Poultry Study

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

Poultry facility Feasibility 1

05. MANAGEMENT AND ORGANISATION

06. INVESTMENT COST ANALYSIS

07. REVENUE PROJECTION

08. FINANCING PLAN

09. FINANCIAL PROJECTIONS AND APPRAISAL OF COMMERCIAL

VIABILITY


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)


Product 1994 1995 1996 1997 1998 1999 2000 2001 2002

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

Milk 951 961 972 989 9 91 1000 1012 1038 1046

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


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.


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


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


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.


PROPOSED CAPACITY (%) OF THE INTEGRATED POULTRY FARM

(a) Poultry Section

(b) Hatchery Section

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.


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.


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 “


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

Chicks

60 63 66.15 69.46 72.93 76.58

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


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)


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


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:


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.


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

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:


Fertile Eggs Fumigations of Eggs

a) A Setter Incubator

b) A Hatchers Incubator

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

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.

4.13 Breeders/Layers Grow out Facility


Setter Incubator

Candling Room

Hatchers Incubator

Day-Old Chicks (DOC)

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

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

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:

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:

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

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,

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.

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

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:

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

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

Poultry facility Feasibility

General Manager

Livestock Manager Hatchery ManagerFinance & Admin

ManagerBusiness Development

Manager

Feed manHatchery Assistants

Admin ClerksAccount Clerks

Business Development ExecutivesVeterinary Assistant

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



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


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


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.

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.

2.3General 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

2.4Depreciation

Depreciation is estimated at N7, 304,625 on a straight-line basis on an annual

basis, given a 10% salvage value, as indicated below: (note that building/poultry


equipment is depreciated over a ten-year period).

DEPRECIATION SCHEDULE

PLTRY.EQM

T/

BUILDING

ENERGY O/EQUIP. VEHICLES FURN./FIT YEAR

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


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.


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





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


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.


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.


PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD

BALANCE SHEETSAll Figures are in Millions of Naira

Year 1 2 3 4 5Cash and Near Cash items

14,296,796

17,442,255

23,912,471

24,976,542

27,218,884

Due from related parties - - - -

Prepaid Expenses 10,274,500

14,997,000

19,944,500

29,164,500

39,284,500

Inventory and WIP 18,421,499

20,724,187

32,478,485

36,538,295

56,211,057

Other Accounts Receivable

652,909

1,822,110 1,154,175

1,298,447

1,997,550

Total current assets 43,645,705

54,985,551

77,489,630

91,977,784

124,711,991

Gross property, plant & equipment

58,185,000

58,185,000

58,185,000

58,185,000

58,185,000

Less accumulated depreciation

(6,854,625)

(13,709,250)

(23,003,895)

(32,298,540)

(41,593,185)

Net property, plant & equipment

51,330,375

44,475,750

35,181,105

25,886,460

16,591,815

Total assets 94,976,080

99,461,301

112,670,735

117,864,244

141,303,806

Accounts payable 513,725

749,850 1,003,118

1,459,768

1,967,540

Taxes Payable 2,098,200

1,172,120 3,513,650

1,996,272

6,886,089

Dividends Payable - - 819,852 465,797

1,606,754

Current Portion of LTD 9,892,705

10,931,439

12,079,240

13,347,561

14,749,054

Other Accruals 1,548,651

2,950,145 4,218,465

5,366,266

6,405,000

Total current liabilities 14,053,281

15,803,554

21,634,324

22,635,663

31,614,438

Long-term debt 61,000,000 61,000,000 61,000,000

61,000,000

61,000,000

Common Stock - Paid up 15,027,000

15,027,000

15,027,000

15,027,000

15,027,000

Net Income 4,895,799

2,734,948 7,378,664

4,192,171

14,460,787

Shareholders equity 19,922,799

22,657,747

30,036,411

34,228,582

48,689,369

Total long-term debt and equity

80,922,799

83,657,747

91,036,411

95,228,582

109,689,369

Total Liabilities 94,976,080

99,461,301

112,670,735

117,864,245

141,303,806

Current Ratio 3.11 3.48 3.58 4.06 3.94

Total Liabilities/Equity 3.83 3.92 3.01 3.07 2.24


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%


CASH FLOW STATEMENT FOR THE 5-YEAR PLANNING PERIOD

STATEMENTS OF CASH FLOWSAll 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


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

"WHAT IF" ANALYSIS YEAR 1 SCENARIOPessimistic Planned Optimistic

Sales 70% 100% 120%

Mature birds 4,725,000

6,750,000

8,100,000

Eggs 4,828,950

6,898,500

8,278,200

Day old Chicks 8,685,600

12,408,000

14,889,600

Manure/Litters 90,300

129,000

154,800

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

Costs of Goods Sold 2.000 1.000 0.500Variable Cost of Goods Sold 20,549,000 10,274,500 5,137,250Fixed Costs Reclassified to Variable Costs 0 0 0Total Variable Costs 20,549,000 10,274,500 5,137,250

1.100 1.000 0.900

Fixed Costs of Goods & Services 0 0 0Total 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 0.900Sales & 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 0Total 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 -1,548,651Income 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


BREAK EVEN ANALYSIS (N'MILLIONS)

YEAR 1 2 3 4 5

Sales 26,185,500

29,458,688

46,167,000

51,937,875

79,902,000

Variable Costs

Material & Labor 10,274,500

14,997,000

19,944,500

29,164,500

39,284,500

Commissions -

-

-

-

Total Variable Costs 10,274,500

14,997,000

19,944,500

29,164,500

39,284,500

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 Commissions)

256,863

374,925

498,613

729,113

982,113

G & A (without Depreciation) 256,863

374,925

498,613

729,113

982,113

Depreciation 6,854,625

6,854,625

9,294,645

9,294,645

9,294,645

Total Fixed Costs (fixed amounts)

7,368,350

7,604,475

10,291,870

10,752,870

11,258,870

Income from Operations 8,542,650

6,857,213

15,930,630

12,020,505

29,358,630

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

(2,950,145)

(4,218,465)

(5,366,266)

(6,405,000)

Income Taxes - "Variable" (2,098,200)

(1,172,120)

(3,513,650)

(1,996,272)

(6,886,089)

Net Income After Taxes 4,895,799

2,734,948

8,198,516

4,657,967

16,067,541

Analysis

Income from Operations

Contribution Margin 0.608 0.491 0.568 0.438 0.508

Break-Even Sales 12,126,449

15,490,437

18,119,735

24,523,428

22,148,242

Sales Volume Above Break-Even

14,059,051

13,968,251

28,047,265

27,414,447

57,753,758


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


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.


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.


ASSUMPTIONS BEHIND PROJECTIONS AND CALCULATIONS

S/N PARTICULARS SIZE/COST/%1 Number of Birds in lay 5,000 – 20,0002 Rearing Period (weeks) 72 – 90

Brooding cum growing period

(weeks)

18 – 20Laying period (weeks) 52

3 Number of batches or cycle 1 - 34 Space requirement per bird (sq.ft.)

Brooder cum grower period 1Layer period 0.8Hatchery Period 0.35

5 Cost of Construction (N/sq.ft)Broiler cum grower shed 1000.00Layer shed 1000.00Hatchery shed 1000.00Store 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) 5008 Total number of birds laying eggs 3500 – 12,6009 Rate of egg laying 2 eggs every 3 days (avg.)10 Egg price (N/egg) 9.00

Egg Production capacity per year 766,500 eggs11 Average body weight of mature birds 1kg – 2.5kg12 Feed requirement (kg/bird)

Brooding cum growing stage 4.5 – 7.5 kg/birdLaying stage 35 – 40 kg/birdHatchery/Day old chicks 0.35 – 1 kg/bird


REVENUE ASSUMPTIONS:

Sale of mature Birds:

[a] Broilers

[b] Layers

No. of Broilers/Layers

Mortality rate (%)

Available for sale

Average sale price

Frequency

5,000 – 20,000

10%

4,500

N450.00

2-3 times/year

Sale of Day old Chicks:

[a] Broilers

[b] Layers

Hatchery Capacity

Mortality rate (%)

Available for sale

Average sale price

Frequency

10,000 DOCs

6%

9,400

N110.00

3-4 times/year

Sale of Eggs:

Initial No. of layers

Layer Mortality rate

Effective no. laying eggs

Laying Period

Rate of lay

Total eggs laid/year

Egg Price/dozen

3,500 – 14,000

10%

3,150 – 12,600

52 weeks

2eggs every 3 days

766,500 eggs

N108.00

Sale of Manure and Litters

Selling price/flock

Feed bags selling price

Frequency

N5000.00

N15.00

Twice/year


EXPENSE ASSUMPTIONS:

PARTICULARS ASSUMPTION

Admin Overhead as a % of sales

Transfer price of Day old chicks

Weight of feed bag (Kg.)

Feed Cost/Bag

Rearing Period Feed use/bird/yr (Kg)

Rearing Period cost of Feed/bird/yr.

Laying Period Feed use/bird/year (Kg)

Laying period Cost of Feed/bird/year

Vaccination Cost per bird

Spray Cost per Flock

Litter Cost per Flock

Growth rate in input prices

12.5%

N110.00

50kg

N850.00

0.95kg

N1,400.00

1.5kg

N3,000.00

N5.00

N1,500.00

N1,350.00

6.5%


Documents

Poultry Study