CONTENT

01. EXECUTIVE SUMMARY

02. INTRODUCTION

i
3

02.01 Project Background

02.02 Objective of Study
02.03 Methodology

03. MARKET ANALYSIS

03.01 Overview
03.02 Product Market
03.03 Major Consumers
03.04 Demand Level
03.05 Projected Demand
03.06 Major Suppliers
03.07 Level of Supply
03.08 Projected Supply
03.09 Competition
03.10 Proposed Marketing Strategy
04. TECHNICAL ANALYSIS
04.01 Operational Details and Structure
04.02 Machinery/Equipment Requirements
04.03 Housing
04.04 Raw materials and sources,
04.05 Infrastructural Requirements

Poultry facility Feasibility

05. MANAGEMENT AND ORGANISATION

06. INVESTMENT COST ANALYSIS
07. REVENUE

PROJECTION

08. FINANCING PLAN

09.

FINANCIAL

PROJECTIONS

AND

APPRAISAL

OF

COMMERCIAL

VIABILITY

Poultry facility Feasibility

CHAPTER TWO
INTRODUCTION
Project Background
The livestock sub-sector is an important component of the Botswana Agricultural
Economy. As in many developing countries, livestock plays many roles in the
socio-cultural lives of Batswana including provision of cash, food, draft power and
as well as poverty alleviation. Its importance derives from the fact that it is one of
the

key

contributors

to

the

national

economy.

The

poultry

industry

as
experienced phenomenal growth in the past 20 years. The poultry industry plays
a significant role in employment creation and poverty alleviation. In 2009 alone,
the industry employed over 4500 people compared to 3050 in 2007/8. This
represents an increase of 47.5%. The industry contributes significantly towards
poverty

alleviation

and

food

security

through

Livestock

Management

and

infrastructure Management (LIMID) and Culture and Youth Grant.

In terms of specific output, the livestock sub-sector can be broken into product
sub-groups such as, poultry meat, goat meat, lamb/mutton, beef, pork, milk and
eggs.
Table 1: Estimated Output of Livestock in Nigeria: 1994 2000
(000 tonnes)

Poultry facility Feasibility

199

199

199

199

199

199

200

200

2002

Product
Poultry
Eggs
Goat meat
Lamb/Mutton
Beef
Pork

4
63
377
80
85
183
25

5
73
399
88
94
192
31

6
74
422
92
96
197
39

7
76
4 35
95
101
200
43

8
77
436
96
102
202
45

9
82
450
101
107
208
47
100

0
88
465
107
113
215
50
101

1
95
487
114
117
228
55
103

107
514
129
126
239
62
1046

Milk

951

961

972

989

9 91

Source:
Reportthat
and the
Statement
of sector
Accounts
However,CBN
it isAnnual
noteworthy
livestock
has(1998-2000)
not provided sufficient
volumes and the capacity to meet the demand of teeming Nigerians for protein.
The annual growth rate has been low for most of the products, particularly for
poultry and eggs sub-group, whereas, the sub-group, if properly managed, could
impact greatly on the income and quality of life of the citizenry. This is because
poultry production is a socio-economic activity that has high rating for the reason
that the net return on investment is relatively higher than that of other animal
species and its contributing role to national economy cannot be overemphasized.
Thus it is the major source of high quality protein that is necessary for th
e
continued survival of the fast growing human population of the developing
economy.
Based on the foregoing, the proposed integrated poultry organisation intends to
invest in comprehensive poultry farming which entails the production of day oldchicks, eggs, broilers and layers.

Objective of Study
The objective of this study is to undertake a detailed investigation of th
e
technical, market, and financial feasibility of the project, bearing in mind the size

Poultry facility Feasibility

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 th
e
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.

Poultry facility Feasibility

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 ha
s
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 pe
r
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

Poultry facility Feasibility

production of protein based food items at competitive costs so that they would be
affordable to the general masses. Aside from the other necessary economic
reforms, massive investment poultry farming is one way of resolving the problem.
What is poultry farming? Poultry farming is the commercial production of poultry
birds, which include chicken, turkey, geese, pigeon, guinea and gamebirds. They
are easy to produce, and have a high meat to carcass ratio. Hence, they are
excellent products for meeting the protein needs of the populace.
Chicken

constitutes

about

90%

of

the

poultry

population

in

Nigeria.

Consequently, poultry farming is generically used to refer to chicken farming in

the country.

Poultry Products
The main products of the proposed project include eggs, day-old chicks and
poultry meat, which will be generated from, culled birds (i.e. layers a
nd
breeders), and broilers.

Poultry by-products such as poultry droppings, poultry

offal and hatchery wastes will also provide additional income to the project.
Poultry dropping can be used as manure for vegetable gardening and feed
ingredient in fish farming.
Indeed, a wheelbarrow of fresh poultry droppings costs between N50.00
N80.00 in some parts of Lagos State at the moment.

Poultry offal and othe

r
hatchery wastes when grounded are good supply of calcium for growing birds.
Hence, they can also be sold in their re-cycled forms.
d
products of the projects will include:

In brief, the propose

(a)

Main Products

Poultry facility Feasibility

(b)

Day-Old Chicks

Farm Eggs

Poultry Meat
-

From Culled birds (Layers and Breeders)

Broilers

By-products

Poultry droppings

Poultry Offal and other hatchery wastes.

PROPOSED CAPACITY
5000 Birds per production cycle is the minimum economic size to commence a
poultry farm, as the operational and fixed costs are justifiable. This is even more
relevant for a non-automated poultry farm. For a fully automated and integrated
farm, the recommended minimum economic size is between 8,000 and 10,000
birds.
The proposed project, which is an automated and integrated poultry farm, is
proposed to commence with 10,000 to 15,000 birds per production cycle in the
poultry section and 10,000 birds in the Hatchery Section. However, the output of
the farm is proposed to increase to 20,000 birds in the poultry section and 15,000
day-old chicks within the first five years of the production period.
In the poultry section, the ratio of layers to broilers is proposed as 70%: 30% or

7: 3, while 40% to 60% is proposed for the hatchery section.

Poultry facility Feasibility

PROPOSED CAPACITY (%) OF THE INTEGRATED POULTRY FARM

(a) Poultry Section

Broilers
30%

3 ,0 0 0 - 6, 00 0

70 00 - 1 4 ,0 0 0 Bi r d s

Bi rds

Layers
70%

(b)

Hatchery Section

Layers
40%
3000- 4000 Chicks

4,000- 6,000 Chicks

B

Broilers
60%

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 ElFitri, Id-El Kabir etc. Also fast food operators such as hotels, restaurants, and
supermarkets also have very high demand for poultry products.

Poultry facility Feasibility

Egg, in its own case, has a wide variety of utilisation.

e

9
Thus, it is used in th

preparation of products such as chicken burger, scotch eggs,salad, and egg

soup among others. Apart from home consumption, eggs can be used as
leavening agent in baked foods, and as an ingredient in the manufacture of hair
shampoo and for the production of egg powder that can later be incorporated into
baby food.
Poultry farmers, especially the ones specializing in broiler and layer production,
are the potential consumers of the day-old chicks produced by the hatchery
section. Point of lay for egg production involves the raising of the pullet chicks
from 0 18 weeks. Such chicks must be obtained from reputable hatcheries.
Nigerias Poultry Market
While some countries are reputed to be important exporters of poultry products
after consistently meeting local demand, Nigerias main problem is meeting its
local demand for poultry products. Nigerias poultry market problems start in
1984 when the Federal Government banned importation of maize.

This indeed

contributed to steadily declining poultry production in addition to the effects of the

structural adjustment programme.
But the Nigerian poultry market had seen more prosperous times for the two
decades after independence in 1960; poultry production grew substantially,
peaking in 1982, with 40 million commercially reared birds. Since then, the bird
population has dipped steadily, to an estimated low of 6 million in 1997. The new
political dispensation has brought about a little improvement to poultry farming.
Hence, the poultry population increased to 20 million in 2003.
CURRENT SOURCES OF SUPPLY
The bulk of current sources of supply of poultry products come from the informal

sector, which is made up of farmers with smallholdings of 50-700 birds capacity.

Poultry facility Feasibility

10

However, there are some big suppliers especially in the southern par
ts 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 fig
ures from
different sources. However, we are able to come out with an estimate
d 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)

Chicken
Eggs
Day-old
Chicks

On the basis of the foregoing methodology we are able to estimate t

he supply
2003
2004
2005
2006
2007
2008
level o
50
52.5
56.13 57.88 60.78 63..81
(Million)
f poultry product
60
63
66.15 69.46 72.93 76.58
60
63
66.15 69.46 72.93 76.58
s in the country
as follows:
50 million birds per annum
60 million eggs per annum
60 day old chicks

Poultry facility Feasibility

11
Considering

infrastructural

constraints

and

other

limiting

factors,

we

may

estimate the projected level of supply of poultry products to increase by 5%.

Hence the projected level of supply from 2003-2008 is provided hereunder:

Estimated Demand for Poultry

There are very few taboos prohibiting the consumption of poultry products in
Nigeria.
Hence, nearly all the 129 million Nigerian are consumers of poultry products, in

one form or the other.

In terms of the household population, Nigeria presently has about 22 million
2004
500

2005
510

2006
520.2

2007
530.60

2006
541.5

households.

Assuming that each hou

sehold consumes 20 chickens per an

num
(million)
which include the ones consumed during the major festive periods such as
Christmas, New Year and Easter for Christian; Idel Malud, Idel Kabir for Muslims
and during the birthday celebration of members of the household or during any
special occasion, these assumptions bring the estimated poultry consumption to
about 440 millions chickens consumed by the households.
It should, however, be noted that the households are not the only consumers of
chicken

and

poultry

products.

The

other

consumers

include

Fast

Foo

Poultry facility Feasibility

12

Companies, Hotels and other food processing companies. Let us conservatively

assume that demand from these groups is about 60 million chickens per annum.
This brings the total estimate demand for poultry chicken to 500 million per
annum. If we further assumed that this demand increase by 2.00% per annum,
the projected demand for chicken is as follows:

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

this is obvious:
1.

Poultry products, in their present forms, are not branded products.

Hence, what is essential in this respect is the effective positioning of

on ou
appro
2.

Cargo(TEUs)

the distributi

tlets, at the
18

priate times.

As

a result o

f 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 facility Feasibility

13

POULTRYPRODUCTS IMPORTEDFROMUNITED
STATES(1997--1999)
Poultry (TEUs)

Eggs&Milk (TEUs)

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
33

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
1998
trade sector. The remaining
20% is normally distributed
through a longer
11997
2
1999 chain of

the formal sector.

3Year

In this wise, the marketing practices of the operators in the market can b
e
considered under the headings of quality of service, promotion, and pricing.
(a) In the area of distribution, poultry farmers sell directly to operators in the
informal sector.
These include

Butchers

Poultry facility Feasibility

Restaurants

Boarding hotels

Small retail stores

Hawkers

Live chicken markets

Spent hen depots

Individual consumers,

Hotels

14

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 th
e
products. In the case of eggs, they are classified to the following three
grades.

Grade 1

Grade 2

Under grade

PROPOSED MARKETING STRATEGIES

The proposed integrated farm will strive to produce highest possible quality of the
various products. The proposed farm will explore the following strategies:
Poultry facility Feasibility

1.

SUPPLY

15

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 b
y
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.

Poultry facility Feasibility

16

CHAPTER FOUR
4.1

OPERATIONAL DETAILS AND STRUCTURE

The proposed project, which is to be sited in the Lagos urban periphery, will be a
fully automated and integrated poultry production farm, which will be made up of
the following units.

Hatchery Unit,

Broiler grow-out facility,

Layer/breeder grow-out facility,

Table eggs production unit,

Broiler/culled birds processing plant,

4.11 Hatchery Unit

This is the unit where fertile eggs will be incubated to produce Day-Old Chicks
(DOC). The proposed hatchery Unit is expected to have a brooding capacity of

Poultry facility Feasibility

17

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:

Fertile Eggs

Fumigations of Eggs

Setter

Incubator
Day-Old Chicks
(DOC)

Hatchers
Incubator

Candling
Room

4.12 Broiler Grow-out Facility

Broiler production involves the raising of day-old chicks (DOC) from 0 50 days.
The breed of such chicks should be such that has with excellent meat to carcass
ratio.
The proposed broiler production capacity is proposed to be between 3000 -6000
birds per cycle.
There are some essential requirements for growing broilers successfully. All
these requirements will be put in place before the proposed project commences.
The requirements include:

Adequate housing

Excellent brooding equipment

Feeding equipment

The modern watering equipment

Miscellaneous equipments

All these will be discussed under facility requirements.

Poultry facility Feasibility

18

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.
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

Poultry facility Feasibility

19

The proposed integrated farm is expected to be fully automated with modern

poultry equipment and machinery.

The equipment/machinery requirements will

include.
a).

b)

Hatchery Unit

Setter Incubator

Hatchers Incubator

Fumigation Equipment

Candling Lamb

Broiler, Layer and Breeder Unit

Brooding Equipment

Feeding Equipment

Watering Equipment

Thermometer

De-beaking scissors

Setter Incubator
The setter incubator would have a minimum capacity of 40,000 Eggs. Th
e
dimension of a typical one, Chick Master 102 is 22length,12.6 Width
and 8.7Height
Hatchery
The Hatchery that will be utilized will have a minimum of 30,000 Day -old Chicks
per hatching cycle

Drinking systems

Poultry facility Feasibility

20

An automatic water trough or drinking nipple system placed inside or preferably

outside the shed will save labour and provide a constant supply of fresh water. It
is important to provide shade in the hot season to keep the water cool.
A low-pressure drinking system is ideal for adult birds. The water flows through
the nipples only when they are touched or pecked. Poultry quickly learn how to
operate the system. Drinking nipples are more hygienic and use less water than
open troughs.
Feeders

In deciding which feeder should be used, it important to put into consideration the
type and the class of chicken that is being reared.
Basically, there should be
Feeder for Pullets
Feeder for Cockerels
Feeder for Day Old Chicks (DOC)
One hanging tube feeder with a pan 400 mm in diameter will provide about
1200 mm of feeding space, enough for 15 hens.
Bulks feed

storage are also a necessary part of

the feeding equipment.

The

bins (Silos) are located outside the house.

Broiler Processing Plant
A set of

poultry slaughtering and broiler processing that has the capacity to

package 5000 broilers per day will be put in place.

Other Support Equipments

Other support equipments include:

Poultry facility Feasibility

4.4

Electric Generator Preferably 250 KV

Egg Lifter

Debeakers

Thermometer

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

21

HOUSING

The first requirement for growing commercial poultry is adequate housing. This

is because broiler/layer production is essentially a chick brooding operation.

Hence the house should contain necessary equipment so that such factors as
temperature, moisture, air quality and light can be controlled easily.

It should

also provide for efficient installation and operation of brooding, feeding, watering
and other equipment.
A poultry building should have the following general features:
*

Excellent ventilation, air movement and sufficient lighting,.

Optimal use of floor space.

Should contain all necessary equipment such as brooding, feeding,

watering and other equipment for efficient operation.

The house should be sited on a well drained soil.

Floor of the poultry houses must be concreted and littered.

Three types of houses are utilised in the commercial production of broiler, layer
and breeder.

Thus birds are transferred to the various houses depending on

their age in the production cycle. These houses include:

Poultry facility Feasibility

Brooder House

Growers House

Deep Litter House

Cage.

22

Brooder House
This is the house where a day-old chick stays until the first 8 weeks of the chicks
life.

Brooder house must be maintained properly and kept warm always.

Installation of brooders guards to confine chicks, flat feeders, drinkers and feed
mash must always be available.

Grower House
After the first 8 weeks, chicks are transferred to the grower house. The purposes
of this transference are to protect them and make them comfortable so that they
can develop optimally. A well ventilated housing accommodation will suit the
growers with enough floor space for the number of growers involved.The
recommended floor space for a flock of 250 birds is 125 square metres.
Deep Litter House
The birds are transferred to the deep litter house after 20 weeks in the growers
house.

In case of broiler production, this is where the birds will domiciled until

they reach the market weight of about 1.6kg in 3 -4 months.

Cage
Poultry facility Feasibility

23

This is the final destination of layers and breeders. No litter is required. Cages
are normally put under the roofed house. The usual number of birds required in
a cell is 3 pullets or 2 layers.

Figure 1. Modern broiler house, which uses two

feed bins.
Houses should be capable of maintaining appropriate temperatures during the
entire growing cycle, regardless of the outside temperature. Colder climates
require additional insulation, whereas proper air speed becomes crucial in a hot
environment. Most broiler houses are built 40 feet wide, usually with two lines of
lighting fixtures arranged so that all areas of the floor are well lit. Low-wattage
bulbs are place 8 to 10 feet above the floor to provide 0.5 to 1.0 foot candle o
f
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,

Poultry facility Feasibility

c)

Paved Road Transportation,

d)

Drainage Facility

24

Water Supply
Clean water supply is a sine qua non of poultry business. Hence, there should be
provision for an alternative source of water since constant and clean water
supply can only be ensured through provision of an internal borehole and, a
minimum of, one overhead water tank of 5000 litres capacity.

Electricity Supply
Since public power supply is not reliable, provision will be made for a 250 KVA
generating set to supplement National Electric Power Authority supply, and
ensure uninterrupted supply of electricity.

4.6 RAW MATERIAL REQUIREMENT

The basic raw materials of a typical Poultry farm include

Feeds

Drugs

Vaccines

Feeds
The types of food birds feed on varies as they grow, and these includ
e:
Chicksmash,

which

is

used

for

feeding

chicks

from

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.

Poultry facility Feasibility

25

The bulk of this feed will be sourced locally from bulk importers and loc
al
manufacturers of livestock feed. In the nearest future, the farm will explore the
possibilities of producing its own feed.
Drugs
Some poultry drugs commonly used in the poultry farms are:
Amprol Solube Powder, Tylan, Vitadol, Vibravet, Soluvita Stress, Teramycin

eggs formular, Malathion insecticide, Vetox 85 insecticide.

Vaccines
Some popular vaccines include:

Newcastle

disease

vaccine,

Coccidants

Vaccines, Gumboro Vaccine, Komoro Vaccine, Pox vaccine and Ant- C.R.D
Vaccine
About 90% of these inputs are imported. These is why poultry production is
highly sensitive to foreign exchange fluctuation In Nigeria

CHAPTER FIVE

MANPOWER REQUIREMENT, MANAGEMENT AND ORGANISATION

MANAGEMENT

Poultry facility Feasibility

26

For the successful operation of the integrated farm, the management should
have adequate and appropriate knowledge in specific features of poultry farming.
These important areas include:

Diseases control,

Housing and equipment ,

Feeding,

Genetic improvement,

Marketing,

Consequent upon the medium size of the farm, the management structure will
not be too elaborate. Since a promoter will finance the farm, the composition of a
board of directors may not be necessary, although it is advisable that this be put
in place. The overall management functions, which will include broad policy
formulation, approval of budgets and strategic plans, will fall on the promoter who
will also function as the Managing Director and Chief Executive Officer of the
farm, although a lot of assistance and value can be derived from the constitution
of a board of Directors.

PERSONNEL REQUIREMENT
Commercial poultry production involves the rearing of exotic breed of chicken
that are highly sensitive to environmental changes, feeding pattern and diseases.
Hence, its management requires highly skilled and experienced personnel.
The farm will to be a fully automated and integrated farm. Hence, there would not
be need for too many staff. In this wise, the farm will require the followin
g
personnel:
Poultry facility Feasibility

27

The Managing Director (1)

The

promoter

will

assume

the

overall

supervisory

responsibilities

as

th

e
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 th
e
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
N
N
N
N

600,000.00--------Year
660,000.00--------Year
726,000.00--------Year
798,600.00--------Year
878,460.00--------Year

1
2
3
4
5

ORGANISATION STRUCTURE

Poultry facility Feasibility

28

Initially, the farm will maintain a lean structure in the first five years of i
ts
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
is

in

place,

very

good

structure.

Hence,

the

following

structure

recommended.
The farm will be structured into four broad departments. The heads of these
departments will report to the General Manager, who will serve as the overall
Farm Manager of the integrated farm. He will report to the Chairman / Managing
Director.
Hatchery Manager, who will supervise the hatchery operations of the farm, will
head the Hatchery unit.
The Finance and Administration Department will be headed by Finance
&
Administration Manager and will supervise all administration accounts and
personnel matters.
The Livestocks Department will be headed by Livestock Manager, who will
supervise the broiler, layers / breeder and egg production operations of the farm.
The
s

Business

Development

Manager

will

head

the

Marketing

and

sale

Department. He will be responsible for implementing marketing and sales

strategies of the farm.

PROPOSED ORGANISATION STRUCTURE

Chairman/CEO

Poultry facility Feasibility

29

Gener
al Man
ager
Business Development
Manager

Manager

Feed man

Veterinary Assistant

Livestock Manager

Hatchery Assistants

Finance & Admin

Admin Clerks
Hatchery Manager

Business Development Executives

Account Clerks

Poultry facility Feasibility

CHAPTER 6
INVESTMENT COST ANALYSIS

30

The cost of the project are estimated under two main headings, viz:
Capital/initial cost and operating/maintenance costs.
1.0

Capital/initial Cost

Based on the estimates gathered during the market survey as well as internet
searches, the principal cost component of the project are [1] land/building &
Infrastructure, [2] Plant & Machinery, [3] office furniture, [4] delivery vehicles and
[5] the pre-operational expenses. These are summarized below:
Construction sheds/store rooms:
Land acquisition

5,000,000

Broiler/grower shed

1,000,000

Hatchery shed

1,000,000

Layer Shed

1,000,000

Store room

850,000

Fencing

2,000,000

Sub-Total
1.2.

10,850,000

Machines/Equipment:
Automated Watering System
Automated feeding system
Automated manure removal
Incubation and Hatchery equipment
Generator

6,500,000
12,000,000
2,750,000
15,000,000

(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

Poultry facility Feasibility

1.3

31

Delivery Vehicles:
a)

Saloon Car

(1 no.)

b)

Purchasing/Delivery Van (1 no.)

2,900,000
2,750,000

Sub-Total
1.4

5,650,000

Furniture & Fittings:

a)

Furniture (see details)

b)

Air conditioners (1 no.)

c)

1,200,000
150,000

Telephone Installation

85,000

Sub-Total
1.5

1,435,000

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
1.6

3,000,000

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

Sub-Total

10,400,000

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

Poultry facility Feasibility

1.7

32

Working Capital:

The working capital is a sum that should be available to the business.

The

working capital for the first year of operation of the Poultry is estimated, on the
basis of the operating expenses.
2.0

OPERATING AND MAINTENANCE COSTS

The operating and maintenance costs are estimated on the basis of assumptions
of usage rates for utilities water, light, fuelling and sundry expenses on a daily
basis. The total is estimated at N350, 000 for two months. This is much in line
with average rates for poultry facilities of similar standard.
2.1

Fuel Expenses

Given at least 2 vehicles and using average fuel expenses of N34/litre and 5
litres/day, the fuel consumption is estimated at N340/day.
a)

Maintenance of other machines/equipment is estimated to cost

N75,000 per annum.

b)
2.2

The Vehicles will be maintained at N300,000 per annum.

Management and Personnel Cost

We note that due to the automation of the Poultry, staff head count should be
kept at a Minimum until the mature birds are due for sale/processing.
The
estimated cost of staff emoluments in the first year of operation is N5million, and
an annual increase of 10% per annum is expected for the next five years.
Detailed breakdown of manpower expenses can be seen at the section on
manpower requirements and organization chart.
b.

Poultry Feed, Vaccination, Spray, litter, etc

The above are estimated based on a benchmarking with model poultry farms as
well as industry best practices.

We have however been a little conservative in

this matter. Vaccination cost is put at N30 per bird. Spray cost is put at N5, 000
per flock, Feed cost is put at N1, 100 per bag of 25kg on average.
Poultry facility Feasibility

33

c.

Utilities

These have been estimated as follows:

i.

Telephone bills (Admin)

100,000.00

ii.

Electricity

200,000.00

iii.

Water

300,000.00

iv.

Diesel for generator

300,000.00

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

d. Audit expenses
These have been pegged at N250, 000 in the first two years, then it moved to
N350,000 as from the third year.
e.

Facilities, Cleaning And Maintenance

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

litters and general material for the up keeping of the premises of the Poultry
facility. It has been pegged at N300, 000.00 per annum and increases at the rate
of 5% per annum.
2.3 General Overhead:
The general overhead cost in the first year of operation is estimated as below:
I)

Travel expenses

200,000

ii)

Printing/Stationery

100,000

iv)

Staff Uniform

100,000

v)

Sundry Expenses

250,000

DEPRECIATION SCHEDULE
PLTRY.EQM
ENERGY
O/EQUIP.

VEHICLES

FURN./FIT

YEAR

1.27125
1.27125
1.27125
1.27125
0.000
5.085
0.565
5.650

0.322875
0.322875
0.322875
0.322875
0.000
1.2915
0.1435
1.435

1
2
3
4
5
TOTAL
Salvage
COST

T/
BUILDING
4.721
4.721
7.161
7.161
7.161
58.185
5.819
75.135

0.450
0.450
0.450
0.450
0.450
2.250
0.250
2.500

0.540
0.540
0.540
0.540
0.540
2.700
0.300
3.000

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).

Poultry facility Feasibility

34

Poultry facility Feasibility

35

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 estimate

d
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 day
s
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.

Poultry facility Feasibility

iii)

36

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

bir

ds
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 other

s.
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 a
s
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

Poultry facility Feasibility

37

CHAPTER 8
FINANCING PLAN
Traditionally, any projects that have been found to be commercially viable are
financed through equity contribution of sponsors and loans term loans and
bank overdrafts.

Our various discussions with the promoter show that the

financing structure and pattern should follow above path. Consequently, the
Poultry facilitys capital cost of N68.135 million is recommended to be financed
as follows:
NMillion

i)

Equity Contribution

15.027

20.00

ii)

SMIES Loan

50.000

66.55

iii)

Start-up funding

10.108

13.45

N75.135

100.00

Total
i.

Equity contribution will cover the cost of initial acquisition of land and as
well as for the construction and completion of the Poultry facility building.
The sum should also cover the construction and part-furnishing of the
administrative office and store rooms.

ii)

SMIEIS Loan of N60.00 million will be used to finance substantial part of

the automated poultry and hatchery equipment and start-up operational

expenses.
It is our view that the project will not have difficulties in securing term loans that
can be achieved through Loan syndication with one of the leading commercial
banks as a lead banker. United Bank for Africa (UBA), Union Bank of Nigeria
(UBN), First Bank of Nigeria (FBN), Afribank and Wema Bank. The other buoyant
commercial/merchant banks should be willing to participate.
Another viable source of financing the project is by lease finance. Once the
viability analysis has indicated project acceptance, the question of whether to
Poultry facility Feasibility

38

finance by leasing or borrowing becomes secondary since the project will do well
whatever the choice of financing. However, lease financing is particularly
attractive on the following grounds:
i) It allows 100% debt financing, as equity contribution is not

required.

ii)

It is easier and quicker to obtain a lease than to obtain a loan

iii)

Lower equity taxes are paid

iv)

It has greater tax savings over a buy decision

The SMIES loan is expected to reduce the pains of servicing a regular bank
revolving loan with periodic interest and principal repayments.

Poultry facility Feasibility

39

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 debt portfolio and is
managed professionally. The cash flow projection is attached.

Poultry facility Feasibility

40

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD

All Figures are in Millions of Naira
BALANCE SHEETS
Year
Cash and Near Cash
items
Due from related parties

2
14,296,7

96

00

Inventory and WIP

Other Accounts
Receivable

99

Total current assets

Gross property, plant &
equipment
Less accumulated
depreciation
Net property, plant &
equipment

05

652,90
9
43,645,7
58,185,0
00

Accounts payable
Taxes Payable

2,098,20

27,218,88
4

29,164,50
0

39,284,50
0

32,478,48
5

1,822,11
0
75
54,985,55
1
58,185,00
0
(13,709,25
0)
44,475,75
0
99,461,30
1
749,85
0
18
1,172,12
0
50

5
24,976,54

19,944,50

20,724,18
7

(6,854,6
25)
51,330,3
75
94,976,0
80
513,72
5

Total assets

0
18,421,4

4
23,912,47

14,997,00

10,274,5
Prepaid Expenses

3
17,442,25

36,538,29
5

56,211,05
7

1,298,44
1,154,1 7
77,489,63
0

91,977,78
4
58,185,00
0

(23,003,89
5)
35,181,10
5
112,670,73
5

124,711,99
1

58,185,00
0

1,997,55
0

58,185,00
0

(32,298,54
0)

(41,593,18
5)

25,886,46
0

16,591,81
5

117,864,24
4

141,303,80
6

1,459,76
1,003,1 8

1,967,54
0

1,996,27
3,513,6 2

6,886,08
9

465,79
Dividends Payable

9,892,70

Current Portion of LTD

Other Accruals

Total current liabilities

81

10,931,43
9

1,548,65
14,053,2
61,000,0

2,950,14
5
65
15,803,55
4

819,852
12,079,24
0

1,606,75
4

13,347,56
1

14,749,05
4

5,366,26
4,218,4 6
21,634,32
4

6,405,00
0

22,635,66
3

31,614,43
8

61,000,00

61,000,00

Long-term debt

00

61,000,000
15,027,00

15,027,0
Common Stock - Paid up

00

Net Income

Shareholders equity
Total long-term debt and
equity

99

Total Liabilities

80

Current Ratio

0
4,895,79

2,734,94
8
64
22,657,74
7
83,657,74
7
99,461,30
1

19,922,7
80,922,7
99
94,976,0

61,000,0000
15,027,00
15,027,00
0
0
4,192,17
7,378,6 1
30,036,41
1

15,027,00
0
14,460,78
7

34,228,58
2

91,036,41
1
112,670,73
5

48,689,36
9

95,228,58
2

109,689,36
9

117,864,24
5

141,303,80
6

3.1
3.48

3.58

4.06

3.92

3.01

3.07

3.94
3.8

Total Liabilities/Equity
3

2.24

Poultry facility Feasibility

41

PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD

INCOME STATEMENTS
Year
Sales
Growth rate (%)
Less COGS

All Figures are in Millions of Naira

1
5

26,185,500
29,458,688
79,902,000
12.50%
53.84%
(10,274,500)

4
46,167,000

51,937,875

56.72%

12.50%

(14,997,000)

(19,944,500)

(29,164,500)

31.49%

24.81%

31.61%

(39,284,500)
Growth rate (%)
Gross profit
Growth rate (%)
Less SG&A expenses
Growth rate (%)
Earnings before Interest,
Tax & Deprec.
Less depreciation

25.76%
15,911,000
14,461,688
40,617,500
-10.02%
43.93%
(513,725)
(749,850)
(1,964,225)
31.49%
25.76%

26,222,500
44.85%
(997,225)
24.81%

22,773,375
-15.15%
(1,458,225)
31.61%

15,397,275
38,653,275

13,711,838

25,225,275

21,315,150

(6,854,625)

(6,854,625)

(9,294,645)

(9,294,645)

6,857,213

15,930,630

12,020,505

(9,294,645)
Earnings after depr. b/4
Interest & Tax

8,542,650
29,358,630

Less
SMIES
repayment accrual

int.

Pre-tax income
Cumulative
income (NOL)

(1,548,651)
(6,405,000)
6,993,999
22,953,630

(2,950,145)

(4,218,465)

(5,366,266)

3,907,068

11,712,165

6,654,239

6,993,999
52,221,101
2,098,200
(6,886,089)
6,993,999
22,953,630

10,901,067

22,613,232

29,267,471

1,172,120

(3,513,650)

(1,996,272)

3,907,068

11,712,165

6,654,239

(2,098,200)

(1,172,120)

(3,513,650)

(1,996,272)

(819,852)

(465,797)

pre-tax

Taxes
Pre-tax income
Less taxes

(6,886,089)
Less Proposed Dividend

(1,606,754)
Net income

4,895,799

2,734,948

7,378,664

4,192,171

14,460,787
Growth rate (%)

Return on Investment
Return on Sales
Return on Equity

7.19%
21.22%
18.70%
18.10%
19.48%
57.53%

-79.01%
71.01%

62.93%

-76.01%

4.01%

10.83%

6.15%

9.28%

15.98%

8.07%

10.88%

29.36%

16.68%

Poultry facility Feasibility

42

CASH FLOW STATEMENT FOR THE 5-YEAR PLANNING PERIOD

STATEMENTS OF CASH
FLOWS
All figures are in Millions of
Naira
Year

Net income
Plus depreciation
Less increase in inventory
Plus
Interest
on
Investments
Less increase in accounts
receivable
Plus increase in accounts
payable
Cash flow from operations
Less investment

Plus
net
new
equity
capital raised
Current year Interest
Less dividends paid
in

4,895,799
14,460,787
6,854,625
9,294,645
10,171,755
3,928,450
(130,928)
(3,859,267)
2,054,900
1,178,535
23,846,152
25,003,150
(75,135,000)

Cash flow from operations

and invests

Inc. (Decr.)
debt

(51,288,848)
25,003,150
15,027,000

2,734,948

7,378,664

4,192,171

6,854,625

9,294,645

9,294,645

(7,499)

6,761,186

(262,481)

2,945,869

(46,167)

4,934,098

4,499,100

199,445

2,085,262

17,027,043

23,587,773

20,243,695

17,027,043
-

(1,548,651)
(2,950,145)
(6,405,000)
(1,606,754)

23,587,773
-

20,243,695
-

(4,218,465)

(5,366,266)

(819,852)

(465,797)

(12,079,240)

(13,347,561)

long-term

Inc.
(Decr.)
Other
borrowings
Cash
flow
from ops,
invests, and fin
Beginning cash balance
Ending cash balance

51,107,295
(14,749,054)
-

(10,931,439)
-

13,296,796
2,242,342

3,145,459

6,470,216

1,064,072

1,000,000

14,296,796

17,442,255

23,912,471

24,976,542
14,296,796
27,218,884

17,442,255

23,912,471

24,976,542

"WHAT IF" ANALYSIS

YEAR 1 SCENARIO
Pessimistic
Planned

Sales
Mature birds

70%
4,725,00

Optimistic

100%

120%

4,828,95

Poultry facility Feasibility

Eggs

43
WHAT IF ANALYSIS FOR THE FIRST YEAR OF OPERATION

000 6,750,

00

8,100,0

500 6,898,

00

8,278,2

0
8,685,60

12,408,0
00

14,889,6

Day old Chicks

Manure/Litters

000

00

Net Sales

18,329,850

26,185,500

31,422,600

Costs of Goods Sold

2.000
Variable Cost of Goods Sold
20,549,000
Fixed Costs Reclassified to Variable
Costs
0
Total Variable Costs
20,549,000

1.000
10,274,500

0.500
5,137,250

0
10,274,500

0
5,137,250

Fixed Costs of Goods & Services

Total Costs of Goods Sold

1.100
0
20,549,000

1.000
0
10,274,500

0.900
0
5,137,250

Gross Profit
% of Total Sales

-2,219,150
-12.11%

15,911,000
60.76%

26,285,350
83.65%

Operating Costs
Sales & Marketing

1.200
308,235

1.000
256,863

0.900
231,176

G & A (without Depreciation)

308,235

256,863

231,176

Depreciation

6,854,625

6,854,625

6,854,625

Fixed Costs Reclassified to Variable

Costs
Total Expenses

0
7,471,095

0
7,368,350

0
7,316,978

Income From Operations

-9,690,245

8,542,650

18,968,373

90,30

00
129,

154,8

Interest Income (Expense) - "Fixed"

Income Taxes - "Variable"

-1,548,651
0

-1,548,651
-2,098,200

-1,548,651
0

Net Income After Taxes

-11,238,896

4,895,799

17,419,722

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

Poultry facility Feasibility

44

BREAK EVEN ANALYSIS (N'MILLIONS)

YEAR
1
5
Sales

3
46,167,00

26,185, 29,458,
50
688
0

19,944,50

10,274, 14,997,
50
000
0

4
51,937,8

75

79,902,
000

Variable Costs
Material & Labor
Commissions

29,164,5
00

39,284,
500

Total Variable Costs

Fixed Costs (calc as % of sales)

Fixed Cost of Goods & Services
Sales
&
Commissions)

Marketing

10,274, 14,997,
50
000
0
0.392
0.509
0.492
0.000%
0.000%

19,944,50

29,164,5
00
0.432

39,284,
500
0.562

0.000%

0.000%

0.000%

2.500%

2.500%

2.500%

2.500%

2.500%

2.500%

5.000%

5.000%

5.000%

(w/o

2.500%
2.500%
G & A (without Depreciation)
2.500%
2.500%
Total Fixed Costs (calc as % of
sales)
5.000%
5.000%
Fixed Costs (fixed amounts)
Fixed Cost of Goods & Services

Sales
&
Commissions)

Marketing

(w/o
63

G & A (without Depreciation) 63

Depreciation
Total
Fixed
amounts)

Costs

Income from Operations

5
(fixed
0

256,8

374
,925
256,8 374
,925
6,854,6 6,854
2
,625
7,368,35
7,604
,475

498,6
13

729,
113

498,6
13

729,
113

9,294,64
5

8,542,6 6,857
5
,213
0

982
,113

9,294,
645

10,291,87
0

982
,113
9,294
,645

10,752,8
70

15,930,63

11,258,
870

12,020,5
05

29,358,
630

(1,548 (2,950,
,6
145)
5)

(4,218,46

(3,513,65

00)

(2,098 (1,172,
,2
120)
0)

8,198,51

4,895,7 2,734
9
,948
6

Interest Income (Expense) - "F 51)

ixed"
Income Taxes - "Variable"

Net Income After Taxes

Analysis
Income from Operations
Contribution Margin

0.608
0.508

66)

(6,405,
000)

(1,996,2
72)

(6,886,
089)

4,657,
967

0.491

12,126, 15,490,
44
Break-Even Sales
9
437
5
Sales Volume Above Break- 14,059,05
13,968,
Even
1
251
5

(5,366,2

541

0.568
18,119,73

16,067,

0.438
24,523,4

28
28,047,26

22,148,
242

27,414,4
47

57,753,
758

Poultry facility Feasibility

45
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 th
e
projected results and the variations could be material.
STRATEGIC DIRECTION
To finance growth, the Company requires N50 million SMIES term financing in
the first quarter of 2005, as well as N10.108million start-up expenses funding.

This financing would enable the Company to develop a world-class Poultry

facility, to strengthen the management team and to provide for:

Increases in sales and other staffing;

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

Purchase of ancillary items.

OPERATIONS - 2004 -- 2008

1. The projections include actual results from a 12-month time span, beginning
early 2005 through to early 2006.
2. Turnover will range from N26.2 million to N79.9million, over the 5year
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 t
he
Poultry facility products and services, leaving 32% of revenues to cover
Poultry facility Feasibility

46

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 t
o
increase such that a significant portion of the total revenue should b
e
generated from these sources.

The projection is that up to 80% of revenue

should be from the sale of mature birds and eggs, leaving the balance of 20%
to be from sales of day old chicks and manure/litters.
5. During the same period, spending on start-up costs such as marketing
,

advertising and promotion, general administration and consulting activities is

expected to peak in order to launch the Poultry facility on a sound footing.
OPERATIONS - 2005 -- 2008
1. A major capital expenditure of N50.0million is expected to be incurred in order
to complete work on the construction phase of the Poultry facility and t
o
purchase

critical

automated

poultry

and

hatchery

equipment. Major

recruitment is also expected to be undertaken during the start-up phase.

2. Operating expenses especially salaries and wages are expected to rise as a
result of the need to retain motivated workers over the long haul. Annual rate
of growth in salaries and wages are to peak at 10%.
3. The productivity of Sales/marketing staff is expected to improve, riding on the
general acceptance of the Poultry facility products and services.
4. Headcount should increase from 2 to about 5 within the planning period. The
high degree of automation makes the need for new hires to be minimal.
5. Annual salaries (except sales staff) increase 10% annually beginning 2005.

Poultry facility Feasibility

47

6. Interest expense for borrowed funds are acquired is provided at 30% per
annum, and interest income on deposits is earned at 2%.
7. Depreciation is calculated using the straight-line method over 5 years.
8. Federal income taxes are provided at 30%
INVESTING - 2004 2008
1. Equipment purchases are projected at between N43.0million and N63million.

This may be staggered over a two period cycle to take account of expansion
in number of birds.
Taxation and Capital Allowances

Annual Taxation on corporate body takes into consideration 30% of profits.

computing this taxation, allowances on assets have been allowed as follows:
Description: Land

Plant

Furniture

Motors

Building

Machinery

Fittings

Vehicles

Initial

5%

20%

15%

25%

Annual

10%

12.5%

10%

20%

FINANCING - 2004 -- 2008

In

1. An overall ratio of about 37:63 is maintained between equity and debt, such
that dilution of ownership and control is deeply affected. In 2005 the
S/N
1
2
3
4

7
8
9
10
11
12

PARTICULARS
SIZE/COST/%
Number of Birds in lay
5,000 20,000
Rearing Period (weeks)
72 90
Brooding
cum
growing
period18 20
Laying period (weeks)
52
(weeks)
1-3
Number of batches or cycle
Space requirement per bird (sq.ft.)
Brooder cum grower period
1
Layer period
0.8
Hatchery Period
0.35
Cost of Construction (N/sq.ft)
Broiler cum grower shed
1000.00
Layer shed
1000.00
Hatchery shed
1000.00
Store room and admin office
650.00
Mortality rate (%)
Broiler cum grower stage
6% - 10%
Laying stage
3% - 5%
Day old chicks (DOCs)
4% - 6%
Total mortality loss (birds)
500
Total number of birds laying eggs
3500 12,600
Rate of egg laying
2 eggs every 3 days (avg.)
Egg price (N/egg)
9.00
Egg Production capacity per year
766,500 eggs
Average body weight of mature birds 1kg 2.5kg
Feed requirement (kg/bird)
Brooding cum growing stage
4.5 7.5 kg/bird
Laying stage
35 40 kg/bird
Hatchery/Day old chicks
0.35 1 kg/bird

2. The
or a
in 2
Poultry facil

Poultry facility Feasibility

Sale of mature Birds:

49
No. of Broilers/Layers

5,000 20,000

[a] Broilers

Mortality rate (%)

10%

[b] Layers

Available for sale

4,500

Average sale price

N450.00

Frequency
Hatchery Capacity

2-3 times/year
10,000 DOCs

[a] Broilers

Mortality rate (%)

6%

[b] Layers

Available for sale

9,400

Average sale price

N110.00

Frequency

3-4 times/year

Initial No. of layers

3,500 14,000

Layer Mortality rate

10%

Effective no. laying eggs

3,150 12,600

Laying Period

52 weeks

Rate of lay

2eggs every 3 days

Total eggs laid/year

766,500 eggs

Egg Price/dozen

N108.00

Selling price/flock

N5000.00

Feed bags selling price

N15.00

Frequency

Twice/year

Sale of Day old Chicks:

Sale of Eggs:

Sale of Manure and Litters

REVENUE ASSUMPTIONS:

EXPENSE ASSUMPTIONS:
Poultry facility Feasibility

50

PARTICULARS
Admin Overhead as a % of sales

ASSUMPTION
12.5%

Transfer price of Day old chicks

N110.00

Weight of feed bag (Kg.)

50kg

Feed Cost/Bag

N850.00

Rearing Period Feed use/bird/yr (Kg)

0.95kg

Rearing Period cost of Feed/bird/yr.

N1,400.00

Laying Period Feed use/bird/year (Kg)

1.5kg

Laying period Cost of Feed/bird/year

N3,000.00

Vaccination Cost per bird

N5.00

Spray Cost per Flock

N1,500.00

Litter Cost per Flock

N1,350.00

Growth rate in input prices

6.5%

Poultry facility Feasibility

51