KINGDOM MULTI-PURPOSE CO-OPERATIVE SOCIETY

LTD

PRESENTS

A Proposal On The Development Of A Comprehensive

Localised Poultry Farmers Incubation Center To Be
Located In The Federal Capital Territory, Abuja,
Nigeria

TO

PROSPECTIVE INVESTORS AND MEMBERS

Corporate Head Office:

Nigeria:
39B Danude Street
Maitama
Abuja
Nigeria.
Telephone: +2347098814236, +2347025465604,

KIMCS 2010 1
CONTENT

01. EXECUTIVE SUMMARY 3

02. INTRODUCTION 9
02.01 Project Background
02.02 Objective of Study
02.03 Methodology

03. MARKET ANALYSIS 11

03.01 Overview
03.02 Product Market
03.03 Major Consumers
03.04 Demand Level
03.05 Projected Demand
03.06 Major Suppliers
03.07 Level of Supply
03.08 Projected Supply
03.09 Competition
03.10 Proposed Marketing Strategy

04. TECHNICAL ANALYSIS 20

04.01 Operational Details and Structure
04.02 Machinery/Equipment Requirements
04.03 Housing
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

KIMCS 2010 2
09. FINANCIAL PROJECTIONS AND APPRAISAL OF COMMERCIAL
VIABILITY 41

CHAPTER ONE

EXECUTIVE SUMMARY

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

2008 under the supervision of the Central Bank of Nigeria (CBN). The main object of the
cooperative is human capital development thereby alleviating poverty in all facet of
human endeavour. The cooperative trains, manage and administer contributions for
employees of Government at all levels, Corporate Establishments, Groups and
Individuals.

The cooperative was conceived out of an ambition to:

 Revolutionise the activities of cooperative societies
 Cater for the down trodden
 Develop human capital
 Provide funds for the establishment of businesses
 Monitor businesses and
 Total financial advisory services for the class that cannot afford such
 A complete solution centre for poverty alleviation
Our main aim is to reverse the ugly stories and sights associated with cooperative
societies and other SMEs establishment administration and management in both public
and private sectors in Nigeria. We wish to achieve this by bringing the practice of
cooperative society in Nigeria to international standard, adapting and improving on the
international best practices. This is synonymous to the practice in Nigeria before
colonialism and present cooperative society set up in India. We intend to provide quality
training and allied services to corporate and individual Nigerians like never before with
high level of honesty and integrity in business relationship by doing the following:
 Make quality education/training and information available to government,
corporate organizations, groups and individuals in order to impact communal
responsibilities at all levels
KIMCS 2010 3
  Make cooperative society practices pleasurable to Nigerians
 Make illiterates, elites, self-employed, corporate workers, public servants, etc
have sense of responsibilities and hope
 Render financial assistance to the members
 Monitoring of members business and taking the business to a profit making level
 Financial advisory services for members
 Liaising and with working with the Government in order to achieve the poverty
alleviation agenda via empowerment
 Raising funds from investing members, investments, business activities and
government where available
 Setting up communal businesses for training purpose and raising of funds for the
cooperative society

Kingdom Multi-purpose Cooperative Society (KIMCS) has been organizing various in-
house and public Sensitization/enlightenment workshops on the need for viable and
purposeful practice of cooperative society in Nigeria. The workshops are to enlighten
members of the public on the dynamics, implementation and benefits of cooperative
societies in Nigeria.

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

authorized share capital out of which =N=20 million should be called-up. This would be
sourced through financial member investment. Major investors who have like minds with
the promoters of the cooperative will be identified in the Nigerian society for this
purpose. The principal promoters of the company have already committed =N=20
million out of this amount towards take-off, while additional =N= 480 million is to be
injected as additional paid-up share capital of the cooperative before major projects kick
off.

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

integrity and positive business antecedents. This is one of the key strategies for awareness
and general acceptability of the cooperative society.
The cooperative’s primary target is made up of employees in the Public, Private sectors
(organized and informal) and individuals in the rural areas. We have mapped out
KIMCS 2010 4
strategies for penetrating the informal sector to sell the new contributory scheme
successfully in that sector.

On this note, KIMCS will use training, workshops, seminars, and enlightenment
programmes to get prospects to internalize the concept workings and benefits of the new
and reformed cooperative society to enhance quality participation and substantial fund
raising for the cooperative.

KIMCS will appoint a Financial Adviser with wide branch network coverage within the
country to give us leverage in rendering prompt and efficient services to all our
contributors and financial members.

KIMCS operation coverage will include Lagos, Abuja and the six geo-political zones in
the country, with our zonal offices located in each of the zones to coordinate the
cooperative society activities of the states and local governments in the zones. As part of
our branch network development, the cooperative will establish unit offices in any state
of the federation where it has secured large number of contributors to the scheme.

When KIMCS is in full operation, there will be unit offices in all the states of the
federation with representative offices in some big local government areas to harmonise
our service delivery and satisfaction of members.
The zonal and unit offices will be connected to the head office via satellite
communication to enhance our on-line real-time service delivery and control.

Our operations would be Information Technology (IT) driven to enable our contributors
and prospective members have access to view the operational progress of the cooperative
society and also print our membership forms from our web site.

KIMCS’s investment philosophy would be anchored mainly on security of the

contributions, grants and investment incomes without compromising fair returns on
investments to our contributors and members, since we are aware that the object is not
profit making but development of human capital and poverty alleviation.

KIMCS 2010 5
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.

Based on the financial projections for the first five years of operation, KIMCS is
expected to break-even in the third quarter of the first year.

The original promoter of KIMCS, Mr. Moses Ajayi , who is the General Coordinator &
Chief Executive Officer, had his Bachelor of Arts in Business Administration degree in
1980, from Andrews University, Berrien Springs, Michigan, USA. He became an
Associate of both the Chartered Insurance Institute (ACII) London and Insurance
Institute of Nigeria (ACIIN) in 1991.

Mr. Ajayi’s work experience has seen him through Insurance Brokerage, Insurance
Agency, Underwriting, Management and Marketing, before joining the banking sector in
1993 during which he served as Deputy Treasurer of Gulf Bank of Nigeria Limited. In
1995, he moved to Continental Trust Bank Limited as the Bank’s Treasurer to oversee
the treasury functions of the Bank. He was later to become Regional Director (Business
Development) (North), Head of Corporate Services Group, Zonal Coordinator
Lagos/Western Zone (Business Development), and Head of Credit Management
Group at different times.

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

managing XYZ, having undergone both local and international training in several areas
of management. He has brought into XYZ his diverse capabilities and versatility in
insurance, pension funds administration, finance and banking, along with his rich
experience as a manager of men and material resources.

THE PROJECT

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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 of Agriculture
development in the country owing to the following factors:
 Lack of fund from the developers/cooperative societies

 Banking reforms that placed embargo on credit

 Global recession in other developed countries

 Government apathy

 Poverty and living standard of the citizens

 Monitoring Problem

Besides, the capital requirement for the execution of various Agricultural Businesses and
ability to break even either as a private or commercial entity putting into consideration
the Direct and Indirect labour factors, are huge enough to scare investors.

PROJECT OBJECTIVES
Our localized poultry farmer’s initiative was conceptualized to;
 Through constant training/self development, bring to the fore all the modern
technology and expertise required for effective Poultry Management and Service
to the knowledge of all those who want to do commercial poultry business in
Nigeria

 Put in place a realistic and reliable method of mobilizing and training a Nigerian
workforce that can provide effective Poultry Management and Services capable
of meeting both local and international demands

KIMCS 2010 7
  Ensure that every State in Nigeria has a localized poultry incubation center that
will continually provide chicken and eggs alike at considerable prices to its
citizens and dwellers

Description of the project idea

Localized Poultry Incubation Center housing 20 Commercial Poultry Farmers; with a
Feed Mill Factory and Store, Borehole and Water House, Cold Room for Harvested
Birds, Generator House, General Store, Administrative Office, Poultry Clinic and
Security/Gate House to provide the required services/logistics for all the 20 Poultry
Farmers.
The Poultry Incubation Center will also accommodate 10 vegetable farmers who will take
advantage of the manure that will be derived from the waste products generated by the 20
Poultry Farmers.
GOALS OF THE FEASIBILITY STUDY
To substantiate the profitability of poultry breeding based on the existing own production
facilities and disposal/sales of poultry meat and eggs on the domestic and export market;
 To analyse the market and to forecast sales of the output finished goods in the course
of the increase of production capacities

 To estimate the expected financial results and to work out the financial strategy of the
company in terms of payments for the credits to bank or financier

Tasks of the company for the investment period

 To construct the poultry house in order to provide closed technological cycle (the
first stage – poultry breeding based on the purchased young birds; the second
stage – home brooding of young birds with the industrial egg production by a
breeding flock and further down-and-feather raw materials and poultry meat
production)

 To equip the poultry farm and relevant infrastructure, to continually upgrade all
vehicle depots and technological equipments

 To enlarge the share of the regional poultry meat market based on the direct
contracts with sales companies/agents

KIMCS 2010 8
  To implement contracts and to develop distribution channels for export of down-
and-feather raw materials

 To ensure profit accumulation from production and sales that meets existing
market demands at every point in time

 To take advantage of our agricultural sector for the improvement of the nation’s
economy and increment of supply of the population with products of its daily
necessity, such as chicken and egg

FINANCIAL REQUIREMENTS
The total sum of =N=80.135 million is required to execute the project with over 20% rate
of return per annum. The project has over 400% turn over in year and employment
opportunity of over 3,000 per annum for unemployed graduates and individuals from the
informal sub-sector of the economy.

CHAPTER TWO

INTRODUCTION

Project Background

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

Economy. Its importance derives from the fact that it is one of the key contributors to the
national economy. For example, using the 1984 factor based data, the sub-sector
contributed on an annual basis, a little over 5% of the Gross Domestic Product (GDP)
between 1996 and year 2000. According to CBN, the livestock sub-sector is second only
to the crop sub-sector under the sub-sector contribution to the general agricultural sector,
and represents an average over 13% of agriculture’s contribution during the period under
consideration.

In terms of specific output, the livestock sub-sector can be broken into product sub-
groups such as, poultry meat, goat meat, lamb/mutton, beef, pork, milk and eggs.
KIMCS 2010 9
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 4 35 436 450 465 487 514
Goat meat 80 88 92 95 96 101 107 114 129
Lamb/Mutton 85 94 96 101 102 107 113 117 126
Beef 183 192 197 200 202 208 215 228 239
Pork 25 31 39 43 45 47 50 55 62
Milk 951 961 972 989 9 91 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, 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

KIMCS 2010 10
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.

CHAPTER THREE
MARKET ANALYSIS

Overview

Nigeria, with a population of about 130 million is grossly underprovided with the
essential food component, which is protein. For example, data from the FOS, CBN, and
FAO indicate that from cattle, less than 2kg of beef is available to an average Nigerian
per year and just mere 4kg of eggs per annum is available to each Nigerian. In fact, milk
production has been nose diving or at best has remained constant since 1994. This
scenario is compounded more so when the volume of egg supply is very low, being
10.56g per person per day as compared with the usual recommendation that an egg
should be consumed by an adult per day. This recommendation would imply a crate of 30
eggs per month. This story also holds for other meat products including, chicken.

KIMCS 2010 11
To ameliorate this problem of low-level of protein intake, there is the need for concerted
effort, among the various stakeholders to bring about the massive production of protein
based food items at competitive costs so that they would be affordable to the general
masses. Aside from the other necessary economic reforms, massive investment poultry
farming is one way of resolving the problem.

What is poultry farming? Poultry farming is the commercial production of poultry birds,
which include chicken, turkey, geese, pigeon, guinea and gamebirds. They are easy to
produce, and have a high meat to carcass ratio. Hence, they are excellent products for
meeting the protein needs of the populace.

Chicken constitutes about 90% of the poultry population in Nigeria. Consequently,

poultry farming is generically used to refer to chicken farming in the country.

Poultry Products

The main products of the proposed project include eggs, day-old chicks and poultry meat,
which will be generated from, culled birds (i.e. layers and breeders), and broilers.
Poultry by-products such as poultry droppings, poultry offal and hatchery wastes will
also provide additional income to the project. Poultry dropping can be used as manure
for vegetable gardening and feed ingredient in fish farming which the cooperative has
considered viable.

Indeed, a wheelbarrow of fresh poultry droppings costs between N50.00 – N80.00 in

some parts of Lagos State and more in Abuja at the moment. Poultry offal and other
hatchery wastes when grounded are good supply of calcium for growing birds.
Hence, they can also be sold in their re-cycled forms. In brief, the proposed products of
the projects will include:

(a) Main Products

 Day-Old Chicks
 Farm Eggs
 Poultry Meat

KIMCS 2010 12
 - From Culled birds (Layers and Breeders)
- Broilers
(b) By-products
 Poultry droppings
 Poultry Offal and other hatchery wastes.

PROPOSED CAPACITY

5000 Birds per production cycle are the minimum economic size to commence a poultry
farm, as the operational and fixed costs are justifiable. This is even more relevant for a
non-automated poultry farm. For a fully automated and integrated farm, the
recommended minimum economic size is between 8,000 and 10,000 birds.

The proposed project, which is an automated and integrated poultry farm, is proposed to
commence with 10,000 to 15,000 birds per production cycle in the poultry section and
10,000 birds in the Hatchery Section. However, the output of the farm is proposed to
increase to 20,000 birds in the poultry section and 15,000 day-old chicks within the first
five years of the production period.

In the poultry section, the ratio of layers to broilers is proposed as 70%: 30% or 7: 3,
while 40% to 60% is proposed for the hatchery section.

PROPOSED CAPACITY (%) OF THE INTEGRATED POULTRY FARM

(a) Poultry Section

7000 - 14,000 Birds

3,000 - 6,000 B

Birds
Broilers, 30%

Layers, 70%

KIMCS 2010 13
 (b) Hatchery Section

3000- 4000 Chicks

4,000- 6,000 Chicks

B
Layers, 40%

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

Egg, in its own case, has a wide variety of utilisation. Thus, it is used in the preparation
of products such as chicken burger, scotch eggs,salad, and egg soup among others. Apart
from home consumption, eggs can be used as leavening agent in baked foods, and as an
ingredient in the manufacture of hair shampoo and for the production of egg powder that
can later be incorporated into baby food.

Poultry farmers, especially the ones specializing in broiler and layer production, are the
potential consumer’s of the day-old chicks produced by the hatchery section. Point of lay
for egg production involves the raising of the pullet chicks from 0 – 18 weeks. Such
chicks must be obtained from reputable hatcheries.

KIMCS 2010 14
Nigeria’s Poultry Market

While some countries are reputed to be important exporters of poultry products after
consistently meeting local demand, Nigeria’s main problem is meeting its local demand
for poultry products. Nigeria’s poultry market problems start in 1984 when the Federal
Government banned importation of maize. This indeed contributed to steadily declining
poultry production in addition to the effects of the structural adjustment programme.

But the Nigerian poultry market had seen more prosperous times for the two decades
after independence in 1960; poultry production grew substantially, peaking in 1982, with
40 million commercially reared birds. Since then, the bird population has dipped
steadily, to an estimated low of 6 million in 1997. The new political dispensation has
brought about a little improvement to poultry farming. Hence, the poultry population
increased to 20 million in 2003.

CURRENT SOURCES OF SUPPLY

The bulk of current sources of supply of poultry products come from the informal sector,
which is made up of farmers with smallholdings of 50-700 birds’ capacity. However,
there are some big suppliers especially in the southern parts of the country. Such
suppliers include:
1. Amo Farm Sanders Hatchery Ltd.,
2. Animal Care Services Konsult (Nig.) Ltd.,
3. Cee-Jay Farms
4. Harmony Projects Ltd.,
5. Mayfield Farms Ltd.,
6. Obasanjo Farms (Nig.) Ltd.,
7. Richmond Foods Nigeria Ltd.,
8. Samrose Agro-Industrial Company Limited
9. Tuns Farm Nigeria Ltd.,

KIMCS 2010 15
10. U.O.O. Agricultural Industries
11. UAC Foods (Integrated Poultry Farming)
12. Zartech Limited
13. Abiola Farms Limited

LEVEL OF SUPPLY
In the course of our survey, we observed that production figures for poultry are not
properly maintained by government agencies that are charged with the responsibility.
Hence, we came across varieties of production figures from different sources. However,
we are able to come out with an estimated supply level by conducting a mini survey, and
aligning the results with data from reliable sources such as the Federal Office of Statistics
(FOS), Central Bank of Nigerian (CBN) and Food and Agriculture Organisation (FAO)

On the basis of the foregoing methodology we are able to estimate the supply level of
poultry products in the country as follows:
50 million birds per annum
60 million eggs per annum
60 day old chicks “
Considering infrastructural constraints and other limiting factors, we may estimate the
projected level of supply of poultry products to increase by 5%. Hence the projected level
of supply from 2003-2008 is provided hereunder:
(‘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 60 63 66.15 69.46 72.93 76.58
Chicks

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.

KIMCS 2010 16
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
and poultry products. The other consumers include Fast Food Companies, Hotels and
other food processing companies. Let us conservatively assume that demand from these
groups is about 60 million chickens per annum.
This brings the total estimate demand for poultry chicken to 500 million per annum. If we
further assumed that this demand increase by 2.00% per annum, then the projected
demand for chicken is as follows:
(‘Million)
2004 2005 2006 2007 2006

500 510 520.2 530.60 541.5

COMPETITION
Competition is not so keen in Nigeria‘s poultry markets. The reasons for this are
obvious:
1. Poultry products, in their present forms, are not branded products. Hence,
what is essential in this respect is the effective positioning of the distribution
outlets, at the appropriate times.
2. As a result of the substantial shortfall in supply, Nigeria’s poultry market is a
sellers’ market.
3. Large proportions of the production are being sold through informal channels.
However, some degrees of competition exist between the locally produced
KIMCS 2010 17
 poultry products and the imported ones. A strong indication of this is the
phenomenal rise of poultry products shipped in container’s from the United
States to Nigeria between 1995 and 1999 (see chart below)

POULTRY PRODUCTS IMPORTED FROM UNITED

STATES(1997--1999)

Poultry (TEUs) Eggs & Milk (TEUs)

33
C a r g o ( T EU s )

18

8 9
6
4

1998
11997 2ar
Ye 31999

Source: PIERS, Journal of Commerce, New York

To reduce the massive importation of frozen poultry products and to stimulate local
production, the Federal Government placed embargo on the importation of poultry
products in year 2002.

COMPETITORS MARKETING ANALYSIS

As mentioned earlier, the distribution chain in Nigeria’s poultry industry tends to be
short, with more than 80% of total production delivered directly to the informal trade
sector. The remaining 20% is normally distributed through a longer chain of the formal
sector.

In this wise, the marketing practices of the operators in the market can be considered
under the headings of quality of service, promotion, and pricing.

KIMCS 2010 18
 (a) In the area of distribution, poultry farmers sell directly to operators in the informal
sector.
These include
 Butchers
 Restaurants
 Boarding hotels
 Small retail stores
 Hawkers
 Live chicken markets
 Spent – hen depots
 Individual consumers,
 Hotels

However, a few big operators sell their farm products directly to operators in the formal
market. Members of this group include
 Big retail outlets
 Wholesalers
 Franchise stores
 Broiler processing plants
 Egg processing plants
 Exporters (Occasionally)

(b) Pricing: Pricing in the informal sector of the industry is relatively stable.
However, price determination greatly depends on the grade of the products. In the
case of eggs, they are classified to the following three grades.

 Grade 1
 Grade 2
 Under grade

PROPOSED MARKETING STRATEGIES

KIMCS 2010 19
The proposed integrated farm will strive to produce highest possible quality of the
various products. The proposed farm will explore the following strategies:

1. SUPPLY TO MAJOR HOTELS, RESTAURANTS AND CATERING

OUTLETS
There are many tourist initiatives and developments in the cities that need to be catered
for. Unfortunately, at the moment, they are under – serviced and still depend on the
traditional distribution channels. The proposed farm will aim at meeting the needs of the
outlets, initially in Lagos, and subsequently other parts of the country.

2. SUPPLY TO HAWKERS
Live chickens or egg will be sold registered to hawkers on a regular basis. As most
retailers have transport problems, the farm could entice them by delivering the chickens
or eggs at their outlets

CONTRACTING
The farm may enter into a contract with medium or large-scale broiler users to supply
stipulated number of chickens or eggs at specified periods. This will, hopefully, provide a
steady market for the farm

SUPPLY TO TOWNSHIP COLD STORAGE DISTRIBUTORS

Some cold storage outlets have positioned themselves very well in the town to sell frozen
food and meat products. The farm will endeavor to supply these distribution centers.

CHAPTER FOUR

4.1 OPERATIONAL DETAILS AND STRUCTURE

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

 Hatchery Unit,
KIMCS 2010 20
  Broiler grow-out facility,
 Layer/breeder grow-out facility,
 Table eggs production unit,
 Broiler/culled birds processing plant,

4.11 Hatchery Unit

This is the unit where fertile eggs will be incubated to produce Day-Old Chicks (DOC).
The proposed hatchery Unit is expected to have a brooding capacity of 10,000 fertile
eggs per production cycle, and will be made up in the proportion of 60% broilers and
40% breeders. The hatchery production line will include:

a) A Setter Incubator
b) A Hatchers Incubator

The process – flow of the proposed hatchery is as follows:

Setter
Fertile Eggs Fumigations of Eggs Incubator

Day-Old Chicks Hatchers Candling

(DOC) Incubator 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:

KIMCS 2010 21
  Adequate housing
 Excellent brooding equipment
 Feeding equipment
 The modern watering equipment
 Miscellaneous equipments

All these will be discussed under facility requirements.

4.13 Breeders/Layers Grow out Facility

The breeders/layers production, otherwise known as point of lay production, involves the
raising of pullet chicks from 0 – 18 weeks. The point of lay birds are used for producing
fertile eggs in the process of producing replacement stocks, or infertile eggs in the
process of producing ordinary table eggs.

The proposed farm is expected to produce between 7,000 and 14,000 breeders per
production cycle

The basic requirements for a typical breeder grow out facility are similar to that of broiler
grow out facility.

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.

KIMCS 2010 22
Since an average layer produces 2 eggs every 3 days, the table egg production capacity of
the farm will depend on the number of layers deployed in the farm.

4.3 EQUIPMENT/MACHINERY REQUIREMENT

The proposed integrated farm is expected to be fully automated with modern poultry
equipment and machinery. The equipment/machinery requirements will include.

a). Hatchery Unit

 Setter Incubator
 Hatchers Incubator
 Fumigation Equipment
 Candling Lamb
b) Broiler, Layer and Breeder Unit
 Brooding Equipment
 Feeding Equipment
 Watering Equipment
 Thermometer
 De-beaking scissors

Setter Incubator

The setter incubator would have a minimum capacity of 40,000 Eggs. The dimension of a
typical one, “Chick Master 102” is 22’length,12.6’ Width and 8.7’Height

Hatchery

The Hatchery that will be utilized will have a minimum of 30,000 Day -old Chicks per
hatching cycle

KIMCS 2010 23
Drinking systems

An automatic water trough or drinking nipple system placed inside or preferably outside
the shed will save labour and provide a constant supply of fresh water. It is important to
provide shade in the hot season to keep the water cool.

A low-pressure drinking system is ideal for adult birds. The water flows through the
nipples only when they are touched or pecked. Poultry quickly learn how to operate the
system. Drinking nipples are more hygienic and use less water than open troughs.

Feeders

In deciding which feeder should be used, it important to put into consideration the type
and the class of chicken that is being reared.

Basically, there should be

 Feeder for Pullets

 Feeder for Cockerels

 Feeder for Day –Old Chicks (DOC)

One hanging ‘tube’ feeder with a pan 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

KIMCS 2010 24
Other support equipments include:

 Electric Generator –Preferably 250 KV

 Egg Lifter
 Debeakers
 Thermometer
 Cold room with the capacity to store about 20,000 processed chicken.

4.4 HOUSING

The first requirement for growing commercial poultry is adequate housing. This is
because broiler/layer production is essentially a chick brooding operation. Hence the
house should contain necessary equipment so that such factors as temperature, moisture,
air quality 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:

KIMCS 2010 25
  Brooder House
 Growers House
 Deep Litter House
 Cage.

Brooder House

This is the house where a day-old chick stays until the first 8 weeks of the chick’s life.
Brooder house must be maintained properly and kept warm always. Installation of
brooder’s guards to confine chicks, flat feeders, drinkers and feed mash must always be
available.

Grower House

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

Deep Litter House

The birds are transferred to the deep litter house after 20 weeks in the growers’ house.
In case of broiler production, this is where the birds will domiciled until they reach the
market weight of about 1.6kg in 3 -4 months.

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

KIMCS 2010 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

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
 Feeds
 Drugs
 Vaccines
Feeds
The types of food birds feed on varies as they grow, and these include: Chicksmash,
which is used for feeding chicks from a “ day old” to
8 weeks old; Growermash , which is used for feeding chicks from 8 weeks to 20 weeks
old; Layermash , which is used from 20 weeks upwards .
Broiler Startermash is used for feeding day old broiler chicks, while Broiler
Finishermash is used from week 4 upwards.

The bulk of this feed will be sourced locally from bulk importers and local manufacturers
of livestock feed. The cooperative will also manufacture its own feed mill.

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

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.

KIMCS 2010 30
The farm is a fully automated and integrated farm. Hence, there would not be need for
too many staff. In this wise, the farm will require the following personnel:

The Managing Director (1)

The promoter will assume the overall supervisory responsibilities as the Managing
Director, carrying out (With the assistance of the key personnel), the function of the
strategic policy formulation. He/She will draw monthly salary and allowance for
performing this function.

Farm Hands (2) Holders of Senior School Certificate

Security Men (2) Relevant guards training
Driver(s) (2) Holders of Nigerian professional driving license

ESTIMATED PERSONNEL COSTS

The total estimated annual salary and allowance for the six staff and the Managing
Director is =N= 600,000.00. If it is assumed that the salary would increase by 10% per
annum, then the salary for the next 5 years is as follows:

 N 600,000.00--------Year 1
 N 660,000.00--------Year 2
 N 726,000.00--------Year 3
 N 798,600.00--------Year 4
 N 878,460.00--------Year 5

ORGANISATION STRUCTURE
Initially, the farm will maintain a lean structure in the first five years of its operation,
during which it would enjoy full automation and the services of six staff. However, as the
farm expands, in the nearest future, it will be imperative to put in place, a very good
structure. Hence, the following structure is recommended.

The farm will be structured into four broad departments. The heads of these departments
will report to the General Manager, who will serve as the overall Farm Manager of the
integrated farm. He will report to the Chairman / Managing Director.

KIMCS 2010 31
Hatchery Manager, who will supervise the hatchery operations of the farm, will head
the Hatchery unit.

The Finance and Administration Department will be headed by Finance &

Administration Manager and will supervise all administration accounts and personnel
matters.

The Livestock’s Department will be headed by Livestock Manager, who will supervise
the broiler, layers / breeder and egg production operations of the farm.

The Business Development Manager will head the Marketing and sales Department. He
will be responsible for implementing marketing and sales strategies of the farm.

PROPOSED ORGANISATION STRUCTURE

Chairman/CEO

General
Manager

Business
Finance & Admin
Livestock Manager Hatchery Manager Development
Manager
Manager

Feed man Account Clerks Business

Veterinary Assistant Hatchery Assistants Admin Clerks Development
Executives

KIMCS 2010 32
 CHAPTER 6
INVESTMENT COST ANALYSIS

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

1.0 Capital/initial Cost

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

Construction sheds/store rooms:

Land acquisition 5,000,000
Broiler/grower shed 1,000,000
Hatchery shed 1,000,000
Layer Shed 1,000,000
Store room 850,000
Fencing 2,000,000
Borehole construction 1,000,000
Feed mill 1,000,000
Sub-Total 12,850,000

1.2. Machines/Equipment:
Automated Watering System 6,500,000
Automated feeding system 12,000,000
Automated manure removal 2,750,000
Incubation and Hatchery equipment 15,000,000
Generator (1 nos. 75 KVA) 2,500,000
Office Equipment (see details) 3,000,000
Water bore hole equipment 1,000,000

KIMCS 2010 33
 Sub-Total 42,750,000

1.3 Delivery Vehicles:

a) Saloon Car (1 no.) 2,900,000
b) Purchasing/Delivery Van (1 no.) 2,750,000
Sub-Total 5,650,000

1.4 Furniture & Fittings:

a) Furniture (see details) 1,200,000
b) Air conditioners (2 no.) 150,000
c) Telephone Installation
85,000
Sub-Total 1,435,000

1.5 Pre-Operating Expenses:

a) Company Incorporation & Legal Fees - 500,000
b) Feasibility Study - 450,000
h) Travel Expenses - 150,000
I) Accounting Systems Manual - 500,000
j) Personnel/Admin Policies Manual - 500,000
k) Staff Recruitment - 650,000
I) Sundry Expenses - 250,000
Sub-Total 3,000,000

1.6 Raw Material 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.
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
operating expenses.

2.0 OPERATING AND MAINTENANCE COSTS

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

2.1 Fuel Expenses

Given at least 2 vehicles and using average fuel expenses of N65/litre and 5 litres/day, the
fuel consumption is estimated at N650/day.
a) Maintenance of other machines/equipment is estimated to cost N75,000
per annum.
b) The Vehicles will be maintained at N300,000 per annum.

2.2 Management and Personnel Cost

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.

KIMCS 2010 35
 b. Poultry Feed, Vaccination, Spray, litter, etc
The above are estimated based on a benchmarking with model poultry farms as well as
industry best practices. We have however been a little conservative in this matter.
Vaccination cost is put at N30 per bird. Spray cost is put at N5, 000 per flock, Feed cost
is put at N1, 100 per bag of 25kg on average.

c. Utilities

These have been estimated as follows: N

i. Telephone bills (Admin) 100,000.00
ii. Electricity 200,000.00
iii. Water 300,000.00
iv. Diesel for generator 300,000.00
The period of time is for one operating cycle within a period.

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

e. Facilities, Cleaning And Maintenance

These include items such as manure equipment clean-up, disposal of birds’ litters and
general material for the up keeping of the premises of the Poultry facility. It has been
pegged at N300, 000.00 per annum and increases at the rate of 5% per annum.

2.3 General Overhead:

The general overhead cost in the first year of operation is estimated as below:
I) Travel expenses N 200,000
ii) Printing/Stationery 100,000
iv) Staff Uniform 100,000
v) Sundry Expenses 250,000

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

KIMCS 2010 36
basis, given a 10% salvage value, as indicated below: (note that building/poultry
equipment is depreciated over a ten-year period).

DEPRECIATION SCHEDULE
PLTRY.EQ ENERGY O/EQUIP. VEHICLE FURN./FIT YEAR
MT/ S
BUILDING
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

KIMCS 2010 37
CHAPTER 7

REVENUE PROJECTION

The main sources of revenue of the Poultry facility are:

i) Sale of mature birds

ii) Sale of eggs
iii) Sale of bird litters/manure
iv) Sale of day-old chicks

i) Revenue from sale of mature birds is based on initial capacity of 5,000 birds,
given a mortality rate of between 6% - 10% per cycle. The production capacity is
expected to increase by 100% to 10,000 birds after the first two years of operation
and to 20,000 birds beginning from year five, all other things remaining as
assumed. Following the assumptions, revenue from sale of mature birds should
average N6.75million for a 5,000 bird capacity, N13.50million for a 10,000 bird
capacity and N27.0million for a 20,000 bird capacity, all on a worst case scenario.
The estimated industry growth rate is about 12.5% annually.

ii) Revenue from the sale of eggs is based on projected number of layers, which
constitutes 70% of total bird count, the layers’ life cycle of 90 weeks, the laying
period of 52 weeks, the ability to lay 2eggs in every 3 days during the laying
period, and given the assumed mortality rate earlier stated above as well as the
growth in bird count over the planning period. The total estimated revenue from
this segment should be N6.899million for a 5,000 bird capacity, N13.80million
for a 10,000 bird capacity and N27.6million for a 20,000 bird capacity on an
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

KIMCS 2010 38
 utilization of between 5000 – 20000 birds respectively. The figure should grow by
about 10% per annum

iv) Revenue from sale of day old chicks is based on estimated availability of hatchery
systems, government policy on the importation of day old chicks and given the
mortality rate of the day old chicks, among others. Therefore, it is estimated that
N12.408million, N18.612million and N24.816million respectively will be realised
on a capacity of 40,000, 60,000 and 80,000 day old chicks. The estimated growth
rate in sales should be 15% per annum.

On the basis of above assumptions, total revenue for years 1 - 5 should as shown below.
The capacity of 10,000 birds should be installed in year 3, while that of 20,000 birds
should be installed in year 5. The average percent growth in revenue of 13% per annum
is assumed as per general industry trend.

Year 1 N26.185 million

Year 2 N29.459 million 12.5% growth rate
Year 3 N46.167 million 56.72% growth rate
Year 4 N51.938 million 12.5% growth rate
Year 5 N79.902 million 53.84% growth rate

KIMCS 2010 39
CHAPTER 8

FINANCING PLAN
Traditionally, any projects that have been found to be commercially viable are financed
through equity contribution of sponsors and loans – term loans and bank overdrafts. Our
various discussions with the promoter show that the financing structure and pattern
should follow above path. Consequently, the Poultry facility’s capital cost of N80.135
million is recommended to be financed as follows:
N’Million %
i) Equity Contribution 15.027 20.00
ii) Investor members 50.000 66.55
iii) Start-up funding 15.108 13.45
Total N80.135 100.00

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

ii) The funds from the prospective investors of N50.00 million will be used to
finance substantial part of the automated poultry and hatchery equipment and
start-up operational expenses.

It is our view that the project will not have difficulties in securing term loans that can be
achieved through Loan syndication with one of the leading commercial banks as a lead
banker. United Bank for Africa (UBA), Union Bank of Nigeria (UBN), First Bank of
Nigeria (FBN), Afribank and Wema Bank. The other buoyant commercial/merchant
banks should be willing to participate. This 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

KIMCS 2010 40
borrowing becomes secondary since the project will do well whatever the choice of
financing. However, lease financing is particularly attractive on the following grounds:

i) It allows 100% debt financing, as equity contribution is not required.

ii) It is easier and quicker to obtain a lease than to obtain a loan
iii) Lower equity taxes are paid
iv) It has greater tax savings over a buy decision

The capital injection by the investor members is expected to reduce the pains of servicing
a regular bank revolving loan with periodic interest and principal repayments. The returns
on the investors on the capital are lower than the interest charges on the loan.

KIMCS 2010 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 facility’s services should
be sold on a near-cash basis, except for a few corporate customers that might ask
for short-term credit. As a result, the projected net cash flow is positive
throughout the period, except for year two. This position is further strengthened
by the fact that company operates little credit extension, has a proportionately
huge SMIES debt portfolio and is managed professionally. The cash flow
projection is attached.

KIMCS 2010 42
 PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING PERIOD

BALANCE All Figures are in Millions of Naira

SHEETS
Year   1 2 3 4 5
Cash and Near Cash
items 14,296,796 17,442,255 23,912,471 24,976,542 27,218,884
Due from related
parties - - - -

Prepaid Expenses 10,274,500 14,997,000 19,944,500 29,164,500 39,284,500

Inventory and WIP 18,421,499 20,724,187 32,478,485 36,538,295 56,211,057

Other Accounts
Receivable 652,909 1,822,110 1,154,175 1,298,447 1,997,550

124,711,99
Total current assets 43,645,705 54,985,551 77,489,630 91,977,784 1
Gross property,
plant & equipment 58,185,000 58,185,000 58,185,000 58,185,000 58,185,000

Less accumulated (6,854,625 (13,709,250 (23,003,895 (32,298,540 (41,593,185

depreciation ) ) ) ) )
Net property, plant
& equipment 51,330,375 44,475,750 35,181,105 25,886,460 16,591,815

112,670,73 117,864,24 141,303,80

Total assets 94,976,080 99,461,301 5 4 6

Accounts payable 513,725 749,850 1,003,118 1,459,768 1,967,540

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

Dividends Payable - - 819,852 465,797 1,606,754

Current Portion of
LTD 9,892,705 10,931,439 12,079,240 13,347,561 14,749,054

Other Accruals 1,548,651 2,950,145 4,218,465 5,366,266 6,405,000

Total current
liabilities 14,053,281 15,803,554 21,634,324 22,635,663 31,614,438

Long-term debt 61,000,000 61,000,000 61,000,000 61,000,000 61,000,000

Common Stock -
Paid up 15,027,000 15,027,000 15,027,000 15,027,000 15,027,000

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

Shareholders equity 19,922,799 22,657,747 30,036,411 34,228,582 48,689,369

Total long-term debt
and equity 80,922,799 83,657,747 91,036,411 95,228,582 109,689,36
KIMCS 2010 43
 9

112,670,73 117,864,24 141,303,80

Total Liabilities 94,976,080 99,461,301 5 5 6

Current Ratio 3.11 3.48 3.58 4.06 3.94

Total
Liabilities/Equity 3.83 3.92 3.01 3.07 2.24

PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD

INCOME
STATEMENTS All Figures are in Millions of Naira
Year   1 2 3 4 5
26,185,50 46,167,00 51,937,87 79,902,00
Sales 0 29,458,688 0 5 0
Growth rate (%) - 12.50% 56.72% 12.50% 53.84%
(10,274,50 (19,944,50 (29,164,50 (39,284,50
Less COGS 0) (14,997,000) 0) 0) 0)
Growth rate (%) - 31.49% 24.81% 31.61% 25.76%
15,911,00 26,222,50 22,773,37 40,617,50
Gross profit 0 14,461,688 0 5 0
Growth rate (%) -10.02% 44.85% -15.15% 43.93%
Less SG&A (513,72 (997,225 (1,458,22 (1,964,22
expenses 5) (749,850) ) 5) 5)
Growth rate (%) 31.49% 24.81% 31.61% 25.76%
Earnings before
Interest, Tax & 15,397,27 25,225,27 21,315,15 38,653,27
Deprec. 5 13,711,838 5 0 5
(6,854,62 (9,294,64 (9,294,64 (9,294,64
Less depreciation 5) (6,854,625) 5) 5) 5)
Earnings after depr. 8,542,65 15,930,63 12,020,50 29,358,63
b/4 Interest & Tax 0 6,857,213 0 5 0
- - - - -
Less int. repayment (1,548,65 (4,218,46 (5,366,26 (6,405,00
accrual 1) (2,950,145) 5) 6) 0)
6,993,99 11,712,16 6,654,23 22,953,63
Pre-tax income 9 3,907,068 5 9 0
Cumulative pre-tax 6,993,99 22,613,23 29,267,47 52,221,10
income (NOL) 9 10,901,067 2 1 1
2,098,20 (3,513,65 (1,996,27 (6,886,08
Taxes 0 1,172,120 0) 2) 9)
6,993,99 11,712,16 6,654,23 22,953,63
Pre-tax income 9 3,907,068 5 9 0
(2,098,20 (3,513,65 (1,996,27 (6,886,08
Less taxes 0) (1,172,120) 0) 2) 9)
Less Proposed (819,852 (465,79 (1,606,75
Dividend - - ) 7) 4)
KIMCS 2010 44
 4,895,79 7,378,66 4,192,17 14,460,78
Net income 9 2,734,948 4 1 7
Growth rate (%) -79.01% 62.93% -76.01% 71.01%

Return on
Investment 7.19% 4.01% 10.83% 6.15% 21.22%
Return on Sales 18.70% 9.28% 15.98% 8.07% 18.10%
Return on Equity 19.48% 10.88% 29.36% 16.68% 57.53%

CASH FLOW STATEMENT FOR THE 5-YEAR PLANNING PERIOD

STATEMENTS OF
CASH FLOWS
All figures are in
Millions of Naira

Year   1 2 3 4 5

2,734,94 7,378,66 14,460,78

Net income 4,895,799 8 4 4,192,171 7
6,854,62 9,294,64 9,294,64
Plus depreciation 6,854,625 5 5 9,294,645 5
Less increase in (7,49 6,761,18 (262,481 3,928,45
inventory 10,171,755 9) 6 ) 0
Plus Interest on
Investments - - - - -
Less increase in (130,928 2,945,86 (46,167 (3,859,26
accounts receivable ) 9 ) 4,934,098 7)
Plus increase in 4,499,10 1,178,53
accounts payable 2,054,900 0 199,445 2,085,262 5
Cash flow from 17,027,04 23,587,77 20,243,69 25,003,15
operations 23,846,152 3 3 5 0
(75,135,000
Less investment ) - - - -
Cash flow from (51,288,848 17,027,04 23,587,77 20,243,69 25,003,15
operations and invests ) 3 3 5 0
Plus net new equity
capital raised 15,027,000 - - - -
(1,548,651 (2,950,14 (4,218,46 (5,366,266 (6,405,00
Current year Interest ) 5) 5) ) 0)
(819,852 (465,797
(1,606,75
Less dividends paid - - ) ) 4)
Inc. (Decr.) in long- (10,931,43 (12,079,24 (13,347,56 (14,749,05
term debt 51,107,295 9) 0) 1) 4)
Inc. (Decr.) Other
borrowings - - - - -
Cash flow from ops, 3,145,45 6,470,21 2,242,34
invests, and fin 13,296,796 9 6 1,064,072 2
Beginning cash 1,000,000 14,296,79 17,442,25 23,912,47 24,976,54
KIMCS 2010 45
balance 6 5 1 2
17,442,25 23,912,47 24,976,54 27,218,88
Ending cash balance 14,296,796 5 1 2 4

KIMCS 2010 46
 ‘’WHAT IF’’ ANALYSIS FOR THE FIRST YEAR OF OPERATION

"WHAT IF" ANALYSIS YEAR 1 SCENARIO

Pessimistic Planned Optimistic
Sales 70% 100% 120%
4,725,0 6,750, 8,100,
Mature birds
00 000 000
4,828,9 6,898, 8,278,
Eggs
50 500 200
8,685,6 12,408, 14,889,
Day old Chicks 00 000 600
90,30 129, 154,
Manure/Litters 0 000 800

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

Costs of Goods Sold 2.000 1.000 0.500

Variable Cost of Goods Sold 20,549,000 10,274,500 5,137,250
Fixed Costs Reclassified to
Variable Costs 0 0 0
Total Variable Costs 20,549,000 10,274,500 5,137,250

1.100 1.000 0.900

Fixed Costs of Goods & Services 0 0 0
Total Costs of Goods Sold 20,549,000 10,274,500 5,137,250

Gross Profit -2,219,150 15,911,000 26,285,350

% of Total Sales -12.11% 60.76% 83.65%

Operating Costs 1.200 1.000 0.900

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

Variable Costs 0 0 0
Total 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 -1,548,651
Income Taxes - "Variable" 0 -2,098,200 0
       
Net Income After Taxes - 4,895,799 17,419,722

KIMCS 2010 47
 11,238,896

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

BREAK EVEN ANALYSIS (N'MILLIONS)

YEAR 1 2 3 4 5
26,185 29,4 46,167, 51,93 79,9
Sales ,500 58,688 000 7,875 02,000
           
Variable Costs          
10,274 14,9 19,944, 29,16 39,2
Material & Labor ,500 97,000 500 4,500 84,500

Commissions - -   - -
10,274 14,9 19,944, 29,16 39,2
Total Variable Costs ,500 97,000 500 4,500 84,500
  0.392 0.509 0.432 0.562 0.492
Fixed Costs (calc as % of
sales)          
Fixed Cost of Goods &
Services 0.000% 0.000% 0.000% 0.000% 0.000%
Sales & Marketing (w/o
Commissions) 2.500% 2.500% 2.500% 2.500% 2.500%
G & A (without
Depreciation) 2.500% 2.500% 2.500% 2.500% 2.500%
Total Fixed Costs (calc as
% of sales) 5.000% 5.000% 5.000% 5.000% 5.000%
           
Fixed Costs (fixed
amounts)          
Fixed Cost of Goods &
Services - - - - -
Sales & Marketing (w/o 25 3 498 72 9
Commissions) 6,863 74,925 ,613 9,113 82,113
G & A (without 25 3 498 72 9
Depreciation) 6,863 74,925 ,613 9,113 82,113
6,854 6,8 9,294, 9,29 9,2
Depreciation ,625 54,625 645 4,645 94,645
Total Fixed Costs (fixed 7,368 7,6 10,291, 10,75 11,2
amounts) ,350 04,475 870 2,870 58,870
 
8,542 6,8 15,930, 12,02 29,3
Income from Operations ,650 57,213 630 0,505 58,630
           
Interest Income (Expense) - (1,548 (2,9 (4,218, (5,36 (6,4
"Fixed" ,651) 50,145) 465) 6,266) 05,000)
Income Taxes - "Variable" (2,098 (1,1 (3,513, (1,99 (6,8
KIMCS 2010 48
 ,200) 72,120) 650) 6,272) 86,089)
           
4,895 2,7 8,198, 4,65 16,0
Net Income After Taxes ,799 34,948 516 7,967 67,541
           
Analysis          
Income from Operations          
Contribution Margin 0.608 0.491 0.568 0.438 0.508
12,126 15,4 18,119, 24,52 22,1
Break-Even Sales ,449 90,437 735 3,428 48,242
Sales Volume Above 14,059 13,9 28,047, 27,41 57,7
Break-Even ,051 68,251 265 4,447 53,758

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 of 2011, as well as N15.108million start-up
expenses funding. This financing would enable the Company to develop a world-class
Poultry facility, to strengthen the management team and to provide for:
 Increases in sales and other staffing;
 Increases production capacity from 5,000 birds to 20,000 birds;
 Purchase of ancillary items.

OPERATIONS - 2011 -- 2015

1. The projections include actual results from a 12-month time span, beginning early
2011 through to early 2012.
KIMCS 2010 49
2. Turnover will range from N26.2 million to N79.9million, over the 5-year planning
period, assuming gross turnover remain steady, on a growth path of 13% per annum.

3. The cost of turnover is expected to peak at 68% of the sale price of the Poultry
facility products and services, leaving 32% of revenues to cover operating and other
expenses. This is much in line with the cost structure of the Poultry and egg industry
in Nigeria at the time of this report.

4. The focus on revenue from sales of mature birds and eggs is expected to increase
such that a significant portion of the total revenue should be generated from these
sources. The projection is that up to 80% of revenue should be from the sale of
mature birds and eggs, leaving the balance of 20% to be from sales of day old chicks
and manure/litters.

5. During the same period, spending on start-up costs such as marketing, advertising and
promotion, general administration and consulting activities is expected to peak in
order to launch the Poultry facility on a sound footing.

OPERATIONS - 2011 -- 2015

1. A major capital expenditure of N50.0million is expected to be incurred in order to
complete work on the construction phase of the Poultry facility and to purchase
critical automated poultry and hatchery equipment. Major recruitment is also
expected to be undertaken during the start-up phase.

2. Operating expenses especially salaries and wages are expected to rise as a result of
the need to retain motivated workers over the long haul. Annual rate of growth in
salaries and wages are to peak at 10%.

3. The productivity of Sales/marketing staff is expected to improve, riding on the

general acceptance of the Poultry facility products and services.

KIMCS 2010 50
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 2011.

6. Interest expense for investing members funds are provided at 20% per annum and
interest income on deposits is earned at 2%.

7. Depreciation is calculated using the straight-line method over 5 years.

8. Federal income taxes are provided at 30%

INVESTING - 2011 – 2015

1. Equipment purchases are projected at between N43.0million and N63million. This
may be staggered over a two period cycle to take account of expansion in number of
birds.

Taxation and Capital Allowances

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

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

Description: Land Plant Furniture Motors

Building Machinery Fittings Vehicles

Initial 5% 20% 15% 25%

Annual 10% 12.5% 10% 20%

FINANCING - 2011 -- 2015

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
KIMCS 2010 51
 and financing cash flow requirements. In year 2014, additional equity of N10million
is introduced to finance growth in number of birds.

2. There are no provisions for bank loans, accounts receivable financing or additional
loans from stockholders after the first operating cycle, beginning in 2012.

ASSUMPTIONS BEHIND PROJECTIONS AND CALCULATIONS

S/N PARTICULARS SIZE/COST/%

1 Number of Birds in lay 5,000 – 20,000
2 Rearing Period (weeks) 72 – 90
Brooding cum growing period 18 – 20
Laying period (weeks) 52
(weeks)
3 Number of batches or cycle 1-3
4 Space requirement per bird (sq.ft.)
Brooder cum grower period 1
Layer period 0.8
Hatchery Period 0.35
5 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
6 Mortality rate (%)
Broiler cum grower stage 6% - 10%
Laying stage 3% - 5%
Day old chicks (DOCs) 4% - 6%
7 Total mortality loss (birds) 500
8 Total number of birds laying eggs 3500 – 12,600
9 Rate of egg laying 2 eggs every 3 days
10 Egg price (N/egg) 9.00
(avg.)
Egg Production capacity per year 766,500 eggs
11 Average body weight of mature 1kg – 2.5kg
12 Feed requirement (kg/bird)
birds
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

KIMCS 2010 52
REVENUE ASSUMPTIONS:

Sale of mature Birds: 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 2-3 times/year
Sale of Day old Chicks: Hatchery Capacity 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
Sale of Eggs:
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
Sale of Manure and Litters
Selling price/flock N5000.00
Feed bags selling price N15.00
Frequency Twice/year

EXPENSE ASSUMPTIONS:
KIMCS 2010 53
 PARTICULARS ASSUMPTION
Admin Overhead as a % of sales 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%

KIMCS 2010 54