BUSINESS PLAN

OF A

PALM OIL AND PALM KERNEL OIL PROJECT

BY

EKEDUM EBUKA INNOCENT

MAY 2014

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TABLE OF CONTENTS

Chapter Page

1. Executive Summary 1

2. Market Analysis 6

3. Company Description 8

4. Management and Organization 9

5. Product Line / Process 12

6. Funding Plan 14

7. Financials 15

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CHAPTER ONE

1 EXECUTIVE SUMMARY

1.1 GENERAL

Name of the Firm: Duca Palm oil mill.

Project: Palm oil, Palm kernel oil.

Location: Adazi-Enu, Anaocha Local Government Area,

Anambra State, Nigeria.

1.2 OWNERSHIP AND NATURE OF REGISTRATION

The palm oil processing mill will be privately owned as a sole proprietorship

business.

Name of Chief Promoter: Ekedum Ebuka Innocent

Date of Birth: 20th July, 1987

Place of Birth: Adazi-Enu, Anaocha Local Government Area,

Anambra State, Nigeria.

Phone No: +2348032823808

E-mail: michealbukason@yahoo.com

Contact Address: Adazi-Enu, Anaocha Local Government Area,

Anambra State, Nigeria.

1.3 EDUCATIONAL QUALIFICATION OF THE CHIEF PROMOTER

Nigerian Certificate In Education: NCE Biology/Mathematics

Institution: Umar Suleiman College of Education , Gashua.

Year of Graduation: 2010

1.4 SPECIAL TRAINING

Horebson Resources- Human Resources and Skills Acquisition Training: 22nd

March 2014.

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CEDR University Of Nigeria Nsukka- Entrepreneurship Skill Training

March 2014.

Web development and affiliate marketing Training June 2013.

1.5 WORK EXPERIENCE

Organization: Ekedum Motor Spare Parts.

Position: Sales Representative.

Nature of Work: Sales

Duration: Five Years

Organization: Umar Suleiman Government Day College Gashua, Bade

Local Government Area, Yobe State.

Position: Teacher (Teaching Practice)

Nature of Work: Teaching

Duration: Three Months.

Organization: Family Palm Plantation.

Position: Assistant

Nature of Work: Palm harvesting and Oil Processing.

Duration: Five Years

1.6 VISION STATEMENT

To be a leading palm oil processing mill, in providing palm products in

Nigeria and beyond.

1.7 MISSION STATEMENT

To provide palm products in a clean environment, while making use of

modern technology with honesty.

1.8 BUSINESS STRATEGY

Advertising strategies include local Tv advertisements to initially announce

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the Grand Opening. Print advertisement will also run in the local newspaper.

Affiliate marketing will be introduced to all potential customers, by affiliate

marketing a customer (mr. A) will register with the marketing manager and also

introduce five more customers (mr. b, mr. c , mr. d, mr e and mr f) to the mill

whom the marketing manager will register under the customer (mr. A). The

customer (mr. A) earns 1% from each of the customers (mr. b, mr. c , mr. d, mr e

and mr f) transactions that is over 100,000.00 naira at the end of the year

(December) for a duration of one year. The business will also run online at

www.ducapalm.globalvila.net

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CHAPTER TWO

2 MARKET ANALYSIS

2.1 MARKET DESCRIPTION

The Nigerian market for palm oil and palm products is promising. With the

growing population and the increase in number of eateries being set up and

household consumption of palm oil, the market continues to grow. Because

of the high demand of these products in the country, they are being imported

in some cases.

The abundance of palm tree plantation in different Local Government Areas

Of Anambra State in Nigeria makes the area a good site for establishing the

palm oil mill. The oil mill will focus on the production of palm oil, palm

kernel oil and palm kernel proceeds needed for the making of soaps,

pomade and even snacks. The products from this oil mill serve as raw

material for cosmetic industries, food and snacks making industries.

It is also used as a substitute for cocoa and fats found in milk and in cream

made from sugar, biscuits, cakes and margarines. Palm kernel oil It is also

used when baking cakes, croissants and bread to give the products added

volume, a soft texture that make bread last longer. Anambra state which will

be the target of the mill has a very big population, which is a good market

palm oil processing mill and palm products. Golden Oil Industries Ltd, 15A

harbour industrial Estate, Onitsha and Envoy oil Industries Ltd, PokoBros

Avenue, Onitsha. are secondary processors of palm kernel oil (pko).

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2.2 MARKETING PLAN

Duca Mills have a team of good marketers and sales forces who will create

public awareness of the mill’s products. There would be an integrated

marketing communication between the mill and its target market. The mill’s

product would be communicated to the public through advertisement, public

relations, sale promotion and publicity.

There will be proficient marketing professionals recruited for this purpose.

Again, the industry will make use of customer based pricing one of its

pricing strategy. It will also emphasize on quantity discount as a pricing

strategy also. The mill will make use of sales representatives and agents

instead of middlemen to avoid hoarding of the products, excessive price hike

and low customer’s satisfaction.

Affiliate marketing will be introduced to all potential customers, by affiliate

marketing a customer (mr. A) will register with the marketing manager and

also introduce five more customers (mr. b, mr. c , mr. d, mr e and mr f) to

the mill whom the marketing manager will register under the customer (mr.

A). The customer (mr. A) earns 1% from each of the customers (mr. b, mr.

c , mr. d, mr e and mr f) transactions that is over 100,000.00 naira at the end

of the year (December) for a duration of one year.

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CHAPTER THREE

3 COMPANY DESRIPTION

3.1 NATURE OF THE MILL

The mill will start as a medium scale palm oil processing mill which will be

focused on processing of red palm oil and palm kernel oil at least for its first

five years of operation.

3.2 OBJECTIVES

The objectives of Duca Palm oil mill for its first three years of operation

are:

Achieve profitability in the first year.

Expand the capacity of the farm.

Maximize profit and minimize cost in each subsequent year.

Control a reasonable share of the markets in Anambra and Delta state.

Have a strong link with government establishments, palm oil dealers and

business concerns on the supply of the palm oil products.

Others include development works which will start in earnest whenever the

mill funds can be able to support it.

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CHAPTER FOUR

4 MANAGEMENT AND ORGANZIATION

4.1 MANAGEMENT

1. Name: Ekedum Ebuka Innocent

Position: Managing Director

Qualification: NCE Mathematics

Responsibilities:

Controlling the marketing of the mill’s products.

Taking of major decisions in the mill.

Provision of good working conditions for other personnel.

Ensuring that the mill operates on a good profit margin.

2. Position: Accountant / Secretary

Qualification: OND Accounting

Responsibilities:

Keeping the record of all the financial transactions in the mill.

Keeping the record of all the assets and liabilities of the mill.

Keeping the record of all the palm processing activities in the mill.

3. Position: Marketing Manager

Qualification: HND Marketing .

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Responsibilities:

Takes the role of assistant managing director.

Marketing campaigns.

Register referrals of all customers in the affiliate marketing.

Buying of palm fruits and kernels from the markets.

Keeps record of prices of palm products.

4.2 SEMI – SKILLED PERSONNEL

1. Position: Security Man

Responsibilities:

Ensuring the general security of the mill.

Controlling the movement of persons in and out of the mill.

Taking care of the security lights.

Operating the electricity generator.

2. Position: Labourers

Responsibilities:

Operation of the mill machinery.

Processing of palm oil and palm kernel oil.

Cleaning the mill.

Packaging of palm oil and palm kernel oil.

Uploading and downloading of product to and fro the mill van.

3 Position: Driver

Responsibilities:

Transporting palm fruits and kernel from the markets to the mill.

Supplying palm oil and palm kernel oil to the customers.

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4.3 ORGANIZATION

The Managing Director will be in control of all the activities of the farm. All

the farm personnel will be answerable to him. In his absence, all other

personnel will be answerable to the Marketing Manager or a senior worker as

may be directed.

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CHAPTER FIVE

5 PRODUCT LINE/ PROCESS

5.1 PRODUCT DESRIPTION

For the first five years, Duca mill will focus on processing of palm oil

And palm kernel oil for the mill and for customers.

5.2 PRODUCTION PROCESS FOR PALM KERNEL OIL (PKO)

The following processes are involved in expelling Palm Kernel oil

(PKO). The raw Palm Kernel nut is an oil yielding seed which contains

between 40% to 48% of oil, 55% to 47% of cake and 5% of sludge. The raw

Kernel is bought from the village markers and transported to the factory. On

arrival, the bags of Kernel are measured and packed ready for processing.

They are fed into the palm kernel oil expelling machine through a hopper for

crushing. The machine propels the nuts through a tight iron age which then

squeezes and extracts the oil from the crushed nuts.

The oil funnels into an oil tank under the machine and subsequently tunnels

into the primary tank from where it is picked up by the fitter press machine

for filtration. The filtered oil descends into the secondary tank by gravity

from where it is pumped to the storage tank. After the crushing and

extraction process in the iron cage, the cake comes out at the front end of the

cage and is conveyed from there by a conveyor to the bagging section and

thereafter packed ready for sale. The filter press machine removes all the

debris and dirts from the crude thereby leaving us with a clear golden

coloured clean oil in the storage tank ready for sale. The sludge and debris

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are trapped in the filter press chambers. They also sediment at the bottom of

the primary tank. Periodically sludge and debris are removed from the filter

press machine and scooped from the bottom of the primary tank and stored

in open drums ready for sale.

5.3 PRODUCTION PROCESS FOR PALM OIL

Fresh fruit arrives from the field/markets as loose fruit. The fresh fruit is

normally emptied into wooden boxes suitable for weighing on a scale so that

quantities of fruit arriving at the processing site may be checked.

Digestion is the process of releasing the palm oil in the fruit through the

rupture or breaking down of the oil-bearing cells. The digester commonly

used consists of a steam-heated cylindrical vessel fitted with a central

rotating shaft carrying a number of beater (stirring) arms. Through the action

of the rotating beater arms the fruit is pounded. Pounding, or digesting the

fruit at high temperature, helps to reduce the viscosity of the oil, destroys the

fruits’ outer covering (exocarp), and completes the disruption of the oil cells

already begun in the sterilization phase.

There are two distinct methods of extracting oil from the digested

material. One system uses mechanical presses and is called the ‘dry’ method.

The other called the ‘wet’ method uses hot water to leach out the oil.

In the ‘dry’ method the objective of the extraction stage is to squeeze the oil

out of a mixture of oil, moisture, fibre and nuts by applying mechanical

pressure on the digested mash. There are a large number of different types of

presses but the principle of operation is similar for each.

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CHAPTER SIX

6 FUNDING PLAN

The duca mill project is expected to be financed with a loan of eight million

Naira (N8,000,000) which will be amortized over its first five years of

operation starting in the first year as the case may be.

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CHAPTER SEVEN

7 FINANCIALS

The financial plan for the mill for its first three years of its operation

includes the:

Profit and Loss Account

Cash Flow Statement

Balance Sheet

Depreciation Schedule

The financial plan will only consider Palm kernel oil, palm kernel cake and

palm oil. Sludge will be assumed neutral so that its profit will take care of

any imperfection with the financial projections.

7.1 ESTIMATED CAPITAL EXPENDITURE NEEDS

Errection of industrial buildings /

furniture

N1,500,000

Payment of workers for first year N300,000

Acquisition of machines and

equipment

N1,500,000

20 Metric Tones Storage Tank N150,00

10 Metric Tones Filter Press Machine N350,000

Miscellaneous N500,000

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Total Capital Expenditure needs N4,300,000

Estimated Working Capital Requirement for the month

Raw Materials- Palm Kernel nuts-one months estimate

N1,800,000

Salaries -two months estimate N300,000Other operating expenses-two months estimate N80,000 Miscellaneous N300,000Total working capital N2,480,000Total capital required N6,780,000

7.2 PROJECTED INCOME STATEMENT PROFIT AND LOSS ACCOUNT

YEAR ONE (N) YEAR TWO (N) YEAR THREE (N)

INCOME

Gross sales 224,219,000 303,269,000 303,269,000

Discount on

affiliate

marketing

2,242,190 3,032,690 3,032,690

Net sales 221,976,810 300,236,310 300,236,310

Cost of

sales

186,830,000 241,605,000 333,345,000

Gross profit 35,146,810 58,631,310 58,631,310

Operating

Expenses

Rent - - -

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Maintenanc

e

1,732,000 2,791,000 2,791,000

Salaries 1,800,000 2,880,000 2,880,000Buildings/

Furniture

1,500,000 - -

Equipments/

Machines

1,850,000 3,500,000 -

Advertisemen

ts

250,000 - -

Company

Name

Registration

45,000 - -

Insurance 150,000 150,000 150,000

Mitsubushi

Canter Truck

800,000 - -

Accumulated

Depreciation

360,000 790,000 1,350,000

Loan

servicing

1,500,000 2,000,000 2,000,000

20 Mt

Storage

Tank

150,000 - -

Total

Expenses

10,137,000 12,111,000 9,171,000

Net Income 25,009,810 46,520,310 49,460,310

Tax 2,500,981 4,652,031 4,946,031

Net income

After Tax

22,508,829 41,868,279 44,514,279

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7.3 Projected cash flow statement

YEAR ONE (N) YEAR TWO (N) YEAR THREE (N)

Cash at the Beginning

of Year

- 30,003,639 80,252,918

Operating Activities:

Cash Receipts from

Cash Sales 221,976,810 303,269,000 303,269,000

Cash Paid for

Inventory Purchases 186,830,000 241,605,000 241,605,000

Salaries 1,800,000 2,880,000 2,880,000

General Administrative Expenses Tax 2,500,981 4,652,031 4,946,031

Affiliate bonus 2,242,190 3,032,690 3,032,690

Net Cash Flow from Operations

28603639 51,099,279 51,099,279

Investing Activities:

Cash Paid for

Fixed Assets 4,300,000 7,800,000 0.00000

Net Cash Flow from Investing Activities

4,300,000 3,500,000 0.0000

Financing Activities:

Cash Receipts from

Loan 8,000,000 - -

Cash Paid for

Repayment of Loan 1,500,000 2,000,000 2,000,000

Interest on Loan 800,000 650,000 450,000

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Net Cash Flow from Financing Activities

5,700,000 2,650,000 2,450,000

Net Increase in Cash 30,003,639 50,249,279 133,802,197

Cash at End of Year 30,003,639 80,252,918 214,055,115

7.4 BALANCE SHEET

Assets YEAR ONE (N) YEAR TWO (N) YEAR THREE (N)

Current Assets:

Cash 30,003,639 80,252,918 214,055,115

Stock - - -

Total Current Assets 30,003,639 80,252,918 214,055,115

Fixed Assets:

Property, machinery and Equipment

4,300,000 3,500,000 0.0000

Accumulated Depreciation

360,000 790,000 1,350,000

Total Fixed Assets 3,940,000 2,710,000 -1,350,000

Total Assets 33,943,639 82,962,918 212,705,115

Liabilities

Long Term Debt 6,500,000 4,500,000 2,500,000

Net Worth 27,443,639 78,462918 210,205,115

7.4 PRICES OF PALM PRODUCTS

MONTH PRICE OF PALM KERNEL OIL /TONNE

PRICE OF PALM OIL/TONNE

PRICE OF PALM KERNEL CAKE/TONNE

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January 195,000 160,000 16,000

February 195,000 140,000 16,000

March 180,000 110,000 16,000

April 160,000 110,000 16,000

May 150,000 130,000 16,000

June 150,000 130,000 16,000

July 155,000 150,000 16,000

August 155,000 150,000 16,000

September

150,000 150,000 16,000

October 150,000 150,000 16,000

November

160,000 150,000 16,000

December 195,000 175,000 16,000

7.5 LOAN AMORTIZATION SCHEDULE

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Year Principal Owing (N)

Interest @ 10% (N)

Annual Installment Payment (N)

Principal Repayment(N)

Balance c/d (N)

1 8,000,000 800,000 2050000 1,500,000 6,500,000

2 6,500,000 650,000 2050000 2,000,000 4,500,000

3 4,500,000 450,000 2050000 2,000,000 2,500,000

4 2,500,000 250,000 2050000 1,500,000 1,000,000

5 1,000,000 100,000 2050000 1,000,000 -

7.6 MONTHLY ANALYSIS OF WORKERS SALARIES (PAYROLL)

POSITION YEAR ONE (N)

YEAR TWO (N) YEAR THREE (N)

1 Marketing manager 40,000 40,000 40,000

2 Accountant/Secretary 15,000 15,000 15,000

3 Driver 20,000 20,000 20,000

4 Four laborers 60,000 60,000 60,000

5 Security Man 15,000 15,000 25,000

6 Truck conductor 15,000 15,000 15,000

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