57122896-Adjusted-Feasibility-Study-of-Kimcs-Abuja.doc

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KINGDOM MULTI-PURPOSE CO-OPERATIVE SOCIETY LTD

PRESENTS

A Proposal On The Development Of A Comprehensive Localised Poultry Farmers Incubation Center To Be Located In The Federal Capital Territory, Abuja, Nigeria

TO

PROSPECTIVE INVESTORS AND MEMBERS

Corporate Head Office:Nigeria:39B Danude StreetMaitama

KIMCS 2010 1

AbujaNigeria.Telephone: +2347098814236, +2347025465604,

CONTENT

01. EXECUTIVE SUMMARY

3

02. INTRODUCTION

9

02.01 Project Background

02.02 Objective of Study

02.03 Methodology

03. MARKET ANALYSIS

11

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 20

04.01 Operational Details and Structure

04.02 Machinery/Equipment Requirements

04.03 Housing

KIMCS 2010 2

04.04 Raw materials and sources,

04.05 Infrastructural Requirements

05. MANAGEMENT AND ORGANISATION 29

06. INVESTMENT COST ANALYSIS 32

07. REVENUE PROJECTION 37

08. FINANCING PLAN 39

09. FINANCIAL PROJECTIONS AND APPRAISAL OF

COMMERCIAL VIABILITY

41

CHAPTER ONE

EXECUTIVE SUMMARY

Kingdom Multi-purpose Cooperative Society (KIMCS) was

incorporated on July 16, 2008 under the supervision of the Central

Bank of Nigeria (CBN). The main object of the cooperative is human

capital development thereby alleviating poverty in all facet of human

endeavour. The cooperative trains, manage and administer

contributions for employees of Government at all levels, Corporate

Establishments, Groups and Individuals.

The cooperative was conceived out of an ambition to:

Revolutionise the activities of cooperative societies

Cater for the down trodden

Develop human capital

Provide funds for the establishment of businesses

Monitor businesses and

Total financial advisory services for the class that cannot afford

such

A complete solution centre for poverty alleviation

KIMCS 2010 3

Our main aim is to reverse the ugly stories and sights associated with

cooperative societies and other SMEs establishment administration

and management in both public and private sectors in Nigeria. We

wish to achieve this by bringing the practice of cooperative society in

Nigeria to international standard, adapting and improving on the

international best practices. This is synonymous to the practice in

Nigeria before colonialism and present cooperative society set up in

India. We intend to provide quality training and allied services to

corporate and individual Nigerians like never before with high level of

honesty and integrity in business relationship by doing the following:

Make quality education/training and information available to

government, corporate organizations, groups and individuals in

order to impact communal responsibilities at all levels

Make cooperative society practices pleasurable to Nigerians

Make illiterates, elites, self-employed, corporate workers, public

servants, etc have sense of responsibilities and hope

Render financial assistance to the members

Monitoring of members business and taking the business to a

profit making level

Financial advisory services for members

Liaising and with working with the Government in order to

achieve the poverty alleviation agenda via empowerment

Raising funds from investing members, investments, business

activities and government where available

Setting up communal businesses for training purpose and

raising of funds for the cooperative society

Kingdom Multi-purpose Cooperative Society (KIMCS) has been

organizing various in-house and public Sensitization/enlightenment

workshops on the need for viable and purposeful practice of

cooperative society in Nigeria. The workshops are to enlighten

members of the public on the dynamics, implementation and benefits

of cooperative societies in Nigeria.

KIMCS 2010 4

On Capitalisation of KIMCS, the promoters have approved =N=500

million as authorized share capital out of which =N=20 million

should be called-up. This would be sourced through financial member

investment. Major investors who have like minds with the promoters

of the cooperative will be identified in the Nigerian society for this

purpose. The principal promoters of the company have already

committed =N=20 million out of this amount towards take-off, while

additional =N= 480 million is to be injected as additional paid-up

share capital of the cooperative before major projects kick off.

The cooperative’s affairs would be driven by a Board of Directors,

composed of men of integrity and positive business antecedents. This

is one of the key strategies for awareness and general acceptability of

the cooperative society.

The cooperative’s primary target is made up of employees in the

Public, Private sectors (organized and informal) and individuals in the

rural areas. We have mapped out strategies for penetrating the

informal sector to sell the new contributory scheme successfully in

that sector.

On this note, KIMCS will use training, workshops, seminars, and

enlightenment programmes to get prospects to internalize the

concept workings and benefits of the new and reformed cooperative

society to enhance quality participation and substantial fund raising

for the cooperative.

KIMCS will appoint a Financial Adviser with wide branch network

coverage within the country to give us leverage in rendering prompt

and efficient services to all our contributors and financial members.

KIMCS operation coverage will include Lagos, Abuja and the six geo-

political zones in the country, with our zonal offices located in each of

KIMCS 2010 5

the zones to coordinate the cooperative society activities of the states

and local governments in the zones. As part of our branch network

development, the cooperative will establish unit offices in any state of

the federation where it has secured large number of contributors to

the scheme.

When KIMCS is in full operation, there will be unit offices in all the

states of the federation with representative offices in some big local

government areas to harmonise our service delivery and satisfaction

of members.

The zonal and unit offices will be connected to the head office via

satellite communication to enhance our on-line real-time service

delivery and control.

Our operations would be Information Technology (IT) driven to enable

our contributors and prospective members have access to view the

operational progress of the cooperative society and also print our

membership forms from our web site.

KIMCS’s investment philosophy would be anchored mainly on

security of the contributions, grants and investment incomes without

compromising fair returns on investments to our contributors and

members, since we are aware that the object is not profit making but

development of human capital and poverty alleviation.

In order to achieve this business objective, KIMCS intends to employ

a crop of young experienced people who would be given first class

training and publicity tools, complemented by a challenging

remuneration and motivation scheme. The clear focus is to offer the

best cooperative society planning, training programme and communal

products/services in the industry.

KIMCS 2010 6

Based on the financial projections for the first five years of operation,

KIMCS is expected to break-even in the third quarter of the first year.

The original promoter of KIMCS, Mr. Moses Ajayi , who is the General

Coordinator & Chief Executive Officer, had his Bachelor of Arts in

Business Administration degree in 1980, from Andrews University,

Berrien Springs, Michigan, USA. He became an Associate of both the

Chartered Insurance Institute (ACII) London and Insurance Institute

of Nigeria (ACIIN) in 1991.

Mr. Ajayi’s work experience has seen him through Insurance

Brokerage, Insurance Agency, Underwriting, Management and

Marketing, before joining the banking sector in 1993 during which he

served as Deputy Treasurer of Gulf Bank of Nigeria Limited. In 1995,

he moved to Continental Trust Bank Limited as the Bank’s Treasurer

to oversee the treasury functions of the Bank. He was later to become

Regional Director (Business Development) (North), Head of Corporate

Services Group, Zonal Coordinator Lagos/Western Zone (Business Development),

and Head of Credit Management Group at different times.

He retired as Deputy General Manager in January 2003 to take up the

challenge of managing XYZ, having undergone both local and

international training in several areas of management. He has

brought into XYZ his diverse capabilities and versatility in insurance,

pension funds administration, finance and banking, along with his rich

experience as a manager of men and material resources.

THE PROJECT

Poultry Farming business in Nigeria can be said to be as old as history

can remember. However, its development and growth compared to

what is obtainable in developed nations is still lagging behind, hence,

making it an emerging market in Nigeria. Due to the enormous KIMCS 2010 7

demand not met by both the Government and private companies and

the ever increasing population and the demand for protein, the

poultry farming business development necessitates a paradigm shift,

if we must only meet the high demand for it, but also make it a

commodity for both the rich and poor.

The present global economic meltdown has no doubt affected the rate

of Agriculture development in the country owing to the following

factors:

Lack of fund from the developers/cooperative societies

Banking reforms that placed embargo on credit

Global recession in other developed countries

Government apathy

Poverty and living standard of the citizens

Monitoring Problem

Besides, the capital requirement for the execution of various

Agricultural Businesses and ability to break even either as a private or

commercial entity putting into consideration the Direct and Indirect

labour factors, are huge enough to scare investors.

PROJECT OBJECTIVES

Our localized poultry farmer’s initiative was conceptualized to;

Through constant training/self development, bring to the fore all

the modern technology and expertise required for effective

Poultry Management and Service to the knowledge of all those

who want to do commercial poultry business in Nigeria

Put in place a realistic and reliable method of mobilizing and

training a Nigerian workforce that can provide effective Poultry

Management and Services capable of meeting both local and

international demands

KIMCS 2010 8

Ensure that every State in Nigeria has a localized poultry

incubation center that will continually provide chicken and eggs

alike at considerable prices to its citizens and dwellers

Description of the project idea

Localized Poultry Incubation Center housing 20 Commercial Poultry

Farmers; with a Feed Mill Factory and Store, Borehole and Water

House, Cold Room for Harvested Birds, Generator House, General

Store, Administrative Office, Poultry Clinic and Security/Gate House

to provide the required services/logistics for all the 20 Poultry

Farmers.

The Poultry Incubation Center will also accommodate 10 vegetable

farmers who will take advantage of the manure that will be derived

from the waste products generated by the 20 Poultry Farmers.

GOALS OF THE FEASIBILITY STUDY

To substantiate the profitability of poultry breeding based on the

existing own production facilities and disposal/sales of poultry meat

and eggs on the domestic and export market;

To analyse the market and to forecast sales of the output finished

goods in the course of the increase of production capacities

To estimate the expected financial results and to work out the

financial strategy of the company in terms of payments for the

credits to bank or financier

Tasks of the company for the investment period

To construct the poultry house in order to provide closed

technological cycle (the first stage – poultry breeding based on

the purchased young birds; the second stage – home brooding of

young birds with the industrial egg production by a breeding

flock and further down-and-feather raw materials and poultry

meat production)

KIMCS 2010 9

To equip the poultry farm and relevant infrastructure, to

continually upgrade all vehicle depots and technological

equipments

To enlarge the share of the regional poultry meat market based

on the direct contracts with sales companies/agents

To implement contracts and to develop distribution channels

for export of down-and-feather raw materials

To ensure profit accumulation from production and sales that

meets existing market demands at every point in time

To take advantage of our agricultural sector for the

improvement of the nation’s economy and increment of supply

of the population with products of its daily necessity, such as

chicken and egg

FINANCIAL REQUIREMENTS

The total sum of =N=80.135 million is required to execute the project

with over 20% rate of return per annum. The project has over 400%

turn over in year and employment opportunity of over 3,000 per

annum for unemployed graduates and individuals from the informal

sub-sector of the economy.

CHAPTER TWO

INTRODUCTION

Project Background

The livestock sub-sector is an important component of the Nigerian

Agricultural Economy. Its importance derives from the fact that it is

KIMCS 2010 10

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 agriculture’s 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 – 2000

(‘000 tonnes)

Product

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

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

100

0

101

2

103

8

104

6

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, KIMCS 2010 11

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 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.

KIMCS 2010 12

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.

KIMCS 2010 13

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

which the cooperative has considered viable.

Indeed, a wheelbarrow of fresh poultry droppings costs between

N50.00 – N80.00 in some parts of Lagos State and more in Abuja 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

KIMCS 2010 14

(b) By-products

Poultry droppings

Poultry Offal and other hatchery wastes.

PROPOSED CAPACITY

5000 Birds per production cycle are 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

KIMCS 2010 15

(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.KIMCS 2010 16

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.

KIMCS 2010 17

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)

KIMCS 2010 18

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)

200

3

200

4

200

5

200

6

200

7

2008

Chicke

n

50 52.5 56.1

3

57.8

8

60.7

8

63..8

1

Eggs 60 63 66.1

5

69.4

6

72.9

3

76.5

8

Day-

old

Chicks

60 63 66.1

5

69.4

6

72.9

3

76.5

8

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 KIMCS 2010 19

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, then 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 are 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

KIMCS 2010 20

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.

KIMCS 2010 21

(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

KIMCS 2010 22

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

KIMCS 2010 23

Fertile Eggs Fumigations of Eggs

The proposed project, which is to be sited in the Abuja suburbs, 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:

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.

KIMCS 2010 24

Setter Incubator

Candling Room

Hatchers Incubator

Day-Old Chicks (DOC)

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

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.

KIMCS 2010 25

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

ThermometerKIMCS 2010 26

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

KIMCS 2010 27

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

Cold room 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

KIMCS 2010 28

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.

KIMCS 2010 29

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 meters.

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.

KIMCS 2010 30

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.

KIMCS 2010 31

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. The cooperative will also

manufacture its own feed mill.

Drugs

Some poultry drugs commonly used in the poultry farms are:

KIMCS 2010 32

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

KIMCS 2010 33

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

KIMCS 2010 34

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 is 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

KIMCS 2010 35

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

KIMCS 2010 36

Chairman/CEO

KIMCS 2010

General Manager

Livestock Manager Hatchery ManagerFinance & Admin

Manager

Business Development

Manager

Feed manHatchery Assistants

Account ClerksAdmin Clerks

Business Development Executives

Veterinary Assistant

37

CHAPTER 6

INVESTMENT COST ANALYSIS

The costs 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

Borehole construction 1,000,000

Feed mill 1,000,000

Sub-Total

12,850,000

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

KIMCS 2010 38

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

Office Equipment (see details)

3,000,000

Water bore hole equipment

1,000,000

Sub-Total 42,750,000

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 (2 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 InputsKIMCS 2010 39

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

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

c) Feed stock - 10,000,000

d) Vaccines, Spray, Litter & consumables - 150,000

Sub-Total 10,400,000

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

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 N65/litre

and 5 litres/day, the fuel consumption is estimated at N650/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

KIMCS 2010 40

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

KIMCS 2010 41

of the Poultry facility. It has been pegged at N300, 000.00 per annum

and increases at the rate of 5% per annum.

2.3 General Overhead:

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

as below:

I) Travel expenses N 200,000

ii) Printing/Stationery 100,000

iv) Staff Uniform 100,000

v) Sundry Expenses 250,000

2.4 Depreciation

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

annual

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

building/poultry

equipment is depreciated over a ten-year period).

DEPRECIATION SCHEDULE

PLTRY.EQ

MT/

BUILDIN

G

ENERGY O/

EQUIP.

VEHICL

ES

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 5KIMCS 2010 42

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

KIMCS 2010 43

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 KIMCS 2010 44

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

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

KIMCS 2010 45

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

N80.135 million is recommended to be financed as follows:

N’Million %

i) Equity Contribution 15.027 20.00

ii) Investor members 50.000 66.55

iii) Start-up funding 15.108 13.45

Total N80.135

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) The funds from the prospective investors of N50.00 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. This

KIMCS 2010 46

project is expected to be backed up by the Central Bank of Nigeria

(CBN)

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 capital injection by the investor members is expected to reduce

the pains of servicing a regular bank revolving loan with periodic

interest and principal repayments. The returns on the investors on the

capital are lower than the interest charges on the loan.

KIMCS 2010 47

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

KIMCS 2010 48

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.

KIMCS 2010 49

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD

BALANCE SHEETS

All Figures are in Millions of Naira

Year   1 2 3 4 5

Cash 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 KIMCS 2010 50

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)

(39,28 4,500)

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 (513 (749, (997, (1,458 (1,96

KIMCS 2010 51

expenses ,725) 850) 225) ,225) 4,225)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)

(9,29 4,645)

Earnings after depr. b/4 Interest & Tax

8,542,650

6,857,213

15,930,630

12,020,505

29,358,630

-

-

-

-

-

Less int. repayment accrual

(1,548 ,651)

(2,950, 145)

(4,218 ,465)

(5,366 ,266)

(6,40 5,000)

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)

(6,88 6,089)

Less Proposed Dividend

-

-

(819, 852)

(465 ,797)

(1,60 6,754)

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

KIMCS 2010 52

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

4,49 9,100

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

14,29 6,796

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

KIMCS 2010 53

‘’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 Sales18,329,850

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

5,137,250

Fixed Costs Reclassified to Variable Costs 0 0 0

Total Variable Costs20,549,000

10,274,500

5,137,250

1.100 1.000 0.900Fixed 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

Depreciation6,854,625

6,854,625

6,854,625

Fixed Costs Reclassified to Variable Costs 0 0 0

KIMCS 2010 54

Total Expenses7,471,095

7,368,350

7,316,978

Income From Operations-9,690,245

8,542,650

18,968,373

Interest Income (Expense) - "Fixed"

-1,548,651

-1,548,651

-1,548,651

Income Taxes - "Variable" 0

-2,098,200 0

Net Income After Taxes

-11,238,896

4,895,799

17,419,722

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

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 0.492Fixed 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%           

KIMCS 2010 55

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 KIMCS 2010 56

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 newly injected

capital by the investing members in the first quarter of 2011, as well

as N15.108million 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 - 2011 -- 2015

1. The projections include actual results from a 12-month time span,

beginning early 2011 through to early 2012.

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.

KIMCS 2010 57

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 - 2011 -- 2015

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.

KIMCS 2010 58

5. Annual salaries (except sales staff) increase 10% annually

beginning 2011.

6. Interest expense for investing members funds are provided at 20%

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 - 2011 – 2015

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 - 2011 -- 2015

KIMCS 2010 59

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 2011 the cooperative raises N50million from investing members

and N15.057million of equity to fund investing and financing cash

flow requirements. In year 2014, additional equity of N10million is

introduced to finance growth in number of birds.

2. There are no provisions for bank loans, accounts receivable

financing or additional loans from stockholders after the first

operating cycle, beginning in 2012.

ASSUMPTIONS BEHIND PROJECTIONS AND

CALCULATIONS

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

Brooding cum growing 18 – 20Laying period (weeks) 52

3 Number of batches or cycle 1 - 34 Space requirement per bird

Brooder cum grower period 1Layer period 0.8Hatchery Period 0.35

5 Cost of Construction 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 3500 – 12,6009 Rate of egg laying 2 eggs every 3 10 Egg price (N/egg) 9.00

KIMCS 2010 60

Egg Production capacity per 766,500 eggs11 Average body weight of 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

KIMCS 2010 61

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

KIMCS 2010 62

EXPENSE ASSUMPTIONS:

PARTICULARS ASSUMPTI

ON

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%

KIMCS 2010 63

KIMCS 2010 64