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CONTENT

01. EXECUTIVE SUMMARY i

02. INTRODUCTION 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 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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199 199 199 199 199 199 200 200 2002
Product 4 5 6 7 8 9 0 1
Poultry 63 73 74 76 77 82 88 95 107
Eggs 377 399 422 4 35 436 450 465 487 514
Goat meat 80 88 92 95 96 101 107 114 129
Lamb/Mutton 85 94 96 101 102 107 113 117 126
Beef 183 192 197 200 202 208 215 228 239
Pork 25 31 39 43 45 47 50 55 62
100 101 103 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, 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 old-
chicks, 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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• Day-Old Chicks
• Farm Eggs
• Poultry Meat
- From Culled birds (Layers and Breeders)
- Broilers
(b) 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
4,000- 6,000 Chicks 40%
3000- 4000 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 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 El-
Fitri, 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)
2003 2004 2005 2006 2007 2008
Chicken 50 52.5 56.13 57.88 60.78 63..81
Eggs 60 63 66.15 69.46 72.93 76.58
Day-old 60 63 66.15 69.46 72.93 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. 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 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
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 2005 2006 2007 2006
500 510 520.2 530.60 541.5

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 &Milk (TEUs)

33
Cargo (TEUs )

18

8 9
6
4

1998
11997 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. Members 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:

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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 registered 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 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 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


Setter
Incubator

Day-Old Chicks Hatchers


(DOC) Incubator Candling
Room
4.12 Broiler Grow-out Facility
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.

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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). Hatchery Unit


• Setter Incubator
• Hatchers Incubator
• Fumigation Equipment
• Candling Lamb
b) 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 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 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

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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.

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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:

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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 Administration Department will be headed by Finance &


Administration Manager and will supervise all administration accounts 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

Finance & Admin Business Development


Livestock Manager Hatchery Manager
Manager Manager

Feed man Admin Clerks


Veterinary Assistant Hatchery Assistants Business Development Executives
Account Clerks

Poultry facility Feasibility 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 10,850,000
1.2. Machines/Equipment:
Automated Watering System 6,500,000
Automated feeding system 12,000,000
Automated manure removal 2,750,000
Incubation and Hatchery equipment 15,000,000
Generator (1 nos. 75 KVA) 2,500,000
Office Equipment (see details) 3,000,000
Water bore hole equipment 1,000,000
Sub-Total 42,750,000

Poultry facility Feasibility 31


1.3 Delivery Vehicles:
a) Saloon Car (1 no.) 2,900,000
b) Purchasing/Delivery Van (1 no.) 2,750,000
Sub-Total 5,650,000

1.4 Furniture & Fittings:


a) Furniture (see details) 1,200,000
b) Air conditioners (1 no.) 150,000
c) Telephone Installation 85,000

Sub-Total 1,435,000

1.5 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 - 500,000
k) Staff Recruitment - 650,000
I) Sundry Expenses - 250,000
Sub-Total 3,000,000

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

2.2 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 (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. 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
T/
BUILDING
4.721 0.450 0.540 1.27125 0.322875 1
4.721 0.450 0.540 1.27125 0.322875 2
7.161 0.450 0.540 1.27125 0.322875 3
7.161 0.450 0.540 1.27125 0.322875 4
7.161 0.450 0.540 0.000 0.000 5
58.185 2.250 2.700 5.085 1.2915 TOTAL
5.819 0.250 0.300 0.565 0.1435 Salvage
75.135 2.500 3.000 5.650 1.435 COST

Poultry facility Feasibility 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.

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

Poultry facility Feasibility 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
Total N75.135 100.00

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
administrative 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 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. 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 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 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 1 2 3 4 5
Cash and Near Cash 14,296,7 17,442,25 23,912,47 24,976,54 27,218,88
items 96 5 1 2 4
Due from related parties - - - -
10,274,5 14,997,00 19,944,50 29,164,50 39,284,50
Prepaid Expenses 00 0 0 0 0
18,421,4 20,724,18 32,478,48 36,538,29 56,211,05
Inventory and WIP 99 7 5 5 7
Other Accounts 652,90 1,822,11 1,298,44 1,997,55
Receivable 9 0 1,154,175 7 0
43,645,7 54,985,55 77,489,63 91,977,78 124,711,99
Total current assets 05 1 0 4 1
Gross property, plant & 58,185,0 58,185,00 58,185,00 58,185,00 58,185,00
equipment 00 0 0 0 0
Less accumulated (6,854,6 (13,709,25 (23,003,89 (32,298,54 (41,593,18
depreciation 25) 0) 5) 0) 5)
Net property, plant & 51,330,3 44,475,75 35,181,10 25,886,46 16,591,81
equipment 75 0 5 0 5
94,976,0 99,461,30 112,670,73 117,864,24 141,303,80
Total assets 80 1 5 4 6
513,72 749,85 1,459,76 1,967,54
Accounts payable 5 0 1,003,118 8 0
2,098,20 1,172,12 1,996,27 6,886,08
Taxes Payable 0 0 3,513,650 2 9
465,79 1,606,75
Dividends Payable - - 819,852 7 4
9,892,70 10,931,43 12,079,24 13,347,56 14,749,05
Current Portion of LTD 5 9 0 1 4
1,548,65 2,950,14 5,366,26 6,405,00
Other Accruals 1 5 4,218,465 6 0
14,053,2 15,803,55 21,634,32 22,635,66 31,614,43
Total current liabilities 81 4 4 3 8
61,000,0 61,000,00 61,000,00
Long-term debt 00 61,000,000 61,000,000 0 0
15,027,0 15,027,00 15,027,00 15,027,00 15,027,00
Common Stock - Paid up 00 0 0 0 0
4,895,79 2,734,94 4,192,17 14,460,78
Net Income 9 8 7,378,664 1 7
19,922,7 22,657,74 30,036,41 34,228,58 48,689,36
Shareholders equity 99 7 1 2 9
Total long-term debt and 80,922,7 83,657,74 91,036,41 95,228,58 109,689,36
equity 99 7 1 2 9
94,976,0 99,461,30 112,670,73 117,864,24 141,303,80
Total Liabilities 80 1 5 5 6
3.1
Current Ratio 1 3.48 3.58 4.06 3.94
3.8
Total Liabilities/Equity 3 3.92 3.01 3.07 2.24

Poultry facility Feasibility 41


PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD

INCOME STATEMENTS All Figures are in Millions of Naira


Year 1 2 3 4 5
Sales 26,185,500 29,458,688 46,167,000 51,937,875 79,902,000
Growth rate (%) - 12.50% 56.72% 12.50% 53.84%
Less COGS (10,274,500) (14,997,000) (19,944,500) (29,164,500) (39,284,500)
Growth rate (%) - 31.49% 24.81% 31.61% 25.76%
Gross profit 15,911,000 14,461,688 26,222,500 22,773,375 40,617,500
Growth rate (%) -10.02% 44.85% -15.15% 43.93%
Less SG&A expenses (513,725) (749,850) (997,225) (1,458,225) (1,964,225)
Growth rate (%) 31.49% 24.81% 31.61% 25.76%
Earnings before Interest,
Tax & Deprec. 15,397,275 13,711,838 25,225,275 21,315,150 38,653,275
Less depreciation (6,854,625) (6,854,625) (9,294,645) (9,294,645) (9,294,645)
Earnings after depr. b/4
Interest & Tax 8,542,650 6,857,213 15,930,630 12,020,505 29,358,630
- - - - -
Less SMIES int.
repayment accrual (1,548,651) (2,950,145) (4,218,465) (5,366,266) (6,405,000)
Pre-tax income 6,993,999 3,907,068 11,712,165 6,654,239 22,953,630
Cumulative pre-tax
income (NOL) 6,993,999 10,901,067 22,613,232 29,267,471 52,221,101
Taxes 2,098,200 1,172,120 (3,513,650) (1,996,272) (6,886,089)
Pre-tax income 6,993,999 3,907,068 11,712,165 6,654,239 22,953,630
Less taxes (2,098,200) (1,172,120) (3,513,650) (1,996,272) (6,886,089)
Less Proposed Dividend - - (819,852) (465,797) (1,606,754)

Net income 4,895,799 2,734,948 7,378,664 4,192,171 14,460,787


Growth rate (%) -79.01% 62.93% -76.01% 71.01%

Return on Investment 7.19% 4.01% 10.83% 6.15% 21.22%


Return on Sales 18.70% 9.28% 15.98% 8.07% 18.10%
Return on Equity 19.48% 10.88% 29.36% 16.68% 57.53%

Poultry facility Feasibility 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 5

Net income 4,895,799 2,734,948 7,378,664 4,192,171 14,460,787


Plus depreciation 6,854,625 6,854,625 9,294,645 9,294,645 9,294,645
Less increase in inventory 10,171,755 (7,499) 6,761,186 (262,481) 3,928,450
Plus Interest on
Investments - - - - -
Less increase in accounts
receivable (130,928) 2,945,869 (46,167) 4,934,098 (3,859,267)
Plus increase in accounts
payable 2,054,900 4,499,100 199,445 2,085,262 1,178,535
Cash flow from operations 23,846,152 17,027,043 23,587,773 20,243,695 25,003,150
Less investment (75,135,000) - - - -
Cash flow from operations
and invests (51,288,848) 17,027,043 23,587,773 20,243,695 25,003,150
Plus net new equity
capital raised 15,027,000 - - - -
Current year Interest (1,548,651) (2,950,145) (4,218,465) (5,366,266) (6,405,000)
Less dividends paid - - (819,852) (465,797) (1,606,754)
Inc. (Decr.) in long-term
debt 51,107,295 (10,931,439) (12,079,240) (13,347,561) (14,749,054)
Inc. (Decr.) Other
borrowings - - - - -
Cash flow from ops,
invests, and fin 13,296,796 3,145,459 6,470,216 1,064,072 2,242,342
Beginning cash balance 1,000,000 14,296,796 17,442,255 23,912,471 24,976,542
Ending cash balance 14,296,796 17,442,255 23,912,471 24,976,542 27,218,884

Poultry facility Feasibility 43


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

"WHAT IF" ANALYSIS YEAR 1 SCENARIO


Pessimistic Planned Optimistic
Sales 70% 100% 120%
4,725,00 6,750, 8,100,0
Mature birds
0 000 00
4,828,95 6,898, 8,278,2
Eggs
0 500 00
8,685,60 12,408,0 14,889,6
Day old Chicks 0 00 00
90,30 129, 154,8
Manure/Litters 0 000 00

Net Sales 18,329,850 26,185,500 31,422,600

Costs of Goods Sold 2.000 1.000 0.500


Variable Cost of Goods Sold 20,549,000 10,274,500 5,137,250
Fixed Costs Reclassified to Variable
Costs 0 0 0
Total Variable Costs 20,549,000 10,274,500 5,137,250

1.100 1.000 0.900


Fixed Costs of Goods & Services 0 0 0
Total Costs of Goods Sold 20,549,000 10,274,500 5,137,250

Gross Profit -2,219,150 15,911,000 26,285,350


% of Total Sales -12.11% 60.76% 83.65%

Operating Costs 1.200 1.000 0.900


Sales & Marketing 308,235 256,863 231,176

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 0 0 0
Total Expenses 7,471,095 7,368,350 7,316,978

Income From Operations -9,690,245 8,542,650 18,968,373

Interest Income (Expense) - "Fixed" -1,548,651 -1,548,651 -1,548,651


Income Taxes - "Variable" 0 -2,098,200 0

Net Income After Taxes -11,238,896 4,895,799 17,419,722

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

Poultry facility Feasibility 44


BREAK EVEN ANALYSIS (N'MILLIONS)
YEAR 1 2 3 4 5
26,185,50 29,458, 46,167,00 51,937,8 79,902,
Sales 0 688 0 75 000

Variable Costs
10,274,50 14,997, 19,944,50 29,164,5 39,284,
Material & Labor 0 000 0 00 500

Commissions - - - -
10,274,50 14,997, 19,944,50 29,164,5 39,284,
Total Variable Costs 0 000 0 00 500
0.392 0.509 0.432 0.562 0.492
Fixed Costs (calc as % of sales)
Fixed Cost of Goods & Services 0.000% 0.000% 0.000% 0.000% 0.000%
Sales & Marketing (w/o
Commissions) 2.500% 2.500% 2.500% 2.500% 2.500%
G & A (without Depreciation) 2.500% 2.500% 2.500% 2.500% 2.500%
Total Fixed Costs (calc as % of
sales) 5.000% 5.000% 5.000% 5.000% 5.000%

Fixed Costs (fixed amounts)

Fixed Cost of Goods & Services - - - - -


Sales & Marketing (w/o 256,8 374 498,6 729, 982
Commissions) 63 ,925 13 113 ,113
256,8 374 498,6 729, 982
G & A (without Depreciation) 63 ,925 13 113 ,113
6,854,62 6,854 9,294,64 9,294, 9,294
Depreciation 5 ,625 5 645 ,645
Total Fixed Costs (fixed 7,368,35 7,604 10,291,87 10,752,8 11,258,
amounts) 0 ,475 0 70 870

8,542,65 6,857 15,930,63 12,020,5 29,358,


Income from Operations 0 ,213 0 05 630

(1,548,6 (2,950, (4,218,46 (5,366,2 (6,405,


Interest Income (Expense) - "Fixed" 51) 145) 5) 66) 000)
(2,098,2 (1,172, (3,513,65 (1,996,2 (6,886,
Income Taxes - "Variable" 00) 120) 0) 72) 089)

4,895,79 2,734 8,198,51 4,657, 16,067,


Net Income After Taxes 9 ,948 6 967 541

Analysis
Income from Operations
Contribution Margin 0.608 0.491 0.568 0.438 0.508
12,126,44 15,490, 18,119,73 24,523,4 22,148,
Break-Even Sales 9 437 5 28 242
Sales Volume Above Break- 14,059,05 13,968, 28,047,26 27,414,4 57,753,
Even 1 251 5 47 758

Poultry facility Feasibility 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 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 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 account 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, accounts 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 SIZE/COST/%


1 Number of Birds in lay 5,000 – 20,000
2 Rearing Period (weeks) 72 – 90
Brooding cum growing period 18 – 20
Laying period (weeks) 52
(weeks)
3 Number of batches or cycle 1-3
4 Space requirement per bird (sq.ft.)
Brooder cum grower period 1
Layer period 0.8
Hatchery Period 0.35
5 Cost of Construction (N/sq.ft)
Broiler cum grower shed 1000.00
Layer shed 1000.00
Hatchery shed 1000.00
Store room and admin office 650.00
6 Mortality rate (%)
Broiler cum grower stage 6% - 10%
Laying stage 3% - 5%
Day old chicks (DOCs) 4% - 6%
7 Total mortality loss (birds) 500
8 Total number of birds laying eggs 3500 – 12,600
9 Rate of egg laying 2 eggs every 3 days (avg.)
10 Egg price (N/egg) 9.00
Egg Production capacity per year 766,500 eggs
11 Average body weight of mature birds 1kg – 2.5kg
12 Feed requirement (kg/bird)
Brooding cum growing stage 4.5 – 7.5 kg/bird
Laying stage 35 – 40 kg/bird
Hatchery/Day old chicks 0.35 – 1 kg/bird

Poultry facility Feasibility 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 2-3 times/year
Sale of Day old Chicks: Hatchery Capacity 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
Sale of Eggs:
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
Sale of Manure and Litters
Selling price/flock N5000.00
Feed bags selling price N15.00
Frequency Twice/year

EXPENSE ASSUMPTIONS:

Poultry facility Feasibility 50


PARTICULARS ASSUMPTION
Admin Overhead as a % of sales 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

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