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Feasibility Report A-1 Feed Industry PROJECT REPORT

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Project feasibility report of poultry feed company.The Islamia University of Bahawalpur, Pakistan.

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Page 1: Poultry Feed

Feasibility Report A-1 Feed Industry

1

PROJECT REPORT

“POULTRY FEED INDUSTRY”

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Feasibility Report A-1 Feed Industry

SUBMITTED TO:

Mr. JAVAID IQBAL (Chairman)

SUBMITTED BY:

NAME ROLL NO

HASAN QURESHI (29)

RAHIQA FATIMA (21)

JAWAD UL HASAN (08)

Msc (Accounting & Finance) 3rd Semester

2

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Feasibility Report A-1 Feed Industry

It is stated that the student of Department of Commerce

presently in M.Sc (Accounting & Finance) 3rd semester have

given project on “POULTRY FEED INDUSTRY”

Department of Commerce is being aware of the importance of practical

training, requires every M.Sc (Accounting & Finance) student to make a

project Assignment.

We also have also visited a Poultry Feed Industry Named as SHAMIM

FEED INDUSTRY SAMA SATTA LINK ROAD,

BAHAWALPUR.

We have tried our best to collect the knowledge and information. It has

broadened out knowledge and vision about the market.

This Report is the Explanation of all work done by project Team.

3

PREFACE

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Feasibility Report A-1 Feed Industry

ToTO

Due to one person we are able to do such a works.

He has produce skills in our selves. We have

dedicated all our work to very

Intelligent Charming, Educated, And Lime light

For student The One and Best OUR Teacher:

Thank you Sir

4

DEDICATED

Javaid Iqbal

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Feasibility Report A-1 Feed Industry

Up and above everything, we are thankful to ALMIGHTY

ALLAH, the most Beneficent and merciful, and His Holy

Prophet (Peace be upon him) Who is forever a true torch of

guidance for whole humanity. We am greatly obliged to

“ALLAH” by Whom grace we have been able to complete this

Project Report successfully.

We also offer our thanks to Honorable Mr. Javaid Iqbal for

providing us a chance to work in such a Profitable Industrial

Project.

We also offer our thanks to Respect Parents for being supports

us in all means Financially and Mentally to complete our work.

We also thank to the General Manager Mr. Saqib Faheem

Butt, & officer of the Shamim Feed Industry Sama Satta Link

Road, BAHAWALPUR. to Help us in completing our work..

5

ACKNOWLEDGEMENT

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Feasibility Report A-1 Feed Industry

ContentsPage

#Executive Summary 07Name & Location of Project 09Objectives & Key Success Factors 12Introduction 14Management 15Project Scheduling Diagram 17Technical Analysis 18Market Analysis 23Economic Analysis 30Ratios 37Assumptions underlying Earning Forecast 42Projected Financial Statements 43Break Even Analysis 53Weighted Average Cost of Capital 55Internal Financial Rate of Return 56Auditing Plan 59Exit Strategy and Risk Assessment 60

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Table of Contents

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Feasibility Report A-1 Feed Industry

Title: “POULTRY FEED INDUSTRY”

Project Assignment:

Each student of MSc. (Accounting & Finance) 3rd semester required preparing a sold Project Assignment. The Project assignment is given to increase our knowledge about “Project Management”.

Objectives:

1. SWTO analysis of Poultry Feed.2. Identify and list down the all aspects and important points

of Feed Industry.3. What is a Production Process.4. What is Cost of unit, Means of finance, Estimated income

statement, Estimated Balance sheet, etc.

Approach to Project:

The Team of project will, analyze, summarize, and interpret the data, which are collected different primary and secondary sources.

Data Collection:

Both primary and secondary means of data will be used to collect the Data. Like Books, Internet, personal visits, teacher guidance etc.

7

Executive Summary

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Feasibility Report A-1 Feed Industry

Primary Sources:

The Team of Project personally visited the FEED INDUSTRY for practical view: Unit selected is;‘SHAMIM FEED INDUSTRY BAHAWALPUR’

Questionnaire:

Project Team has prepared a Questionnaire that contains 100 Questions and exists on 15 pages for Management of‘SHAMIM FEED INDUSTRY BAHAWALPUR’.Data Preparation & Analysis:

After collection of all the data through both primary & secondary means, team will used MS. Word, MS. Excel, MS. Power point etc.

Time Frame:

Time period is allowed is one month 15/12/2009 to 18/01/2010.

Limitation:

Team has visited the various people but the information given by them is just based of approximation.

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Feasibility Report A-1 Feed Industry

‘A-1 FEED INDUSTRY’

Head office: “P.O. BOX. 1245 Small-Industries Bahawalpur”

Tel: 0622-88473

Fax: +92-62-88844, 88843

Contact Person: Hasan Qureshi

( CEO)

E-mail: jawad_hasan@ yahoo.com

Jawad ul Hasan

Branch: Sama Satta Link Road Bahawalpur.

“ Pakistan- Bahawalpur”

“ Small- Industries”

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Name of Project

Location of Project

CITY

LOCATION

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Feasibility Report A-1 Feed Industry

1-Brailer Feed (for starter & finisher)

2-Layer Feed (for starter & finisher)

3-Breeder

The capacity of projected plant produces 361200 Bags at 100% Efficiency per Year.

Fixed Cost 36136892

Initial Working Capital +34999705

71136597

Debt 49%

Equity 51%

10

PRODUCTS

Installed Capacity

Cost of Project

Means of Finance

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Feasibility Report A-1 Feed Industry

Muslim Commercial Bank Ltd. Bahawalpur.

A- Hasan Qureshi

B- Jawad ul Hasan

C- Rahiqa Fatima

“Amin & Co. LDA Plaza, Lahore”

.

“Uzair & Co. Engineering Limited,Lahore”

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Names of Lender

Names of Sponsors

Name of Civil Contaractor

Name of MachinerySupplier

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Feasibility Report A-1 Feed Industry

Implementation Schedule

Implementation Schedule

Sr.No. Activities Month Year

1Engineering studies and designing of civil works: 2010

Start January 2010

Complete February 2010

3 Construction of Building and Civil works: 2010

Start February 2010

Complete September 2010

4 Order for foreign machinery March 2010

5 Arrival of foreign machinery at sea port September 2010

6 Arrival of foreign machinery a site October 2010

7 Order for local machinery June 2010

8 Arrival of local machinery at site September 2010

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Feasibility Report A-1 Feed Industry

Current RatioCurrent Ratio 2.16 1.87 1.71

Gross Profit RatioG R O S S P R O F I T 12.15% 12.99% 11.54%

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Financial Ratios

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Feasibility Report A-1 Feed Industry

Operating Profit Ratio

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Feasibility Report A-1 Feed Industry

OPERATING PROFIT 9.30% 10.26% 8.83%

Net Profit Ratio

6.87% 8.33% 7.39%

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Feasibility Report A-1 Feed Industry

Internal Rate of Return

IRR= 24%

Payback Period

2 YEARS.

Sponsor’s Stake

51%

16

Introduction of Company

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Feasibility Report A-1 Feed Industry

Shamim Group of Industries

Shamim Feed Industry

Shamim Ghee Mill

Shamim Oil Mill

17

Shamim Feed Industry

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Feasibility Report A-1 Feed Industry

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Market Analysis

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Feasibility Report A-1 Feed Industry

Brief Description of Market

Role of feed and nutrition for livestock production is as essential as management or animal itself but its fiscal contribution surpasses all other aspects. A good nutrition plays a significant role for optimum production and in my opinion, on a scale of 1 to 10, it has rating of 7. Since last two decades science of nutrition, both in humans and animals, has taken centre-stage in the field of research, rather it is considered more important than pathological or medicinal aspects of production and life.To provide feed in Punjab Late Mian Mukhtar (elder brother of Mian Mumtaz) constructed a feed mill, Ani Feed in Gujranwala in 1967. The late Dr. Naseer Butt was the first full time veterinarian nutritionist; Dr. Abdul Ghafoor, Dr. Tariq Anjum and Dr. Zia Qureshi joined Ani Feed as his assistants. In 1968 Aftab Feed was built in Karachi by Mian Aftab; but later on changed its name to Mehran Feeds.

Shahzor group (now named as Sabir's) has erected and started Multan Feeds near Multan while Sharif Feed by Sharif's (Shahbaz Sharif family) has also commenced its commercial operation. Hi Tech and SB group are currently in the process to build new feed mills in Sahiwal, both feed mills are planned to manufacture 120 tons pellet feed per hour. Big Feed has also build a new feed mill tower at the old location and currently producing feed from new facility.

Some new feed mill plants are under construction in Punjab; Dawood Feed by Pakasia group near Pattoki and Khawaja Feeds in Multan, both of these plants are expected to start production within this year. OK Feed (Van Aarsen Pellet Mill C750) by OK Oil is being also constructed near Pattoki. Dr. Ghulam Nabi of Asia Feeds too is planning to build a new feed mill in Karachi along with Mr. Nabi Bakhsh of Sind Feeds, moreover Dr. Aslam of Islamabad group is planning for a new feed mill in Okara area. Younger brother of Dr. Sadiq, Mian Javed who recently separated from SB Poultry to start his own brand as Jadeed Chicks is also assembling a feed mill near Khanewal. These feed mills are expected to commence their operation in 2010.

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Feasibility Report A-1 Feed Industry

Feed Production in Pakistan of Last Five

Productions in Pakistan Province Wise

(tones)

Province Feed capacity 2003 2004 2005 2006 2007 2008 2009

Punjab 3600 1100 1251 1420 2180 2250 2600 3000

Sindh 1500 370 456 510 420 620 680 875

NWFP 250 90 100 100 120 130 80 50

Balochistan 120 66 84 97 97 100 50 50

Total Pakistan 5470 1625 1891 2127 2817 3100 3410 3975

The Demand of feed in last few years is increasing because the agriculture sector is

now growing and the demand of feed is also increasing.

20

Present Demand

Distributuion Channel

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Feasibility Report A-1 Feed Industry

The Demand & Supply gap is 4% which is increasing per year.

21

Demand Supply Gap

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Feasibility Report A-1 Feed Industry

The process of feed production is given below

22

Technical Analysis

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Feasibility Report A-1 Feed Industry

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List of Machinery

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Feasibility Report A-1 Feed Industry

Hammer Mill

Mixer

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Feasibility Report A-1 Feed Industry

Elevator

Conveyor

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Feasibility Report A-1 Feed Industry

Strainer

Pellet Machine

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Feasibility Report A-1 Feed Industry

Working of Pellet Machine

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Feasibility Report A-1 Feed Industry

Packing Machine

Boiler

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Feasibility Report A-1 Feed Industry

5- RAW MATERIAL REQUIREMENT

Poultry Feed (For Bridder&Brialer)/50kg 50kg

Material Description

For one Bag Annual Bags Produced

Material in kg for annual Production

Unit cost

Annually Cost each Material

ItemsMaiz 13%

240,800

1,565,200 40 62,608,000Wheat 14% 1,685,600 23 38,768,800Rice 14% 1,685,600 13 21,912,800Sun Fiower 5% 602,000 30 18,060,000cotton seed Meal

2% 240,800 7 1,685,600

Soyabeen Seed

5% 602,000 20 12,040,000

Cynola seed 5% 602,000 20 12,040,000Na,Ca,Mg 6% 722,400 5 3,612,000Vit,Pro,nd other chemicals

5% 602,000 6 3,612,000

Fish,chicken wastage

11% 1,324,400 17 22,514,800

Grains 8% 963,200 8 7,705,600Minerls,Molasses

12% 1,444,800 13 18,782,400

Packing material (Bags)

1 240,800 3 722,400

Total Annual Cost

        224,064,400

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Raw Materials Required

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Feasibility Report A-1 Feed Industry

Poultry Feed For Layer

    50kg

Material Description Require

d

Annual Bags

Produced

Requirement of

Material in unit for annual

Production

Unit cost

Annually Cost each Material

Items

Maiz 13%   782,600 40 31,304,000

Wheat 14%   842,800 23 19,384,400

Rice 14%   842,800 13 10,956,400

Sun Fiower 5%   301,000 30 9,030,000

cotton seed Meal 2%   120,400 7 842,800

Soyabeen Seed 5% 120,400 301,000 20 6,020,000

Cynola seed 5%   301,000 20 6,020,000

Na,Ca,Mg 6%   361,200 5 1,806,000

Vit,Pro,nd other chemicals 5%   301,000 6 1,806,000

Fish,chicken wastage 11%   662,200 17 11,257,400

Grains 8%   481,600 8 3,852,800

Minerls,Molasses 12%   722,400 13 9,391,200

Packing material (Bags) 1   120,400 3 361,200

Total Annual Cost         112032200

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Feasibility Report A-1 Feed Industry

Brief Description of Personnel

The personnel or the human resource depends upon the work and the total employees the personnel of a small feed unit and a big feed industry is different. So, the employees will be efficient and effective so that the feed industry can do better work.

Description NumberSalary per month Rs, Annual cost

CEO 1 60,000 720,000General Manager 1 40,000 480,000Financial Manager 1 40,000 480,000Export Manager 1 40,000 480,000Sectery 1 15,000 180,000Accountant 1 12,000 144,000clerks 4 8,000 384,000Computer operator 1 8,000 96,000Recepnicet 1 8,000 96,000Time Keeper 3 8,000 288,000Drivers 2 7,000 168,000security Guard 3 6,000 216,000Gate keeper 3 6,000 216,000Office Attendence 2 6,000 144,000Mali 1 6,000 72,000Sweepers 2 5,000 120,000TOTAL     4,284,000Add: Fringe Benefits @  5%   214,200TOTAL ADMIN COST     4,498,200

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Personnel Analysis

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Feasibility Report A-1 Feed Industry

Brief Description of Finance

In Financial Analysis we see the sources of finance and calculate the ratios of our

project that how much it is profitable for us and also we make financial statements to

know that how much it is feasible for us.

Cost of Project

The total cost of project is Rs. 69510128

Means of Finance

In the sources of finance we take Loan from MCB and the remaining is from the

Sponsors.

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Financial Analysis

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Feasibility Report A-1 Feed Industry

Initial Net Working Capital

CURRENT ASSETS- A       AmountCash 6 months   8,850,292Accounts Receivable 5% of sales   12,864,278Raw materials 1 months   18,205,233Finished Goods Inventory   3% production 5,863,441Marketables Securities       4,970,857spares & stores       98,916

Advances & deposits to supplier of Raw Material       1,000,000

Tools       100,000Total Current Assests       51,953,016CURRENT LIABILITIES-B        Accounts Payable   3% material cost 6,553,884Accrued Expenses   3% material cost 6,553,884Dealers Deposits       100,000short -term bank borrowings   20% Inventories 3,745,544Total Current Liabilities       16,953,311INITIAL NET WORKING CAPITAL( A-B)       34,999,705

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Initial Working Capital

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Feasibility Report A-1 Feed Industry

A-1 POULTRY FEED COMPANY BAHAWALPUR   

  PROJECT COST & MEANS OF FINANCE (in RS.)

COST OF THE PROJECT   LOCAL FRGN TOTALLand & Land Devolpment     8,606,250 0 8,606,250Building & Civil Works     9,236,220 0 9,236,220Foreign Machinery MCB(FCL)   0 6,846,000 6,846,000

Marine insurance etc.     300,770 0 300,770

Customs Duty 12% Imported Machinary 821,520 0 821,520

Import and Iqra surcharges 1% Imported Machinary 68,460 0 68,460

Engineering /Technical Fees 2% Machinary 136,920 0 136,920Erection & Installation 1% Machinary 68,460 0 68,460Interest during construction     5,950,000 0 5,950,000Furniture & Fixture     511,100 0 511,100Vehicles     1,040,000 0 1,040,000Pre-production Expenses     2,251,192 0 2,251,192Contingencies     300,000 0 300,000

TOTAL FIXED COST:     29,290,892

6,846,000

36,136,892

Initial Net Working Capital     34,999,705 0 34,999,705

TOTAL COST OF THE PROJECT    64,290,59

76,846,00

071,136,59

7

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Cost of Project

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Feasibility Report A-1 Feed Industry

A-1 POULTRT FEED INDUSTRY . BAHAWALPURFor the year ending Dec. 31, I II IIIEfficiency Assumed : 65% 70% 75%         SALES   a ) Bridder Feed   86,086,738 103,113,878 110,510,856b) Bria Feedler   86,086,738 102,131,841 109,458,372c) Layer Feed   85,112,074 101,946,435 109,259,665Total Sales   257,285,551 307,192,154 329,228,894Less:        COST OF GOODS SOLD :       Raw Materials   218,462,790 247,031,001 264,676,073Labour   6,582,600 6,780,078 6,983,480Manufacturing Expenses   3,779,755 3,953,676 4,069,624Excise Duty \ Sales tax 3% 7,718,567 9,215,765 9,876,867Royalty fee (Straight

line method)

0 0 0

Deprication 1,213,744 1,213,744 1,213,744

Cost of Goods Manufactured   237,757,456 268,194,264 286,819,787Add: Opening Inventory   0 11,726,882 12,628,950Less: Ending Inventory   11,726,882 12,628,950 8,198,110

COST OF G00DS SOLD   226,030,574 267,292,196 291,250,627

G R O S S P R O F I T   31,254,977 39,899,958 37,978,266Less :       OPERATING EXPENSES               Admin & General Expenses   3,287,831 3,717,777 3,983,333Selling Expenses   4,050,398 4,651,836 4,930,863Total Operating Expenses   7,338,229 8,369,613 8,914,196        OPERATING PROFIT   23,916,749 31,530,344 29,064,070Add:       OTHER INCOME   0 0 0Less:       NON OPERATING EXPENSES       Financial Expenses   5950000 5,650,055 4,460,055Amortzn. of Prelim. Exp   281,399 281,399 281,399Workers participation fund 4% 956,670 1,261,214 1,162,563workers wekfore fund 4% 956,670 1,261,214 1,162,563Total Operating Expenses   8,144,739 8,453,881 7,066,579

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Income Statements

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Feasibility Report A-1 Feed Industry

Profit Transferred to Profit& losss Appropriaion account   15,772,010 23,076,463 21,997,491

A-1 POULTRY FEED INDUSTRY . BAHAWALPURESTIMATED BALANCE SHEETS

  Construction year I II III

ASSETSFixed Assets

Fixed Assets at cost 33,885,700

33,885,700

33,885,700

33,885,700

Less: Accumulated Dprcn. 01,213,7442,427,488 3,641,232

Net Fixed Assets 33,885,700

32,671,956

31,458,212

30,244,468

Preliminary Expenses: 2,251,1921,969,7931,688,394 1,406,995

Total Fixed Assets 36,136,892

34,641,749

33,146,606

31,651,463

Current Assets       

Cash 8,850,29254,270,439

75,133,031

72,756,820

Marketable Securities 4,970,857 313,580 75,683 1,866,517

Accounts Receivables 12,864,27812,864,27

813,063,62

016,461,44

5

Finished Goods Inventory 5,863,44111,726,88

212,628,95

08,198,110

Raw Material Inventory 18,205,23313,107,76

79,175,437 6,881,578

Stores & Spares 98,916 99,000 20,000 958,259Advances & Depostis 1,000,0001,419,142 30,000 968,259

Total Current Assets 51,853,01693,801,088110,126,721108,090,988

TOTAL ASSETS 87,989,908

128,442,837

143,273,327

139,742,451

LIABILITIES & EQUITY        Long-term Liabilities       Muslim Commercial Bank:       

Outstanding Loan principal35,000,00

035,000,00

028,000,00

021,000,00

0

Total Long-term Liab.: 35,000,000

35,000,000

28,000,000

21,000,000

Current Liabilities       

- Accounts Payable 6,553,8848,738,5129,881,240 10,587,043

- Accrued Expenses 6,553,8847,718,5679,215,765 9,876,867- Workers Partcpn. Fund 0 956,6702,217,884 3,380,447-Workers Welfare Fund 0 956,6702,217,884 3,380,447

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Balance Sheet

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Feasibility Report A-1 Feed Industry

Provision for Taxation 0 1,892,641 4,661,817 7,301,516

- Bank Borrowings 3,745,54417,213,812

17,984,799

17,261,688

outstanding loan instalments 05,950,00012,650,055

11,460,055

Interest payable        

Total Current Liabilities: 16,853,311

43,426,871

58,829,443

63,248,062

Total Liabilities 51,853,311

78,426,871

86,829,443

84,248,062

EQUITY

Equity 36,136,597

36,136,597

36,136,597

36,136,597

Balance c/d from Profit & loss appropriation account

013,879,369

20,307,287

19,357,792

Total Equity: 36,136,597

50,015,966

56,443,884

55,494,389

 

Total Liab. & Equity: 87,989,908

128,442,837

143,273,327

139,742,451

A-1 Poultry Feed Industry . BAHAWALPUR

E S T I M A T E D C A S H F L O W S

For the year ended, Const. Yr. I II III

SOURCES       

Operating Profit 0 23,916,749 31,530,344 29,064,070

Add Back: Depreciation 0 1,213,744 1,213,744 1,213,744

Amortization 0 281,399 281,399 281,399

Funds from Operations 0 25,411,892 33,025,487 30,559,213

other income 0 0 0 0

Equity 36,136,597 0 0 0

Loan from Mcb 35,000,000 0 0 0

- Custom Debentures 0 0 0 0

Increase in Current Liab. 9,000,000 26,573,560 15,402,572 4,418,619

Increase in Bank Borrowings 3,745,544 13,468,268 770,987 -723,111

TOTAL SOURCES 83,882,141 65,453,720 49,199,046 34,254,722

        

APPLICATION OF FUNDS       

Investment in Fixed Assets: 33,885,700 0 0 0

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Cash Flows

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Feasibility Report A-1 Feed Industry

-Preliminary Exp 2,251,192 281,399 281,399 281,399

Financial Expenses 0 5,950,000 5,650,055 4,460,055

Repayment of : 0 0 0 0

Loan from Mcb 0 0 7,000,000 7,000,000

Workers Partcpn. Fund 0 956,670 1,261,214 1,162,563

-Workers Wel. Fund 0 956,670 1,261,214 1,162,563

provision for tax 0 1,892,641 2,769,176 2,639,699

profit distributed 0 0 0 0

Increase in current Assets: 43,002,724 5,888,425 10,113,397 19,924,655

TOTAL 79,139,616 15,925,805 28,336,454 36,630,933

      

Surplus/(Deficit) 4,742,525 49,527,914 20,862,592 -2,376,211

Cash Balance - Opening 0 4,742,525 54,270,439 75,133,031

Cash Balance - Ending 4,742,525 54,270,439 75,133,031 72,756,820

Strengths:

The labor to manufacture feed is easily available we can reach easily to low cost labor. Moreover the location for our project is very attractive. We can avail maximum advantage from this market.

Weaknesses:

Our weakness is that we are not producing feed up to the present demand of the consumer. Because we have dependend on govt for wheat & other raw materials like grains and rice and electricity problem is also our weakness.

Opportunities:

Pakistan is an agricultureal country, the production of feed is very high.feed is neccessry for the chicks(Brailer & Layer) so, demand of feed is repedly increases.also there is no enough feed mills to fullfill the demand so, there is great opportunity to establish feed mill.

Threats:

The market of the flour mills is highly competitive; therefore if the entrepreneur isnot well responsive and fulfilling the demand of the consumer he/she may not be able to capitalize the opportunity properly..

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SWOT ANALYSIS

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Feasibility Report A-1 Feed Industry

Conclusion & Recommendations

We conclude that on the basis of field work and survey of feed mills that the feed is necessary product so its demand increase day by day. There is no chance to decrease the demand of feed. Pakistan is an agricultural country and it plays a very important role in our economy. Feed contributes 3.2% GDP in our economy. Availability of raw material is very easy. So, conclusion is that the feed mill is a profit motive business because no chance of decrease of demand.Our recommendation to new investors is that they must invest in feed mill because from the last year there is a great change or entrance of new poultry farmers in Pakistan. So, they step forward to come and invest or to start this business, and also contribute in the economic as well as social growth of Pakistan.

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Feasibility Report A-1 Feed Industry

Special Thanks

We bow our head, before ALLAH Almighty, who blessed us with potential and

stamina to complete our feasibility report on Feed mill.

First of all would like to pay our special regards to Respected “Sir Mr. JAVED

IQBAL” who provides us guidance at each and every step, in completion of all

this feasibility report. We are especially thankful to those personalities who

help us in collecting data during the fieldwork and also in our practical work.

In this regard our thanks goes to:

Mr:Arsalan Rabbani, Mr: Hunain khan, Mr: Farzan Rafi, Mr: Shakeel

Ahmed, Mr: Mohsin shazad, Mr: Adnan Ch., Mr: Farhan Khizer & Mr.

Amir Faraz and all of our Class Fellows.

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