smeda environmentally controlled poultry farm (60,000 birds)

Pre-Feasibility Study

ENVIRONMENTAL CONTROLLED POULTRY FARM

(60,000 Birds)

Small and Medium Enterprises Development Authority

Government of Pakistan www.smeda.org.pk

HEAD OFFICE 6th Floor , LDA Plaza, Egerton Road, Lahore Tel: (042) 111-111-456, Fax: (042) 6304926-7

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6304926-7

[email protected]

5TH Floor, Bahria Complex II, M.T. Khan Road,

Karachi. Tel: (021) 111-111-456

Fax: (021) 5610572 [email protected]

Ground Floor State Life Building

The Mall, Peshawar. Tel: (091) 9213046-47


Bungalow No. 15-A Chaman Housing Scheme

Airport Road, Quetta. Tel: (081) 831623, 831702


April, 2010

mailto:[email protected]

mailto:[email protected]

Pre-Feasibility Study Environmental Controlled Farm (60,000 Birds)

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various

sources and is based on certain assumptions. Although, due care and diligence has

been taken to compile this document, the contained information may vary due to any

change in any of the concerned factors, and the actual results may differ substantially

from the presented information. SMEDA does not assume any liability for any

financial or other loss resulting from this memorandum in consequence of

undertaking this activity. Therefore, the content of this memorandum should not be

relied upon for making any decision, investment or otherwise. The prospective user

of this memorandum is encouraged to carry out his/her own due diligence and gather

any information he/she considers necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or

other form.

DOCUMENT CONTROL

Document No. PREF 105

Revision 1

Prepared by SMEDA-Punjab

Issue Date April, 2010

Issued by Library Officer

PREF-105/April, 2010/Rev 1

1


1 EXECUTIVE SUMMARY The Environmental Controlled Poultry Farm is a project of livestock sector, in which, the day old chicks (DOCs) are raised on high protein feed for an approximate period of six weeks with a lag time of 15 days for cleaning and fumigation of the farm. The entire specific requirement will be met by automatic operations of temperature control, feeding and nipple drinking system, which will be monitored by the concerned staff. Broiler farming in controlled environment is a profitable venture due to continuous increasing demand of the white meat in the market. According to the World Health Organization standards, daily required dietary protein allowance from animal sources are 27 grams but in Pakistan this amount is only 13.6 grams. Poultry sector is one of the vibrant segments of agriculture industry of Pakistan. This sector generates employment (direct/indirect) and income for about 1.5 million people. Its contribution in agriculture growth is 4.81% and in Livestock growth 9.84%. Poultry meat contributes 19% of the total meat production in the country. According to Industry sources there is capacity of 5,000 Environmental Control Houses in Pakistan and currently 2,500 houses are working, out of which 75% (1,875) are in Punjab and remaining 25% (625) are in other provinces. An Environmentally Controlled Poultry House with a population of 60,000 birds needs a capital investment estimated at Rs. 28.43 million for construction and purchasing machinery & equipment. In addition to this, an estimated sum of Rs. 10.50 million is required as working capital, which should be used for purchasing day old chicks and other inputs like feed, vaccines, etc. The total project cost is estimated at Rs. 38.93 million. Projected IRR, Net Present Value and Payback of this project are 37%, Rs. 33,320,508 and 3.68 years respectively. In this pre-feasibility study, all the calculations have been based on a flock size of 60,000 birds, with raising 7 flocks per year. These birds are kept in a double story shed of 20,000 Sq. ft each. Proposed space of a bird is 0.65 Sq. ft.


2


2 INTRODUCTION

2.1 Project Brief The Environmental Controlled Poultry Farm is a project of livestock sector, in which, the day old chicks (DOCs) are raised on high protein feed for an approximate period of six weeks. Broiler meat is the cheapest source of animal protein available in the country. The time required for rearing broiler birds is lesser than that for large animals. The consumption of white meat is increasing due to growing health consciousness in the masses. Broiler farming in controlled environment is a profitable venture due to continuous increasing demand of the white meat in the market. Annually, seven flocks of birds will be reared on the same premises of the farm. The broiler birds are sold to traders and the whole sellers markets in the urban areas. Some times birds can also be sold directly to the shopkeepers in the urban markets. This unit is proposed for the rearing of broilers. These birds are marked for white meat purpose to the masses. The broiler chicks will be purchased from private hatcheries. A flock of 60,000 commercial broiler chicks will be bought after every 52 days. The chicks will be set in brooding on litter floor providing specific requirement during 0-4 week and then finishing phase from 4-6 weeks. The entire specific requirement will be met by automatic operations of temperature control, feeding and nipple drinking system, which will be monitored by the concerned staff. After marketing of broiler approximately at 6 weeks of age the broiler house will be given 15 days for the preparation to receive the new flock. During these days, proper cleaning, washing, white washing, disinfection and fumigation will be performed prior to the arrival of the new flock. During flock, strict measures for bio-security will be observed at the unit.

2.2 Opportunity Rationale Poultry sector is one of the vibrant segments of agriculture industry of Pakistan. This sector generates employment (direct/indirect) and income for about 1.5 million people. Its contribution in agriculture growth is 4.81% and in Livestock growth 9.84%. Poultry meat contributes 19% of the total meat production in the country.1

The existing daily availability of protein quantity per capita in Pakistan deriving from animal source including beef, mutton, poultry and fish combined amounts to 13.6 grams. This is far less than the recommended daily dietary protein allowance from animal source of 27 grams, according to the World Health Organization standards. In our Country per capita consumption of meat is only 5 KG and 40-45 eggs annually whereas developed world is consuming 41 KG meat and over 300 Eggs per capita per year.2 According to Industry sources there is capacity of 5,000 Environmental Control Houses in Pakistan and currently 2,500 houses are working,

3

1 Source: Economic Survey of Pakistan 2008-09. (Chapter No. 2 Page No.34) 2 Source: Pakistan Poultry Association (www.ppapaknorthern.com)



out of which 75% (1,875) are in Punjab and remaining 25% (625) are in other provinces.

2.3 Total Project Cost An Environmentally Controlled Poultry House with a population of 60,000 birds established in a purpose-built controlled shed needs a capital investment estimated at Rs. 28.43 million for construction and purchasing machinery & equipment. In addition to this, a sum of Rs. 10.50 million is required as working capital, which should be used for purchasing day old chicks and other inputs like feed, vaccines, etc. The total project cost is estimated at Rs. 38.93 million.

2.4 Proposed Capacity In this pre-feasibility study, all the calculations have been based on a flock size of 60,000 birds, with raising 7 flocks per year. A lag time of 15 days for cleaning and fumigation of the farm is proposed.

3 CURRENT INDUSTRY STRUCTURE The generation line of broiler comes from pure line (Strains) that make the Great Grand Parents (GGP), which are imported. These great grand parents produce grand parents which are available in Pakistan. These grand parents produce parent stocks (Breeders) and parent stock end up in producing the final product which is broiler. Pakistan’s poultry industry is importing 100,000 Grandparents (GP) chicks annually from Australia, Holland, Germany and USA with the cost of US$100 per day-old female chick. The farmers get day old broiler from hatcheries. These hatcheries maintain their breeder farms, or in some cases, purchase their hatching eggs from breeder farms. These breeder farms depend on producers of parent stock.

Poultry feed mills are the major player in the poultry industry, which produce a specific formula feed mix. Poultry feed consists of rich protein elements like soyabean meal, canola meal, rapeseed meal, sunflower meal, feather meal and rich energy elements like grains, gluten, etc. When feed efficiency matters most you can gain the right weight of your bird. The major component of cost of production of chicken meat accounts for feed cost.

3.1 Sector Information3 Total Investment Rs. 200 Billion No. of Hatcheries 400 No of Feed Mills 150 Grand Parents 200,000 Parents 6 Million Broiler 600 Million Poultry Meat 621,000 Metric Ton

43 Source: Pakistan Poultry Association (www.ppapaknorthern.com)



In this way, poultry sector is contributing its major share to provide animal protein to the masses and is striving hard to fulfill the gap of animal protein in the country.

3.2 Problems faced by Poultry Industry This important sector is facing a great problem in the form of heat stress. Pakistan is a tropical country and during summer the temperature reaches over 40°C. Even the average temperature remains well beyond the higher side of thermo neutral zone for the greater part of the year. Hot and humid weather conditions coupled with manual and poor management practices increases the mortality in flocks, depresses their growth and makes poultry production an unmanageable and uneconomical pursuit. Business is also adversely affected for four long months due to severe environment. During this period owner has to either continue his flock compromising with poor performance in feed intake, growth rate, weight gain, FCR (Feed Conversion Ratio) in broilers along with mortality or he has to totally close his business to avoid all these risks. This situation creates severe shortage of poultry meat which is the cheapest and easily available source of animal protein. Environment controlled houses can overcome this critical situation, which counteracts the adverse effects of heat stress providing tunnel ventilation and enhancing the wind chill effect. These houses when equipped with highly mechanized system of automatic chain feeding and nipple drinking makes the environment quite conducive for poultry production.

3.3 Poultry Trend in Pakistan

Figure 3.1: Broilers' Population (1999-2009)4

Poultry (Million Birds)

0

100

200

300

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600

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Mill

ion

Bird

s

Poultry (Million Birds) It can be seen from above figure that Broilers’ Population is increasing year by year.

54 Source: Economic Survey of Pakistan 2008-09



The poultry meat production has showed a growing trend over the past few years. The meat production trend of chicken meat, beef and mutton from the year 1999-2009 is presented below.

Figure 3.2: Meat Production Trends55

Meat Production Trend

0

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1750

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000,

Ton

s

Beef Mutton Poultry Meat

It can be seen from the above figure that from 1999-00 to 2004-05 the production of poultry meat was lower then the Mutton Meat but from 2005-06 to 2008-09 there is a rise in the production of Poultry Meat. It is evident from the above figure that Poultry has taken the share of Mutton although Beef production is always higher then Poultry meat and Mutton.

3.4 Comparative Efficiency of Environment Control House (ECH) and Conventional Open-Side House (COH)

The modern trend of environment control houses (ECH) in poultry production has brought a great revolution in poultry industry of Pakistan in the recent years. This has solved a great hurdle of heat stress in the way economical commercial poultry production. The ECH with evaporative cooling system, providing tunnel ventilation, giving the wind chill effect has markedly improved the broiler production system. The technology of ECH is rapidly becoming popular among broiler producers due to its following significant advantages: 1. The ECH brings down the temperature by 10°C to 15°C as compared to the COH

and makes it comfortable like colder regions. 2. ECH maintains the uniform temperature round the clock providing very

conducive environment to the broilers avoiding fluctuation in the day and night temperature.

65 Source: Economic Survey of Pakistan 2008-09



3. Due to severe heat stress during four long summer months the broiler production is stopped in COH, resultantly only 4-5 flocks are possible in such houses in a year. However, in ECH 7 flocks are marketed without any break.

4. ECH being complete closed system has minimized the incidence of diseases, cutting down the cost of vaccine and medication of Rs. 2-3 per bird as compared to COH.

5. Mortality in ECH has been decreased to 2 to 3 percent as compared to 10 percent in COH.

6. Installation of highly mechanized automatic feeding and nipple drinking system in ECH has provided the solution of manual and poor management practices. 2 housemen at daytime and 2 at night time are sufficient to look after a flock of 60,000 birds. In COH nearly 8-12 housemen are required to manage such a flock.

7. Equal distribution of feed and water to broilers through automatic system in ECH has markedly improved the uniformity up to 95% as compared to 75% in COH.

8. In ECH a broiler flock is ready for market in 37 days as compared to 45 days in COH.

9. An individual broiler in COH usually consumes 3 to 3.3 kg feed to gain 1.5 kg weight reflecting its Feed Conversion Ratio (FCR) = 2 to 2.2. Whereas this figure of FCR is improved to 1.8 in ECH.

All these significant features in ECH have reduced the cost of production of broiler to Rs. 7 to 8 Per Bird as compared to COH.

4 MARKETING The marketing of chickens follows the traditional channels of distribution. Generally, broilers are distributed in the market through middlemen (Arti) and wholesalers. The role of Arti is to identify a farm and negotiate the price. In some cases, the middleman provides Day Old Chicks and other farm inputs (feed, etc.) to the broiler farmers and then agrees to buy back the mature birds from them.

Birds are transported to the urban market and are sold to retailers. Birds are sold on live-weight basis. The time spent in getting broilers from the farm to the retail shop is brief. Although collection and handling of birds has improved with the use of loader vehicles, but it is an established fact that greater the distance between the poultry producer and consumer, more complicated is the marketing system including their collection, handling and transportation to the consumer or processing plants.

The trick in marketing is quick availability of market information of chicken supply and demand, which will determine the selling price.

5 FARM MANAGEMENT Farm inputs required for a Controlled House include farm equipment (drinkers, feed trays, brooders, and feeders) and other items like feed, vaccines & medicines, rice-husk or saw-dust, water, electricity, etc.


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The following practices starting from arrival of the chicks to marketing of broilers should be performed under the supervision of an expert.

1. Low temperature should be controlled with the help of diesel heaters and high temperature with evaporative cooling system.

2. Watering through automatic nipple drinking system. 3. Feeding through automatic feeding system. 4. Specific vaccination schedule should be adopted for disease control. 5. Prophylactic medication should be provided according to requirement. 6. Sanitation and disinfection program should be strictly followed during and

after the completion of one flock. 7. Record should be maintained for feed intake, body weight, FCR and

mortality. 8. Marketing of finished (ready) broilers.

6 PRODUCT The proposed project should generate revenues from sale of chicken. Assumptions used for the product mix are as follows:

Table 6.1: Product Mix

Product Avg. Live Weight (Kg)

Price per Kg6

Chicken 1.85 Rs. 100

Table 6.2: Production Assumptions Number of Flocks per year 7Number of Birds per Flock 60,000Time required per Flock (Days) 37Lag time required per Flock (Days) 15Total Annual Production Capacity 420,000Shed Space Required per Bird (Sq.ft) 0.65Sale price growth rate 10%Production capacity utilization 100%

7 MANPOWER REQUIREMENTS Semi skilled workers are needed to look after the feeding, vaccination and cleaning operations at the farm. Thirteen people should be hired to mange the operations of the automated shed. The personal needed for the farm is as under:

86 As per flock wise analysis, attached in Annexure 1



Table 7.1: Human Resource Requirement

Description No. Salary Per Month Salary for the YearSupervisor 1 20,000 240,000Housemen 5 7,500 450,000Electrician 1 10,000 120,000Watchmen 4 7,500 360,000Cleaner 2 7,000 168,000Total 13 1,338,000

8 TECHNOLOGY

8.1 Machinery & Equipment Requirement7 Various types of farm equipment are needed for feeding, drinking and handling the birds. List of farm equipment, which should be needed, is as under:

Table 8.1: Machinery Details8

Description Unit Amount (PKR)

WATERING SYSTEM Floor Regulator Kit with 30" Flex Standpipe 4 10' PVC Nipple pipe kit ( 20 high flow quinch nipples) with conduit and winching, 8' drop

156

End Assembly kit with 30" Flex Standpipe 4 1500Lb winch (Worm gear / split drum) 4 Winch handle for VB312 1 PVC Cement Glue – Pint 1 Installation / management manual for watering system 1

VAL-CO PAN FEEDING SYSTEM End House Control Pan Unit - Mechanical Switch 3 1/2 HP Direct Drive Motor & Gearbox 368RPM - 50HZ - 3PH - 380V

3

200 lb. Capacity Feed Hopper 3 Single Outlet Boot Assembly 3 Broiler Feeder Pan - 13" Dia, Low Profile 468 10' Tube – 4 Holes Ribbed Tube 117 1.75" Tube Clamp 96

7 List of Machinery Suppliers is attached in ANNEXTURE 2

98 Equipments are proposed of VALCO, USA based company.



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Tube Hanger (for Ribbed Tube) 147 405 Roll – 1.438" O.D. Auger 3 Insulator Bracket & Tube Clamp Assembly 21 Spring for Anti-Roost Shocker Wire 21 1/16" Anti-Roost Shocker Wire 1230 1/16" Cable Clamp for Anti Roost Wire 25 Hopper Level Mechanical Switch - 3PH 1

FEEDER LINE WINCHING 390' Winching kit with 10' drops 3 Winch Handle 1

FEED BIN HOPPER AND FILL SYSTEM 30 Degree Plastic Upper Boot Transition-Green 1 3.5" HV Single Outlet Lower Boot 1 800KG Taper hopper 1 2 piece collar kit for 60 deg hopper 1 Basic Hardware Carton 1 3.5" 45 Degree Formed PVC Tube 3 PVC Cement – Quart 1 3.5" x 10" Straight PVC Tubes 7 3.5" PVC TUBE SPLICE 1 2.71" OD Auger 125 3.5" formed tube hanger 10 #2 Hanger Chain 250 S Hook ¼ x 2.25" 10 3.5" Standard Poly Drop With Shutoff 2 3.5" x 12' Translucent Downspout Tube 2 3.5" Stainless Steel Downspout Clamp 3 Poly Discharge Head - 3PH 1 3.5" HV Port & Driver Kit 1 0.75HP Direct Drive Motor & Gearbox box 368RPM - 50HZ - 3PH

1

TUNNEL VENTILATION SYSTEM

48" Hypermax GALV CONE FAN, 50 HZ, 3PH, 380V

8

48" WHITE PVC SHUTTER 8 2.0 x 0.6 x 0.15 CoolPad, 45/45 FLUTE 60

MINIMUM AND TRANSITIONAL VENTILATION SYSTEM

39" Galvanised Box Fan with 6 S/S blades 3 Adjustable Minimum Vent, With Bird Screen 42



11

3/16" Galvanised 7 x 7 cable 820 Adjustable Wall Puley Kit 4 3 1/2" Cast Iron Pulley with Eye Bolt 4 1200Lb ratchet winch 2 Right Angle Mounting Plate For Winch 2 3/16" Galv. Cable Clamp 24 3/8" x 3" Lag Screw 8 7/16" Clamp With Long Slot 42

ENVIRONMENTAL CONTROL 12 Channel GainTrac 1 Temperature Sensor 4 Relative Humidity Sensor 1 Sensor cable 2

Total Machinery Cost for 1 Shed 2,366,022Total Machinery Cost for 2 Sheds 4,732,043Generator Set (75 KVA) 2 1,500,000Diesel Heaters 2 507,000Fire Extinguisher etc. (Set) 2 84,500Weigh Bridge 30 Ton, 8` X 16` 1 300,000Other Equipments (Shovels, Hand Trolley, Uniforms, etc) 30,000Total Machinery & Equipment Required 7,153,545Erection & Installation of Machinery 118,300Contingencies (3% of Total Machinery) 214,606Total Machinery & Equipment Required (incl. Erection & Installation etc.)

7,486,450



9 LAND & BUILDING

Table 9.1: Land Requirement

Land Per Acre Cost Total Cost3 Acre 1,000,000 3,000,000

Table 9.2: Building Requirement

Description Area (sq.ft.)

Cost (Rs. / sq.ft.) Total (Rs.)

Shed Space Ground Floor (50' X 400') 20,000 350 7,000,000Shed Space 1st Floor (50' X 400') 20,000 325 6,500,000Building for Resident & Office Purposes Ground Floor

Feed Store 500 Toilet Block 100 Admin Office 100 Areas for Corridor 150 Generator Set Room 400 Store for Vaccine & Medicines & Misc. 150

Total Area for Ground Floor 1,400 500 700,000Changing/Store Room for Staff 100 Rooms for Staff 400 Kitchen 80

Total Area for 1st Floor 580 500 290,000Feed Hopper Room Double Story 450 500 225,000Water Tank 1,000 Gallon (2) 13,000 26,000Boundary wall 7 feet height 700,000Total Building & Infrastructure Cost 15,441,000

9.1 Recommended Mode for Acquiring Land It is recommended that the proposed project should be started on a purchased land.

9.2 Suitable Locations Suburban and rural areas around the major cities of the country are the suitable areas for setting up a poultry farm. Setting up a farm at an isolated place will minimize the risk of disease.

Proximity of the farm to the city enables the farmer to have a quick communication with the market for the purchase of Day Old Chicks, farm inputs (feed, etc.), and selling of mature birds.


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9.3 Other Requirements Poultry's farming needs to be handled tactically, right from the selection of the site to the final stage when the birds are sold. The farm should be located at a place where transportation of birds and feed can be handled easily.

The entrepreneur should make sure that the following things are available at the farm site before setting up the farm:

• Electricity connection • Drinking quality water


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10 PROJECT DETAIL

Table 10.1: Project Economics

Capital Investment Rs. in actualsLand 3,000,000 Building/Infrastructure 15,441,000 Machinery & equipment 7,486,449 Furniture & fixtures 35,000 Office equipment 46,500 Pre-operating costs 2,417,200 Total Capital Costs 28,426,149

actuals10,003,891

500,00010,503,891

38,930,040

actuals19,465,02019,465,020

-

ProjectI 37%

3.68 33,320,508

Working Capital Rs. in Raw material inventory & Salaries etc (based on per/flock approx.) Cash Total Working Capital

Total Investment

Initial Financing Rs. in Debt 50% Equity 50% Export re-finance facility

Project Returns Equitynternal Rate of Return (IRR) 47%

Payback Period (yrs) 3.60 Net Present Value (NPV) Rs. 30,807,026


11 FINANCIAL ANALYSIS

11.1 Projected Income Statement

Calculations Environmental Controlled Shed Farm - SMEDAIncome Statement

Rs. In actualsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue from the sale of Birds 76,876,380 84,564,018 93,020,420 102,322,462 112,554,708 123,810,179 136,191,197 149,810,316 164,791,348 181,270,483 Sale of Feed Bags 180,699 198,769 218,646 240,511 264,562 291,018 320,120 352,131 387,345 426,079 Sale of Rice Husk 420,000 462,000 508,200 559,020 614,922 676,414 744,056 818,461 900,307 990,338 Total Revenue 77,477,079 85,224,787 93,747,266 103,121,992 113,434,192 124,777,611 137,255,372 150,980,909 166,079,000 182,686,900 Cost of sales

Cost of DOC 23,100,000 24,255,000 25,467,750 26,741,138 28,078,194 29,482,104 30,956,209 32,504,020 34,129,221 35,835,682 Cost of Feed 37,242,740 39,849,732 42,639,213 45,623,958 48,817,635 52,234,869 55,891,310 59,803,702 63,989,961 68,469,258 Operation costs 1 (direct labor) 690,000 759,000 834,900 918,390 1,010,229 1,111,252 1,222,377 1,344,615 1,479,076 1,626,984 Vaccination, Medication & Disinfection 2,441,880 2,563,974 2,692,173 2,826,781 2,968,120 3,116,526 3,272,353 3,435,970 3,607,769 3,788,157 Direct Exlectricity 2,940,000 3,234,000 3,557,400 3,913,140 4,304,454 4,734,899 5,208,389 5,729,228 6,302,151 6,932,366 Diesel for Generators & Heater 3,231,000 3,554,100 3,909,510 4,300,461 4,730,507 5,203,558 5,723,914 6,296,305 6,925,935 7,618,529 Litter & Spray Cost 574,000 602,700 632,835 664,477 697,701 732,586 769,215 807,676 848,059 890,462

Total cost of sales 70,219,620 74,818,506 79,733,780 84,988,344 90,606,840 96,615,794 103,043,767 109,921,516 117,282,173 125,161,439 Gross Profit 7,257,459 10,406,281 14,013,485 18,133,648 22,827,351 28,161,816 34,211,605 41,059,393 48,796,827 57,525,461 General administration & selling expenses

Administration expense 648,000 712,800 784,080 862,488 948,737 1,043,610 1,147,972 1,262,769 1,389,046 1,527,950 Administration benefits expense 19,440 21,384 23,522 25,875 28,462 31,308 34,439 37,883 41,671 45,839 Travelling expense 32,400 35,640 39,204 43,124 47,437 52,181 57,399 63,138 69,452 76,398 Communications expense (phone, fax, mail, internet, etc.) 19,440 21,384 23,522 25,875 28,462 31,308 34,439 37,883 41,671 45,839 Office expenses (stationary, entertainment, janitorial services, etc.) 19,440 21,384 23,522 25,875 28,462 31,308 34,439 37,883 41,671 45,839 Professional fees (legal, audit, consultants, etc.) 38,739 42,612 46,874 51,561 56,717 62,389 68,628 75,490 83,039 91,343 Depreciation expense 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 Amortization of pre-operating costs 483,440 483,440 483,440 483,440 483,440 - - - - -

Subtotal 2,789,743 2,867,489 2,953,010 3,047,082 3,150,562 2,780,950 2,906,160 3,043,892 3,195,396 3,362,051 Operating Income 4,467,716 7,538,792 11,060,476 15,086,566 19,676,789 25,380,867 31,305,445 38,015,502 45,601,431 54,163,410

Other income (interest on cash) 92,559 243,962 496,720 944,076 1,630,343 2,709,921 4,273,461 6,271,427 8,731,297 12,171,484 Earnings Before Interest & Taxes 4,560,275 7,782,754 11,557,196 16,030,642 21,307,133 28,090,788 35,578,906 44,286,929 54,332,728 66,334,893

Interest expense on long term debt (Project Loan) - 1,376,372 1,128,001 838,300 500,393 106,259 - - - - Interest expense on long term debt (Working Capital Loan) 1,372,964 1,140,003 872,250 564,510 210,812 - - - - - Subtotal 1,372,964 2,516,375 2,000,250 1,402,810 711,205 106,259 - - - - Earnings Before Tax 3,187,310 5,266,379 9,556,945 14,627,831 20,595,927 27,984,529 35,578,906 44,286,929 54,332,728 66,334,893

Tax 796,828 1,316,595 2,389,236 3,656,958 5,148,982 6,996,132 8,894,727 11,071,732 13,583,182 16,583,723 NET PROFIT/(LOSS) AFTER TAX 2,390,483 3,949,784 7,167,709 10,970,874 15,446,946 20,988,397 26,684,180 33,215,197 40,749,546 49,751,170


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11.2 Projected Cash-flow Statement

Calculations Environmental Controlled Shed Farm - SMEDACash Flow Statement

Rs. In actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activitiesNet profit 2,390,483 3,949,784 7,167,709 10,970,874 15,446,946 20,988,397 26,684,180 33,215,197 40,749,546 49,751,170 Add: depreciation expense 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 1,528,845 amortization of pre-operating costs 483,440 483,440 483,440 483,440 483,440 - - - - - amortization of training costs - - - - - - - - - - Deferred income tax 796,828 1,316,595 2,389,236 3,656,958 5,148,982 6,996,132 8,894,727 11,071,732 13,583,182 16,583,723 Accounts receivable (6,318,607) (315,930) (663,454) (729,799) (802,779) (883,057) (971,363) (1,068,499) (1,175,349) (1,292,884) Finished goods inventory - - - - - - - - - - Equipment inventory - - - - - - - - - - - Raw material inventory (10,003,891) (655,184) (700,258) (748,595) (800,443) (856,070) (915,766) (979,844) (1,048,642) (1,122,526) 17,831,219 Advance insurance premium - - - - - - - - - - - Accounts payable 6,036,468 376,795 401,016 426,837 454,368 483,725 515,031 548,421 584,037 (942,335) Other liabilities - - - - - - - - - -

Cash provided by operations (10,003,891) 4,262,273 6,639,271 10,558,197 15,536,711 21,403,731 28,198,275 35,671,576 44,247,055 54,147,735 83,459,739

Financing activitiesProject Loan - principal repayment - (1,492,618) (1,740,989) (2,030,690) (2,368,596) (1,328,236) - - - - Working Capital Loan - principal repayment (1,559,922) (1,792,883) (2,060,636) (2,368,376) (2,722,074) - - - - - Short term debt principal repayment - - - - - - - - - - Additions to Project Loan 8,961,129 - - - - - - - - - - Additions to Working Capital Loan 10,503,891 - - - - - - - - - - Issuance of shares 19,465,020 - - - - - - - - - - Purchase of (treasury) shares

Cash provided by / (used for) financing activities 38,930,040 (1,559,922) (3,285,501) (3,801,625) (4,399,065) (5,090,670) (1,328,236) - - - -

Investing activitiesCapital expenditure (28,426,149) - - - - - - - - - - Acquisitions

Cash (used for) / provided by investing activities (28,426,149) - - - - - - - - - -

NET CASH 500,000 2,702,351 3,353,770 6,756,572 11,137,645 16,313,061 26,870,039 35,671,576 44,247,055 54,147,735 83,459,739


16

Pre-Fea

PREF-105/A

sibility Study Environmental Controlled Farm (60,000 Birds)

pril, 2010/Rev 1

17

11.3 Projected Balance Sheet

Calculations Environmental Controlled Shed Farm - SMEDABalance Sheet

Rs. In actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Current assetsCash & Bank 500,000 3,202,351 6,556,121 13,312,693 24,450,338 40,763,399 67,633,438 103,305,015 147,552,069 201,699,805 285,159,543 Accounts receivable 6,318,607 6,634,537 7,297,991 8,027,790 8,830,569 9,713,625 10,684,988 11,753,487 12,928,836 14,221,719 Raw material inventory 10,003,891 10,659,075 11,359,333 12,107,928 12,908,372 13,764,442 14,680,208 15,660,052 16,708,693 17,831,219 -

Total Current Assets 10,503,891 20,180,033 24,549,991 32,718,612 45,386,500 63,358,410 92,027,272 129,650,054 176,014,249 232,459,859 299,381,263

Fixed assetsLand 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 Building/Infrastructure 15,441,000 14,668,950 13,896,900 13,124,850 12,352,800 11,580,750 10,808,700 10,036,650 9,264,600 8,492,550 7,720,500 Machinery & equipment 7,486,449 6,737,804 5,989,159 5,240,514 4,491,869 3,743,224 2,994,579 2,245,935 1,497,290 748,645 - Furniture & fixtures 35,000 31,500 28,000 24,500 21,000 17,500 14,000 10,500 7,000 3,500 - Office vehicles - - - - - - - - - - - Office equipment 46,500 41,850 37,200 32,550 27,900 23,250 18,600 13,950 9,300 4,650 -

Total Fixed Assets 26,008,949 24,480,104 22,951,259 21,422,414 19,893,569 18,364,724 16,835,879 15,307,035 13,778,190 12,249,345 10,720,500

Intangible assetsPre-operation costs 2,417,200 1,933,760 1,450,320 966,880 483,440 - - - - - -

Total Intangible Assets 2,417,200 1,933,760 1,450,320 966,880 483,440 - - - - - - TOTAL ASSETS 38,930,040 46,593,896 48,951,570 55,107,906 65,763,509 81,723,134 108,863,151 144,957,089 189,792,439 244,709,204 310,101,763

Current liabilitiesAccounts payable 6,036,468 6,413,263 6,814,279 7,241,116 7,695,484 8,179,209 8,694,240 9,242,662 9,826,699 8,884,364

Total Current Liabilities - 6,036,468 6,413,263 6,814,279 7,241,116 7,695,484 8,179,209 8,694,240 9,242,662 9,826,699 8,884,364

Other liabilitiesDeferred tax 796,828 2,113,422 4,502,659 8,159,617 13,308,598 20,304,731 29,199,457 40,271,189 53,854,371 70,438,095 Long term debt (Project Loan) 8,961,129 8,961,129 7,468,511 5,727,522 3,696,832 1,328,236 - - - - - Long term debt (Working Capital Loan) 10,503,891 8,943,969 7,151,086 5,090,450 2,722,074 - - - - - -

Total Long Term Liabilities 19,465,020 18,701,926 16,733,019 15,320,630 14,578,523 14,636,834 20,304,731 29,199,457 40,271,189 53,854,371 70,438,095

Shareholders' equityPaid-up capital 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 19,465,020 Retained earnings 2,390,483 6,340,267 13,507,976 24,478,850 39,925,795 60,914,192 87,598,371 120,813,568 161,563,114 211,314,284

Total Equity 19,465,020 21,855,503 25,805,287 32,972,996 43,943,870 59,390,815 80,379,212 107,063,391 140,278,588 181,028,134 230,779,304 TOTAL CAPITAL AND LIABILITIES 38,930,040 46,593,896 48,951,570 55,107,906 65,763,509 81,723,134 108,863,151 144,957,089 189,792,439 244,709,204 310,101,763

Liabilities & Shareholders' Equity

Assets


12 KEY ASSUMPTIONS Table 12.1: Net Birds Calculation for Revenue

No. of Birds Per Flock 60,000 Excessive Birds @ 2% of Birds 9 1,200

Total Birds Per Flock 61,200Mortality in Birds @ 3% of Total Birds 1,836 Net Birds after Mortality Per Flock 59,364Net Birds after Mortality for the Year (For Revenue)

415,548

Table 12.2: Net Birds Calculation for Cost of Feed No. of Birds Amount in

Rs. Total Mortal Birds 1,836

During first two weeks Mortal birds @ 50% of Total Mortality

918 30,524

During 3rd and 4th weeks Mortal birds @ 30% of Total Mortality

551 36,628

During 5th and 6th weeks Mortal birds @ 20% of Total Mortality

367 36,628

Cost of Feed Consumed by Mortal Birds Per Flock 1836 103,780

Cost of Feed Consumed by Remaining Birds 59,364 5,216,612Total Cost of Feed Consumed by the Birds Per Flock 5,320,391Total Cost of Feed Consumed by the Birds Per Year

37,242,740

Table 12.3: Expense Assumption Administration benefits expense 3% of administration expense Traveling expense 5% of administration expense Communication expense 3% of administration expense Office expenses (Misc.) 3% of administration expense Professional fees (legal, audit, consultants, etc.) 0.05% of revenue

189 Excessive birds are given as per market practices.



Table 12.4: Depreciation Assumption Depreciation Method Straight Line MethodBuilding depreciation rate 5%Machinery & Equipment depreciation rate 10%Office Equipment depreciation rate 10%Furniture & Fixtures depreciation rate 10%

Table 12.5: COGS Details:

Description DOC (Day Old Chicks) (Rs.) 55 Feed Conversion Ratio (FCR) i.e. Feed required to gain 1 Kg weight (Kgs.)

1.90

Feed required per 1000 birds - (50 Kgs bags) 70.3 Feed Requirement/bird/day - Kgs 0.10 Vaccination. Medication and Disinfection Cost per Bird (Rs.) 5.70 Feed Price per Bag (50 Kgs) 1,250 Cost of Feed per Kg – Rs. 25 Table 12.6: Growth Rate Description Sales Growth Rate 10%CGS Growth Rate (DOC, Vaccine & Medication, Litter & Spray) 5%Cost of Feed Growth Rate 7%Salaries Growth Rate 10%Electricity & Diesel Growth Rate 10% Table 12.7: Debt Assumption Debt Tenure 5 YearsInterest Rate on Long Term Debt 16%

Debt Payments Semi AnnuallyWorking Capital Loan 14%

Debt Payment Monthly


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13 ANNEXURE 1

Flock wise Calculation of Live Bird prices against Day Old Chick10 In this report it is assumed that the flock will be ready after 37 days, and 15 days for lag time. By analyzing the past data, keeping in view the flock preparation time and lag time, there is difference of 52 days for purchasing the new Day Old Chick and 37 days for selling them into the market. For example if Day Old Chicks are purchased on January 01, 2008 the following schedule of flocks will be formed.

Day Old Chick

Purchases Dates

DOC Rate

Live Birds Sale Dates

Live Bird Sale Rate Difference

Flock 1 1-Jan-08 15 7-Feb-08 58 43Flock 2 22-Feb-08 13 30-Mar-08 80 67Flock 3 14-Apr-08 21 21-May-08 60 39Flock 4 5-Jun-08 5 12-Jul-08 70 65Flock 5 27-Jul-08 15 2-Sep-08 90 75Flock 6 17-Sep-08 26 24-Oct-08 74 48Flock 7 8-Nov-08 18 15-Dec-08 77 59Flock 8 30-Dec-08 75 5-Feb-09 90 15Flock 9 20-Feb-09 33 29-Mar-09 106 73Flock 10 13-Apr-09 28 20-May-09 90 62Flock 11 4-Jun-09 30 11-Jul-09 92 62Flock 12 26-Jul-09 44 1-Sep-09 98 54Flock 13 16-Sep-09 64 23-Oct-09 100 36Flock 14 7-Nov-09 77 14-Dec-09 80 3Flock 15 29-Dec-09 42 4-Feb-10 95 53Flock 16 19-Feb-10 68 28-Mar-10 120 52

Average 35.88 86.25 50.38 From the above it can be seen that there is 50.38 Avg. price differences of Day Old Chick and Live Bird Farm Gate rate. It means that from the past trend Live Bird farm gate rate is Rs. 50.38 higher then the Day Old Chick rate that is purchased before 37 days. In this report the price of Day Old Chick is taken at Rs. 55 and Live Bird Farm Gate rate at Rs. 100. So the difference of Rs. 45 has been proposed between Day Old Chick and Live bird farm gate rate.

2010 As per the rates provided by Pakistan Poultry Association (PPA)



Day Old Chick Vs. Live Bird Farm Gate Rate

0

20

40

6080

100

120

140

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Flocks

Pak

Rs.

DOC Rate Live Bird Farm Gate RateLinear (DOC Rate) Linear (Live Bird Farm Gate Rate)


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ANNEXURE 2 Table 13.1: Feed & DOC Supplier Feed Suppliers DOC Suppliers

Supreme Feeds (Pvt.) Ltd. Head Office: 176-Shadman 1 Lahore. Phone: +92-42-37522104-7 Fax: +92-42-37573106

Big Bird Poultry Breeders (Pvt.) Ltd. 2-A,Ahmed Block, New Garden Town Lahore Phone : +92-42-35835373-4 Fax : +92-42-35835371

National Feeds Ltd. 171 Shadman – II Lahore. Phone: +92-42 37551405-8 Fax: +92-42- 37573045

Hi-Tech Poultry Breeders (Pvt.) Ltd. 1-A, Shadman Chowk Jail Road, Lahore Phone : +92-42-37564503 Fax : +92-42-37564508

Asia Feed (Pvt.) Ltd. 359 Shamsabad Colony, Humayun Road Multan. Phone: +92-61-6224414 Fax: +92-61-6224414

Islamabad Poultry Breeding Co. D-98, Satellite Town, Murree Road Rawalpindi. Phone : +92-51-4427139 Fax : +92-51-4421203

Fast Poultry Feeds 12-KM Near Nai Sabzi Mandi Jhang Road, Faisalabad. Phone: +92-41-2577171-2 Fax: +92-41-2517474

Jadeed Farms (Pvt.) Ltd. 6,Allied Commercial Plaza, Murree Road, Chandni Chowk Rawalpindi. Phone: +92-51-4851280-84 Fax: +92-51-4851255

Rustum Feeds Flat No.6, 1st Floor, United Center Shamsabad, Murree Road, Rawalpindi Phone: +92-51-4455362 Fax: +92-51-4847382

SB Poultries SB PLAZA 48-C Satellite Town ,Murree Road, Chandni Chowk, Rawalpindi. Phone: +92-51-4457561 Fax : +92-51-4511191


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Table 13.2: Machinery Suppliers & Consultants Machinery Suppliers Consultants

Biovet (Pvt.) Ltd. 97-A, Jail Road Lahore Phone : +92-42-37534508 Fax : +92-42-37534510 www.biovet.com.pk

Dr. Imtiaz Alam Mobile:+92-333-4093001

Eastern Veterinary Services 4- C Chubirji Center, Near Venus Cinema, Multan Road, Lahore. Phone : +92-42-37417649-50

Dr. Ahtsham Mobile:+92-300-6888807

B.A.Traders H.No. 210-Riwaz Garden, Lower Mall, Lahore Phone: +92-42-37225666 Fax: +92-42-37323129 www.batraders.com

Dr. Asim Cheema Mobile:+92-300-4203674

Automation Masters

Office No. 1, 2nd floor, Block 2, National Business Center, Shamsabad Murree Road, Rawalpindi. Phone: +92-51-4841782-3 Fax: +92-51-4451088

Dr. Asif Raza

Mobile:+92-301-8459002

PEPCO (Pvt.) Ltd. Sialkot Bypass, Near Beacon House School, Mohala Haji Park, Gujranwala. Phone: +92-55-3204402-4 Fax: +92-55-3204401

Dr. Anwar Mobile:+92-300-4355542


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http://www.biovet.com.pk/

http://www.batraders.com/

smeda environmentally controlled poultry farm (60,000 birds)

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