Adjusted Feasibility Study of Kimcs - Abuja

8/6/2019 Adjusted Feasibility Study of Kimcs - Abuja

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KIMCS 2010 1

KINGDOM MULTI-PURPOSE CO-OPERATIVE SOCIETYLTD

PRESENTS

A Proposal On The Development Of A ComprehensiveLocalised 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 Street

Maitama

Abuja

Nigeria.Telephone: +2347098814236, +2347025465604,


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KIMCS 2010 2

CONTENT

01. EXECUTIVE SUMMARY 3

02. INTRODUCTION 9

02.01 Project Background02.02 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

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


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KIMCS 2010 3

CHAPTER ONE

EXECUTIVE SUMMARY

Kingdom Multi-purpose Cooperative Society(KIMCS) was incorporated on July 16, 2008under 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:

y Revolutionise the activities of cooperative societies

y Cater for the down trodden

y Develop human capital

y Provide funds for the establishment of businesses

y Monitor businesses and

y Total financial advisory services for the class that cannot afford such

y A complete solution centre for poverty alleviation

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:

y Make quality education/training and information available to government, corporate

organizations, groups and individuals in order to impact communal responsibilities at

all levels

y Make cooperative society practices pleasurable to Nigerians

y Make illiterates, elites, self-employed, corporate workers, public servants, etc have

sense of responsibilities and hope


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KIMCS 2010 4

y Render financial assistance to the members

y Monitoring of members business and taking the business to a profit making level

y Financial advisory services for members

y Liaising and with working with the Government in order to achieve the poverty

alleviation agenda via empowerment

y Raising funds from investing members, investments, business activities and

government where available

y 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 enlightenmembers of the public on the dynamics, implementation and benefits of cooperative

societies in Nigeria.

On Capitalisation ofKIMCS, 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 cooperatives 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 cooperatives 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


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KIMCS 2010 5

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 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 cooperativesociety and also print our membership forms from our web site.

KIMCSs 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.


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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 Associateof both the Chartered Insurance Institute (ACII) London and Insurance Institute of Nigeria

(ACIIN) in 1991.

Mr.Ajayis 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 Banks 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 January2003 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 amanager 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

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 ofAgriculture

development in the country owing to the following factors:


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KIMCS 2010 7

y Lack of fund from the developers/cooperative societies

y Banking reforms that placed embargo on credit

y Global recession in other developed countries

y

Government apathy

y Poverty and living standard of the citizens

y 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 farmers initiative was conceptualized to;

y 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

y Put in place a realistic and reliable method of mobilizing and training a Nigerian

workforce that can provide effective Poultry Management and Services capable ofmeeting both local and international demands

y 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 housing20 Commercial PoultryFarmers; 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 PoultryFarmers.

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

PoultryFarmers.


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KIMCS 2010 8

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;

y To analyse the market and to forecast sales of the output finished goods in the course of

the increase of production capacities

y 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

y 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)

y To equip the poultry farm and relevant infrastructure, to continually upgrade all

vehicle depots and technological equipments

y To enlarge the share of the regional poultry meat market based on the direct

contracts with sales companies/agents

y To implement contracts and to develop distribution channels for export of down-

and-feather raw materials

y To ensure profit accumulation from production and sales that meets existing market

demands at every point in time

y To take advantage of our agricultural sector for the improvement of the nations

economy and increment of supply of the population with products of its daily

necessity, such as chicken and egg

FINANCIAL REQUIREMENTSThe 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.


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KIMCS 2010 9

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 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 2000

(000 tonnes)

Product 1994 1995 1996 1997 1998 1999 2000 2001 2002

Poultry 63 73 74 76 77 82 88 95 107

Eggs 377 399 422 435 436 450 465 487 514

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 951 961 972 989 991 1000 1012 1038 1046

Source: CBN Annual Report and Statement of Accounts (1998-2000)

However, it is noteworthy that the livestock sector has not provided sufficient volumes and

the capacity to meet the demand of teeming Nigerians for protein . The annual growth rate

has been low for most of the products, particularly for poultry and eggs sub-group, whereas,


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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.

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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KIMCS 2010 12

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 hatcherywastes 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

y Day-Old Chicks

y Farm Eggs

y Poultry Meat

- From Culled birds (Layers and Breeders)

- Broilers

(b) By-products

y Poultry droppings

y 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 tocommence 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.


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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

Layers, 70%

Broilers, 30%

B

7000 - 14,000 Birds

3,000 - 6,000Birds

(b) Hatchery Section

Layers,40%

Broilers,60%

B

3000- 4000 Chicks

4,000- 6,000 Chicks

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.


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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 ofproducts 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 theF

ederalGovernment 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 of6 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.


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KIMCS 2010 15

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 of50-700 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-JayFarms

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 PoultryFarming)

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 cameacross 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 by5%. Hence the projected level of

supply from 2003-2008 is provided hereunder:


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(Million)

2003 2004 2005 2006 2007 2008

Chicken 50 52.5 56.13 57.88 60.78 63..81

Eggs 60 63 66.15 69.46 72.93 76.58

Day-old

Chicks

60 63 66.15 69.46 72.93 76.58

Estimated Demand for Poultry

There are very few taboos prohibiting the consumption of poultry products in Nigeria.

Hence, nearly all the 129 million Nigerian are consumers of poultry products, in one form or

the other.

In terms of the household population, Nigeria presently has about 22 million households.

Assuming that each household consumes 20 chickens per annum which include the ones

consumed during the major festive periods such as Christmas, New Year and Easter for

Christian; Idel Malud, Idel Kabir for Muslims and during the birthday celebration of

members of the household or during any special occasion, these assumptions bring the

estimated poultry consumption to about 440 millions chickens consumed by the households.

It should, however, be noted that the households are not the only consumers of chicken andpoultry 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 by2.00% 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


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KIMCS 2010 17

COMPETITION

Competition is not so keen in Nigerias poultry markets . The reasons for this are

obvious:

1. Poultry products, in their present forms, are not branded products. Hence, whatis 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 FROMUNITED

STATES(1997--1999)

4

8

18

6

9

33

1 2 3Year

Cargo

(T

Poultry (TEUs) Eggs & Milk (TEUs)

19971998

1999

Source: PIERS, Journal of Commerce, New York


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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

remaining20% 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

y Butchers

y Restaurants

y Boarding hotels

y Small retail stores

y Hawkers

y Live chicken markets

y Spent hen depots

y Individual consumers,

y Hotels

However, a few big operators sell their farm products directly to operators in the formal

market. Members of this group include

y Big retail outlets

y Wholesalers

y Franchise stores

y Broiler processing plants

y Egg processing plants

y 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.

y Grade 1

y Grade 2

y 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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Fertile Fumigationsof ggs

CHAPTER FOUR

4.1 OPERATIONAL DETAILS AND STRUCTURE

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.

y Hatchery Unit,

y Broiler grow-out facility,

y Layer/breeder grow-out facility,

y Table eggs production unit,

y 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 of60% 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

Setter

Incubator

CandlingRoom

HatchersIncubator

Day-Old ChicksDOC


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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 theserequirements will be put in place before the proposed project commences.

The requirements include:

y Adequate housing

y Excellent brooding equipment

y Feeding equipment

y The modern watering equipment

y 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.


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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 every3 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

y Setter Incubator

y Hatchers Incubator

y Fumigation Equipment

y Candling Lamb

b) Broiler, Layer and Breeder Unit

y Brooding Equipment

y Feeding Equipment

y Watering Equipment

y Thermometer

y De-beaking scissors


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Setter Incubator

The setter incubator would have a minimum capacity of40,000 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 of30,000 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

y Feeder for Pullets

y Feeder for Cockerels

y 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.


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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:

y Electric Generator Preferably250 KV

y Egg Lifter

y Debeakers

y Thermometer

y 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 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.


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KIMCS 2010 25

* 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 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 developoptimally. 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 of250

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.


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KIMCS 2010 26

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


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KIMCS 2010 27

Water Supply

Clean water supply is a sine qua non of poultry business. Hence, there should be provision

for an alternative source of water since constant and clean water supply can only be ensured

through provision of an internal borehole and, a minimum of, one overhead water tank of

5000 litres capacity.

Electricity Supply

Since public power supply is not reliable, provision will be made for a 250 KVA generating

set to supplement National Electric Power Authority supply, and ensure uninterrupted

supply of electricity.

4.6 RAW MATERIAL REQUIREMENT

The basic raw materials of a typical Poultry farm include

y Feeds

y Drugs

y 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 .

BroilerStartermash is used for feeding day old broiler chicks, while Broiler Finishermash

is used from week4 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.


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KIMCS 2010 28

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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KIMCS 2010 29

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 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:


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KIMCS 2010 30

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 by10%

per annum, thenthe salary for the next 5 years is as follows:

y N 600,000.00--------Year 1

y N 660,000.00--------Year 2

y N 726,000.00--------Year 3

y N 798,600.00--------Year 4

y N 878,460.00--------Year 5

ORGANISATION STRUCTURE

Initially, the farm will maintain a lean structure in the first five years of its operation, during

which it would enjoy full automation and the services of six staff. However, as the farm

expands, in the nearest future, it will be imperative to put in place, a very good structure.

Hence, the following structure is recommended.

The farm will be structured into four broad departments. The heads of these departments

will report to the General Manager, who will serve as the overallF

arm Manager of theintegrated 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.


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KIMCS 2010 31

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 for implementing marketing and sales strategies of the farm.

PROPOSED ORGANISATION STRUCTURE

General

anager

Livestock

anager Hatchery

anager Finance Admin

anager usiness

Development

anager

Feedman Hatchery Assistants Account ClerksAdmin Clerks

usinessDevelopment

xecutives

Veterinary Assistant

Chairman/C O


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KIMCS 2010 32

CHAPTER6

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

A

utomated manure removal 2,750,000Incubation and Hatchery equipment 15,000,000

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

Office Equipment (see details) 3,000,000

Water bore hole equipment 1,000,000



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KIMCS 2010 33

1.3 Delivery Vehicles:

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

b) Purchasing/Delivery Van (1 no.) 2,750,000Sub-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 - 650,000I) Sundry Expenses - 250,000

Sub-Total 3,000,000

1.6 Raw Material Inputs

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

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

c) Feed stock - 10,000,000

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


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


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KIMCS 2010 34

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 operatingexpenses.

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

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 of10% 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.


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KIMCS 2010 35

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 of25kg on average.

c. Utilities

These have been estimated as follows: Ni. Telephone bills (Admin) 100,000.00

ii. Electricity 200,000.00

iii. Water 300,000.00

iv. Diesel for generator 300,000.00

The period of time is for one operating cycle within a period.

d. Audit expenses

These have been pegged at N250, 000 in the first two years, then it moved to N350,000 as

from the third year.

e. Facilities, Cleaning And Maintenance

These include items such as manure equipment clean-up, disposal of birds litters and general

material for the up keeping of the premises of the Poultry facility. It has been pegged at

N300, 000.00 per annum and increases at the rate of5% per annum.

2.3General Overhead:

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

I) Travel expenses N 200,000

ii) Printing/Stationery 100,000

iv) Staff Uniform 100,000

v) Sundry Expenses 250,000

2.4Depreciation

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

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

equipment is depreciated over a ten-year period).


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KIMCS 2010 36

DEPRECIATION SCHEDULE

PLTRY.EQMT/

BUILDING

ENERGY O/EQUIP. VEHICLES

FURN./FIT

YEAR

4.721 0.450 0.540 1.27125 0.322875 1

4.721 0.450 0.540 1.27125 0.322875 2

7.161 0.450 0.540 1.27125 0.322875 3

7.161 0.450 0.540 1.27125 0.322875 4

7.161 0.450 0.540 0.000 0.000 5

58.185 2.250 2.700 5.085 1.2915 TOTAL

5.819 0.250 0.300 0.565 0.1435 Salvage

75.135 2.500 3.000 5.650 1.435 COST


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KIMCS 2010 37

CHAPTER7

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 of5,000 birds, given a

mortality rate of between 6% - 10% per cycle. The production capacity is expected

to increase by100% 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 of52 weeks, the ability to lay2eggs in every3 days during the laying period,

and given the assumed mortality rate earlier stated above as well as the growth in

bird count over the planning period. The total estimated revenue from this segment

should be N6.899million for a 5,000 bird capacity, N13.80million for a 10,000 bird

capacity and N27.6million for a 20,000 bird capacity on an annual basis. The average

industry growth rate is 15% per annum.

iii) Revenue from sale of manure and bird litters is based on industry average revenue

estimates and given the strategic location of the poultry. It is estimated that

N129,000 N492,000 will be realized from the above sales, given capacity utilization


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KIMCS 2010 38

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 thatN12.408million, N18.612million and N24.816million respectively will be realised on

a capacity of40,000, 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 of10,000 birds should be installed in year 3, while that of20,000 birds should

be installed in year 5. The average percent growth in revenue of13% per annum is assumed

as per general industry trend.

Year 1 N26.185 million

Year 2 N29.459 million 12.5% growth rate





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KIMCS 2010 39

CHAPTER8

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 N80.135 million is

recommended to be financed as follows:

NMillion %

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 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:


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KIMCS 2010 40

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 .


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KIMCS 2010 41

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 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 a proportionately huge SMIES debtportfolio and is managed professionally. The cash flow projection is attached.


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KIMCS 2010 42

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD

BALANCESHEETS

All Figures are in Millions of Naira

Year 1 2 3 4 5

Cash and Near Cashitems 14,296,796 17,442,255 23,912,471 24,976,542 27,218,884Due 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 56,211,057Other AccountsReceivable 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 91,977,784 124,711,991Gross property, plant& equipment 58,185,000 58,185,000 58,185,000 58,185,000 58,185,000

Less accumulateddepreciation (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 1,606,754Current Portion ofLTD 9,892,705 10,931,439 12,079,240 13,347,561 14,749,054

Other Accruals 1,548,651 2,950,145 4,218,465 5,366,266 6,405,000Total currentliabilities 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 61,000,000Common 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 48,689,369Total long-term debtand 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


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KIMCS 2010 43

Total Liabilities/Equity 3.83 3.92 3.01 3.07 2.24

PROJECTED PROFIT & LOSS FOR5-YEAR PLANNING PERIOD

INCOMESTATEMENTS All Figures are in Millions of NairaYear 1 2 3 4 5

Sales 26,185,500 29,458,688 46,167,000 51,937,875 79,902,000Growth rate (%) - 12.50% 56.72% 12.50% 53.84%

Less COGS (10,274,500) (14,997,000) (19,944,500) (29,164,500) (39,284,500)

Growth rate (%) - 31.49% 24.81% 31.61% 25.76%Gross profit 15,911,000 14,461,688 26,222,500 22,773,375 40,617,500Growth rate (%) -10.02% 44.85% -15.15% 43.93%Less SG&A

expenses (513,725) (749,850) (997,225) (1,458,225) (1,964,225)Growth rate (%) 31.49% 24.81% 31.61% 25.76%Earnings beforeInterest, Tax &Deprec. 15,397,275 13,711,838 25,225,275 21,315,150 38,653,275

Less depreciation (6,854,625) (6,854,625) (9,294,645) (9,294,645) (9,294,645)Earnings after depr.b/4 Interest & Tax 8,542,650 6,857,213 15,930,630 12,020,505 29,358,630

- - - - -Less int. repayment

accrual (1,548,651) (2,950,145) (4,218,465) (5,366,266) (6,405,000)

Pre-tax income 6,993,999 3,907,068 11,712,165 6,654,239 22,953,630Cumulative pre-taxincome (NOL) 6,993,999 10,901,067 22,613,232 29,267,471 52,221,101

Taxes 2,098,200 1,172,120 (3,513,650) (1,996,272) (6,886,089)

Pre-tax income 6,993,999 3,907,068 11,712,165 6,654,239 22,953,630

Less taxes (2,098,200) (1,172,120) (3,513,650) (1,996,272) (6,886,089)

Less ProposedDividend - - (819,852) (465,797) (1,606,754)

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


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KIMCS 2010 45

WHAT IF ANALYSIS FOR THE FIRST YEAR OF OPERATION

"WHAT IF" ANALYSIS YEAR 1 SCENARIOPessimistic Planned Optimistic

Sales 70% 100% 120%

Mature birds4,725,000 6,750,000 8,100,000

Eggs4,828,950 6,898,500 8,278,200

Day old Chicks 8,685,600 12,408,000 14,889,600

Manure/Litters 90,300 129,000 154,800

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

Costs of Goods Sold 2.000 1.000 0.500Variable Cost of Goods Sold 20,549,000 10,274,500 5,137,250

Fixed Costs Reclassified to VariableCosts 0 0 0Total Variable Costs 20,549,000 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 Costs1.200

1.000

0.

900

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

G & A (without Depreciation) 308,235 256,863 231,176

Depreciation 6,854,625 6,854,625 6,854,625

Fixed Costs Reclassified to VariableCosts 0 0 0Total Expenses 7,471,095 7,368,350 7,316,978

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

Interest Income (Expense) -"Fixed" -1,548,651 -1,548,651 -1,548,651Income Taxes - "Variable" 0 -2,098,200 0

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


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KIMCS 2010 46

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 39,284,5000.392 0.509 0.432 0.562 0.492

Fixed Costs (calc as % ofsales)

Fixed Cost of Goods &Services 0.000% 0.000% 0.000% 0.000% 0.000%Sales & Marketing (w/oCommissions) 2.500% 2.500% 2.500% 2.500% 2.500%G & A (without Depreciation) 2.500% 2.500% 2.500% 2.500% 2.500% Total Fixed Costs (calc as% of sales) 5.000% 5.000% 5.000% 5.000% 5.000%

Fixed Costs (fixedamounts)Fixed Cost of Goods &

Services - - - - -Sales & Marketing (w/oCommissions) 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 (fixedamounts) 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


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KIMCS 2010 47

AnalysisIncome 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 22,148,242Sales Volume Above

Break-Even 14,059,051 13,968,251 28,047,265 27,414,447 57,753,758

SUMMARY OF ASSUMPTIONS

The accompanying financial projections are based on a number of assumptions made in the

process of forecasting future events and circumstances. The assumptions disclosed below

are those that are considered to be significant to the preparation of its financial projections .

Some assumptions, regardless of the amount of study or analysis, will not materialize, and

unexpected events and circumstances may occur after the date of the financial projections.

Thus, it should be expected that actual results will vary, to some degree, from the projected

results and the variations could be material.

STRATEGIC DIRECTION

To finance growth, the Company requires N50 million newly injected capital by the investing

members in the first quarter of2011, 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:

y Increases in sales and other staffing;

y Increases production capacity from 5,000 birds to 20,000 birds;

y Purchase of ancillary items.

OPERATIONS - 2011 -- 2015

1. The projections include actual results from a 12-month time span, beginning early2011

through to early2012.

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 of13% per annum.


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KIMCS 2010 48

3. The cost of turnover is expected to peak at 68% of the sale price of the Poultry facility

products and services, leaving32% 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 suchthat 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 of20% 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 theneed 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 beginning2011.

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

interest income on deposits is earned at 2%.


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KIMCS 2010 49

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

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.


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KIMCS 2010 50

ASSUMPTIONS BEHIND PROJECTIONS AND CALCULATIONS

S/N PARTICULARS SIZE/COST/%

1 Number of Birds in lay 5,000 20,0002 Rearing Period (weeks) 72 90

Brooding cum growing period (weeks) 18 20

Laying period (weeks) 523 Number of batches or cycle 1 - 34 Space requirement per bird (sq.ft.)

Brooder cum grower period 1Layer period 0.8

Hatchery Period 0.355 Cost of Construction (N/sq.ft)

Broiler cum grower shed 1000.00Layer shed 1000.00Hatchery shed 1000.00Store room and admin office 650.00

6 Mortality rate (%)Broiler cum grower stage 6% - 10%Laying stage 3% - 5%

Day old chicks (DOCs) 4% - 6%7 Total mortality loss (birds) 5008 Total number of birds laying eggs 3500 12,6009 Rate of egg laying 2 eggs every3 days (avg.)10 Egg price (N/egg) 9.00

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

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


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KIMCS 2010 51

REVENUE ASSUMPTIONS:

Sale of mature Birds:

[a] Broilers

[b] Layers

No. of Broilers/Layers

Mortality rate (%)

Available for sale

Average sale priceFrequency

5,000 20,000

10%

4,500

N450.002-3 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 every3 days

766,500 eggs

N108.00

Sale of Manure and LittersSelling price/flock

Feed bags selling price

Frequency

N5000.00

N15.00

Twice/year


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EXPENSE ASSUMPTIONS:

PARTICULARS ASSUMPTION

Admin Overhead as a % of sales

Transfer price of Day old chicks

Weight of feed bag (Kg.)Feed Cost/Bag

Rearing Period Feed use/bird/yr (Kg)

Rearing Period cost ofFeed/bird/yr.

Laying Period Feed use/bird/year (Kg)

Laying period Cost ofFeed/bird/year

Vaccination Cost per bird

Spray Cost per Flock

Litter Cost per Flock

Growth rate in input prices

12.5%

N110.00

50kgN850.00

0.95kg

N1,400.00

1.5kg

N3,000.00

N5.00

N1,500.00

N1,350.00

6.5%

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Adjusted Feasibility Study of Kimcs - Abuja

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