.

*

Floor of the poultry houses must be concreted and littered.

Three types of houses are utilised in the commercial production of broiler, layer and breeder. Thus birds are transferred to the various houses depending 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.

Brooder house must be maintained properly and kept warm 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, 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 optimally. A well ventilated housing accommodation will suit the growers with enough floor space for the number of growers involved.

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, this is where the birds will domiciled until

they reach the market weight of about 1.6kg in 3 -4 months. Cage Poultry facility Feasibility

23

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

Figure 1. Modern broiler house, which uses two feed bins. Houses should be capable of maintaining appropriate temperatures during the entire growing cycle, regardless of the outside temperature. Colder 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)

Supplementary Electricity supply,

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c)

Paved Road Transportation,

d)

Drainage Facility

Water Supply Clean water supply is a sine qua non of poultry business. Hence, there should be provision for an alternative source of water since constant and clean 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 generating set to supplement National Electric Power Authority 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 types of food birds feed on varies as they grow, and these include: Chicksmash, which is used for feeding chicks from a

“ day old” 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.

Poultry facility Feasibility

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The bulk of this feed will be sourced locally from bulk importers and 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 popular vaccines include: Newcastle disease vaccine, Coccidants 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

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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. The overall management functions, which will include broad 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 promoter will assume the overall supervisory responsibilities 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 estimated annual salary and allowance for the six staff and the Managing Director is N 600,000.00. If it is assumed that the salary would increase by 10% per annum, then the salary for the next 5 years is as follows: • • • • •

N 600,000.00--------Year 1 N 660,000.00--------Year 2 N 726,000.00--------Year 3 N 798,600.00--------Year 4 N 878,460.00--------Year 5

ORGANISATION STRUCTURE

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Initially, the farm will maintain a lean structure in the first five 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 in place, a very good structure. Hence, the following structure 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 Finance and istration Department will be headed by Finance & istration Manager and will supervise all istration s and personnel matters. The Livestock’s Department will be headed by Livestock Manager, who will supervise the broiler, layers / breeder and egg production operations of the farm. The Business Development Manager will head the Marketing and sales Department. He will be responsible for implementing marketing and sales strategies of the farm.

PROPOSED ORGANISATION STRUCTURE

Chairman/CEO

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General Manager

Livestock Manager

Feed man

Poultry facility Feasibility

Veterinary Assistant

Hatchery Manager

Finance & Manager

Business Development Manager

Hatchery Assistants

Clerks 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 searches, the principal cost component of the project are [1] land/building & 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.

10,850,000

Machines/Equipment: Automated Watering System Automated feeding system Automated manure removal Incubation and Hatchery equipment Generator

(1 nos. 75 KVA)

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

Office Equipment (see details)

3,000,000

Water bore hole equipment

1,000,000

Sub-Total

Poultry facility Feasibility

42,750,000

31

1.3

1.4

Delivery Vehicles: a)

Saloon Car (1 no.)

2,900,000

b)

Purchasing/Delivery Van (1 no.)

2,750,000

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)

ing Systems Manual

-

500,000

j)

Personnel/ Policies Manual

-

500,000

k)

Staff Recruitment

-

650,000

I)

Sundry Expenses

-

250,000

Sub-Total 1.6

3,000,000

Raw Material 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.

Poultry facility Feasibility

32

1.7

Working Capital:

The working capital is a sum that should be available to the business. The working capital for the first year of operation of the Poultry is estimated, on the basis of the operating expenses. 2.0

OPERATING AND MAINTENANCE COSTS

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 is estimated at N350, 000 for two months. This is much in 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)

Maintenance of other machines/equipment is estimated to cost N75,000 per annum.

b) 2.2

The Vehicles will be maintained at N300,000 per annum.

Management and Personnel Cost

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

The

estimated cost of staff emoluments in the first year of operation is N5million, and an annual increase of 10% per annum is expected for the next five years. Detailed breakdown of manpower expenses can be seen at the section 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 best practices. We have however been a little conservative in this matter. Vaccination cost is put at N30 per bird. Spray cost is put at N5, 000 per flock, Feed cost is put at N1, 100 per bag of 25kg on average. Poultry facility Feasibility

33

c. Utilities These have been estimated as follows:

N

i.

Telephone bills ()

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. Audit expenses These have been pegged at N250, 000 in the first two years, then it moved to N350,000 as from the third year. e. Facilities, Cleaning And Maintenance These include items such as manure equipment clean-up, disposal of 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. 2.3 General Overhead: The general overhead cost in the first year of operation is estimated as below: I)

Travel expenses

N 200,000

ii)

Printing/Stationery

100,000

iv)

Staff Uniform

100,000

v)

Sundry Expenses

250,000

2.4 Depreciation 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).

Poultry facility Feasibility

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

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

Poultry facility Feasibility

0.540 0.540 0.540 0.540 0.540 2.700 0.300 3.000

0.322875 0.322875 0.322875 0.322875 0.000 1.2915 0.1435 1.435

35

CHAPTER 7 REVENUE PROJECTION The main sources of revenue of the Poultry facility are: i) Sale of mature birds ii) Sale of eggs iii) Sale of bird litters/manure iv) Sale of day-old chicks i)

Revenue from sale of mature birds is based on initial capacity of 5,000 birds, given a mortality rate of between 6% - 10% per cycle.

The

production capacity is 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 remaining as assumed. Following the 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 20,000 bird capacity, all on a worst case scenario.

The estimated

industry growth rate is about 12.5% annually. ii)

Revenue from the sale of eggs is based on projected number of layers, 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 the laying period, and given the assumed mortality 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 for a 20,000 bird capacity on an annual basis. The average industry growth rate is 15% per annum.

Poultry facility Feasibility

36

iii)

Revenue from sale of manure and bird litters is based on industry average revenue estimates and given the strategic location of the poultry. It is estimated that N129,000 – N492,000 will be realized from the above sales, given capacity utilization of between 5000 – 20000 birds respectively. The figure should grow by about 10% per annum

iv)

Revenue from sale of day old chicks is based on estimated availability of hatchery systems, government policy on the importation of day old chicks and given the mortality rate of the day old chicks, among others. Therefore, it is estimated that N12.408million, N18.612million and N24.816million respectively will be realised on a capacity of 40,000, 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. The capacity of 10,000 birds should be installed in year 3, while that of 20,000 birds should be installed in year 5. The average percent growth in revenue of 13% per annum is assumed as per general industry trend.

Poultry facility Feasibility

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 overdrafts.

Our various discussions with the promoter show that the

financing structure and pattern should follow above path.

Consequently, 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

ii)

SMIES Loan

50.000

66.55

iii)

Start-up funding

10.108

13.45

N75.135

100.00

Total i.

Equity contribution will cover the cost of initial acquisition of land 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 istrative office and store rooms.

ii)

SMIEIS Loan of N60.00 million will be used to finance substantial part 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 whatever the choice of financing. However, lease financing is particularly attractive on the following grounds: i) It allows 100% debt financing, as equity contribution is not required. ii) It is easier and quicker to obtain a lease than to obtain a loan iii) Lower equity taxes are paid iv) It has greater tax savings over a buy decision The SMIES loan is expected to reduce the pains of servicing a regular bank revolving loan with periodic interest and principal repayments.

Poultry facility Feasibility

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 Profit and Loss 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. In the second year, net profit after tax is expected to be N2.735million. Beginning from year three, the 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. The high 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 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 that might ask for short-term credit. As a result, the projected net cash flow is positive throughout the period, except for 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.

Poultry facility Feasibility

40

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD All Figures are in Millions of Naira BALANCE SHEETS Year Cash and Near Cash items Due from related parties Prepaid Expenses Inventory and WIP Other s Receivable Total current assets Gross property, plant & equipment Less accumulated depreciation Net property, plant & equipment Total assets s payable Taxes Payable

1

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

2

14,296,7 96

5

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

Poultry facility Feasibility

1

0

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

39,284,50 0

36,538,29 5

1,822,11

56,211,05 7

1,298,44

0

1,154,175 77,489,63

54,985,55 1

27,218,88 4

29,164,50

32,478,48 5

0 58,185,00

7

1,997,55 0

91,977,78 4

58,185,00

124,711,99 1

58,185,00

58,185,00

0

0

0

0

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

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

10,931,43

819,852 12,079,24

(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

91,036,41 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

4 23,912,47

14,997,00

9,892,70 5

3 17,442,25

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

41

PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD INCOME STATEMENTS Year Sales Growth rate (%)

All Figures are in Millions of Naira 1 2 3 26,185,500 29,458,688 46,167,000 12.50% 56.72%

Less COGS

(10,274,500)

(14,997,000)

(19,944,500)

(29,164,500)

(39,284,500)

Growth rate (%) Gross profit Growth rate (%) Less SG&A expenses Growth rate (%) Earnings before Interest, Tax & Deprec.

15,911,000

31.49% 14,461,688 -10.02% (749,850) 31.49%

24.81% 26,222,500 44.85% (997,225) 24.81%

31.61% 22,773,375 -15.15% (1,458,225) 31.61%

25.76% 40,617,500 43.93% (1,964,225) 25.76%

15,397,275

13,711,838

25,225,275

21,315,150

38,653,275

Less depreciation Earnings after depr. b/4 Interest & Tax

(6,854,625)

(6,854,625)

(9,294,645)

(9,294,645)

(9,294,645)

8,542,650 -

6,857,213 -

15,930,630 -

12,020,505 -

29,358,630 -

(1,548,651) 6,993,999

(2,950,145) 3,907,068

(4,218,465) 11,712,165

(5,366,266) 6,654,239

(6,405,000) 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

(2,098,200)

(1,172,120)

(3,513,650)

(1,996,272)

(6,886,089)

(819,852)

(465,797)

(1,606,754)

Less SMIES int. repayment accrual Pre-tax income Cumulative pre-tax income (NOL) Taxes Pre-tax income Less taxes

(513,725)

Less Proposed Dividend Net income Growth rate (%) Return on Investment Return on Sales Return on Equity

Poultry facility Feasibility

4,895,799

7.19% 18.70% 19.48%

-

4

5

51,937,875 12.50%

79,902,000 53.84%

2,734,948 -79.01%

7,378,664 62.93%

4,192,171 -76.01%

14,460,787 71.01%

4.01% 9.28% 10.88%

10.83% 15.98% 29.36%

6.15% 8.07% 16.68%

21.22% 18.10% 57.53%

42

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

1

2

3

4,895,799 6,854,625 10,171,755

Less investment Cash flow from operations and invests Plus net new equity capital raised Current year Interest Less dividends paid Inc. (Decr.) in long-term debt Inc. (Decr.) Other borrowings Cash flow from ops, invests, and fin

(75,135,000)

13,296,796

3,145,459

6,470,216

1,064,072

2,242,342

Beginning cash balance Ending cash balance

1,000,000 14,296,796

14,296,796 17,442,255

17,442,255 23,912,471

23,912,471 24,976,542

24,976,542 27,218,884

Poultry facility Feasibility

(130,928) 2,054,900 23,846,152

-

7,378,664 9,294,645 6,761,186

5

Net income Plus depreciation Less increase in inventory Plus Interest on Investments Less increase in s receivable Plus increase in s payable Cash flow from operations

-

2,734,948 6,854,625 (7,499)

4

-

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

14,460,787 9,294,645 3,928,450

-

-

2,945,869

(46,167)

4,934,098

(3,859,267)

4,499,100 17,027,043

199,445 23,587,773

2,085,262 20,243,695

1,178,535 25,003,150

-

-

-

-

(51,288,848)

17,027,043

23,587,773

20,243,695

25,003,150

15,027,000 (1,548,651) -

(2,950,145) -

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

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

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

51,107,295

(10,931,439)

(12,079,240)

(13,347,561)

(14,749,054)

-

-

-

-

-

43

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

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

Sales Mature birds Eggs Day old Chicks

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

Poultry facility Feasibility

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)

-

G & A (without Depreciation)

63

Depreciation Total Fixed amounts)

5

256,8

63

,925 256,8

(fixed

374

7,368,35

0

Interest Income (Expense) - "Fixed"

51)

Income Taxes - "Variable"

00)

Net Income After Taxes

9

Analysis Income from Operations Contribution Margin

0.608

(1,548,6 (2,098,2

4,895,79

0.491 12,126,44

Break-Even Sales Sales Volume Above BreakEven

Poultry facility Feasibility

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,

11,258, 870

05

5)

120)

10,752,8

15,930,63

(2,950,

9,294 ,645

70

0

145)

9,294,

10,291,87

6,857

982 ,113

645

0

,213

729,

9,294,64

7,604

982 ,113

113

5

,475 8,542,65

Income from Operations

498,6

6,854

729,

113

13

,625

0

498,6

13

,925 6,854,62

Costs

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 in the process of forecasting future events and circumstances.

The

assumptions disclosed below are those that are considered to be significant to the preparation of its financial projections. Some assumptions, regardless of the amount of study or analysis, will not materialize, and unexpected events and circumstances may occur after the date of the financial projections. Thus, it should be expected that actual results will vary, to some degree, from 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 would enable the Company to develop a world-class 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 projections include actual results from a 12-month time span, beginning early 2005 through to early 2006. 2. Turnover will range from N26.2 million to N79.9million, over the 5-year planning period, assuming gross turnover remain steady, on a growth path of 13% per annum. 3. The cost of turnover is expected to peak at 68% of the sale price of the Poultry facility products and services, leaving 32% of revenues to cover Poultry facility Feasibility

46

operating and other expenses. This is much in line with the cost structure of the Poultry and egg industry in Nigeria at the time of this report. 4. The focus on revenue from sales of mature birds and eggs is expected to increase such that a significant portion of the total revenue should be generated from these sources. The projection is that up to 80% of 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 the same period, spending on start-up costs such as marketing, advertising and promotion, general istration 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 expenditure of N50.0million is expected to be incurred in order to complete work on the construction phase of the Poultry facility and to purchase critical automated poultry and hatchery equipment.

Major

recruitment is also expected to be undertaken during the start-up phase. 2. Operating expenses especially salaries and wages are expected 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 of Sales/marketing staff is expected to improve, riding on the general acceptance of the Poultry facility products and services. 4. Headcount should increase from 2 to about 5 within the planning period. The high degree of automation makes the need for new hires to be minimal. 5. Annual salaries (except sales staff) increase 10% annually beginning 2005.

Poultry facility Feasibility

47

6. Interest expense for borrowed funds are acquired is provided at 30% per annum, and interest income on deposits is earned at 2%. 7. Depreciation is calculated using the straight-line method over 5 years. 8. Federal income taxes are provided at 30% INVESTING - 2004 – 2008 1. Equipment purchases are projected at between N43.0million and N63million. This may be staggered over a two period cycle to take of expansion in number of birds. Taxation and Capital Allowances Annual Taxation on corporate body takes into consideration 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 ratio of about 37:63 is maintained between equity and debt, such that dilution of ownership and control is deeply affected.

In 2005 the

Company raises N50million SMIES loan and N15.057million of equity to fund investing and financing cash flow requirements.

In year 2007, additional

equity of N10million is introduced to finance growth in number of birds. 2. There are no provisions for further bank loans, s receivable financing or additional loans from stockholders after the first operating cycle, 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) Brooding cum growing period Laying period (weeks) (weeks) 3 Number of batches or cycle 4 Space requirement per bird (sq.ft.) Brooder cum grower period Layer period Hatchery Period 5 Cost of Construction (N/sq.ft) Broiler cum grower shed Layer shed Hatchery shed Store room and 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 body weight of mature birds 12 Feed requirement (kg/bird) Brooding cum growing stage Laying stage Hatchery/Day old chicks

Poultry facility Feasibility

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:

Poultry facility Feasibility

50

PARTICULARS 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%

Poultry facility Feasibility

51