Table of
Contents
Page
EXECUTIVE SUMMARY
.....................................................................................................................
3 1.0 Abbreviations and Acronyms
................................................................................................
4
2.0 BUSINESS IDEA
....................................................................................................................
4 3.0 PROJECT DESCRIPTION
...................................................................................................
5
4.0 MARKETING STRATEGY
....................................................................................................
5
4.1 Competition ..................................................................................................
5
4.2 Target markets
.............................................................................................
5
4.3 Presentation .................................................................................................
5
4.4 SWOT Analysis
............................................................................................
6
5.0 OPERATIONAL PLAN...........................................................................................................
6
5.1 Production process
......................................................................................
7
5.2 Processing and Grading
...............................................................................
8
5.3 Transportation
..............................................................................................
8
5.4 Pricing and labeling
......................................................................................
8
5.5 Marketing
.....................................................................................................
8
6.0 ORGANIZATIONAL PLAN
....................................................................................................
9
6.1 Internal organizational structure
................................................................... 9
6.2 Partner strategy
..........................................................................................
10
7.0 FINANCIAL PLAN
................................................................................................................
12
7.1 Initial Investment
........................................................................................
12
7.2 Assumptions...............................................................................................
14
7.3 Projected income statement
....................................................................... 15
7.4 Balance sheet assumptions .......................................................................
16
7.5 Projected balance sheet
.............................................................................
17
7.6 Ratio Analysis ............................................................................................
17
7.7 Projected cash flows
..................................................................................
19
7.8 Break- even analysis
..................................................................................
20
7.9 Sensitivity analysis (see table 7.1.9)
.......................................................... 20
8.0 RECOMMENDATIONS AND KEY
SUCCESS FACTORS ............................................ 20
9.0 ECONOMIC IMPACT EVALUATION
................................................................................
21
LIST OF TABLES
Table 1: Abbreviations and Acronyms
....................................................................................
4
Table 2: SWOT Analysis
.........................................................................................................
6
Table 3: Seasonal
calendar for boiler production ...................................................................
7
Table 4: Initial investment
.....................................................................................................
13
Table 5: Assumptions for the income statement
................................................................... 14
Table 6: projected income statement
....................................................................................
15
Table 7: Projected balance sheet
..........................................................................................
17
Table 8: Ratio analysis
..........................................................................................................
18
Table 9: projected
cash flows...............................................................................................
19
Table 10: Break even analysis
..............................................................................................
20
Table 11: Sensitivity analysis
................................................................................................
20
List of Figures
Figure 1: internal organizational structure
...............................................................................................
9 EXECUTIVE SUMMARY
The proposed Thuthukani broiler
project aims to produce 2000 broilers per cycle that will be graded according
to weight (1.2kg – 2kg) and according customers’ preferences; packaged,
labeled, priced and sold to the potential buyers in Bulawayo. These broilers
will either be sold whole or as cutlets and would be supplied to 2 hotels, 2
restaurants, individual bulk buyers and 3 supermarkets. Thuthukani broiler
project has 100 farmers who are managing the from seed to table [F.S.t.T]
innovation project and these will be working in groups of 25 and each of the 4
groups of 25 farmers is expected to produce 500 broilers per cycle.
The initial
investment for the project is estimated to be US$ 29260.00, which includes
US$17 336.00 in construction, US$ 7900.00 in working capital and US$ 4024.00 in
equipment.
The average annual net profit is expected to
be USD 5568.00 and the average net profit margin is expected to be 13 % and a
pay back period of 5 years 3 months. Thuthukani broiler project will start to
realise profits in the first year of its trading but it will not pay out
dividends during this period. In year one Thuthukani broiler project has to
produce 838 broilers to break even.
A worst case scenario is taken
by assuming that the price of broiler chicken is decreased from US$2.00/kg to
US$ 1.80, the business will have average profitability of US$1715 .00annually
and a pay back period of 17 years 8 months.
The best case scenario is taken
by assuming that the price of broiler chicken is increased from US$ 2.00 to US$
2.20, the business will have an average profitability of US$ 9447.00
annually and a pay back period of 3 years 1 month.
In
order to achieve satisfactory results and minimize labour costs, Thuthukani
broiler project will be managed by the producers themselves with the assistance
F.S.t.T team and technical partners.
1.0 Abbreviations and Acronyms
Table 1: Abbreviations and Acronyms
|
BCC
|
Bulawayo City Council
|
|
F.S.t.T
|
From Seed to Table
|
|
MoPO
|
Most Promising Option
|
|
MDP
|
Municipal Development
Partnerships
|
|
RUAF
|
Resource Centres on Urban Agriculture and Food Security
|
|
UPFS
|
Urban Producer Field
Schools
|
SWOT Strength, Weaknesses,
Opportunities and Threats
ZOU
Zimbabwe Open University
2.0 BUSINESS IDEA
The Most Promising Option (MoPO)
for the Thuthukani broiler project is broiler production and will entail production, processing and marketing broilers
that have been dressed, graded according to weight ( 1.2kg – 2kg), packaged,
labeled and sold in large quantities (20kg+) as chicken cuts or whole to
supermarkets, hotels, and restaurants in Bulawayo. Broiler production has not
been practiced before, meaning that broiler production will start from a zero
base.
The innovation in the broiler production will be organised
as follows:
Processing and Grading: The
dressed broilers will be weighed and graded according to the weights and
standards that meet the market requirements. The market analysis results showed
that hotels and restaurants preferred whole broilers weighing between 1.2 kg
and 1.5kg while the supermarkets preferred those weighing 1.2kg up to 2kg. The
supermarkets also registered interests in broiler mixed cutlets and specific
cuts of 250g, 500g, 750g, 1kg, 1.5kg and 2kg.
Packaging: The whole broilers will be packed in plastic bags while
the pieces will be packed in Kalite half boxes with the top sealed with cling
paper. All the products will be labeled with the brand name, weight, and price
and expiry date.
Marketing: The broiler producers will have to produce a quality
that is preferred by their potential buyers and that is above usual market
standards. There will be need for periodic market research to maintain customer
conformity and determine current preferences. The producers will also go out to
supermarkets and advertise their special broiler through tasting and giving
free samples. Pamphlets will also be distributed at strategic points.
Training and capacity building: The
producers will receive training mainly through UPFS and from the technical
partners on the best production methods. Capacity building will be an ongoing
activity that will be based on baseline surveys, monitoring and evaluation
results by experts and self/peer evaluation among producers themselves.
3.0 PROJECT DESCRIPTION
The project aims to produce 2000
quality broiler chickens per cycle that meet the customers’ expected standards.
The fowl run space will be leased from Bulawayo City Council. Farmers will
construct the fowl run to house 2000 broiler chickens in batches of 500 per
group of 25 producers, 1 administration office, 2 brooders and 1 slaughter room
at gum-plantation site. Clean water
supply will be from the Bulawayo City Council. The project has 100 producers
who have been recruited on a voluntary basis into the broiler production
F.S.t.T innovation project. The broiler producers likewise will be organized
into four groups of twenty-five to manage 500 chickens in each compartment. The
project has been designed to ensure reasonable net profit for the producers in
the 18 months phase.
MDP/RUAF and World Vision will
assist with seed money for inputs and the producers are expected to pay back
the money after they have sold the broilers and they have made reasonable
profit to be able to sustain the project and at the same time earn a living.
This fund will be a revolving fund which should be passed onto new producers
who intend to start an F.S.t.T innovation project
4.0 MARKETING STRATEGY
Due to low production and input
shortages of chicks and feeds, people in Bulawayo are now consuming some
broiler chickens that are produced in neighbouring countries like South Africa
and Botswana. The findings from the market analysis revealed that most customers
do not like the taste of these imported chickens. They were described as fatty and tasteless. This finding
underscores a need to augment efforts of the local broiler producers and to increase the supplies of home grown
broilers. In addition, Thuthukani producers have to take an additional step and
produce a quality broiler that their potential buyers want.
4.1 Competition
The main local competitors for
this project are Drummonds, Irvine, Mandalay and other small scale producers.
There are also chicken brands important from regional countries which are
slightly cheaper but customers do not favour their quality. These competitors
are capable of cutting down their price so as to attract the customers. They
are also capable of providing good packaging for their products.
4.2 Target markets
The project will target 3
Supermarkets, 2 Hotels, 2 restaurants and individual bulk buyers. However the
project is envisaged to expand and provide supplies to 3 Boarding schools, 3
hospitals, 1 prison, 4 hotels and 5 supermarkets as well as regional
supermarkets and hotels. This entails frequent markets analysis in order to
determine production quantities and qualities and ensure consistence,
reliability and trust on the product
4.3 Presentation
Thuthukani broiler project will
offer quality broilers to its customers in terms of taste, size presentation
and price. In addition to whole chickens will produce packed chicken cuts of
250g, 500g, 750g and 1kg and 2kg so as to accommodate all its customers.
4.4 SWOT Analysis
The table below shows the Strengths, Weaknesses,
Opportunities and Treats of the intended broiler production
Table 2: SWOT Analysis
|
Strength
-One of the advantages offered by
Thuthukani broiler project is that it will produce chickens of high quality
and it will also provide continuous supply of broilers to its customers.
-Bedding
is readily available from the site
-Integration of different projects is possible for example
poultry and crop production
-
Labour is readily available and will be provided by the farmers and
their families at no costs
-
Land and water has been provided by BCC at minimal cost.
-
The project has taken cognisance of social inclusion
factors in terms of gender, social status (widow/widower/orphans) and
adolescents
|
Weakness
-There is no electricity at the site and this will make some
operations difficult.
- Project members live very far
from the project site and this makes some routine operations difficult.
|
|
Opportunities
-
Thuthukani broiler project will create employment for
many producers as they will get income from the retained earnings
-
When the product is advertised well the market share
will increase hence the profits will also increase.
-
There is room to expand production to road runners
,layers and rabbit production
-
Broilers will be produced organically as most
consumers prefer organic products.
-
Presence of BCC game rangers will provide some
security at the project site.
|
Threats
Construction costs
High initial investment is require for the construction of
the fowl run, brooders, store room, slaughter house and offices
Competition
There are many competitors for
this project, and this will require the Thuthukani broiler producers to
produce broilers of high quality and introduce innovations that are have not
been introduced by their competitors.
Predators
The project site is very far from
the producers’ homesteads and there are chances that predators may be a
problem
|
5.0 OPERATIONAL PLAN
Table 5.1.1 shows the calendar
for broiler production. Each cycle should be 6 or 8 weeks depending on the
weight of the chickens that is on order. The average number of production
cycles is estimated to be 5.5 per annum taking into account the disinfection
period of 10 days before putting new chicks. The management and coordination of
the plan will be done by the producers through the management committee and
assistance of the FStT team (Figure
6.1.1). Labour will be provided by the producers
themselves
Table 3: Seasonal calendar for
boiler production
|
Age of chicks
|
|
|
Day
old
|
1 week
|
2 weeks
|
3 weeks
|
4
week
s
|
5 weeks
|
6 weeks
|
7 weeks
|
8 weeks
|
|
Activities
|
Week
1
|
Week
2
|
Week
3
|
Week
4
|
Week 5
|
Week
6
|
Week
7
|
Week
8
|
Week
9
|
Week 10
|
Week 11
|
|
Preparation:
collection of materials, booking chicks and disinfections of the brooder
house
|
|
|
|
|
|
|
|
|
|
|
|
|
Collection
and brooding of chicks, commence starter feeds disinfections of
poultry house
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer
2 week old
chicks to the poultry house
|
|
|
|
|
|
|
|
|
|
|
|
|
Change over of feed
|
|
|
|
|
|
|
|
|
|
|
|
|
Organize
slaughtering
facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Slaughtering, dressing and marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
Booking of chicks
|
|
|
|
|
|
|
|
|
|
|
|
|
Preparation:
collection of materials and disinfections of the brooder house
|
|
|
|
|
|
|
|
|
|
|
|
|
Collection
and brooding of chicks, commence starter feeds and disinfections of the
poultry house
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer 2
week old to the poultry house
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of feed
|
|
|
|
|
|
|
|
|
|
|
|
|
Organize
slaughtering
facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Slaughtering, dressing and marketing
|
|
|
|
|
|
|
|
|
|
|
|
5.1 Production process
The broiler producers will
procure their one day old chicks and feeds from Irvines or Ross chicks and
Bulawayo one-day-old chicks. The other inputs will be procured from hardware
shops, supermarkets and pharmacies. Day old chicks would be managed in the
brooders for 2-3 weeks before they are transferred to the fowl run. During the
brooding period chicks should be properly fed and given vaccinations in order
to keep them in good health. The cycle covers a period of approximately 56
days. After the cycle is complete the fowl run is cleaned and disinfected for
10 days. Proper types of feeds and proper feeding practices have to be adhered
to in order to ensure expected maturation at the expected time. Monitoring the
chicks for diseases and growth will be an on going process.
5.2 Processing and Grading
After maturation the chickens will be
transferred to the slaughter room where they will be dressed using the plucking
machine .They will then be graded according customers’ preferred weights and
stored in the freezer till deliveries to the customers. Those weighing 1.2kg
-1.5kg would be supplied to the hotels and restaurants while those which weigh
1.2 up to 2kg will be delivered to supermarkets as they require an assortment of
weights for customers to choose from. The chicken cuts will be supplied to the
supermarkets and individual customers.
5.3 Transportation
Some customers will collect
their chickens while others may request deliveries. Deliveries at a cost will
only be done for customers without transport who order mainly 20 broilers or
more. Initially the producers will use hired transport until such a time when
they have purchased their own delivery truck. All the products will be
delivered on time so as to satisfy the customers.
5.4 Pricing and labeling
Pricing will be at US$2.00 /kg and labeling will indicate
the organizational logo and contact details, weight, best before date and the
price of the pack.
5.5 Marketing
The producers will promote their
products through use of leaflets and supermarket displays. The marketing
department will take orders before the cycle starts through individual personal
phones and from those coming to the site. Eventually there will be a need to
open an outlet shop at the site where they will be selling dressed and live
chickens as well as chicken offals.
6.0 ORGANIZATIONAL PLAN
6.1 Internal organizational
structure 
Figure 1: internal organizational structure
Management Committee
Management committee will
comprise 4 chairpersons from each of the 4 groups of 25. The management
committee will appoint a chairperson, vice chairperson, secretary and
treasurer. This committee will be involved in the coordination and management
as well as making the overall decisions. It will ensure implementation of the
producers’ objectives and activities. This committee will be expected to report
to the Apex committee which represents 1080 farmers at Gum plantation.
Committees in groups
of 25
Each group of 25 producers will
also have chairperson who is a member of the management committee, vice chair
person, secretary, treasurer. This committee will be responsible for coordinating and ensuring
implementation of the activities for the project in that group.
Disciplinary
committee
The disciplinary and security
committee looks and resolves issues of discipline and security within the
broiler production project. It will consist of four members drawn from each
group of 25 members .This committee is involved in keeping of peace and law
within the organization and good public relations.
Production committee
It will consist of four members
drawn from each group of 25 members. The group will support and promote
production by ensuring construction of fowl runs, brooders, store rooms and
procurements of inputs. It will also be involved in keeping all the production
records and maintain accurate records of chicks that have been purchased;
mortality rate, growth rate, breed, and inventory of stock. It will also be
responsible for slaughtering of broilers and proper disposal of bi products
according to health requirements.
Processing committee
This committee will consist of
four members drawn from each group of 25 members .These will be involved in all
the processing activities of grading, pricing, packaging, and labeling of
broilers. Broilers will be graded according to weights and customers’ preferences.
Pricing will be at US$2.00 /kg and labeling will indicate the organizational
logo and contact details, weight, best before date and the price of the pack.
Marketing committee
It will consist of 4 members drawn from each group of 25
members. This committee will be involved in advertising, tenders, contracts
supply and delivery of broilers.
Finance committee
The committee will consist of 4
members drawn from each group of 25 members. It will be involved in costing,
budgeting, procurement of inputs and fund raising. It will also be responsible
for keeping of financial records, allocation of funds, decision making in
finance and group saving schemes. This group will be responsible for
supervising and monitoring financial records of the 4 groups; it will be
answerable to the management committee and is subject to internal or external
auditing at regular intervals.
6.2 Partner strategy
The following are some of the key strategic partners for the
successful implantation of the broiler FStT innovation project;
Bulawayo City Council
will be useful in facilitating the acquisition of land to put up the fowl run
structures, permits, leases and bylaws in order to legalize the existence of
the project.
Bulawayo city council is also in envisaged to play a
critical role in the provision of water.
AGRITEX, Livestock Department and Veterinary Services are Government
departments that are responsible for providing technical support to the broiler
producers that will facilitate proper feeding practices, disease prevention and
pests control measures, proper record keeping of key information and
statistics.
World Vision Zimbabwe
will be responsible for the coordination and implementation of the FStT broiler
production innovation project.
SNV will be
responsible for facilitating and coordinating the MSF activities and market
linkages.
Zimbabwe Open University (ZOU) will be responsible for research and
capacity building programmes, inbuilt monitoring, as well as monitor the impact
of the project and report results in a systematic and coherent way.
MDP/ RUAF is
responsibility for funding the F.S.t.T broiler production innovation project.
Urban producer farmer organizations will be responsible for
planning and management of the broiler project and will provide onsite labour
for all the activities. This will promote ownership and hence the
sustainability of the project.
Other broiler
producers
These are broiler producers in
Bulawayo who are already into broiler production who will assist in providing a
look and learn environment in their project sites. Thuthukani broiler producers
will be expected to visit these other broiler producers’ projects’ sites and
observe each and every step of the broiler production cycle.
7.0 FINANCIAL PLAN
This section details calculations, assumptions and
methodologies used as a foundation for the projections of the expected
financial performance of Thuthukani broiler project
7.1 Initial Investment
The below table (7.1.1) shows different funds required for
the establishment of Thuthukani broiler project.
Table 4: Initial investment
|
Investment
requirements
|
|
|
|
|
|
|
|
|
|
|
|
Descrption
|
|
Quantity
|
unit rate (US$)
|
Total
(US$)
|
|
Construction
of fowl run
|
|
|
|
|
|
Land
|
Square metres
|
600
|
2
|
1200
|
|
Wire mesh
|
Roles
|
4
|
200
|
800
|
|
Cement
|
Bags
|
200
|
10
|
2000
|
|
Bricks
|
Bricks
|
2000
|
1
|
2000
|
|
Polythene plastic
|
Roles
|
3
|
210
|
630
|
|
Pit sand
|
Cubic metres
|
4
|
60
|
240
|
|
River sand
|
Cubic metres
|
4
|
60
|
240
|
|
Gum poles
|
poles
|
50
|
8
|
400
|
|
Paddolcks
|
Paddolcks
|
9
|
7
|
63
|
|
Door frames
|
Frames
|
9
|
40
|
360
|
|
Doors
|
Doors
|
9
|
14
|
126
|
|
Quarry stone
|
Cubic metres
|
3
|
210
|
630
|
|
Asbestos
|
Sheets
|
50
|
21
|
1050
|
|
Roofing timber
|
metres
|
300
|
4.2
|
1260
|
|
Roofing nails
|
Kg
|
50
|
7.5
|
375
|
|
DPC
|
DPC
|
4
|
7
|
28
|
|
Reinforce materials
|
Roles
|
25
|
5.6
|
140
|
|
Electrictity
|
|
1
|
4900
|
4900
|
|
Labour
|
|
|
|
894
|
|
Total
|
|
|
|
17336
|
|
Working
Capital
|
|
|
|
|
|
Chicks
|
Chicks
|
2000
|
0.6
|
1200
|
|
Feeds- Starter
|
50Kg bags
|
40
|
25
|
1000
|
|
finisher
|
50Kg bags
|
120
|
25
|
3000
|
|
Vet costs
|
50g/100ml
|
100
|
5
|
500
|
|
Packaging materials
|
|
2000
|
0.1
|
200
|
|
Labour
|
|
|
|
2000
|
|
Total
|
|
|
|
7900
|
|
Equipment
|
|
|
|
|
|
Feeders
|
|
40
|
15
|
600
|
|
Drinkers
|
|
40
|
15
|
600
|
|
Infrared light
|
|
4
|
30
|
120
|
|
Knives
|
|
8
|
2
|
16
|
|
Buckets
|
|
12
|
5
|
60
|
|
Swabs
|
|
24
|
2
|
48
|
|
Scale
|
|
4
|
20
|
80
|
|
Deep frezeer
|
|
2
|
1000
|
2000
|
|
Plucking machine
|
|
1
|
500
|
500
|
|
Total
|
|
|
|
4024
|
|
|
|
|
|
|
|
TOTAL INVESTMENT COST
|
|
|
|
29260
|
The initial investment for the project is estimated to be
US$ 29260.00, which includes US$17 336.00 in construction, US$ 7900.00 in
working capital and US$ 4024.00 in equipment.
7.2 Assumptions
The following are the
assumptions for the income statement (see table 7.1.2)
Table 5: Assumptions for the income statement
|
Maintanance expenses
|
0.1 % of sales
|
|
General Expenses
|
0.2 % of sales
|
|
Cost of goods sold
|
25 % of sales
|
|
Price of chickens
|
US$2 /Kg
|
|
Average weight
|
2 Kg
|
|
Mortility rate
|
5 %
|
|
Annual increase in price is assumed to be
|
1 %
|
|
Number of chicks per year
|
11000
|
|
Number of cycles per year
|
5.5
|
|
Cost of chicks
|
US$0.60 /bird
|
|
Cost of feed per chick
|
US$1.50
|
|
Annual increase in price is assumed to be
|
1 %
|
|
Dividends
|
50 %
|
|
Tax rate
|
7 %
|
|
Heat and light
|
1% of electricity cost
|
The production cycle for the
project is 66 days, of which 56 days is for the actual production and 10 days
for disinfection of the fowl runs until the next cycle has commenced, therefore
there are approximately 5.5 cycles in a year. The average weight of the birds
is estimated to be 2 kg and sold at a price of US$2.00 /kg. The mortality rate
of 5 % is also taken into account even though it might be lower than 5 % or
higher if there is poor management. Thuthukani broiler project will start to
pay out dividends in the second year of its trading period at 50 % of the net
profit. Thuthukani broiler project will also pay corporate tax at 7 %.
7.3 Projected income
statement
This is a profitability statement showing the profit or loss
from Thuthukani broiler project(see table 7.1.3)
Table 6: projected income statement
|
Income
statement
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
|
Sales
|
9880
|
42218
|
42640
|
43067
|
43497
|
43932
|
44372
|
|
Total Revenue
|
9880
|
42218
|
42640
|
43067
|
43497
|
43932
|
44372
|
|
Cost of goods solds
|
2470
|
10555
|
10660
|
10767
|
10874
|
10983
|
11093
|
|
Total cost of goods sold
|
2470
|
10555
|
10660
|
10767
|
10874
|
10983
|
11093
|
|
Gross profit
|
7410
|
31663
|
31980
|
32300
|
32623
|
32949
|
33279
|
|
Gross profit margin (%)
|
75
|
75
|
75
|
75
|
75
|
75
|
75
|
|
Cost of chicks
|
1560
|
6333
|
6396
|
6460
|
6525
|
6590
|
6656
|
|
Cost of feed
|
3900
|
15832
|
15990
|
16150
|
16311
|
16475
|
16640
|
|
Heat and light
|
49
|
49
|
49
|
50
|
51
|
50
|
51
|
|
Vet costs
|
112
|
480
|
485
|
489
|
494
|
499
|
504
|
|
water
|
30
|
30
|
30
|
30
|
32
|
32
|
32
|
|
Labour
|
1300
|
1900
|
1900
|
1901
|
1901
|
1901
|
1903
|
|
Maintainance expenses
|
94
|
120
|
140
|
160
|
180
|
200
|
220
|
|
Rent
|
30
|
31
|
31
|
31
|
32
|
32
|
32
|
|
Adrevrtising
|
10
|
42
|
43
|
43
|
43
|
44
|
44
|
|
General expenses
|
20
|
84
|
85
|
86
|
87
|
88
|
89
|
|
Total expenses
|
7105
|
24901
|
25150
|
25401
|
25655
|
25911
|
26171
|
|
Profit be for tax
|
305
|
6762
|
6830
|
6899
|
6968
|
7038
|
7108
|
|
Tax
|
21
|
473
|
478
|
483
|
488
|
493
|
498
|
|
Net profit /loss
|
284
|
6289
|
6352
|
6417
|
6480
|
6545
|
6611
|
|
Net profit Margin (%)
|
3
|
15
|
15
|
15
|
15
|
15
|
15
|
Thuthukani broiler project is expected to realise an average
net profit of US$ 5568.00 and an average net profit margin of 13%.
7.4 Balance sheet
assumptions
The following are the assumptions for the projected balance
sheet (see table 7.1.4)
Table: 7.1.4 balance sheet assumptions
|
accounts receivable
|
Sales for one cycle
|
|
Inventory
|
75 % of cost of goods sold
|
|
Expenses payable
|
45% of cost of feed
|
Inventory will be at 75 % of cost of goods sold and expenses
payable will be at 45 % of the cost feed.
7.5 Projected balance sheet
The following is the projected balance sheet for Thuthukani
broiler project (see table 7.1.5)
Table 7: Projected balance sheet
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and Bank
|
4231
|
4466
|
10716
|
15966
|
22073
|
28214
|
34385
|
|
|
Accounts receivable
|
7600
|
7676
|
7753
|
7830
|
7909
|
7988
|
8068
|
|
|
Inventory
|
1853
|
7916
|
7995
|
8075
|
8156
|
8237
|
8320
|
|
|
Total current assets
|
13684
|
20058
|
26464
|
31872
|
38137
|
44439
|
50772
|
|
|
Land
|
1200
|
1200
|
1200
|
1200
|
1200
|
1200
|
1200
|
|
|
Deep Frezeer
|
2000
|
2000
|
2000
|
2000
|
2000
|
2000
|
2000
|
|
|
Pluckiing machine
|
500
|
500
|
500
|
500
|
500
|
500
|
500
|
|
|
Construction
|
16136
|
16136
|
16136
|
16136
|
16136
|
16136
|
16136
|
|
|
Equipment
|
4024
|
4024
|
4024
|
4024
|
4024
|
4024
|
4024
|
|
|
less depreciation
|
-3727
|
-3737
|
-3744
|
-3744
|
-3744
|
-3744
|
-3744
|
|
|
Net Fixed assets
|
20133
|
20123
|
20116
|
20116
|
20116
|
20116
|
20116
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
33817
|
40181
|
46580
|
51988
|
58253
|
64555
|
70888
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Expenses payable
|
1755
|
1773
|
1790
|
1808
|
1826
|
1845
|
1863
|
|
|
Creditors
|
765
|
1141
|
1154
|
14503
|
20687
|
26905
|
33155
|
|
|
owners' account
|
1753
|
1718
|
8024
|
|
|
|
|
|
|
Total current liablities
|
4273
|
4632
|
10968
|
16311
|
22513
|
28750
|
35018
|
|
|
Capital
|
29260
|
29260
|
29260
|
29260
|
29260
|
29260
|
29260
|
|
|
Retained earnings
|
284
|
6289
|
6352
|
6416
|
6480
|
6545
|
6610
|
|
|
Total long term liabilities
|
29544
|
35549
|
35612
|
35676
|
35740
|
35805
|
35870
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
33817
|
40181
|
46580
|
51987
|
58253
|
64555
|
70888
|
|
|
|
|
|
|
|
|
|
||
|
Statement
of retained earnings
|
Year 1 Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
||
|
Retained earnings at 1 January 2009
|
0 284
|
3225.55
|
6196.6
|
9404.6
|
12644.6
|
15917.1
|
||
|
Net profit(loss) for the year
|
284 6289
|
6352
|
6416
|
6480
|
6545
|
6610
|
||
|
Dividends
|
0 3347.45
|
3380.95
|
3208
|
3240
|
3272.5
|
3305
|
||
|
Retained earnings at 31 December
|
284 3225.55
|
6196.6
|
9404.6
|
12644.6
|
15917.1
|
19222.1
|
||
Thuthukani broiler project is expected to start distributing
dividends in the second year at US$ 3347. 45 and year seven at US$ 3305.00
7.6 Ratio Analysis
Table 7.1.6 shows
accounting ratios used by Thuthukani broiler project. These ratios are used to
test the profitability, liquidity and stability of the project
Table 8: Ratio analysis
|
Ratio analysis
|
Year
1
|
Year
2
|
Year
3
|
Year
4
|
Year
5
|
Year
6
|
Year
7
|
|
Liquidity ratios
|
|
|
|
|
|
|
|
|
Current ratio
|
3.2
|
4.3
|
2.4
|
2.0
|
1.7
|
1.5
|
1.4
|
|
Acid test ratio
|
2.8
|
2.6
|
1.7
|
1.5
|
1.3
|
1.3
|
1.2
|
|
Working capital
|
9411
|
15426
|
15496
|
15561
|
15624
|
15689
|
15754
|
|
Profitability ratios
|
|
|
|
|
|
|
|
|
Gross profit margin (%)
|
75
|
75
|
75
|
75
|
75
|
75
|
75
|
|
Net profit margin(%)
|
3
|
15
|
15
|
15
|
15
|
15
|
15
|
|
Stability ratios
|
|
|
|
|
|
|
|
|
Return on assets
|
0.01
|
0.16
|
0.14
|
0.12
|
0.11
|
0.10
|
0.09
|
|
Return on capital invested
|
0.01
|
0.22
|
0.22
|
0.22
|
0.22
|
0.22
|
0.23
|
The working capital for
Thuthukani broiler project will be increasing
from USD 9411.00 in year I to USD 15 754.00 in year 7. Working capital
is the capital required to finance the business current assets (that is circulating
capital which results in the creation of profits). Acid test ratio measures the
ability of Thuthukani broiler project to meet its immediate claims without
resorting to selling inventory. In year 1 the acid test ratio will be 2. 8 and
it will decrease to 1.2 in year 7. Return on capital invested will be rising
from 0.01 in tear 1 to 0.23 in year 7 and this is due to escalating profit
levels. Return on assets shows how much profit Thuthukani broiler project is
able to achieve from the use of its assets.
7.7 Projected cash flows
Table 9 shows the summary of
cash inflows and outflows for Thuthukani poultry project.
Table 9: projected cash flows
Statement
of cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
|
Net
income
|
284
|
6289
|
6352
|
6416
|
6480
|
6545
|
6610
|
|
Adjustments
to reconcile net income to cash
provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
3000
|
3000
|
3000
|
3000
|
3000
|
3000
|
3000
|
|
Changes in
receivables
|
-7600
|
-76
|
-77
|
-77
|
-79
|
-79
|
-80
|
|
Changes in inventory
|
-1853
|
-6063
|
-79
|
-80
|
-81
|
-81
|
-83
|
|
Changes in creditors
|
729
|
13
|
8
|
8
|
9
|
10
|
11
|
|
Changes in payables
|
1753
|
20
|
17
|
18
|
18
|
19
|
18
|
|
Total adjustments
|
-3971
|
-3106
|
2869
|
2869
|
2867
|
2869
|
2866
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
-3687
|
3183
|
9221
|
9285
|
9347
|
9414
|
9476
|
|
Cash
flows from investing activities Capital expenditure
|
|
|
|
|
|
|
|
|
Investment in fixed assets
|
-21360
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Net cash used in investing activities
|
-21360
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Cash flow
from financing activities
|
|
|
|
|
|
|
|
|
Capital injection
|
29260
|
|
|
|
|
|
|
|
Dividends distributed
|
0
|
-3347
|
-3381
|
-3208
|
-3240
|
-3273
|
-3305
|
|
Cash provided by financing acitivies
|
29260
|
-3347
|
-3381
|
-3208
|
-3240
|
-3273
|
-3305
|
|
Cash at the beginning of the year
|
0
|
4213
|
4049
|
9889
|
15966
|
22073
|
28214
|
|
Changes
in cash
|
4213
|
-164
|
5840
|
6077
|
6107
|
6141
|
6171
|
|
Cash at
the end of the year
|
4213
|
4049
|
9889
|
15966
|
22073
|
28214
|
34385
|
Thuthukani broiler project will start to realise profits in
the first year of its trading but dividends will only be paid from the year 2
onwards.
7.8 Break- even analysis
Table 7.1.8 shows the volumes needed for Thuthukani broiler
project to break even. In year one Thuthukani broiler project has to produce
838 broilers to break even.
Table 10: Break even analysis
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
|
Total Revenues
|
9880
|
42218
|
42640
|
43067
|
43497
|
43932
|
44372
|
|
Total variable costs
|
5681
|
22850
|
23080
|
23266
|
23500
|
23734
|
23972
|
|
Total Fixed costs
|
1424
|
2050
|
2071
|
2135
|
2155
|
2178
|
2199
|
|
Break even volume
|
838
|
1206
|
1218
|
1256
|
1268
|
1281
|
1294
|
7.9 Sensitivity analysis
(see table 7.1.9)
It is a planning tool or technique for assessing the impact
of changes on costs, benefits, and net gains.
A worst case scenario is taken
by assuming that the price of broiler chicken is decreased from US$2.00 /kg to
US$ 1.80, the business will have average profitability of US$1715 .00 annually
and a pay back period of 17 years 8 months.
The best case scenario is taken
by assuming that the price of broiler chicken is increased from US$ 2.00 to US$
2.20, the business will have an average profitability of US$ 9447.00
annually and a pay back period of 3 years 1 month.
Table 11: Sensitivity analysis
|
Sensitivity analysis
|
Worst
case
|
Most
likely
|
Best
case
|
|
Average net profit
|
US$1715
|
US$ 5568
|
US$ 9447
|
|
Average net profit margin
|
3.50%
|
13%
|
21 %
|
|
Pay back period (years)
|
17 years 8 months
|
5 years 3 months
|
3 Years 1 month
|
8.0 RECOMMENDATIONS AND KEY
SUCCESS FACTORS
In order to achieve good results Thuthukani broiler project
must ensure that:
-
Proper fowl run structures are constructed so that the
incidence of predators are minimised.
-
Chicks are purchased from reliable suppliers to obtain
stock that is free from diseases and deformities.
-
There is regular vaccination to avoid
contamination
-
Proper disinfection of the structures and disposal of
bi-products to avoid infections
-
Effective UPFS session during each production cycle
