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KINGDOM MULTI-PURPOSE CO-OPERATIVE

SOCIETY LTD

PRESENTS

A Proposal On The Development Of A

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

TO
PROSPECTIVE INVESTORS AND MEMBERS

Corporate Head Office:

Nigeria:
39B Danude Street
Maitama
Abuja
KIMCS 2010

Nigeria.
Telephone: +2347098814236, +2347025465604,

CONTENT
01.

EXECUTIVE

SUMMARY

3
02.

INTRODUCTION

9
02.01 Project Background
02.02 Objective of Study
02.03 Methodology
03.

MARKET

ANALYSIS

11
03.01 Overview
03.02 Product Market
03.03 Major Consumers
03.04 Demand Level
03.05 Projected Demand
03.06 Major Suppliers
03.07 Level of Supply
03.08 Projected Supply
03.09 Competition
03.10 Proposed Marketing Strategy
04. TECHNICAL ANALYSIS

20

04.01 Operational Details and Structure

04.02 Machinery/Equipment Requirements
04.03 Housing
04.04 Raw materials and sources,
KIMCS 2010

04.05 Infrastructural Requirements

05. MANAGEMENT AND ORGANISATION

29

06. INVESTMENT COST ANALYSIS

07. REVENUE

32

PROJECTION

37

08. FINANCING PLAN

09.

FINANCIAL

COMMERCIAL

39

PROJECTIONS

AND

APPRAISAL

OF

(KIMCS)

was

VIABILITY
41
CHAPTER ONE

EXECUTIVE SUMMARY
Kingdom

Multi-purpose

Cooperative

Society

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

Bank of Nigeria (CBN). The main object of the cooperative is human
capital development thereby alleviating poverty in all facet of human
endeavour.

The

cooperative

trains,

manage

and

administer

contributions for employees of Government at all levels, Corporate

Establishments, Groups and Individuals.
The cooperative was conceived out of an ambition to:

Revolutionise the activities of cooperative societies

Cater for the down trodden

Develop human capital

Provide funds for the establishment of businesses

Monitor businesses and

Total financial advisory services for the class that cannot afford
such

A complete solution centre for poverty alleviation

KIMCS 2010

Our main aim is to reverse the ugly stories and sights associated with
cooperative societies and other SMEs establishment administration
and management in both public and private sectors in Nigeria.

We

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

Nigeria to international standard, adapting and improving on the
international best practices. This is synonymous to the practice in
Nigeria before colonialism and present cooperative society set up in
India. We intend to provide quality training and allied services to
corporate and individual Nigerians like never before with high level of
honesty and integrity in business relationship by doing the following:

Make quality education/training and information available to

government, corporate organizations, groups and individuals in
order to impact communal responsibilities at all levels

Make cooperative society practices pleasurable to Nigerians

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

servants, etc have sense of responsibilities and hope

Render financial assistance to the members

Monitoring of members business and taking the business to a

profit making level

Financial advisory services for members

Liaising and with working with the Government in order to

achieve the poverty alleviation agenda via empowerment

Raising funds from investing members, investments, business

activities and government where available

Setting up communal businesses for training purpose and

raising of funds for the cooperative society

Kingdom Multi-purpose Cooperative Society (KIMCS) has been

organizing various in-house and public Sensitization/enlightenment
workshops on the need for viable and purposeful practice of
cooperative society in Nigeria. The workshops are to enlighten

KIMCS 2010

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 cooperatives affairs would be driven by a Board of Directors,
composed of men of integrity and positive business antecedents. This
is one of the key strategies for awareness and general acceptability of
the cooperative society.
The cooperatives primary target is made up of employees in the
Public, Private sectors (organized and informal) and individuals in the
rural areas. We have mapped out strategies for penetrating the
informal sector to sell the new contributory scheme successfully in
that sector.
On this note, KIMCS will use training, workshops, seminars, and
enlightenment programmes to get prospects to internalize the
concept workings and benefits of the new 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 2010

KIMCS operation coverage will include Lagos, Abuja and the six geopolitical 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.
KIMCSs investment philosophy would be anchored mainly on
security of the contributions, grants and investment incomes without
compromising fair returns on investments to our contributors and
members, since we are aware that the object is not profit making but
development of human capital and poverty alleviation.
In order to achieve this business objective, KIMCS intends to employ
a crop of young experienced people who would be given first class
training

and

publicity

tools,

complemented

by

challenging

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

best cooperative society planning, training programme and communal
products/services in the industry.
KIMCS 2010

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. Ajayis work experience has seen him through Insurance
Brokerage,

Insurance

Agency,

Underwriting,

Management

and

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

served as Deputy Treasurer of Gulf Bank of Nigeria Limited. In 1995,
he moved to Continental Trust Bank Limited as the Banks Treasurer
to oversee the treasury functions of the Bank. He was later to become
Regional Director (Business Development) (North), Head of Corporate
Services Group, Zonal Coordinator Lagos/Western Zone (Business
Development), and Head of Credit Management Group at different
times.
He retired as Deputy General Manager in January 2003 to take up the
challenge of managing XYZ, having undergone both local and
international training in several areas of management. He has
brought into XYZ his diverse capabilities and versatility in insurance,
pension funds administration, finance and banking, along with his rich
experience as a manager of men and material resources.
THE PROJECT
Poultry Farming business in Nigeria can be said to be as old as history
can remember.
KIMCS 2010

However, its development and growth compared to

7

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 farmers 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
8

KIMCS 2010

Management and Services capable of meeting both local and

international demands

Ensure that every State in Nigeria has a localized poultry

incubation center that will continually provide chicken and eggs
alike at considerable prices to its citizens and dwellers

Description of the project idea

Localized Poultry Incubation Center housing 20 Commercial Poultry
Farmers; with

a Feed Mill Factory and Store, Borehole and Water

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

Store, Administrative Office, Poultry Clinic and Security/Gate House
to provide the required services/logistics for all the 20 Poultry
Farmers.
The Poultry Incubation Center will also accommodate 10 vegetable
farmers who will take advantage of the manure that will be derived
from the waste products generated by the 20 Poultry Farmers.
GOALS OF THE FEASIBILITY STUDY
To substantiate the profitability of poultry breeding based on the
existing own production facilities and disposal/sales of poultry meat
and eggs on the domestic and export market;

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

goods in the course of the increase of production capacities

To estimate the expected financial results and to work out the

financial strategy of the company in terms of payments for the
credits to bank or financier

Tasks of the company for the investment period

To construct the poultry house in order to provide closed

technological cycle (the first stage poultry breeding based on
the purchased young birds; the second stage home brooding of
young birds with the industrial egg production by a breeding
flock and further down-and-feather raw materials and poultry
meat production)

KIMCS 2010

To equip the poultry farm and relevant infrastructure, to

continually

upgrade

all

vehicle

depots

and

technological

equipments

To enlarge the share of the regional poultry meat market based

on the direct contracts with sales companies/agents

To implement contracts

and to develop distribution channels

for export of down-and-feather raw materials

To ensure profit accumulation from production and sales that

meets existing market demands at every point in time

To

take

advantage

of

our

agricultural

sector

for

the

improvement of the nations economy and increment of supply

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

CHAPTER TWO
INTRODUCTION
Project Background
The livestock sub-sector is an important component of the Nigerian
Agricultural Economy. Its importance derives from the fact that it is
KIMCS 2010

10

one of the key contributors to the national economy.

For example,

using the 1984 factor based data, the sub-sector contributed on an

annual basis, a little over 5% of the Gross Domestic Product (GDP)
between 1996 and year 2000. According to CBN, the livestock subsector is second only to the crop sub-sector under the sub-sector
contribution to the general agricultural sector, and represents an
average over 13% of agricultures contribution during the period
under consideration.
In terms of specific output, the livestock sub-sector can be broken into
product sub-groups such as, poultry meat, goat meat, lamb/mutton,
beef, pork, milk and eggs.
Table 1: Estimated Output of Livestock in Nigeria: 1994 2000
(000 tonnes)
199

199

199

199

199

199

200

200

200

Product
Poultry

4
63

5
73

6
74

7
76
4

8
77

9
82

0
88

1
95
487

2
107
514

Eggs
Goat meat
Lamb/Mutton
Beef
Pork

377
80
85
183
25

399
88
94
192
31

422
92
96
197
39

35
95
101
200
43

436
96
102
202
45
9

450
101
107
208
47
100

465
107
113
215
50
101

114
117
228
55
103

129
126
239
62
104

Milk
951 961 972 989 91
0
2
8
6
Source: CBN Annual Report and Statement of Accounts (19982000)
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.
KIMCS 2010

This is because poultry

11

production is a socio-economic activity that has high rating for the

reason that the net return on investment is relatively higher than that
of other animal species and its contributing role to national economy
cannot be overemphasized. Thus it is the major source of high quality
protein that is necessary for the continued survival of the fast growing
human population of the developing economy.
Based on the foregoing, the proposed integrated poultry intends to
invest in comprehensive poultry farming which entails the production
of day old-chicks, eggs, broilers and layers.
Objective of Study
The objective of this study is to undertake a detailed investigation of
the technical, market, and financial feasibility of the project, bearing
in mind the size of the target market (potential customers), the
existing competition, project location, investment costs and financial
returns of the project.
Methodology
In carrying out the study, we adopted the following methodology:
1.

A field survey of the market including potential consumers,

existing competition, and marketing practices of competitors.

2.

Collation and detailed analysis of data so collected;

3.

Appraisal of the commercial viability of the project, and

4.

Preparation of comprehensive Feasibility Report.

This feasibility report will, thus provide the necessary guide, to not
only the project promoters in evaluating and carrying out their
KIMCS 2010

12

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

population

of

about

130

million

is

grossly

underprovided with the essential food component, which is protein.

For example, data from the FOS, CBN, and FAO indicate that from
cattle, less than 2kg of beef is available to an average Nigerian per
year and just mere 4kg of eggs per annum is available to each
Nigerian. In fact, milk production has been nose diving or at best has
remained constant since 1994. This scenario is compounded more so
when the volume of egg supply is very low, being 10.56g per person
per day as compared with the usual recommendation that an egg
should be consumed by an adult per day. This recommendation would
imply a crate of 30 eggs per month. This story also holds for other
meat products including, chicken.
To ameliorate this problem of low-level of protein intake, there is the
need for concerted effort, among the various stakeholders to bring
about the massive production of protein based food items at
competitive costs so that they would be affordable to the general
masses. Aside from the other necessary economic reforms, massive
investment poultry farming is one way of resolving the problem.
What is poultry farming?

Poultry farming is the commercial

production of poultry birds, which include chicken, turkey, geese,

KIMCS 2010

13

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)

(b)

Main Products

Day-Old Chicks

Farm Eggs

Poultry Meat
-

From Culled birds (Layers and Breeders)

Broilers

By-products

KIMCS 2010

14

Poultry droppings

Poultry Offal and other hatchery wastes.

PROPOSED CAPACITY
5000 Birds per production cycle are the minimum economic size to
commence a poultry farm, as the operational and fixed costs are
justifiable.

This is even more relevant for a non-automated poultry

farm. For a fully automated and integrated farm, the recommended

minimum economic size is between 8,000 and 10,000 birds.
The proposed project, which is an automated and integrated poultry
farm, is proposed to commence with 10,000 to 15,000 birds per
production cycle in the poultry section and 10,000 birds in the
Hatchery Section. However, the output of the farm is proposed to
increase to 20,000 birds in the poultry section and 15,000 day-old
chicks within the first five years of the production period.
In the poultry section, the ratio of layers to broilers is proposed as
70%: 30% or 7: 3, while 40% to 60% is proposed for the hatchery
section.
PROPOSED CAPACITY (%) OF THE INTEGRATED POULTRY
FARM
(a) Poultry Section

KIMCS 2010

15

7000 - 14,000 Birds

3,000 - 6,000
Birds

Broilers, 30%
Layers, 70%

(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.
KIMCS 2010

16

Egg, in its own case, has a wide variety of utilisation. Thus, it is used
in the preparation of products such as chicken burger, scotch
eggs,salad,

and

egg

soup

among

others.

Apart

from

home

consumption, eggs can be used as leavening agent in baked foods,

and as an ingredient in the manufacture of hair shampoo and for the
production of egg powder that can later be incorporated into baby
food.
Poultry farmers, especially the ones specializing in broiler and layer
production, are the potential 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.
KIMCS 2010

17

CURRENT SOURCES OF SUPPLY

The bulk of current sources of supply of poultry products come from
the informal sector, which is made up of farmers with smallholdings of
50-700 birds capacity. However, there are some big suppliers
especially in the southern parts of the country. Such suppliers include:
1.

Amo Farm Sanders Hatchery Ltd.,

2.

Animal Care Services Konsult (Nig.) Ltd.,

3.

Cee-Jay Farms

4.

Harmony Projects Ltd.,

5.

Mayfield Farms Ltd.,

6.

Obasanjo Farms (Nig.) Ltd.,

7.

Richmond Foods Nigeria Ltd.,

8.

Samrose Agro-Industrial Company Limited

9.

Tuns Farm Nigeria Ltd.,

10.

U.O.O. Agricultural Industries

11.

UAC Foods (Integrated Poultry Farming)

12.

Zartech Limited

13.

Abiola Farms Limited

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

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18

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

supply level of poultry products in the country as follows:
50 million birds per annum
60 million eggs per annum
60 day old chicks

Considering infrastructural constraints and other limiting factors, we

may estimate the projected level of supply of poultry products to
increase by 5%. Hence the projected level of supply from 2003-2008 is
provided hereunder:
(Million)
200

200

200

200

200

2008

Chicke

3
50

4
52.5

5
56.1

6
57.8

7
60.7

63..8

n
Eggs

60

63

3
66.1

8
69.4

8
72.9

1
76.5

Day-

60

63

5
66.1

6
69.4

3
72.9

8
76.5

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

Assuming that each household consumes 20

chickens per annum which include the ones consumed during the
major festive periods such as Christmas, New Year and Easter for
Christian; Idel Malud, Idel Kabir for Muslims and during the birthday
celebration of members of the household or during any special

KIMCS 2010

19

occasion, these assumptions bring the estimated poultry consumption

to about 440 millions chickens consumed by the households.
It should, however, be noted that the households are not the only
consumers of chicken and poultry products. The other consumers
include Fast Food Companies, Hotels and other food processing
companies.

Let us conservatively assume that demand from these

groups is about 60 million chickens per annum.

This brings the total estimate demand for poultry chicken to 500
million per annum. If we further assumed that this demand increase
by 2.00% per annum, then the projected demand for chicken is as
follows:
(Million)
2004

2005

2006

2007

2006

500

510

520.2

530.60

541.5

COMPETITION
Competition is not so keen in Nigerias 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, 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

KIMCS 2010

20

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)

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 Nigerias poultry
industry tends to be short, with more than 80% of total production
delivered directly to the informal trade sector. The remaining 20% is
normally distributed through a longer chain of the formal sector.
In this wise, the marketing practices of the operators in the market
can be considered under the headings of quality of service, promotion,
and pricing.
KIMCS 2010

21

(a) In the area of distribution, poultry farmers sell directly to

operators in the informal sector.
These include

Butchers

Restaurants

Boarding hotels

Small retail stores

Hawkers

Live chicken markets

Spent hen depots

Individual consumers,

Hotels

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

operators in the formal market. Members of this group include

Big retail outlets

Wholesalers

Franchise stores

Broiler processing plants

Egg processing plants

Exporters (Occasionally)

(b)Pricing: Pricing in the informal sector of the industry is

relatively stable. However, price determination greatly depends
on the grade of the products. In the case of eggs, they are
classified to the following three grades.

KIMCS 2010

Grade 1

Grade 2

Under grade
22

PROPOSED MARKETING STRATEGIES

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

TO

MAJOR

HOTELS,

RESTAURANTS

AND

CATERING OUTLETS
There are many tourist initiatives and developments in the cities that
need to be catered for. Unfortunately, at the moment, they are under
serviced and still depend on the traditional distribution channels. The
proposed farm will aim at meeting the needs of the outlets, initially in
Lagos, and subsequently other parts of the country.
2. SUPPLY TO HAWKERS
Live chickens or egg will be sold registered to hawkers on a regular
basis. As most retailers have transport problems, the farm could
entice them by delivering the chickens or eggs at their outlets
CONTRACTING
The farm may enter into a contract with medium or large-scale broiler
users to supply stipulated number of chickens or eggs at specified
periods. This will, hopefully, provide a steady market for the farm
SUPPLY TO TOWNSHIP COLD STORAGE DISTRIBUTORS
Some cold storage outlets have positioned themselves very well in the
town to sell frozen food and meat products. The farm will endeavor to
supply these distribution centers.

CHAPTER FOUR
KIMCS 2010

23

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,

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 DayOld 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:

Fertile Eggs

Fumigations of Eggs

Day-Old Chicks
(DOC)

Hatchers
Incubator

Setter
Incubator

Candling
Room

4.12 Broiler Grow-out Facility

KIMCS 2010

24

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.

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

KIMCS 2010

25

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
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

KIMCS 2010

Setter Incubator

Hatchers Incubator

Fumigation Equipment
26


b)

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.
The dimension of a typical one, Chick Master 102 is
22length,12.6 Width and 8.7Height
Hatchery
The Hatchery that will be utilized will have a minimum of 30,000 Day
-old Chicks per hatching cycle

Drinking systems
An automatic water trough or drinking nipple system placed inside or
preferably outside the shed will save labour and provide a constant
supply of fresh water. It is important to provide shade in the hot
season to keep the water cool.
A low-pressure drinking system is ideal for adult birds. The water
flows through the nipples only when they are touched or pecked.

KIMCS 2010

27

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:

Electric Generator Preferably 250 KV

Egg Lifter

Debeakers

Thermometer

KIMCS 2010

28

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:
Brooder House
Growers House
KIMCS 2010

29

 Deep Litter House

Cage.
Brooder House
This is the house where a day-old chick stays until the first 8 weeks of
the chicks life. Brooder house must be maintained properly and kept
warm always. Installation of brooders guards to confine chicks, flat
feeders, drinkers and feed mash must always be available.
Grower House
After the first 8 weeks, chicks are transferred to the grower house.
The purposes of this transference are to protect them and make them
comfortable so that they

can develop optimally.

A well ventilated

housing accommodation will suit the growers with enough floor space
for the number of growers involved. The recommended floor space
for a flock of 250 birds is 125 square meters.
Deep Litter House
The birds are transferred to the deep litter house after 20 weeks in
the growers house.

In case of broiler production, this is where the

birds will domiciled until they reach the market weight of about 1.6kg
in 3 -4 months.
Cage
This is the final destination of layers and breeders.

No litter is

required. Cages are normally put under the roofed house. The usual
number of birds required in a cell is 3 pullets or 2
layers.

KIMCS 2010

30

Figure 1. Modern broiler house, which uses

two feed bins.
Houses should be capable of maintaining appropriate temperatures
during

the

entire

growing

cycle,

regardless

of

the

outside

temperature. Colder climates require additional insulation, whereas

proper air speed becomes crucial in a hot environment. Most broiler
houses are built 40 feet wide, usually with two lines of lighting
fixtures arranged so that all areas of the floor are well lit. Lowwattage 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

31

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.

KIMCS 2010

32

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

Drugs
Some poultry drugs commonly used in the poultry farms are:
Amprol Solube Powder, Tylan, Vitadol, Vibravet, Soluvita Stress,
Teramycin eggs formular, Malathion insecticide, Vetox 85
insecticide.
Vaccines
Some

popular

vaccines

include:

Newcastle

disease

vaccine,

Coccidants Vaccines, Gumboro Vaccine, Komoro Vaccine, Pox

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

KIMCS 2010

33

CHAPTER FIVE

MANPOWER

REQUIREMENT,

MANAGEMENT

AND

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

Diseases control,

Housing and equipment ,

Feeding,

Genetic improvement,

Marketing,

KIMCS 2010

34

Consequent upon the medium size of the farm, the management

structure will not be too elaborate. Since a promoter will finance the
farm, the composition of a board of directors may not be necessary,
although it is advisable that this be put in place. The overall
management functions, which will include broad policy formulation,
approval of budgets and strategic plans, will fall on the promoter who
will also function as the Managing Director and Chief Executive
Officer of the farm, although a lot of assistance and value can be
derived from the constitution of a board of Directors.
PERSONNEL REQUIREMENT
Commercial poultry production involves the rearing of exotic breed of
chicken that are highly sensitive to environmental changes, feeding
pattern and diseases. Hence, its management requires highly skilled
and experienced personnel.
The farm is a fully automated and integrated farm. Hence, there
would not be need for too many staff. In this wise, the farm will
require the following personnel:
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
Security Men
Driver(s)

(2) Holders of Senior School Certificate

(2) Relevant guards training
( 2) Holders of Nigerian professional
driving license

KIMCS 2010

35

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
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
Initially, the farm will maintain a lean structure in the first five years
of its operation, during which it would enjoy full automation and the
services of six staff. However, as the farm expands, in the nearest
future, it will be imperative to put in place, a very good structure.
Hence, the following structure is recommended.
The farm will be structured into four broad departments. The heads of
these departments will report to the General Manager, who will serve
as the overall Farm Manager of the integrated farm. He will report to
the Chairman / Managing Director.
Hatchery Manager, who will supervise the hatchery operations of
the farm, will head the Hatchery unit.
The Finance and Administration Department will be headed by
Finance

&

Administration

Manager

and

will

supervise

all

administration accounts and personnel matters.

The Livestocks Department will be headed by Livestock Manager,
who will supervise the broiler, layers / breeder and egg production
operations of the farm.
KIMCS 2010

36

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

Livestock Manager

Feed man

KIMCS 2010

Veterinary Assistant

Hatchery Manager

Hatchery Assistants

Finance & Admin

Manager

Business
Development
Manager

Account Clerks
Admin Clerks

Business
Development
Executives

37

CHAPTER 6
INVESTMENT COST ANALYSIS
The costs of the project are estimated under two main headings, viz:
Capital/initial cost and operating/maintenance costs.
1.0

Capital/initial Cost

Based on the estimates gathered during the market survey as well as

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

5,000,000

Broiler/grower shed

1,000,000

Hatchery shed

1,000,000

Layer Shed

1,000,000

Store room

850,000

Fencing
Borehole construction
Feed mill

2,000,000
1,000,000
1,000,000

Sub-Total
12,850,000

1.2. Machines/Equipment:
Automated Watering System

6,500,000

Automated feeding system

12,000,000

Automated manure removal

2,750,000

Incubation and Hatchery equipment

15,000,000
KIMCS 2010

38

Generator (1 nos. 75 KVA)

2,500,000

Office Equipment (see details)

3,000,000
Water bore hole equipment
1,000,000
Sub-Total

1.3

42,750,000

Delivery Vehicles:
a)

Saloon Car (1 no.)

2,900,000

b)

Purchasing/Delivery Van (1 no.)

2,750,000

Sub-Total
1.4

5,650,000

Furniture & Fittings:

a)

Furniture (see details)

b)

Air conditioners (2 no.)

c)

1,200,000
150,000

Telephone Installation

85,000
Sub-Total
1.5

Pre-Operating Expenses:
a)

Company Incorporation & Legal Fees

b)

Feasibility Study

450,000

h)

Travel Expenses

150,000

I)

Accounting Systems Manual

j)

Personnel/Admin Policies Manual

k)

Staff Recruitment

650,000

I)

Sundry Expenses

250,000

Sub-Total
1.6

1,435,000

500,000

500,000
500,000

3,000,000

Raw Material Inputs

KIMCS 2010

39

a)

Day old Broilers

(1,500 no) -

165, 000

b)

Day old Layers

(3,500 no) -

385,000

c)

Feed stock

d)

Vaccines, Spray, Litter & consumables

Sub-Total

10,000,000
-

150,000
10,400,000

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

1.7

Working Capital:

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

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

OPERATING AND MAINTENANCE COSTS

The operating and maintenance costs are estimated on the basis of

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

Fuel Expenses

Given at least 2 vehicles and using average fuel expenses of N65/litre

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

Maintenance of other machines/equipment is estimated to

cost N75,000 per annum.

b)
2.2
KIMCS 2010

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

Management and Personnel Cost
40

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

Poultry Feed, Vaccination, Spray, litter, etc

The above are estimated based on a benchmarking with model poultry

farms as well as industry best practices.

We have however been a

little conservative in this matter. Vaccination cost is put at N30 per

bird. Spray cost is put at N5, 000 per flock, Feed cost is put at N1,
100 per bag of 25kg on average.
c. Utilities
These have been estimated as follows:

i.

Telephone bills (Admin)

100,000.00

ii.

Electricity

iii.

Water

300,000.00

iv.

Diesel for generator

300,000.00

200,000.00

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

d. Audit expenses
These have been pegged at N250, 000 in the first two years, then it
moved to N350,000 as from the third year.
e. Facilities, Cleaning And Maintenance
These include items such as manure equipment clean-up, disposal of
birds litters and general material for the up keeping of the premises
KIMCS 2010

41

of the Poultry facility. It has been pegged at N300, 000.00 per annum
and increases at the rate of 5% per annum.
2.3

General Overhead:

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

as below:
I)

Travel expenses

ii)

Printing/Stationery

100,000

iv)

Staff Uniform

100,000

v)

Sundry Expenses

250,000

2.4

N 200,000

Depreciation

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

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

DEPRECIATION SCHEDULE
PLTRY.EQ ENERGY
O/EQUIP

VEHICL

FURN./F

MT/

ES

IT

0.540
0.540
0.540
0.540
0.540
2.700
0.300
3.000

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

YEAR

BUILDIN
G
4.721
4.721
7.161
7.161
7.161
58.185
5.819
75.135
KIMCS 2010

0.450
0.450
0.450
0.450
0.450
2.250
0.250
2.500

1
2
3
4
5
TOTAL
Salvage
COST
42

KIMCS 2010

43

CHAPTER 7
REVENUE PROJECTION
The main sources of revenue of the Poultry facility are:
i) Sale of mature birds
ii) Sale of eggs
iii) Sale of bird litters/manure
iv) Sale of day-old chicks
i)

Revenue from sale of mature birds is based on initial capacity of

5,000 birds, given a mortality rate of between 6% - 10% per
cycle. The production capacity is expected to increase by 100%
to 10,000 birds after the first two years of operation and to
20,000 birds beginning from year five, all other things
remaining as assumed.

Following the assumptions, revenue

from sale of mature birds should average N6.75million for a

5,000 bird capacity, N13.50million for a 10,000 bird capacity
and N27.0million for a 20,000 bird capacity, all on a worst case
scenario.

The estimated industry growth rate is about 12.5%

annually.
ii)

Revenue from the sale of eggs is based on projected number of

layers, which constitutes 70% of total bird count, the layers life
cycle of 90 weeks, the laying period of 52 weeks, the ability to
lay 2eggs in every 3 days during the laying period, and given the
assumed mortality rate earlier stated above as well as the
growth in bird count over the planning period.

The total

estimated revenue from this segment should be N6.899million

for a 5,000 bird capacity, N13.80million for a 10,000 bird
capacity and N27.6million for a 20,000 bird capacity on an
KIMCS 2010

44

annual basis.

The average industry growth rate is 15% per

annum.
iii)

Revenue from sale of manure and bird litters is based on

industry average revenue estimates and given the strategic
location of the poultry. It is estimated that N129,000 N492,000
will be realized from the above sales, given capacity utilization
of between 5000 20000 birds respectively. The figure should
grow by about 10% per annum

iv)

Revenue from sale of day old chicks is based on estimated

availability of hatchery systems, government policy on the
importation of day old chicks and given the mortality rate of the
day old chicks, among others. Therefore, it is estimated that
N12.408million,

N18.612million

and

N24.816million

respectively will be realised on a capacity of 40,000, 60,000 and

80,000 day old chicks. The estimated growth rate in sales
should be 15% per annum.
On the basis of above assumptions, total revenue for years 1 - 5
should as shown below.

The capacity of 10,000 birds should be

installed in year 3, while that of 20,000 birds should be installed in

year 5. The average percent growth in revenue of 13% per annum is
assumed as per general industry trend.

KIMCS 2010

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

45

CHAPTER 8
FINANCING PLAN
Traditionally, any projects that have been found to be commercially
viable are financed through equity contribution of sponsors and loans
term loans and bank overdrafts. Our various discussions with the
promoter show that the financing structure and pattern should follow
above path.

Consequently, the Poultry facilitys capital cost of

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

NMillion

i)

Equity Contribution

15.027

20.00

ii)

Investor members

50.000

66.55

iii)

Start-up funding

15.108

13.45

Total

N80.135

100.00
i.

Equity contribution will cover the cost of initial acquisition of

land and as well as for the construction and completion of the
Poultry facility building.

The sum should also cover the

construction and part-furnishing of the administrative office and

store rooms.
ii)

The funds from the prospective investors of N50.00 million will

be used to finance substantial part of the automated poultry and
hatchery equipment and start-up operational expenses.

It is our view that the project will not have difficulties in securing
term loans that can be achieved through Loan syndication with one of
the leading commercial banks as a lead banker. United Bank for Africa
(UBA), Union Bank of Nigeria (UBN), First Bank of Nigeria (FBN),
Afribank and Wema Bank. The other buoyant commercial/merchant
banks should be willing to participate. This project is expected to be
backed up by the Central Bank of Nigeria (CBN)
KIMCS 2010

46

Another viable source of financing the project is by lease finance.

Once the viability analysis has indicated project acceptance, the
question of whether to finance by leasing or borrowing becomes
secondary since the project will do well whatever the choice of
financing. However, lease financing is particularly attractive on the
following grounds:
i) It allows 100% debt financing, as equity contribution is not
required.
ii) It is easier and quicker to obtain a lease than to obtain a loan
iii) Lower equity taxes are paid
iv) It has greater tax savings over a buy decision
The capital injection by the investor members is expected to reduce
the pains of servicing a regular bank revolving loan with
periodic interest and principal repayments. The returns on the
investors on the capital are lower than the interest charges on
the loan.

KIMCS 2010

47

CHAPTER 9
FINANCIAL PROJECTIONS AND APPRAISAL OF COMMERCIAL
VIABILITY
This chapter undertakes the financial projection of the project by
relating the projected streams of costs and revenue for the first five
years of its operations.
Thereafter, standard appraisal techniques are used to evaluate the
feasibility or commercial profitability of the project.
1.

Projected Profit and Loss Account

The projected Profit and Loss statements of the company for 5
years shows that the project will post net profit after tax of
N4.896million in the first year of operation. In the second year,
net profit after tax is expected to be N2.735million. Beginning
from year three, the project should begin to realize substantial
profits of N7.379million, falling to N4.192million in year four
due to expansion costs incurred in the latter part of year three.
In the fifth year, it will rise to N14.461million.

The high

equipment costs at the beginning of the project as well as

additional increases in capacity utilization by means of more
birds and Day old chicks account for the fluctuations in revenue
and cost structure.

The range of annualized return on

investment should be between 4.0% and 21.22% year over year

as shown in the income statement.
2.

Cash flow Projection

The cash flow projection indicates that the project will have a
reasonable financial position over the five-year period. Almost
all the Poultry facilitys services should be sold on a near-cash
basis, except for a few corporate customers that might ask for
short-term credit.

KIMCS 2010

As a result, the projected net cash flow is

48

positive throughout the period, except for year two.

This

position is further strengthened by the fact that company

operates little credit extension, has a proportionately huge
SMIES debt portfolio and is managed professionally. The cash
flow projection is attached.

KIMCS 2010

49

PROJECTED BALANCE SHEET FOR THE 5-YEAR PLANNING

PERIOD
BALANCE
SHEETS
Year

All Figures are in Millions

of Naira
1

Cash and Near

Cash items
Due from
related parties

14,296,
796

Prepaid
Expenses

10,274,
500

Inventory and
WIP

17,442,2 23,912,4
55
71

24,976,5
42

27,218,
884

14,997,0 19,944,5
00
00

29,164,5
00

39,284,
500

18,421,
499

20,724,1 32,478,4
87
85

36,538,2
95

56,211,
057

Other Accounts
Receivable

652,90
9

1,822,11 1,154,17
0
5

1,298,44
7

1,997,5
50

Total current
assets
Gross property,
plant &
equipment
Less
accumulated
depreciation
Net property,
plant &
equipment

43,645,
705

54,985,5 77,489,6
51
30

91,977,7
84

124,711
,991

58,185,
000

58,185,0 58,185,0
00
00

58,185,0
00

58,185,
000

(6,854,
625)

(13,709,
250)

(23,003,
895)

(32,298,
540)

(41,593,
185)

51,330,
375

44,475,7 35,181,1
50
05

25,886,4
60

16,591,
815

Total assets

94,976,
080

99,461,3 112,670,
01
735

117,864,
244

141,303
,806

Accounts
payable

513,72
5

749,850

1,003,11
8

1,459,76
8

1,967,5
40

Taxes Payable

2,098,2
00

1,172,12 3,513,65
0
0

1,996,27
2

6,886,0
89

Dividends
Payable

465,797

1,606,7
54

9,892,7
05

10,931,4 12,079,2
39
40

13,347,5
61

14,749,
054

Current Portion
of LTD
Other Accruals
KIMCS 2010

819,852

50

1,548,6
51

2,950,14 4,218,46
5
5

5,366,26
6

6,405,0
00

Total current
liabilities

14,053,
281

15,803,5 21,634,3
54
24

22,635,6
63

31,614,
438

Long-term debt

61,000,
000

61,000,0 61,000,0
00
00

61,000,0
00

61,000,
000

Common Stock
- Paid up

15,027,
000

15,027,0 15,027,0
00
00

15,027,0
00

15,027,
000

Net Income

4,895,7
99

2,734,94 7,378,66
8
4

4,192,17
1

14,460,
787

Shareholders
equity

19,922,
799

22,657,7 30,036,4
47
11

34,228,5
82

48,689,
369

Total long-term
debt and equity

80,922,
799

83,657,7 91,036,4
47
11

95,228,5
82

109,689
,369

Total Liabilities

94,976,
080

99,461,3 112,670,
01
735

117,864,
245

141,303
,806

3.11

3.48

3.58

4.06

3.94

3.83

3.92

3.01

3.07

2.24

Current Ratio
Total
Liabilities/Equi
ty

PROJECTED PROFIT & LOSS FOR 5-YEAR PLANNING PERIOD

INCOME
STATEMENTS
Year
Sales
Growth
(%)

rate

Less COGS
Growth
rate
(%)
Gross profit
Growth
rate
(%)
Less
SG&A
KIMCS 2010

All Figures are in Millions

of Naira
1
2
3
4
5
26,185,
29,458,
46,167,
51,937,
79,902
500
688
000
875
,000
-

12.50%
56.72%
12.50%
53.84%
(10,274
(14,997,
(19,944
(29,164
(39,28
,500)
000)
,500)
,500)
4,500)
-

31.49%
24.81%
31.61%
25.76%
15,911,
14,461,
26,222,
22,773,
40,617
000
688
500
375
,500
(513

-10.02%
44.85%
-15.15% 43.93%
(749,
(997,
(1,458
(1,96
51

expenses
Growth
rate
(%)
Earnings
before Interest,
Tax & Deprec.
Less
depreciation
Earnings after
depr.
b/4
Interest & Tax

,725)

225)

,225)

4,225)

31.49%

24.81%

31.61%

25.76%

15,397,
13,711,
25,225,
21,315,
38,653
275
838
275
150
,275
(6,854
(6,854,
(9,294
(9,294
(9,29
,625)
625)
,645)
,645)
4,645)
8,542,
6,857,
15,930,
12,020,
29,358
650
213
630
505
,630
-

Less
repayment
accrual

850)

int.

Pre-tax income
Cumulative
pre-tax income
(NOL)
Taxes
Pre-tax income
Less taxes
Less Proposed
Dividend
Net income
Growth
rate
(%)
Return
Investment
Return
Sales
Return
Equity
CASH FLOW
PERIOD

(1,548
(2,950,
(4,218
(5,366
(6,40
,651)
145)
,465)
,266)
5,000)
6,993,
3,907,
11,712,
6,654,
22,953
999
068
165
239
,630
6,993,
999
2,098,
200
6,993,
999
(2,098
,200)

10,901,
067
1,172,
120
3,907,
068
(1,172,
120)

22,613,
232
(3,513
,650)
11,712,
165
(3,513
,650)
(819,
852)

29,267,
471
(1,996
,272)
6,654,
239
(1,996
,272)
(465
,797)

52,221
,101
(6,88
6,089)
22,953
,630
(6,88
6,089)
(1,60
6,754)

4,895,
2,734,
7,378,
4,192,
14,460
799
948
664
171
,787
-79.01%

62.93%

-76.01%

71.01%

7.19%

4.01%

10.83%

6.15%

21.22%

18.70%

9.28%

15.98%

8.07%

18.10%

19.48%

10.88%

29.36%

16.68%

57.53%

on
on
on
STATEMENT

FOR

THE

5-YEAR

PLANNING

STATEMENTS
OF
CASH
FLOWS
All figures are in
KIMCS 2010

52

Millions of Naira
Year

4,895,

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
Cash flow from
operations
and
invests
Plus
net
new
equity
capital
raised
Current
year
Interest
Less
dividends
paid
Inc. (Decr.) in
long-term debt
Inc.
(Decr.)
Other
borrowings
Cash flow from
ops, invests, and
fin
Beginning cash
balance
Ending
cash
balance

KIMCS 2010

2,73
7,378,
4,192,
14,460
799
4,948
664
171
,787
6,854,
6,85
9,294,
9,294,
9,294
625
4,625
645
645
,645
10,171,
(7
6,761,
(262,
3,928
755
,499)
186
481)
,450
-

(130,

928)

2,94
(46,
4,934,
(3,85
5,869
167)
098
9,267)

2,054,
4,49
199,
2,085,
1,178
900
9,100
445
262
,535
23,846,
17,02
23,587,
20,243
25,003
152
7,043
773
,695
,150
(75,135,
000)
(51,288,
17,02
23,587,
20,243
25,003
848)
7,043
773
,695
,150
15,027,
000
(1,548,
(2,95
(4,218
(5,366,
651)
0,145)
,465)
266)
(819,
(465,
852)
797)
51,107,
(10,93
(12,079 (13,347
295
1,439)
,240)
,561)
-

(6,40
5,000)
(1,60
6,754)
(14,74
9,054)
-

13,296,
3,14
6,470,
1,064,
2,242
796
5,459
216
072
,342
1,000,
14,29
17,442,
23,912
24,976
000
6,796
255
,471
,542
14,296,
17,44
23,912,
24,976
27,218
796
2,255
471
,542
,884

53

WHAT

IF

ANALYSIS

FOR

THE

FIRST

YEAR

OF

OPERATION
"WHAT IF" ANALYSIS

Manure/Litters

YEAR 1 SCENARIO
Pessimi Planne
stic
d
70%
100%
4,725
6,7
,000
50,000
4,828
6,8
,950
98,500
8,685
12,40
,600
8,000
90,
1
300
29,000

Net Sales

18,329,8
50

26,185,5 31,422,6
00
00

2.000
20,549,0
00

1.000
0.500
10,274,5 5,137,25
00
0

0
20,549,0
00

0
0
10,274,5 5,137,25
00
0

1.100

1.000

Sales
Mature birds
Eggs
Day old Chicks

Costs of Goods Sold

Variable Cost of Goods
Sold
Fixed Costs Reclassified to
Variable Costs
Total Variable Costs

Fixed Costs of Goods &

Services
0
Total Costs of Goods 20,549,0
Sold
00

Optimis
tic
120%
8,1
00,000
8,2
78,200
14,8
89,600
1
54,800

0.900

0
0
10,274,5 5,137,25
00
0

Gross Profit
% of Total Sales

2,219,1
50
-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

308,235

256,863

231,176

6,854,62
5

6,854,62 6,854,62
5
5

G
&
A
Depreciation)
Depreciation
KIMCS 2010

(without

54

Fixed Costs Reclassified to

Variable Costs
0
7,471,09
5
Total Expenses
9,690,2
45

Income From Operations

Interest Income (Expense) 1,548,65

- "Fixed"
1

0
0
7,368,35 7,316,97
0
8

8,542,6
50

18,968,
373
1,548,65
1

17,419,
722

Income Taxes - "Variable"

1,548,65
1
2,098,20
0

Net Income After Taxes

11,238,
896

4,895,7
99

BREAK EVEN ANALYSIS FOR THE 5-YEAR PLANNING PERIOD

BREAK EVEN ANALYSIS (N'MILLIONS)
YEAR
1
2
3
4
5
26,
29
46,1
51,
79
Sales
185,500
,458,688
67,000
937,875
,902,000
Variable Costs
Material & Labor

274,500

10,

14
19,9
29,
39
,997,000
44,500
164,500
,284,500

Commissions

Total
Costs

Variable

Fixed Costs (calc as

% of sales)
Fixed Cost of Goods &
Services
Sales
&
Marketing
(w/o Commissions)
G
&
A
(without
Depreciation)
Total
Fixed
Costs
KIMCS 2010

1
3
10 4,997,00
19,
29 9,284,50
,274,500
0
944,500 ,164,500 0
0.392
0.509
0.432
0.562
0.492

0.000%

0.000%

0.000%

0.000%

0.000%

2.500%

2.500%

2.500%

2.500%

2.500%

2.500%
5.000%

2.500%
5.000%

2.500%
5.000%

2.500%
5.000%

2.500%
5.000%
55

(calc as % of sales)
Fixed Costs (fixed
amounts)
Fixed Cost of Goods &
Services
Sales
&
Marketing
(w/o Commissions)
256,863
G
&
A
(without
Depreciation)
256,863

374,925

98,613

854,625

729,113

982,113

4
374,925

98,613

6,
Depreciation

4
729,113
9,2

Total
Fixed
Costs
7 7,604,47
(fixed amounts)
,368,350
5

9,294,645
1
10,
10 1,258,87
291,870 ,752,870 0

Income
Operations

2
15,
12 9,358,63
930,630 ,020,505 0

from

6,854,625 94,645

982,113
9,

8 6,857,21
,542,650
3

294,645

(
Interest
Income
(1, 2,950,145
(4,2
(5,
(Expense) - "Fixed"
548,651)
)
18,465)
366,266)
(
Income
Taxes
(2, 1,172,120
(3,5
(1,
"Variable"
098,200)
)
13,650)
996,272)

(
6,405,000
)
(
6,886,089
)

Net Income
Taxes

1
6,067,54
1

After

4 2,734,94
,895,799
8

Analysis
Income
from
Operations
Contribution Margin 0.608

8, 4,657,96
198,516 7

0.491

0.568
0.438
0.508
12,
15
18,1
24,
22
Break-Even Sales
126,449
,490,437
19,735
523,428
,148,242
Sales Volume
14,
13
28,0
27,
57
Above Break-Even
059,051
,968,251
47,265
414,447
,753,758

SUMMARY OF ASSUMPTIONS
The accompanying financial projections are based on a number of
assumptions made in the process of forecasting future events and
KIMCS 2010

56

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.
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
the Poultry facility products and services, leaving 32% of revenues
to cover operating and other expenses. This is much in line with

KIMCS 2010

57

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

58

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
Initial

KIMCS 2010

5%

Machinery
20%

Fittings
15%

Vehicles
25%

59

Annual

10%

12.5%

10%

20%
FINANCING - 2011 -- 2015
1. An overall ratio of about 37:63 is maintained between equity and
debt, such that dilution of ownership and control is deeply affected.
In 2011 the cooperative raises N50million from investing members
and N15.057million of equity to fund investing and financing cash
flow requirements. In year 2014, additional equity of N10million is
introduced to finance growth in number of birds.
2. There are no provisions for bank loans, accounts receivable
financing or additional loans from stockholders after the first
operating cycle, beginning in 2012.

ASSUMPTIONS

BEHIND

PROJECTIONS

AND

CALCULATIONS
S/
1
2
3
4

6
KIMCS 2010

PARTICULARS
Number of Birds in lay
Rearing Period (weeks)
Brooding
cum
growing
Laying period (weeks)
Number of batches or cycle
Space requirement per bird
Brooder cum grower period
Layer period
Hatchery Period
Cost
of
Construction
Broiler cum grower shed
Layer shed
Hatchery shed
Store room and admin office
Mortality rate (%)
Broiler cum grower stage

SIZE/COST/%
5,000 20,000
72 90
18 20
52
1-3
1
0.8
0.35
1000.00
1000.00
1000.00
650.00
6% - 10%
60

7
8
9
10
11
12

KIMCS 2010

Laying stage
Day old chicks (DOCs)
Total mortality loss (birds)
Total number of birds laying
Rate of egg laying
Egg price (N/egg)
Egg Production capacity per
Average body weight of
Feed requirement (kg/bird)
Brooding cum growing stage
Laying stage
Hatchery/Day old chicks

3% - 5%
4% - 6%
500
3500 12,600
2 eggs every
9.00
766,500 eggs
1kg 2.5kg

4.5 7.5 kg/bird

35 40 kg/bird
0.35 1 kg/bird

61

REVENUE ASSUMPTIONS:
Sale of mature Birds:

No.

of 5,000 20,000

[a] Broilers

Broilers/Layers

10%

[b] Layers

Mortality rate (%)

4,500

Available for sale

N450.00

Average sale price

2-3 times/year

Frequency
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

Initial No. of layers

3,500 14,000

Layer Mortality rate

10%

Sale of Day old Chicks:

Sale of Eggs:

Effective

Sale

of

Litters

Manure

no.

laying 3,150 12,600

eggs

52 weeks

Laying Period

2eggs

Rate of lay

days

Total eggs laid/year

766,500 eggs

Egg Price/dozen

N108.00

Selling price/flock

N5000.00

every

and
Feed

bags

price

selling N15.00
Twice/year

Frequency

KIMCS 2010

62

EXPENSE ASSUMPTIONS:
PARTICULARS

ASSUMPTI

Admin Overhead as a % of sales

ON
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 0.95kg

(Kg)

N1,400.00

Rearing Period cost of Feed/bird/yr.

1.5kg

Laying Period Feed use/bird/year N3,000.00

(Kg)
Laying

N5.00
period

Cost

of N1,500.00

Feed/bird/year

N1,350.00

Vaccination Cost per bird

6.5%

Spray Cost per Flock

Litter Cost per Flock
Growth rate in input prices

KIMCS 2010

63

KIMCS 2010

64