poultry plan edit

8/3/2019 Poultry Plan Edit

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CONTENT

01. EXECUTIVE SUMMARY

02. INTRODUCTION

Project BackgroundObjective of Study

Methodology

03. MARKET ANALYSIS

Overview

Product Market

Major Consumers

Demand LevelProjected Demand

Major Suppliers

Level of Supply

Projected Supply

Competition

Proposed Marketing Strategy

04 TECHNICAL ANALYSIS

Operational Details and Structure

Machinery/Equipment Requirements

Housing

Raw materials and sources

Infrastructural Requirements

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 Nigerian Agricultural Economy. Its importance derivesfrom the fact that it is one of the key contributors to the national economy. For example, using the 1984 factor based

data, the sub-sector contributed on an annual basis, a little over 5% of the Gross Domestic Product (GDP) between

1996 and year 2000. According to CBN, the livestock sub-sector is second only to the crop sub-sector under the

sub-sector contribution to the general agricultural sector, and represents an average over 13% of agricultures

contribution during the period under consideration.

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

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.


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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 isprotein. 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 offaland 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.


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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.

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 consumers 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.

Nigerias Poultry Market

While some countries are reputed to be important exporters of poultry products after consistently meeting local

demand, Nigerias main problem is meeting its local demand for poultry products. Nigerias 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.


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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:

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


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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:

COMPETITION

Competition is not so keen in Nigerias 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, Nigerias 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 containers from the United States to Nigeria between 1995 and

1999

(see chart below)

POULTRY PRODUCTS IMPORTED FROM UNITED STATES(1997--1999)

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 Nigerias 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,Spenthen

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)


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(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.


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CHAPTER FOUR

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,

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:

a) A Setter Incubator

b) A Hatchers Incubator

The process.

flow of the proposed hatchery is as follows:..

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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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.

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 oflay 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 thefarm.

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


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Setter Incubator

The setter incubator would have a minimum capacity of 40,000 Eggs. The dimension of a typical one, Chick Master

102 is 22length,12.6 Width and 8.7Height

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 400mm in diameter will provide about 1200 mm of feeding space, enough for15 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


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

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 li ttered.

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 chicks life. Brooder house must be

maintained properly and kept warm always. Installation of brooders 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.


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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.

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.

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:


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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


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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


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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 toput 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 Livestocks 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 forimplementing marketing and sales strategies of the farm.

PROPOSED ORGANISATION STRUCTURE ..


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CHAPTER 6

INVESTMENT COST ANALYSIS

The cost of the project are estimated under two main headings, viz:

Capital/initial cost and operating/maintenance costs.

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

Machines/Equipment:

Automated Watering System 6,500,000

Automated feeding system 12,000,000

Automated manure removal 2,750,000

and Hatchery equipment 15,000,000

Generator (1 nos. 75 KVA) 2,500,000

Office Equipment (see details) 3,000,000


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Water bore hole equipment 1,000,000


Delivery Vehicles:

Saloon Car (1 no.) 2,900,000

Purchasing/Delivery Van 2,750,000

Sub-Total 5,650,000

Furniture & Fittings:

Furniture (see details) 1,200,000

Air conditioners (1 no.) 150,000

Telephone Installation 85,000

Sub-Total 1,435,000

Pre-Operating Expenses:

Company Incorporation & Legal Fees 500,000

Feasibility Study 450,000

Travel Expenses 150,000

Accounting Systems Manual 500,000

Personnel/Admin Policies Manual 500,000

Staff Recruitment 650,000

Sundry Expenses 250,000

Sub-Total 3,000,000

Raw Material Inputs

Day old Broilers (1,500 no) 165, 000

Day old Layers (3,500 no) 385,000

Feed stock 10,000,000

Vaccines, Spray, Litter & consumables 150,000



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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.

Facilities, Cleaning And Maintenance

These include items such as manure equipment clean-up, disposal of birds litters and general material for the upkeeping 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.

General Overhead:

The general overhead cost in the first year of operation is estimated as below:

Travel expenses 200,000

Printing/Stationery 100,000

Staff Uniform 100,000

Sundry Expenses 250,000

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).

DEPRECIATION SCHEDULE..


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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 estimatedindustry 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, givencapacity utilization of between 500020000 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 N29.459million 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.


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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 facilitys capital cost of N68.135

million is recommended to be financed as follows:.

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 commercialbanks 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.

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 aftertax 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.


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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 facilitys 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 aproportionately huge SMIES debt portfolio and is managed professionally. The cash flow projection is attached.

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD

PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD

CASH FLOW STATEMENT FOR THE 5-YEAR PLANNING PERIOD

WHAT IF ANALYSIS FOR THE FIRST YEAR OF OPERATION

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

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;


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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 turnoverremain 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 at30%

INVESTING 20042008

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.


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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 andcontrol 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. 2. There are no provisions for further bank loans, accounts receivable financing or additional loans fromstockholders after the first operating cycle, beginning in 2005.

ASSUMPTIONS BEHIND PROJECTIONS AND CALCULATIONS

REVENUE ASSUMPTIONS:

EXPENSE ASSUMPTIONS:

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