smeda sausages production unit

Pre-Feasibility Study

SSaauussaaggeess PPrroodduuccttiioonn UUnniitt

Small and Medium Enterprise Development AuthorityGovernment of Pakistanwww.smeda.org.pk

HEAD OFFICE6th Floor, LDA Plaza, Egerton Road, Lahore.Tel: (042) 111-111-456, Fax: (042) , 6304926, [email protected] OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICENWFP

REGIONAL OFFICE BALOCHISTAN

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

5TH Floor, BahriaComplex II, M.T. Khan Road, Karachi.Tel: (021) 111-111-456Fax: (021) [email protected]

Ground FloorState Life BuildingThe Mall, Peshawar.Tel: (091) 9213046-47Fax: (091) [email protected]

Bungalow No. 15-AChaman Housing SchemeAirport Road, Quetta.Tel: (081) 2831623, 2831702Fax: (081) [email protected]

April, 2010

Pre-feasibility Study Sausages Production unit

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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 CONTROLDocument No. PREF-21

Revision -

Prepared by SMEDA-Balochistan

Issued by Library Officer

Issue Date 27 April 2010


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TABLE OF CONTENTS

1 PURPOSE OF THE DOCUMENT............................................................................................................. 5

2 PROJECT PROFILE.................................................................................................................................. 5

2.1 PROJECT BACKGROUND.......................................................................................................................... 52.2 PROJECT BRIEF....................................................................................................................................... 62.3 OPPORTUNITY RATIONALE ..................................................................................................................... 62.4 MARKET ENTRY TIMING......................................................................................................................... 72.5 PROPOSED BUSINESS LEGAL STATUS ...................................................................................................... 82.6 PROJECT CAPACITY ................................................................................................................................ 82.7 PROPOSED PRODUCT MIX ....................................................................................................................... 82.8 PROJECT INVESTMENT ............................................................................................................................ 82.9 PROPOSED LOCATION ............................................................................................................................. 82.10 KEY SUCCESS FACTORS.......................................................................................................................... 8

3 CURRENT INDUSTRY STRUCTURE ..................................................................................................... 9

3.1 GLOBAL SCENARIO ................................................................................................................................ 93.1.1 World Top Ten Fast Food Consumption Countries......................................................................... 10

3.2 CURRENT DOMESTIC INDUSTRY ............................................................................................................ 113.2.1 Facts of Pakistan Market ............................................................................................................... 113.2.2 Demand......................................................................................................................................... 113.2.3 Future Growth............................................................................................................................... 12

4 MARKETING STRATEGY ..................................................................................................................... 12

4.1 TARGET MARKET ................................................................................................................................. 124.2 PRICING STRATEGY .............................................................................................................................. 12

5 PRODUCTION UNIT LAYOUT.............................................................................................................. 13

5.1 GENERAL REQUIREMENT FOR ESTABLISHING A SAUSAGE PLANT............................................................ 135.1.1 Commercial Consideration ............................................................................................................ 135.1.2 Location ............................................................................................................................................. 135.1.3 Building materials, Floors and walls................................................................................................... 145.1.4 Sanitation ........................................................................................................................................... 14

5.2 PROCESS FLOW .................................................................................................................................... 145.2.1 Receiving and chilling ................................................................................................................... 155.2.2 Cutting and Trimming Section........................................................................................................ 155.2.3 Non Meat ingredients Section ........................................................................................................ 155.2.4 Meat Chopping, Mixing and Stuffing Section.................................................................................. 155.2.5 Smoking and Cooking Section........................................................................................................ 155.2.6 Wrapping ...................................................................................................................................... 155.2.7 Storage and Dispatch Section ........................................................................................................ 16

6 PROJECT REQUIREMENTS ................................................................................................................. 18

6.1 EQUIPMENT DETAILS............................................................................................................................ 186.2 FURNITURE & FIXTURE ......................................................................................................................... 186.3 HUMAN RESOURCE REQUIREMENT........................................................................................................ 19

7. LAND & BUILDING REQUIREMENT........................................................................................................ 19

7.1. VEHICLE REQUIREMENT ....................................................................................................................... 197.2. FURNITURE AND EQUIPMENT MAINTENANCE......................................................................................... 19


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7.3. TOTAL CAPITAL REQUIREMENT ............................................................................................................ 207.4. CAPITAL STRUCTURE OF THE PROJECT................................................................................................... 20

8. KEY ASSUMPTIONS............................................................................................................................... 21


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Introduction to SMEDA

The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program.1

Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including financial aspects, niche marketing, technology up gradation and human resource development.

SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, urban transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s areas of operation.

Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions.

1 For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk


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11 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

22 PPRROOJJEECCTT PPRROOFFIILLEE

The project is about establishing a Sausages Production unit in the adjoining areas of major cities like Quetta, Lahore, Peshawar and Karachi etc.

22..11 PPrroojjeecctt BBaacckkggrroouunndd

Finely chopped and seasoned meat mixed with different ingredients, usually stuffed into a prepared animal intestine or other casing and cooked or cured are named as sausages. The word sausage derives from the Latin salsisium, meaning something that has been salted. Centuries ago what started out simply as a means of using and preserving all of the animal trimmings has turned into the art of sausage-making. Simply saying, sausage is meat mixed with fat, salt and other seasonings, preservatives and sometimes fillers. Such a mixture is usually packed into a casing (animal intestine). Sausages can differ dramatically depending on their ingredients, additives, shape, curing technique, level of dryness and freshness. Moreover when it comes to cooking, sausages can be prepared as follows

Fully cooked; Sausages are ready-to-serve products, basically made from already cooked fresh or exceptionally cured raw materials, subjected to final cooking after stuffing, with or without additional smoking. An example of fully cooked sausages is hot dog.

Smoked Cooked; Smoked precooked sausages are mostly cured, non fermented products; their shelf life is increased by heating due to partial reduction of their moisture content; they are usually cooked before consumption. i.e. Gyulai kolbász, kielbasa and Mortadella.

Fresh; Fresh sausages are made from fresh meats which are, as a rule, neither cured, smoked, fermented nor cooked. Fresh sausages must be kept under refrigeration prior to eating. They are heated by the consumer himself before serving. Examples include Boerewors, Italian sausage and breakfast sausage.

Dry sausages (Cured or Fermented sausages); Sausages are made from cured or uncured, fermented and often smoked meats but they are not heat processed in any way; they are divided into semidry and dry sausages. Examples include salami, Droë wors, Sucuk, Landjäger, and summer sausage.

Emulsion-type sausages; Sausages comprises of ready-to-eat products made from comminuted and well-homogenized cured meats, fatty tissue, water and seasonings, usually smoked and slightly cooked

Moreover sausages are eaten in raw or prickle appearance etc.


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Sausages are prepared & eaten around the world, it has become an important aspect of modern age but history of sausage making is quite old. It begins at the times of ancient Greeks and Romans. Sausages prepared at that time were usually plain and unspiced. Art of modern sausages begin in the Middle Ages when people starts to add various meat & spice in sausages for flavoring. The art furnished even more in the last decades when it got liaison with modern technology for commercial scale production. In result sausage become one of the major components of food industry. Presently there are more than 1500 different types of sausages prepared all over the world. Many of the sausages that became famous were named for the localities where they were first made i.e. the frankfurter in Frankfurt (Germany), the bologna in Bologna (Italy) and the genoa salami in Genoa (Italy).

22..22 PPrroojjeecctt BBrriieeff

The proposed project is about establishing a sausages production unit in the adjoining areas of major cities like Quetta, Lahore, Peshawar and Karachi etc. A Sausages production facility located in any of the above stated areas can create a strong market in the country. Whereas it can also be exported if produced according to international standards and compliance. The project would serve as facility to utilize abundant raw material available in the country usually ends up as waste, especially the large resources of casings. On the other hand it would generate employment for the local inhabitants and more over would possibly generate cash inflow for the country as well. Currently the project is being designed / proposed for adjoining areas of major cities but the same can be proposed for several other cities which can fulfill input and logistic requirements of the proposed project.

The project would serve as a focal point for efficient utilization of natural resources while on the same time it would be facilitating consumer that desire to eat fast food any time they want. Initially the project is proposed to attract domestic customers but after its maturity, international customers could also be easily targeted. The main feature of the project would include sausagesprepared according to international quality standards. The Product mix may include different varieties of vegetable, meat or mixture of both. Whereas value addition will be done in shape of quality processing, standardize packaging, and final product with proper preservation. In addition to above, another very important key success factor of the proposed project is that the project would be focusing on preparing “HALAL” sausages according to Islamic values.

22..33 OOppppoorrttuunniittyy RRaattiioonnaallee

Livestock plays an important role in the economy of Pakistan in terms of income and employment. It enables poor and landless farmers to earn income using common property rangelands. The rapidly growing demand for livestock products reinforces the value of livestock as part of household asset portfolios and its potential to reduce poverty.

Opportunities in Livestock Sector

Swift increases in consumption/demand of live stock products; Increasing demand of byproducts, blood, skin, etc. Technological improvement in live stock production and processing in developed

countries which can be replicated in the developing countries.


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There is no doubt about the rich potential associated with country production of animal meat and byproducts but deficiency exist only in its usage. Every year tons of animal meat and its byproducts are wasted or sold at minimum price with in and outside the country. There is a huge potential for a facility or unit, that can process & pack these valuable resources. If this sector is explored properly it can provide a base point of heavy cash inflows & employment generationfor the country. Sausages production unit can provide a solid platform for above stated purpose. An overview of the annual production of animal meat & byproduct of Pakistan is described in the following table 1.

Table 1: Total Production of Animal byproducts in Pakistan ITEMS UNITS 2008-09 Meat 000 Tons 2,618Edible Offal `` 325Fat `` 221.56Casings 000 No`s 13,426

Economic Survey 2008-09

There2 are about 37 registered and non-registered animal casings processing firms/facilities in Pakistan. The registered firms are those which are duly approved by the Ministry of Food Agriculture and Livestock, Government of Pakistan and European Union at Brussels for the processing and export of animal casings. With these limited facilities export of raw casing has increased from 11.23 million USD in year 2003 to 14.24 million USD in year 2007, and it is still on a increasing trend3. There is a strong need of a facility that can utilize our potential resources with in the boundary of our homeland.

Moreover statistics reveals that world trade of Muslim Halal food worth more than $81 billion4

annually and is growing rapidly due to emergence of new markets and population growth. There is no doubt that Pakistan economy possesses all the positive aspects that any business require to be successful. It has strong demand both at domestic & international level, backed with sufficient availability of natural resources and economical labor, whereas the discrepancy prevails only at the entrepreneurial side. In Pakistan, Sausages production facility should be started on commercial scale, based on Halaal ingredients. It must not contain any ham, pork product or lardto capture Muslim population, while at the same time it must include all features that must fulfill the international quality standards for exports to capitalize the huge market potential in western countries as well.

22..44 MMaarrkkeett EEnnttrryy TTiimmiinngg

Sausages aren’t seasonal products; they are consumed all over the world throughout the year. Hence it provides round the year business for sausage producers. In contrast to such healthy demand, raw material requirements of proposed project such as meat and casings etc. are also available in almost every season but found more abundantly during the month of Eid-ul-Azha. 2 Pre feasibility report Animal casing processing unit SMEDA

3 ITC calculations based on COMTRADE statistics4 Article: M. M. Nazri "Prospects of Manufacturing Halal Sausages in Cans".2000


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The project is proposed to become operational at the end of Eid-ul-Azaha to acquire to rawmaterial more economically as compare to other seasons.

22..55 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

The proposed legal structure of the business entity is either sole proprietorship or partnership. Although selection totally depends upon the choice of the entrepreneur but proposed prefeasibility is based on a Sole Proprietorship.

22..66 PPrroojjeecctt CCaappaacciittyy

The proposed daily capacity of the plant would be around 1800 packs of finished product of 550 gms (0.55 kg) each.

22..77 PPrrooppoosseedd PPrroodduucctt MMiixx

The proposed product mix for the stated project is sausages that would be prepared & packed according to the market standards. In addition proposed product mix would consist of different varieties of sausages prepared of meat, vegetable or combination of both. Sausages prepared will be be 100% Halal in order to attract Muslim customers across globe.

22..88 PPrroojjeecctt IInnvveessttmmeenntt

The total investment required for this project is Rs.22.27 M. The investment mainly covers capital costs of Rs.19.09 M and working capital requirement of 3.17 M.

Table 2: Project InvestmentDescription Amount (Rs)Total Fixed Cost 19,096,718Working Capital 3,179,146Total 22,275,864

22..99 PPrrooppoosseedd LLooccaattiioonn

The proposed location for the project could be in any of the adjoining areas of major cities inPakistan such as Quetta, Hub, Lahore, Peshawar & Karachi etc. However, such a project could also be established in other areas with high livestock potential after careful analysis of market demand and project viability. In choosing location, preferences should be given to site with adequate availability of infrastructure, raw material and comparatively high traffic rate.

22..1100 KKeeyy SSuucccceessss FFaaccttoorrss

Prior to establishing a sausages production unit, there are critical points that must be kept in mind for success.

Location plays the most important role for such a project. More convenient availability ofraw material and good transportation facility make a location ideal for the proposed project.

Trained personnel would increase the chances of success for the project. Awareness among the general people would attract more customers therefore; use of

proper marketing techniques is important.


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Highway and International Airport availability are vital for projects as they provideperfect connectivity of the proposed location.

Target customers should initially be the domestic customers. Upon its maturity, international customers could also be attracted.

Priority would be given to Halal Production in order to attract Muslim customer not only from Pakistan but also from abroad.

Availability of raw material at low prices would be another key success factor.

33 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

33..11 GGlloobbaall SScceennaarriioo

The liaison between traditional sausages making art & modern industrial processing has led to commercial sausages advancement of modern era. Though the process has gone through many metamorphoses but the rationale behind today's sausage production and traditional practices remains the same, namely, obtaining a product of high taste value and longer shelf life. At present sausages is one of the most known fast food types, prepared & eaten all over the world. It is prepared in many different varieties with Germany boasting over 1200 types, Britain with over 470, and United States with more than 200.

Sausages are an excellent source of high quality protein, containing all the essential amino acids necessary for growth, maintenance and repair of body tissue. Sausages also provide significant amounts of vitamins and minerals. It is for the reason that sausages are prolific & popular world wide for thousands of years. In accordance with the year 2009 statistics provided by British Sausages week5, there are more than 470 recipes and flavors for sausages in Britain only. In Britain 90% of British households use sausages. Where as each household spends an average of £22.51 per year on sausages while five million Britons eat sausages every day. Craze of sausage consumption is not limited to Britain only. In accordance with statistics provided by AMIKO (Russian consultancy firm), Russian sausage market consumes 60% of the total meat market every year. Russian sausage consumer expenditures are also very high as Russian sausage market amounted to US$21 billion in retail prices in 2006 only and still on the increasing trend. Beside above two, USA market is also characterized as one of the high sausage consumption countries. According to figures for 20086, dinner sausage sales increased 2 percent, with more than $1.7 billion in sales. While Breakfast sausage sales remained relatively steady, at $9 million in saleson annual basis.

According to a report7 the global fast food market grew by 4.8% in 2006 to reach a value of $102.7 billion. In 2011, the global fast food market is forecast to have a value of $125.4 billion, an increase of 22.2% since 2006. As sausage being one of the major parts of fast food is also expected to increase in the same fashion.

5 http://www.britishsausageweek.com/documents/FASTFACTSONSAUSAGES.pdf6 Refrigerated dinner sausage and breakfast sausage figures based on data collected during the calendar year of 2008, by Information Resources Inc7 http://www.researchandmarkets.com/reports/c71910


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Sausages’ eating is not limited as road site snack food only, but it is consumed in events, Lunch times, parties and even by the households. Sausages are mainly eaten in evening time but are also consumed at other times as in breakfast & lunch etc. The consumption Sausages craze is not limited to western countries only but; they are also popular in Muslim’s countries as well. There is a huge market for the sausages in all over the world, especially in Muslim countries if Halal sausages are prepared and delivered to them.

33..11..11 WWoorrlldd TToopp TTeenn FFaasstt FFoooodd CCoonnssuummppttiioonn CCoouunnttrriieess

According to the research carried out by Euromonitor International8, among the top ten per capita fast food consumption countries of world USA has the lead. USA per capita fast food expenditures stood at $566 in 2005, followed by Canada, UK and Australia with $456, $390 and $363 respectively. Surprisingly, South Korea has a higher per capita consumption than several relatively wealthy European countries, namely Austria, Germany, Switzerland and Sweden, with $239 spent on fast food in 2005. This high level of per capita fast food consumption demonstrates the importance of fast food as a lifestyle in these countries. Following figure presents the world top ten fast food consumption countries in ascending order.

Fig. 1: Per capital expenditure on fast food – top 10

8 http://www.euromonitor.com/Who_eats_the_most_fast_food


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33..22 CCuurrrreenntt DDoommeessttiicc IInndduussttrryy

Among industry view point, sausages are characterized as a part of fast food industry. According to data a promising potential does exist for the sausages industry. The overview of Pakistan fast food industry is described below:

33..22..11 FFaaccttss ooff PPaakkiissttaann MMaarrkkeett

According to the statistics provided by World Bank report “Consumer Asia9”, Pakistan made up a strong market for the fast food industry. Table 3 present trends of food consumption for the last 5 years in Pakistan.

Table 3: Pakistan statistics

Source: World Bank Report – Consumer Asia

It is obvious from the table that both consumer expenditure (on food), along with Populationgrowth is on increasing trend in Pakistan. Hence it provides an opportunity for investors tocapitalize such a remarkable potential. The graphical representation of the above stated figures on consumer expenditure is represented in the following figure.

Fig 2: Consumer food expenditure trend in Pakistan

Consumer Food Expenditure Trend

0

10000

20000

30000

40000

50000

2005 2006 2007 2008 2009

33..22..22 DDeemmaanndd

Pakistan has a total population of 169 million with a growing middle-class. Approximately one-quarter of the total population represents the potential market for processed and packaged foods.

9 www.euromonitor.com/factfile.aspx?country=PK

Indicator 2005 2006 2007 2008 2009Population:January 1st ('000)

6,158.18 6,333.64 6,511.59 6,693.46 6,881.08

Consumer expenditure on food (US$ million)

33,352.5 37,681.1 42,374.2 46,334.2 47,209.1


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Moreover increased exposure to international food products and brands via cable and satellite TV, and traveling has increased fast food desirability among Pakistani consumers. Evidence of the viability of the packaged and processed food market can be seen in the success of international fast food chains in Pakistan such as McDonald’s, KFC, Pizza Hut, Pizza Express, Subway and Dunkin’ Donuts.

Pakistan processed food market is valued at approximately $2 billion; whereas significant percentage is imported every year (i.e. 25% in year 2008) to full fill the local demand. The market has been growing at an annual rate of 10 per cent10. Evidences proved profitability of fast food industry but yet this market is dominated by some bunch of international food suppliers. There is a need to build up a fast food production facility like sausages manufacturing units in Pakistan that can prepare and sell sausages at reasonable price within the market. Sausages beingvery popular in Pakistan especially among the youth but unfortunately not sold as per demandrequirement. The overall sausage selling market is composed of few restaurants situated only in big cities like Islamabad, Lahore, Karachi, Peshawar & Quetta etc. and some International food chains like McDonalds and K&N’s etc. However there are insufficient sausage production facilities existing in Pakistan to capitalize the abundant resources & potential demand.

33..22..33 FFuuttuurree GGrroowwtthh

According to the figures released by Federal Bureau of Statistics, Consumer Price Index has shown a remarkable increase over the last few years. It has increased to 7.39 percent in February 2007 only with food prices contributed the largest share with an increase of 9.9 percent11 and the same is forecasted in the upcoming years. In addition factors like increasing life standard, rising preference towards fast food & exposure to international fast food through media etc. has already created a healthy market for the fast food items. Gap exists only from supplier’s side that can be fulfilled by establishing such proposed projects.

44 MMAARRKKEETTIINNGG SSTTRRAATTEEGGYY

44..11 TTaarrggeett CCuussttoommeerrss

The target market of the project is very wide in nature. All the fast food lovers whether domestic or international could be the major consumer base for this project. Initially main focus would be given to domestic market while preferring young generation with a craze for fast food, additionally office workers, retailers, hotels & restaurants etc. can also be targeted. As the project passes the growth stage mark, foreign market can also be targeted for the proposed product mix. Moreover to attract more customers, sausage stands or outlets can be established in major super markets, to create market awareness & additional revenue.

44..22 PPrriicciinngg SSttrraatteeggyy

Since the project has a very wide range of customer class, the pricing strategy should be appealing enough to give its customers the value of their spending. At the same time, the charges should neither be very high nor very low to avoid negative impression in the market. After

10 http://www.austrade.gov.au/Food-to-Pakistan/default.aspx11 Daily Times - Friday, March 16, 2007


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carefully analyzing the current fast food market in industry, it is proposed that the customers should be charged somewhere between Rs. 275 – 500 on the final product depending on its size.

55 PPRROODDUUCCTTIIOONN UUNNIITT LLAAYYOOUUTT

A need for development of innovative and unique high quality sausage products using the greatest possible efficiency, experience and new knowledge is permanently present in all segments of the sausage manufacturing field. This goal can be achieved through continueddevelopment of new value-added sausage products and by taking advantage of present processing equipment and knowledge. A value-added sausage utilizes one or more raw material available at economical rate in combination with other ingredients to create a sausage which can be sold at a higher price.

The custom fit of a new sausage formula into sausage plant production often requires modification of the original formula. Versatility in the usual sausage processing line can create not only one but several new products for the market. For example, a simple grind-mix-grind system with a stuffer not only produces a fresh sausage but also a variety of other products. The quality aspects of a new product determine the product's continued success. A new sausage product must be delicious in flavor and exhibit a desirable texture, as visually poor-looking products do not attract customers. Certain modifications are required according to geographical area, such as hot or mild seasoning or the product's physical appearance, etc. Simply stated, excellent quality in new sausage items is a must and this can be achieved without high-cost materials by utilizing modern technology for the production of quality sausages.

55..11 GGeenneerraall RReeqquuiirreemmeenntt ffoorr eessttaabblliisshhiinngg aa SSaauussaaggee PPllaanntt

Simplicity of design and costs are of particular importance for sausage plants. Whenever the construction of a new sausage plant is envisaged, a plan to overcome possible defects is recommended. It is of paramount importance to draw up a plan giving the greatest efficiency to the entire sausage plant. Hence there are some points which must be considered before undertaking construction of sausages manufacturing plant.

55..11..11 CCoommmmeerrcciiaall CCoonnssiiddeerraattiioonn

Economic and marketing considerations are vitally important in determining the most suitable location for a sausage manufacturing plant. The first and the most important consideration is of efficient meat supply for the proposed plant, followed by the distribution of sausage products to consumers. Secondly, discrepancies between the retail price paid for meat & other animalbyproducts and the price for locally sold sausages should be determined on the basis of commercial research. Finally it is advisable to build a sausage plant large enough to deal with the periodic marketing peaks i.e. Plant must have the capacity to easily extend to hours of processing during peak season.

55..11..22 LLooccaattiioonn

The site of a sausage plant should be selected on the basis of certain factors. The sausage plant should be located in an area free from objectionable odors, smoke, dust etc. The selected place should be completely separated from any other plant or building. Attention should be given to an adequate clean water supply, also including adequate arrangement of electric power sources.


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Moreover in planning a sausage plant, consideration must be given to a location or an arrangement of buildings that will permit future expansion.

55..11..33 BBuuiillddiinngg mmaatteerriiaallss,, FFlloooorrss aanndd wwaallllss

In general, space of a sausage plant must be compact and designed for economical use in relation to the capital and operating costs. The whole structure must suit local climatic conditions. In order to carry out proper construction of sausages production plant following points must be considered

A hard, smooth and impervious floor must be constructed in a fashion that it resist slip ness, won’t absorb moisture and can be readily cleaned.

The surfaces of interior walls must be impervious, smooth and made of non-absorbent materials. Walls should be covered and coated with lead-free paint or tiled at least to a height of 1.8 m.

Ceiling surfaces of rooms, where wet operations are conducted, should be smooth and flat and of sufficient height.

The slope (usually of 1.8–2.0 percent) of floors to drainage inlets must enable rapid disposal of effluent. All effluent drainage lines must have a sufficient inside diameter of at least 10 cm with the fat traps incorporated in the drainage system. Drainage lines from toilets and urinals should be constructed separately.

55..11..44 SSaanniittaattiioonn

A well-designed sausage plant cannot be attained through buildings alone. Sanitation is also essential in a well-run sausage producing plant. The hygienic maintenance of equipment and the plant as a whole is a fundamental factor for production efficiency and keeping quality of finished products. Tile walls, hard-surfaced brick or concrete floors, carefully sloped to drains, stainless steel table tops; galvanized metal tracks and barrels are an integral part of a good sanitation program. Simply stating, strict sanitary methods and conditions must be employed through outthe entire process for quality assurance.

55..22 PPrroocceessss FFllooww

A proper integration of section layouts is required if maximum efficiency, smooth flow of operations, reduced labor and managerial control are to be achieved. Layouts of these sections can be combined in varying ways depending on the size and shape of space available, amount and structure of production, the methods selected etc. Basically a sausage plant is composed of the following sections:

Receiving and chilling Cutting and trimming Non-meat ingredients Meat chopping and mixing Smoking and cooking Wrapping and dispatch sections.


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The details of the above is described as below

55..22..11 RReecceeiivviinngg aanndd cchhiilllliinngg

The receiving area is the place where all raw materials arrived are checked and their weight determined by means of a scale. The area around the entrance door is more suitable for the respective section. The receiving section, even in the smallest sausage plant, should be so designed that the meat moves from the receiving door into the processing section with in minimum time, effort and without any possible interference of operations & contact of the meat with other raw materials.

The selection of type and size of chiller (cooling device) depends largely upon the capacity and character of processing conducted. The temperature of the chiller should be 0° to 4°C. Access to the chiller and its connection with the cutting and trimming area must be easy. The chiller must have separate area with suitable facilities for holding by-products and meat.

55..22..22 CCuuttttiinngg aanndd TTrriimmmmiinngg SSeeccttiioonn

This section, adjacent to the chopping and stuffing area, includes the space occupied by cutting and trimming tables. There should be sufficient room for free movement and safe use of knives, cleavers and other tools. A room temperature of 13°C is considered to be suitable good practice. The humidity should be low enough to give a dew point close to that of the surface temperature of the product.

55..22..33 NNoonn MMeeaatt iinnggrreeddiieennttss SSeeccttiioonn

This section needs a separate, dry and cool area, protected from insects, humidity and provided with tables, scales & other facilities for storage, control and preparation of spices, casings, containers etc

55..22..44 MMeeaatt CChhooppppiinngg,, MMiixxiinngg aanndd SSttuuffffiinngg SSeeccttiioonn

This section includes the space in which the meat is processed, mixed with other ingredients and stuffed into casings. This section is occupied by basic processing equipment such as a grinder, cutter, mixer, stuffer and working tables. It is extremely important that all equipment is designed for easy cleaning.

55..22..55 SSmmookkiinngg aanndd CCooookkiinngg SSeeccttiioonn

The principles applicable to the layout of this section are:

The smokehouse should be built so that its fireplace opens externally. Whereas goodair and smoke circulation in the smokehouse is essential and a thermometer for checking the temperature is highly desirable.

The smoking and cooking section should be well isolated from other areas with adequate ventilation.

55..22..66 WWrraappppiinngg

The wrapping for the proposed project is to be outsourced in order to achieve economical rates. The per unit cost of packaging for final product would be Rs. 3.


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55..22..77 SSttoorraaggee aanndd DDiissppaattcchh SSeeccttiioonn

The type and size of this section is determined not only by the number and structure of finished products but mainly by the method of marketing. A specific area would be allocated for Cold storage facility. This section may be located in an area outside the main building but in many plants it is established in another section at the end of the process flow. Special attention should be devoted to the arrangement of an adequate storage area.

The comprehensive layout of the sausages manufacturing plant is depicted be the following figure 3.1. Whereas the overall process flow is shown in fig 3.2.

Fig 3.1: Layout of sausage plant

Receiving & Chilling

Cutting & Trimming

Non-Meat Ingredients

Meat Chopping & Mixing

Smoking & Cooking

Wrapping & Dispatch Section


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Fig 3.2 PROCESS FLOW CHART

Receiving Raw Meat

Storage Raw Meat (Refrigerated)

Temporary Frozen Meat

Preparation of Raw Meat

Combine ingredients / Processing

Stuffing

Cooking / Smoking

Chilling

Portioning

Packaging / Labeling

Finished Product Storage

Storage Casings / Packaging Materials

Rework

Receiving of Non Meat Ingredients

Storage Non Meat

Ingredients

Weighing of Non Meat Ingredients


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66 PPRROOJJEECCTT RREEQQUUIIRREEMMEENNTTSS

66..11 EEqquuiippmmeenntt DDeettaaiillss

The details of the different machinery and equipment required for the project are given as below:

TTaabbllee 66..11..11:: EEqquuiippmmeenntt && MMaacchhiinneerryy DDeettaaiillss

Description No Price/Unit (Dollar-$) Total Price (PKR)Assuming $1=85PKR

Cold storage Capacity ( 250 T , 50x 50x 15) -30 C 1 2,240,000

Meat & Bone Separator 1 51,429 4,371,465

Cutting & Mixing Machine 1 14,726 1,251,710

Vacuumed Filling Machine 1 7,529 639,965

Smoke House 1 16,913 1,437,605

Smoking Trolley 1 572 48,620

Smoking Stick 1 3 255

Generators 1 350,000

Total 10,339,620

TTaabbllee 66..11..22:: OOffffiiccee EEqquuiippmmeenntt DDeettaa11iillss

Other Equipment Details Qty Cost/Unit Total Cost (PKR)

Computer 1 25,000 25,000

Printers 1 6,000 6,000

Fax 1 12,000 12,000

Telephone Sets 2 1000X2=1,000 2,000

Total 45,000

66..22 FFuurrnniittuurree && ffiixxttuurree

Description Total Amount (PKR)Furniture 244,000Air conditioners (1.5 Ton Window) 24,000Carpeting 100,000Total 368,000


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66..33 HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt

The manpower required for operating the Sausages Production unit is as follows:

TTaabbllee 66..22:: HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt DDeettaaiillss

Description – HR Requirements Nos Salary per month Salary per yearManager 1 25,000 300,000Accounts & Admin Officer 1 15,000 180,000Technicians 3 12,000 432,000Supporting Staff 4 10,000 480,000PeonGuardSweeper

Annual Contract 160,000

Total 1,552,000Note: The staff salaries are estimated according to the market trends; however, the investor may set different pay scales.

77.. LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

The land & building required for operating the Sausages Production unit is as follows:

TTaabbllee 77:: LLaanndd && BBuuiillddiinngg RReeqquuiirreemmeenntt DDeettaaiillss

Description – Land & Building Cost/Sq. Ft Area in Sq. ft Total CostLand 200 10,000 2,000,000Office Building (12*14 per room) 1,200 500 600,000Warehouse & Cold storage section

1,000 1000 1,000,000

Processing 1,700 2,000 3,400,000Total 7,000,000

77..11.. VVeehhiiccllee RReeqquuiirreemmeenntt

The Vehicle required for operating the Sausages Production unit is as follows:

TTaabbllee 77..11:: VVeehhiiccllee RReeqquuiirreemmeenntt DDeettaaiillss

Vehicle Nos CostShahzor 1 9,00,000Registration 1 9,000Total Cost 909,000

77..22.. FFuurrnniittuurree aanndd EEqquuiippmmeenntt MMaaiinntteennaannccee

The furniture and equipment maintenance process will be conducted on yearly basis.


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77..33.. TToottaall CCaappiittaall RReeqquuiirreemmeenntt

TTaabbllee 77..22:: TToottaall CCaappiittaall RReeqquuiirreemmeennttss

77..44.. CCaappiittaall SSttrruuccttuurree ooff tthhee pprroojjeecctt

Table 7-3 Project Financing

Initial Financing Rs. in actuals

Debt

8,975,457

Equity 13,300,406

Capital Investment Rs. in actuals Land 2,000,000 Building/Infrastructure 5,000,000 Machinery & equipment 10,339,620 Furniture & fixtures 368,000 Office vehicles 909,000 Office equipment 45,000 Pre-operating costs 435,098 Total Capital Costs 19,096,718

Working Capital Rs. in actuals Equipment spare part inventory 12,938 Raw material inventory 2,328,750 Upfront insurance payment 337,459 Cash 500,000 Total Working Capital 3,179,146

Total Investment 22,275,864


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88.. KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 88--11 CCoosstt ooff GGooooddss SSoolldd ppeerr UUnniitt ooff PPrroodduuccttiioonn

COGS 1 (Raw material per unit) Rs. 220COGS 2 (Packing cost and Fumigation Overhead per unit) Rs.5 COGS growth rate per annum 8%

TTaabbllee 88--22 PPrroodduuccttiioonn RReellaatteedd AAssssuummppttiioonnss

Production capacity per year 540,000 PacksSale price per unit in year 1 Rs. 255Sale price growth rate per annum 10%Production capacity utilization in first year 60%Production capacity utilization growth rate 5%Maximum production capacity utilization 95%

TTaabbllee 88--33 EEccoonnoommiicc RReellaatteedd AAssssuummppttiioonnss

Inflation rate 10%Wage growth rate 10%Electricity Growth Rate 10%Water Price Growth Rate 10%GAS Price Growth Rate 10%

TTaabbllee 88--44 FFiinnaanncciinngg AAssssuummppttiioonnss

Interest rate on long term debt 20%Project Debt Component 40%Project Equity Component 60%Tax rate 22%Required rate of return on equity 16%WACC 12%Owners Withdrawals 50% of available cash

TTaabbllee 88--55 EExxppeennssee AAssssuummppttiioonnss

Administrative benefit expense 5% of administrative expense

Travelling expense 5% of administrative expense

Communication expense 5% of administrative expense

Office vehicle running expense 10% of vehicle cost

Office expense 5% of administrative expense


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Promotional Expense 0.5% of revenue

Machinery & equipment insurance rate 3%

Office vehicle insurance rate 3%

Professional Fee (Legal, Audit etc) 0.1% of revenue

Bad debt expense 1% of revenue

Pre-Operational Expense Rs. 406,108

TTaabbllee 88--66 DDeepprreecciiaattiioonn RRaatteess

Building & Infrastructure 5%Furniture & fixtures 5%Machinery 5%Office equipment 5%Office Vehicle 10%

TTaabbllee 88--77 CCaasshh FFllooww AAssssuummppttiioonnss

Accounts Receivables Cycle (In Days) 30

Accounts Payable Cycle (In Days) 30

Initial cash on hand Rs. 500,000


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Financial Evaluation of … Sausages Production unit SMEDA

Key VariablesTotal Investment in Project 22,275,864 Equity 60% 13,300,406 Debt 40% 8,975,457 Interest Rate 17%Debt Tenure 10 Debt Payments per year 1

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

Free Cash Flow to Equity (FCFE) (977,292) 4,535,269 6,336,063 9,805,848 12,738,054 19,075,640 25,364,117 32,291,514 39,406,773 60,537,603 Free Cash Flow to Firm (FCFF) 147,856 6,629,992 7,959,551 11,449,857 14,406,071 20,771,748 27,093,090 34,058,940 41,219,189 83,707,484

Profit margin on sales 3% 5% 7% 8% 10% 11% 13% 14% 15% 17%ROE 14% 23% 27% 29% 29% 28% 27% 25% 23% 22%Times interest earned 2.75 5.02 8.07 12.28 18.63 27.20 41.34 63.77 107.01 236.92

Equity ProjectInternal Rate of Return (IRR) 52% 42%Modified Internal Rate of Return (MIRR)* 34% 28%Payback Period (yrs) 3.25 3.66 Net Present Value (NPV) @ 16% 61,177,941 @ 10% 100,607,766 *Re-investment rate has been taken to be the interest on cash in bank, which in this case is 2%


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Statement Summaries SMEDAInitial Investment

Capital Investment Rs. in actualsLand 2,000,000 Building/Infrastructure 5,000,000 Machinery & equipment 10,339,620 Furniture & fixtures 368,000 Office vehicles 909,000 Office equipment 45,000 Pre-operating cos ts 435,098 Total Capital Costs 19,096,718

Working Capital Rs. in actualsEquipment spare part inventory 12,938 Raw material inventory 2,328,750 Upfront insurance payment 337,459 Cash 500,000 Total Working Capital 3,179,146

Total Investment 22,275,864

Initial Financing Rs. in actualsDebt 8,975,457 Equity 13,300,406 * Provisioning for the first year installments


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Statement Summaries 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 79,177,500 98,139,938 116,284,781 137,077,194 160,865,242 188,040,128 219,041,338 254,362,389 280,413,570 308,454,927 Cost of goods sold 71,703,650 87,204,133 101,394,349 117,299,053 135,102,096 155,005,812 177,232,808 203,473,405 220,312,073 238,023,590

Gross Profit 7,473,850 10,935,805 14,890,432 19,778,141 25,763,146 33,034,316 41,808,530 50,888,984 60,101,497 70,431,338

General administration & selling expensesAdministration expense 504,000 553,070 606,918 666,008 730,852 802,008 880,093 965,780 1,059,810 1,162,995 Rental expense - - - - - - - - - - Utilities expense - - - - - - - - - - Travelling & Comm. expense (phone, fax, etc.) 48,000 52,673 57,802 63,429 69,605 76,382 83,818 91,979 100,934 110,761 Office vehicles running expense 90,900 99,990 109,989 120,988 133,087 146,395 161,035 177,138 194,852 214,337 Office expenses (stationary, etc.) 24,000 26,337 28,901 31,715 34,802 38,191 41,909 45,990 50,467 55,381 Promotional expense 395,888 490,700 581,424 685,386 804,326 940,201 1,095,207 1,271,812 1,402,068 1,542,275 Insurance expense 337,459 319,222 300,986 282,749 264,513 290,195 267,567 244,938 222,310 199,682 Profess ional fees (legal, audit, etc.) 79,178 98,140 116,285 137,077 160,865 188,040 219,041 254,362 280,414 308,455 Depreciation expense 878,531 878,531 878,531 878,531 878,531 1,024,926 1,024,926 1,024,926 1,024,926 1,024,926 Amortization expense 87,020 87,020 87,020 87,020 87,020 - - - - - Property tax expense - - - - - - - - - - Miscellaneous expense 791,775 981,399 1,162,848 1,370,772 1,608,652 1,880,401 2,190,413 2,543,624 2,804,136 3,084,549

Subtotal 3,236,749 3,587,082 3,930,702 4,323,675 4,772,253 5,386,740 5,964,010 6,620,550 7,139,917 7,703,361 Operating Income 4,237,101 7,348,723 10,959,730 15,454,466 20,990,893 27,647,576 35,844,520 44,268,434 52,961,580 62,727,976

Other income 5,000 45,353 154,066 315,485 540,924 859,061 1,303,459 1,880,015 2,596,998 3,596,442 Gain / (loss) on sale of assets - - - - 363,600 - - - - - Earnings Before Interest & Taxes 4,242,101 7,394,076 11,113,796 15,769,951 21,895,418 28,506,637 37,147,979 46,148,449 55,558,577 66,324,418

Interest expense 1,540,547 1,472,409 1,377,968 1,284,693 1,175,562 1,047,879 898,489 723,703 519,204 279,939 Earnings Before Tax 2,701,554 5,921,667 9,735,828 14,485,258 20,719,856 27,458,758 36,249,490 45,424,746 55,039,374 66,044,479

Tax 594,342 1,302,767 2,141,882 3,186,757 4,558,368 6,040,927 7,974,888 9,993,444 12,108,662 14,529,785 NET PROFIT/(LOSS) AFTER TAX 2,107,212 4,618,900 7,593,946 11,298,501 16,161,487 21,417,831 28,274,602 35,431,302 42,930,712 51,514,693

Balance brought forward 2,107,212 6,726,112 14,320,058 25,618,559 41,780,047 63,197,878 91,472,480 126,903,782 169,834,493 Total profit available for appropriation 2,107,212 6,726,112 14,320,058 25,618,559 41,780,047 63,197,878 91,472,480 126,903,782 169,834,493 221,349,187 Dividend - - - - - - - - - - Balance carried forward 2,107,212 6,726,112 14,320,058 25,618,559 41,780,047 63,197,878 91,472,480 126,903,782 169,834,493 221,349,187


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Statement Summaries 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

AssetsCurrent assets

Cash & Bank 500,000 - 4,535,269 10,871,332 20,677,180 33,415,234 52,490,874 77,854,990 110,146,504 149,553,277 210,090,880 Accounts receivable - 6,507,740 7,287,018 8,811,975 10,412,136 12,244,210 14,338,577 16,729,375 19,454,948 21,977,094 24,200,075 Finished goods inventory - 3,117,550 3,645,189 4,237,376 4,901,075 5,643,952 6,474,444 7,401,834 8,496,692 9,179,670 9,917,650 Equipment spare part inventory 12,938 16,072 19,087 22,551 26,525 31,076 36,282 42,228 46,659 51,441 - Raw material inventory 2,328,750 2,975,687 3,634,835 4,417,203 5,343,979 6,439,816 7,733,381 9,257,987 10,521,631 11,931,530 - Pre-paid annual land lease - - - - - - - - - - - Pre-paid building rent - - - - - - - - - - - Pre-paid lease interest - - - - - - - - - - - Pre-paid insurance 337,459 319,222 300,986 282,749 264,513 290,195 267,567 244,938 222,310 199,682 -

Total Current Assets 3,179,146 12,936,271 19,422,384 28,643,187 41,625,408 58,064,483 81,341,124 111,531,353 148,888,743 192,892,694 244,208,605

Fixed assetsLand 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Building/Infrastructure 5,000,000 4,750,000 4,500,000 4,250,000 4,000,000 3,750,000 3,500,000 3,250,000 3,000,000 2,750,000 2,500,000 Machinery & equipment 10,339,620 9,822,639 9,305,658 8,788,677 8,271,696 7,754,715 7,237,734 6,720,753 6,203,772 5,686,791 5,169,810 Furniture & fixtures 368,000 349,600 331,200 312,800 294,400 276,000 257,600 239,200 220,800 202,400 184,000 Office vehicles 909,000 818,100 727,200 636,300 545,400 1,918,454 1,681,158 1,443,863 1,206,568 969,272 731,977 Office equipment 45,000 42,750 40,500 38,250 36,000 33,750 31,500 29,250 27,000 24,750 22,500

Total Fixed Assets 18,661,620 17,783,089 16,904,558 16,026,027 15,147,496 15,732,919 14,707,992 13,683,066 12,658,140 11,633,213 10,608,287

Intangible assetsPre-operation costs 435,098 348,078 261,059 174,039 87,020 - - - - - - Legal, licensing, & training costs - - - - - - - - - - -

Total Intangible Assets 435,098 348,078 261,059 174,039 87,020 - - - - - - TOTAL ASSETS 22,275,864 31,067,438 36,588,001 44,843,253 56,859,923 73,797,401 96,049,116 125,214,419 161,546,883 204,525,907 254,816,891

Liabilities & Shareholders' EquityCurrent liabilities

Accounts payable - 6,013,542 7,318,431 8,528,411 9,888,529 11,415,598 13,128,244 15,047,098 17,151,198 18,606,947 19,029,940 Export re-finance facility - - - - - - - - - - - Short term debt - 477,292 - - - - - - - - - Other liabilities - - - - - - - - - - -

Total Current Liabilities - 6,490,834 7,318,431 8,528,411 9,888,529 11,415,598 13,128,244 15,047,098 17,151,198 18,606,947 19,029,940

Other liabilitiesLease payable - - - - - - - - - - - Deferred tax - 594,342 1,137,358 1,137,358 1,137,358 1,137,358 1,137,358 1,137,358 1,137,358 1,137,358 1,137,358 Long term debt 8,975,457 8,574,644 8,105,692 7,557,019 6,915,071 6,163,992 5,285,229 4,257,077 3,054,139 1,646,702 -

Total Long Term Liabilities 8,975,457 9,168,986 9,243,050 8,694,377 8,052,429 7,301,350 6,422,588 5,394,435 4,191,497 2,784,060 1,137,358

Shareholders' equityPaid-up capital 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 13,300,406 Retained earnings - 2,107,212 6,726,112 14,320,058 25,618,559 41,780,047 63,197,878 91,472,480 126,903,782 169,834,493 221,349,187

Total Equity 13,300,406 15,407,619 20,026,519 27,620,465 38,918,966 55,080,453 76,498,284 104,772,886 140,204,188 183,134,900 234,649,593 TOTAL CAPITAL AND LIABILITIES22,275,864 31,067,438 36,588,001 44,843,253 56,859,923 73,797,401 96,049,116 125,214,419 161,546,883 204,525,907 254,816,891

Note: Total assets value will differ from project cost due to first installment of leases paid at the start of year 0


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- - - - - - - - 0 (0) 0

Statement Summaries 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 - 2,107,212 4,618,900 7,593,946 11,298,501 16,161,487 21,417,831 28,274,602 35,431,302 42,930,712 51,514,693 Add: depreciation expense - 878,531 878,531 878,531 878,531 878,531 1,024,926 1,024,926 1,024,926 1,024,926 1,024,926 amortization expense - 87,020 87,020 87,020 87,020 87,020 - - - - - Deferred income tax - 594,342 543,016 - - - - - - - - Accounts receivable - (6,507,740) (779,278) (1,524,957) (1,600,161) (1,832,074) (2,094,367) (2,390,798) (2,725,572) (2,522,147) (2,222,981) Finished good inventory - (3,117,550) (527,639) (592,187) (663,699) (742,877) (830,492) (927,390) (1,094,857) (682,978) (737,980) Equipment inventory (12,938) (3,135) (3,015) (3,464) (3,974) (4,551) (5,206) (5,946) (4,431) (4,783) 51,441 Raw material inventory (2,328,750) (646,937) (659,148) (782,368) (926,776) (1,095,837) (1,293,564) (1,524,606) (1,263,644) (1,409,899) 11,931,530 Pre-paid building rent - - - - - - - - - - - Pre-paid lease interest - - - - - - - - - - - Advance insurance premium (337,459) 18,236 18,236 18,236 18,236 (25,682) 22,628 22,628 22,628 22,628 199,682 Accounts payable - 6,013,542 1,304,890 1,209,980 1,360,118 1,527,069 1,712,646 1,918,853 2,104,100 1,455,750 422,993 Other liabilities - - - - - - - - - - -

Cash provided by operations (2,679,146) (576,479) 5,481,513 6,884,736 10,447,796 14,953,086 19,954,403 26,392,269 33,494,452 40,814,210 62,184,305

Financing activitiesChange in long term debt 8,975,457 (400,813) (468,952) (548,673) (641,948) (751,079) (878,762) (1,028,152) (1,202,938) (1,407,437) (1,646,702) Change in short term debt - 477,292 (477,292) - - - - - - - - Change in export re-finance facility - - - - - - - - - - - Add: land lease expense - - - - - - - - - - - Land lease payment - - - - - - - - - - - Change in lease financing - - - - - - - - - - - Issuance of shares 13,300,406 - - - - - - - - - - Purchase of (treasury) shares - - - - - - - - - - -

Cash provided by / (used for) financing activities22,275,864 76,479 (946,244) (548,673) (641,948) (751,079) (878,762) (1,028,152) (1,202,938) (1,407,437) (1,646,702)

Investing activitiesCapital expenditure (19,096,718) - - - - (1,463,954) - - - - - Acquisitions - - - - - - - - - - -

Cash (used for) / provided by investing activities(19,096,718) - - - - (1,463,954) - - - - -

NET CASH 500,000 (500,000) 4,535,269 6,336,063 9,805,848 12,738,054 19,075,640 25,364,117 32,291,514 39,406,773 60,537,603

Cash balance brought forward 500,000 - 4,535,269 10,871,332 20,677,180 33,415,234 52,490,874 77,854,990 110,146,504 149,553,277 Cash available for appropriation 500,000 (0) 4,535,269 10,871,332 20,677,180 33,415,234 52,490,874 77,854,990 110,146,504 149,553,277 210,090,880 Dividend - - - - - - - - - - - Cash carried forward 500,000 - 4,535,269 10,871,332 20,677,180 33,415,234 52,490,874 77,854,990 110,146,504 149,553,277 210,090,880


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smeda sausages production unit

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