Business Plan

Bkem Agro Livestock Company Limited

(Word count total: 8,563)

By: Adebayo Odunowo (Student ID: 15280250)

Class ID: MBASHR-EN-091203-02 Instructor: Dr Mercy Chaita

University of Liverpool January 2010

Table of Contents

1. Executive Summary 1.1. Overview 1.2. The Opportunity 1.3. The Venture Offering 1.4. The Target Market 1.5. Harvesting and Exiting

p. 5 p. 5 p. 5 p. 6 p. 7 p. 8

2. Business Description 2.1. Business Summary 2.2. History 2.3. Our Mission 2.4. Our Vision 2.5. Location and Facilities 2.6. Legal Form 2.7. Owners

p. 9 p. 9 p. 9 p. 9 p. 9 p. 10 p. 10 p. 11

3. Economics of the Business 3.1. Background 3.2. Gross and Operating Margin 3.3. Profit Potential and Durability 3.4. Fixed and Variable start-up costs 3.5. Months to Break-Even and Reach Positive Cash Flow

p. 12 p. 12 p. 13 p. 14 p. 14 p. 15

4. Marketing Plan 4.1. Marketing Overview 4.2. Overall Marketing Strategy 4.3. Pricing 4.4. Distribution 4.5. Advertising and Promotion

p. 16 p. 16 p. 17 p.18 p.19 p. 19

5. Design, Development and Operations Plan 5.1. Design 5.1.1. Housing Requirements 5.2. Development 5.3. Operations Plan 5.3.1. Feeding Operation 5.3.2. Watering Operation 5.3.3. Eggs Collection Operation 5.3.4. Manure Removal Operation 5.3.5. Other Non-Routine Operations

p. 20 p. 20 p. 20 p. 21 p. 23 p. 23 p. 23 p. 24 p. 24 p. 24

6. Organization and Management Plan 6.1. Organization and Management Overview 6.2. Personnel Requirement 6.3. Management Team 6.4. Organization Structure

p. 25 p. 25 p. 25 p. 27 p. 29

7. Critical risks, Problem and Assumption 7.1. Critical Risks 7.2. Problems 7.3. Assumptions

p. 31 p. 31 p. 32 p. 33

8. Sustainability and Impact

p. 34

9. Financial Plan 9.1. Financial Overview 9.2. Financial Expenditure 9.2.1. Start-up Expenditure 9.2.2. Operating Expenses 9.3. Important Assumptions

p. 35 p. 35 p. 36 p. 36 p. 36 p. 37

9.4. Key Financial Indicators 9.5. Key Financial Statements 9.5.1. Projected Profit and Loss Statement 9.5.2. Projected Balance Sheet 9.5.3. Projected Break-Even Analysis 9.5.4. Projected Cash Flow Statement 9.5.5. Sensitivity Analysis

p. 38 p. 39 p. 39 p. 40 p. 41 p. 41 p. 41

10. Exiting and Harvesting

p. 43

11. Reference

p. 44

12. Appendices

p. 46

1.

Executive Summary1.1. Overview

The agriculture industry, which before the discovery and exploration of crude oil was the mainstay of the Nigeria economy in terms of its substantial contribution to the GDP, export earnings, food supply and employment, has not been registering appreciable increase in growth in the past 20years. Successive governments, military and civilian alike have continued to pay lip service to the agric industry despite its potentials of increasing our economic growth and in turn reducing the poverty level by offering employment opportunities to a large number of unemployed youth. This lackadaisical altitude of government at all levels has led to the failure of previous laudable Agric policies like the Operation Feed the Nation (OFN), Green Revolution, Back to Land among others leading to problem of food insecurity that is still widespread in Nigeria today.

1.2. The Opportunity This prevalence of malnutrition among urban and rural dwellers most especially children is aggravated by the decline in protein intake occasioned by the inadequate supply of animal protein foods (Asiabaka, Obasi and Ukpong,1999 cited in Obasi, 2003), in fact, the World Health Organization (1997, cited in Obasi, 2003) reported that 35.3% of Nigerian children between the ages of 0.5 - 5.99 years in urban areas are malnourished while 41% of children of the same age bracket in rural areas are underweight. The FAO (1989, cited in Adepoju, 2008) in one of their bulletins cited that the consumption of animal protein in Nigeria is ridiculously low and that out of their recommendation of a minimum of 35gr per head per day, an average Nigerian consumes 8.6gr per head per

day protein from animal source. This is unlike what is obtainable in developed countries whose citizens consumes over 65gr per head per day animal protein (Isoun, 1980 cited in Adepoju, 2008). While the demand for animal protein has continued to rise in Nigeria, the high demand has hardly been met (USDA, 2002 cited in Adewunmi, 2008) thereby creating a protein gap opportunity, it has been estimated by the world Bank assisted National Agricultural Research Strategy Plan that by the year 2010, animal protein supply in Nigeria should hit 5.32gr per head per day for its projected 159 million population (Tewe and Bokanga, 2001).

1.3. The Venture Offering Poultry production offers the fastest and least expensive way of filling the protein gap and to overcome the problem of malnutrition, when compared to other sources of animal protein such as cattle, sheep, goat and pork. A venture has been created to take advantage of this gap and exploit this opportunity created by the gap in protein supply cum consumption. It is this gap that we would like to fill hence the objective of this venture is to increase animal protein consumption amongst the populace towards ensuring food security in the country.

Bkem Agro Livestock Company Limited is a newly formed venture by a young lady (a family member) who has invited me to partner her in this entrepreneurial journey due to my vast experience in entrepreneurship and the Nigerian poultry industry, the venture shall be involved in the production of table eggs. We intend to produce 1.92 million eggs in the second year of operation because the first year will be devoted to putting down

infrastructures such as buildings, equipments, electricity, motorable road and water. By the year 2016, it is expected that egg production would have gone up to 12 million eggs.

The management of Bkem Agro Livestock Company Limited comprises co-owners Bayo Odunowo and Oluwakemi Adetutu. Bayo has extensive experience in every aspects of entrepreneurship, poultry management, sales and marketing, business and financial management among other skills, moreover he is the current Chairman/Managing Director, founder and co-owner of Bimba Agro Livestock Company Limited (a company that won the 2007 Africa SMME Award in South Africa) which shall be providing the initial start-up financial and other non-financial capital, while Kemi has worked in leadership position in the aviation industry for over 9 years. Both partners will be taking hands-on management roles in the company. In addition, we have assembled a board of advisors to provide complementary management expertise pending the time when the board of directors will be constituted.

1.4. Target Market Due to the fact that our product offering is an essential need and serves the needs of the whole country and populace of 140 million people are our potential market coupled with the fact that our product offering is production driven, we have decided to segment our target market based on geographic segmentation, for this reason we shall restrict our market to Lagos. Apart from the fact that Lagos is a cosmopolitan city where level of disposable income is high with a population of about 16 million Lagosians, it is of close proximity to our farm location making it easily accessible for our distributors.

Based on our start-up production capability, our sales projection for the first year is estimated to be N28.3 million and we hope to invest a minimum of N15 million cash which will come from the returns on Bayos investment in Bimba Agro, in addition we are seeking an operating line of N5 million in form of credit facility from our suppliers to finance our working capital.

1.4. Harvesting and Exiting The venture is a family business hence our harvest strategy is to grow our cash flow such that the excess cash known as capital cow will be used to enhance the owners personal net worth and fund the owners other investments just as what Bimba Agro is presently doing for this venture; this will be carried out once in five years. The owners planned to exit this venture 20 years from now by handing the venture over to Kemis children and selling a minority stake to Asian investors that will be in charge of the dayto-day management of the venture.

2. Business Description2.1. Business Summary The venture is the operation of a poultry egg production business and is about the rearing and management of young pullets for the primary purpose of producing table eggs. The secondary objective of the venture is to grow the farm to a 44,000 laying bird capacity that is capable of producing 12 million eggs by the sixth year of operation.

2.2. History Bkem Agro Livestock Company Limited has no history as it was recently formed and incorporated in June 2009.

2.3. Our Mission We have a mission of enhancing the quality of life of Nigerians through the provision of affordable animal protein and to deliver value through consistent delivery of high quality products and excellent customer services to our egg distributors. In pursuing this mission, we shall deliver value to all stakeholders through superior returns to our investors, value to customers by enhancing their quality of life through qualitative poultry products and to employees through stimulating environment that foster growth, development and innovation.

2.4. Our Vision We want to be one of the leading providers of animal protein and to be at the table of every breakfast.

2.5. Location and Facilities Bkem Agro Livestock Company Limited has been given an office space by Bimba Agro Livestock Company Limited that is located at 49, Ire-Akari Estate Road, Isolo, Lagos State. This will serve as the head office of Bkem Agro, while the farm site is located at Gboligi Village in Sagamu, Ogun State; its about 64km from the Head Office in Isolo. The operations of Bkem Agro will utilize the following facilities in the first phase: A pen house measuring 220ft x 28ft x 12 ft that will house 6,960 laying birds. 2 units of borehole that will generate water supply. 2 units of 14kva diesel generators to supply electricity. A sick bay where sick birds will be kept and treated. Generator house that will house the generators. Sales shed for the distributors to turnover and arrange their eggs.

2.6. Legal Form Bkem Agro Livestock Company Limited is incorporated under the Companies and Allied Matters Act 1990 of Nigeria on 18th June 2009 as a private limited liability company with just 2 directors who are involve in the day-to-day management. Poultry farming in Nigeria is usually a family-based enterprise with no external shareholders, so it is not uncommon to see farming enterprise with two or more shareholders, all belonging to the same family, Bkem Agro is not an exception but as the company grows, more directors will be invited to join the board.

2.7. Owners

There are just 2 shareholders in Bkem Agro Livestock Company Limited, it is believed that as the business matures investors could be invited to own minority equity via private placement but as at today, it is not in the immediate short and medium-term plan.

3. Economics of the business3.1. Background Poultry business in Nigeria is a very profitable business, in the sense that money invested are recovered faster than any other livestock enterprise, moreover poultry business offers the quickest return on investment outlay (Sanni and Ogundipe, 2005 cited in Kalla et al, 2007). When compared to other livestock species such as cattle sheep, goat and swine, its rate of production and growth is highest and it is the cheapest and commonest source of animal protein (Ojo, 2002 cited in Kalla et al, 2007), moreover it has the greatest potential of filling the protein gap. Poultry production is a capital intensive venture as a lot of funds are invested in fixed assets that includes land, buildings, equipments and machineries, and infrastructural facilities such as electricity, water and roads, nevertheless it is still a profitable venture that offers a steady average income ranging from 10% to 20% return on investment after the initial loss principally due to incomplete production cycle as at the end of the first financial year and commencement of the rearing of the next batch of bird;, stability occurs after few years of operations when the farmer would have stopped the initial rapid expansion of his venture.

Every poultry venture has a production cycle since it is a life-based venture, for an egg production venture, the cycle begins with the purchase of day-old-chicks that are reared till 14 weeks of age known as point of lay; at this age the point-of-lay are transferred into the cages in preparatory for their laying period. The first egg is laid anytime as from the 16th week due to breed differential and the numbers and size will increase gradually

until it reaches and stabilize at a peak of about 90%, thereafter decline in production sets in and continues to the point where revenue obtained cannot fund the cost of feeding, at this point known as end-of-lay the farmers will sell off and replace them with a new set of birds. This marks the end of the cycle as the birds are no longer on the farm, the length of this cycle ranges from 18 months to 24 months or more depending on the production objectives of the farmer, however most farmers follows the 18 month cycle as they sell off their layers after 12 months of continuous laying.

To aid in my explanation of the economics of this venture, I have collected the actual performance of a similar venture I started in 2004 (see table 1)

3 YEAR ACTUAL FINANCIAL SUMMARY OF A SIMILAR VENTURE STARTED IN 20042005 Amount 14,229,270 11,175,346 3,053,924 1,543,466 1,510,458 2006 Amount 38,749,807 25,573,541 13,176,266 5,258,792 7,917,474 2007 Amount 63,403,258 37,648,143 25,755,115 9,924,313 15,830,802

% 78.54 21.46 10.85 10.62

% 66.00 34.00 13.57 20.43

% 59.38 40.62 15.65 24.97

Revenue Production cost Gross Profit Expenses Net Profit

TABLE 1.

3.2. Gross and Operating Margins The income from laying birds begins to appear as from 18 to 20 weeks and continues until the birds leave the farm. Due to the presence of birds of various ages and in different production cycle, the gross margin usually ranges from 20% to 40%. When the farm has a large proportion of pullet birds (young layers) vis--vis older birds on the farm then margin drops on account of low and unstable production but when the reverse

is the case, the farm records very high margin. Moreover, at the end of the first year of operation, a production cycle is yet to be completed hence extra income from the sales of spent layers is not earned.

3.3. Profit Potential and Durability Profit potential from this venture is good with a net income ranging from 10% to 25% when compared to counterparts in the U.K. whose net margin ranges from 0.36% to 6.40% (Defra, 2007 cited in Spedding, 2008) depending of the system of production and this profit is durable provided the farmer has in place good birds replacement program because it is the continuous replacement of spent layers that will guarantee continued profit. For profitability to be improved, the venture shall be operated at a high level of production efficiency via the efficient deployment and utilization of inputs (Oladeebo and Ambe-Lamidi, 2007) coupled with efficient management and operational practices.

3.4. Fixed and Variable Start-up Cost The fixed and variable cost at start-up of this venture is shown in table 2.

ACTIVITIES Land & related matters Buildings (Pen, sick bay and generator house) Car Support infrastructures (water, electricity)

COST TYPE Fixed Fixed

VALUE 1,450,000 5,500,000

% OF TOTAL COST 6.71% 26.20%

Fixed Fixed

2,650,000 1,000,000

12.62% 4.76%

Equipment system TOTAL FIXED COST Incorporation of business Starting birds inventory TOTAL VARIBLE COST TOTAL COST

Fixed

6,000,000 16,600,000

28.58% 79.08% 0.38% 20.54% 20.92%

Variable Variable

80,000 4,312,000 4,392,000 20,992,000

TABLE 2

3.5. Months to Break-Even and to Reach Positive Cash Flow It will take seven months from the purchase of point-of-lay to reach break-even point and three months to reach positive cash flow, but each time the venture expands or when spent layers are replaced with young pullets both the cash flow and break-even point will be in the negative until the farm achieves optimal production level.

4. Marketing Plan4.1. Marketing Overview In Nigeria as in many developing nations, eggs are consumed as food and are marketed as an unbranded product due to its homogeneity; moreover they are being sold in their original form as a commodity across retail outlets in the country and is purchased by consumers from their next door shop. Virtually all the eggs produced in Nigeria are consumed by the household and confectionary sector both of which is showing growth due to the increasing human population, consumption by the industrial sectors is almost non-existent due to lack of egg processing such as converting raw eggs into egg powder - facilities in Nigeria.

Egg marketing is production driven as whatever the farmers produced is what he brings to the market, his response to increase market demand is usually slow moreover there is a long lead time to increase production minimum lead time is usually 5 months if the hatcheries are not overbooked, if they are lead time could go as high as twelve months; however a poultry farmer response to decrease in market demand is usually very fast as he can cull his bird to reduce stock. The poultry farmer is usually in charge of production of eggs in his enterprise and will invest more in increasing his stock of birds so as to churn out more egg into the market, very little or no marketing, sales or branding is being done and the farmers usually show an open aversion toward good marketing and branding principles (Stine, 2002).

4.2. Overall Marketing Strategy The poultry industry in Nigeria is highly fragmented comprising a very large number of small scale farmers who have stock ranging from 50 birds to 3000 birds, and a few number of farmers with sizeable number of birds. Eggs produced are sold in markets within the immediate vicinity of the farms most especially the small holders. Since eggs are sold and distributed as commodities, branded marketing strategy that differentiate our product will not be feasible, moreover when our product gets to the market, it will not be recognizable from eggs from other farms; hence our marketing strategy will be based on developing an efficient distribution channel and network that will ensure that our product gets to the market as fast as it is laid by the birds due to its perishable nature because shelf life is estimated to be 11 14 days during the summer and 13 20 days during the winter (Anand, 2005). In instance in Sudan, during summer about 40% of the eggs deteriorate in quality before they are consumed due to extremely summer temperature (Stewart and Abbott, 1961 cited in Crawford, 1997) and this loss in quality is usually not noticeable until the egg is about to be consumed by the consumer. The situation is not any different in Nigeria most especially northern Nigeria that used to experience extreme ambient temperature at the peak of summer, in order to reduce the rate of deterioration, we shall keep our eggs in well aerated store that has fans and airconditioners to reduce the room temperature.

The household sector is our primary target and since consumers are scatter all over the country, we shall concentrate on a territorial niche instead of covering the whole country and offer good pricing. Besides the retail market in Nigeria is not formalize and organize

hence it will be difficult to target a market segment. However, we shall rely on geographic segmentation to target our market, for this reason we shall focus on Lagos market because apart from its cosmopolitan nature, it is one of the egg consuming cities in Nigeria due to its large population and the relatively high disposable income vis--vis other markets in Nigeria. The close proximity of Lagos to our farm will not only make it easily accessible to our farm but will reduce the cost of transporting the eggs to Lagos thus enhancing our competitiveness.

4.3. Pricing Eggs are generic and undifferentiated products, since they have no other distinguishing and marketable characteristics, competition is usually done on the basis of price. Since price is the only revenue generating component of the marketing-mix, efforts will be made to ensure that we get the best available price while using a production-cost approach and bench-marking competitors, nevertheless it should be noted that egg prices is driven by the interaction between supply and demand. To get the best available price we shall grade our eggs according to egg condition colour, shell shape and texture, as these are the external physical characteristics that are visible to the consumers and they use it to determine its quality (Crawford, 1997). For instance first grade eggs will have a normal shape and texture, and its shell must be clean and unbroken while second grade eggs will have a slightly abnormal shape and texture but its shell must be clean and unbroken. The lower the grade the less price such eggs will attract.

4.4. Distribution Egg collected from the pen and shall be sold the next day to our distributors who in turn will sell to either retail outlets/stores or directly to consumers hence we shall adopt a mixture of 0-level, 1-level and 2-level distribution channels depending on the financial capacity and experiences of the distributors. Since egg distributor picks eggs from more than one farms, to encourage them to come on a weekly basis, we shall ensure that the efficiency of our service delivery system is so high that our distributors/customers will be highly satisfied. We shall sell a tray of eggs 10 20 naira below average competitors price depending on our production cost. We shall organize an annual end of year party where apart from feting our distributors/customers, we shall reward them with valuable gifts based on their patronage. All these we believe will build loyalty thereby endearing our distributors/customers to us.

4.5. Advertising and Promotion Due to the homogeneity of eggs coupled with the fact that there are so many producers, advertising and promoting may not achieve the desired results unless we brand and we are yet to get to the critical production mass that will make us brand our eggs. Since we do not have a egg marketing board like the America Egg Board in the U.S or the Canadian Egg Marketing Association (CEMA), we shall join force with other farmers under the aegis of the Poultry Association of Nigeria to promote the consumption of eggs in Nigeria and advertise eggs and other poultry products as the cheapest source of animal protein vis--vis other sources of animal protein.

5. Design, Development and Operations plan5.1. Design Poultry operations can be design to be outdoor or indoor or a mixture of both, the venture shall utilize the indoor design to actualize its operation because it allows for a high level of production through the use of cage system whose feeding, drinking, egg collection and manure removal system can be automated; though egg consumers in Europe are concerned about the small amount of space and the welfare of birds housed under this system hence the use of cage system has been banned and will be phased out in 2012 (Fanatico, 2006) however this is not a problem in Nigeria and Africa in general, so semi automated cage system will be use for this venture, though egg collection will not be automated because of the per pen low stocking density of the venture. The design of the cages is such that it will have a sloping floor that allow eggs to roll out of the reach of birds for collection by the attendant while the dropping passes through the mesh floor into the pit underneath. The use of cages apart from allowing high stocking rate of birds on a small area of land will promote the most efficient utilization of labour thereby promoting highest level of performance; however the cost implication of this system is very high.

5.1.1. Housing Requirements Before commencement of operation, the pen house, sick bay, generator house and sales shed would have been put in place. The pen housing design that will house the first batch of birds will be such that will allow for optimum conditions of ventilation while protecting the birds from adverse weather elements such as rains, strong wind and

direct sun rays; to achieve this, the long axis of the pen house will be oriented along the east - west direction. The dimension of the pen house will be 220ft long, 28ft wide with a height of 12ft, the pen house will be open-sided and windowless but will be covered with fencing wire and chicken wire mesh to aid unrestricted air movement while at the same time keeping out vermin like rodents. The roof will constructed using asbestos material with an open ridge on top (see appendix I); this will help keep the temperature of the pen low as corrugated roofing material is a good conductor of heat. A 2-row deep pit for the collecting of feaces and upon which the cage system will sit will be constructed (see appendix II).

The sick bay will be of a dimension of 10ft long, 7ft wide with a height of 6ft, this will serve as a hospital where isolated sick birds will be treated. The generator house will have a dimension of 24ft by 16ft and will be able to house 4 units of diesel generator. Other houses to be constructed are security post, sales shed, convenience and feed store.

5.2. Development Since a lot of infrastructures will need to be put in place before and during operations, the development of ventures infrastructure has been spaced in such a way that will allow of efficient utilization of resources while at the same time will allow for staged finance system adopted by the owners. We want to achieve greater production capacity so as to enjoy the economy of scale which will help us drive down production costs. Consequently, the venture will kick off with 6,960 birds in 2010, while another 6,960

birds will be added in 2011. Between 2012 and 2014, 10,080 birds will be added to the flock each year bringing the total capacity of the farm to 44,160 laying birds. Thereafter, the farm will take a break from expansion to consolidate its operations and review market opportunities for potential future expansion. The milestone for the development in the first 2 years of operation is in table 3. Date Jan 2010 April 2010 June 2010 June 2010 Aug. 2010 Development Tasks Purchase and survey of 10 acres of land. Land clearing Sinking of first bore hole Establish letter of credit for cage system for pen 1 Commencement of construction work on pen house, sick bay, generator house, security post and sales shed. Purchase and installation of first 14kva generator Sinking of second bore hole Delivery and commencement of installation of cages Collection of point of lay birds Purchase and installation of second 14kva generator Establish letter of credit for cage system for pen 2 Commencement of pen 2 construction Commencement of office building construction Delivery and commencement of installation of cages Collection of point of lay birds TABLE 3 2 weeks 4 days Duration 2 months 4 6 weeks 2 weeks 4 months 3 - 4 months

September 2010 November 2010 November 2010 November 2010 December 2010 June 2011 June 2011 July 2011 September 2011 October 2011

5 days 2 weeks 2 weeks 4 days 5 days 4 months 3 months

5.3. Operations Plan Major farms operations revolves round feeding, watering, egg collection and manure removal, these operation are routine and are performed by poultry attendants who are non-skilled workers. Workers will resume by 7:00am and are expected to close at 5:00pm except on days where special or non-routine operations such as vaccination, caging of birds, debeaking among others are to be carried out, on such days workers will be adequately compensated.

5.3.1. Feeding Operation To obtain the highest level of performance from the birds, they will be fed high quality balanced ration ad libitum, hence feeding will be carried out thrice a day at 7:30am, 12noon and 4:00pm. This is to ensure that birds have access to feed at all times.

5.3.2. Watering Operation The watering system is automated via the use of nipple drinking system that is connected to the main water system; so as long there is water in the reserve tanks that are connected to the main water system the birds will have access to water 24/7. So the poultry attendants dont have to serve water but they have to check all the nipples in the morning to ensure that none is blocked, and this checking is repeated in the afternoon.

5.3.3. Eggs Collection Operation Egg will be collected manually twice a day, at 12noon immediately after second feeding and at 4:30pm. After collection, the eggs will be sorted and graded according to shape and size.

5.3.4. Manure Removal Operation Manure will be moved out of the pen house twice a day at 8am immediately after feeding and at 4:00pm through the use of automated manure removal system that has already been incorporated into the cage system.

5.3.5. Other Non-Routine Operations This set of non-routine operations are not carried out on a daily basis but are very critical to the success of the venture. These include beak cutting (debeaking), removal of unproductive birds (culling), vaccination, deworming, removal of cob-webs, flushing of drinking system.

6. Organization and Management Plan6.1. Organization and Management Overview This section describes the Bkems organization and management plan. The proposed key management structures are to be implemented during this phase and future phases as appropriate. The approach is to develop and implement structure that fits the growth and peculiarities of the enterprise vis--vis the Nigerian poultry industry. The goal of this organization and management plan is to have an efficient, focused, flexibly staffed organization that will allow Managing Director to have overall management control while utilizing the talents of technical personnel such as the farm manager who is an Animal Scientist and Veterinarian.

Just like any other farming venture in Nigeria, this venture is a family venture, and since it is starting small, to support the work of the owners and enhance value creation, a board of advisors has been constituted comprising the Executive Chairman, a chartered accountant, stock-broker, veterinary consultant, financial adviser, attorney and auditor. But after 5 years of operation, when it is expected that the first phase of expansion and construction work would have been completed, a proper Board of Directors will be constituted.

6.2. Personnel Requirement In addition to finance and expertise that Mr. Adebayo Odunowo is bringing into this venture, he shall be seconding some of his staff at Bimba Agro to supervise the growth of this venture, these staff are the farm manager, accountant and veterinarian who will

work part time as he will visit the farm twice a week and during emergencies. While Bimba Agro will continue to pay their salary, Bkem Agro will pay a stipend as wage.

Bkem Agro personnel requirements and cost are shown in table 4 and 5 respectively.

PERSONNEL REQUIREMENT TITLE Executive Chairman Managing Director Farm Manager Accountant Veterinarian Poultry Attendants Driver Security Others TOTAL 2011 1 1 1 1 1 2 1 3 0 11 2012 1 1 1 1 1 4 1 3 0 13 TABLE 4 2013 1 1 1 1 1 7 1 4 1 18 2014 1 1 1 1 1 10 1 5 1 22

COST OF PERSONNEL TITLE Executive Chairman Managing Director Farm Manager Accountant Veterinarian Poultry Attendants Driver Security Others TOTAL 2011 100,000 650,000 260,000 156,000 130,000 260,000 240,000 468,000 0 2,264,000 2012 600,000 720,000 240,000 144,000 120,000 480,000 240,000 432,000 0 2,976,000 2013 1,020,000 1,020,000 240,000 144,000 120,000 840,000 240,000 576,000 120,000 4,320,000 2014 1,200,000 1,200,000 480,000 240,000 180,000 1,200,000 300,000 720,000 120,000 5,640,000

TABLE 5

6.3. Management Team Bkems management team will comprise the Executive Chairman, Managing Director, Farm Manager, Accountant and Farm Veterinarian.

The Executive Chairman who is an experienced and successful entrepreneur shall be involved in the development of primary goals, operating plans, policies, short and long range objectives of the farm. He will direct all activities to achieve profit and return on capital. He shall be responsible for the execution of all project of the venture that includes land acquisition and construction work. He shall lead the organization towards achieving its corporate objective.

The Managing Director shall manage the farm operations, direct and coordinate all farming and non-farming related activity that is consistent with established objectives and policies. She will follow direction set by the Executive Chairman and implement programs to ensure the attainment of business plan for growth and profit. She shall provide direction and structure for operating units in addition to participating in the development of policy and strategic plan. She shall also oversee all marketing and sales activities for the farm products, in addition to evaluating market conditions and recommend selling and distribution strategies.

The Farm Manager will be responsible for the planning and day-to-day management of the poultry farming operations. He shall recruit and train poultry attendants and security staff, organize work program for staff and supervise the feeding and care of the birds.

He shall ensure that all equipment such as the automatic feeding units and cages are clean and in good working order. He shall ensure that clean cool drinking water is available al all times and that the nipple drinking system allows water flow at all times. He shall be responsible for taking and keeping farm records in addition to selling of eggs to distributors. He shall manage the distributors in conjunction with the Managing Director.

The Veterinarian will be responsible for all the health and related problems of the birds; he shall be responsible for the design and implementation of the farm health and vaccination program. He will be responsible for ensuring that the farm is disease free and any disease outbreak is tackled promptly with the appropriate medication. While the veterinarian works complement the farm manager he shall be reporting to the Managing Director.

The Accountant shall be responsible for all book-keeping, accounting and financial related activity of the farm. He shall prepare and maintain records of all financial transactions. He shall be responsible for payment of staff salary and suppliers invoices. Due to the small number of employees involved now, the accountant shall handle all administrative related issues. The accountant shall report to the Managing Director.

The Head of Poultry shall supervise the work of the poultry attendants and ensure that all operational plans, work schedule and instructions given by the farm manager are adhered to by the poultry attendants. The poultry attendants on the other hand are to

carry out daily routine activities such as feeding, watering, cleaning, checking for sick and dead birds, disinfection, and non-routine activities as instructed by the farm manager,

The Head of Security and the security personnel shall ensure that all life and properties on the farm premise are secured and safe.

6.4. Organization Structure Bkem Agro Livestock Company Limited organization structure consists of line of reporting, authority and coordination as well as decision making authority. Moreover, it enables employees to carry out a wide range of operations in line with division of labour and coordinate their activities through integrating mechanism as well as setting the boundaries of the organization (Nohria, 1991). Since poultry is a business of life, decision making authority is vested in the hands of the farm manager, veterinarian and accounts manager as this will enable them exercise initiative and act responsibly, moreover the Managing Director will not always be on the farm all through the day. This decentralization apart from allowing fast response time to problems encountered, will promote greater motivation amongst the management team and other workers thereby allowing the employees to have a feeling of being part of the business (Thompson, Strickland III and Gamble, 2008).

I am not unmindful that some bad decisions could be taken, but this will be avoided or reduced to the barest minimum with adequate training coupled with the oversight

functions that will be performed by the Executive Chairman who is well vast in the technical and operational aspect s of poultry production, this will enable the senior employees to take good and informed judgement. (See appendix III for organogram)

7. Critical risks, Problem and Assumption7.1. Critical Risks The main critical risk in this venture is the outbreak of disease most especially viral infection that has no cure, and bacterial and fungal infections. While preventive medication and vaccination are one of the cornerstones of bacterial and viral infections on the farm, the strategy is to apply medications and vaccinations ahead of the predicted outbreak of disease. Consequently a comprehensive health program will be formulated and implemented to ensure that birds are vaccinated and medicated as at when due and that a good bio-security system that will curtail movement of pathogens into the farm is put in place. To further mitigate against the risk of disease, the following will be carried out: New arrivals on the farm will be treated for ecto-parasites and endo-parasites as well as vaccinated. Sick birds will be isolated from healthy birds and move to the sick bay for treatment. Dead birds will be burnt or buried. Birds will not be overcrowded. Birds of different ages will not be housed together and new birds will not be housed together with old birds on the farm moreover they will be quarantined for 2 weeks before they can join the flocks. Droppings which are source of pathogens will be moved out of the poultry house daily.

-

While feeder and drinkers are cleaned regularly to avoid bacteria build-up, the pen house will be disinfected regularly.

All these measures will ensure that the farm is disease free thereby allowing for optimum productivity.

7.2. Problems According to Ugwu (2009) major constraint to a successful poultry venture are inadequate finance, water, electricity, bad road network, high cost of feeds and scarcity of day-old chicks. Inadequate Finance: Due to the high capital input and lack of assess to external borrowing, the venture shall rely on internal funding, credit facilities from suppliers and leasing of equipments to grow expand. Moreover, the expansion has been divided into phases and spaced to allow for efficient utilization of internally generated funds.

Water: The venture shall provide it own water by sinking 4 boreholes over a space of four years.

Bad Road Network: To mitigate against the effect of bad roads, the owners of the business has ensured that their farm is situated just about 1 km from the main road. This will ensure that making the road that leads to the farm will not consume too much funds to be motorable.

High Cost of Feeds: Feeds cost constitute between 65% to 70% of total cost of production, however our feed supplies will be gotten from a subsidiary of Bimba Agro as they have no only the expertise to formulate and compound a least cost ratio but have the expertise and knowledge to substitute expensive feed ingredient with cheaper ones without compromising the productivity of the birds.

Scarcity of Day-old-chicks: Bimba Agro is responsible for the supply of point-of-lay birds (14 weeks old birds) to the venture and due to the vast connection of the CEO of Bimba Agro in the Nigeria poultry industry, the venture sure of getting its supply of pointof-lay birds as at when due.

7.3. Assumptions This will be treated under section 7.3.

8. Sustainability and ImpactPoultry operation generates a lot of waste in form of feaces by posing serious environmental pollution problem through the emission of offensive odour (Adeoye, Sridhar and Mohammed 1994), despite the biodegradability of poultry feaces are biodegradable, its disposal still constitute a major problem for poultry farmers due to lack of knowledge about what to do with their waste and inadequate land for proper disposal. To reduce the environmental impact of our operations we shall carry out the following one a short and medium term basis: Addition of Yucca Schidigera to our feed as this will not only eliminate odour but control the breeding activities of flies and rodents. In addition, Yucca helps in reducing the amount of ammonia emitted to the barest minimum thereby making the birds comfortable and reducing the wear and tear of the cage system. Earmarking one acre of land principally for the disposal of waste generated. Install alternative power supply such as solar and inverter system to power the lightings of the pens and security lighting system rather than relying on generators to will continue to pollute the environment

For the long-term we shall look for ways of converting waste generated into organic manure for crop farmers and for the generation of biogas.

9. Financial Plan9.1. Financial Overview Due to the difficultly of start-up in accessing bank credit in Nigeria coupled with the fact that the formal and informal financial market which is underdeveloped hardly finance livestock business due to its high risk nature and their lack of knowledge, we have decided to source our financing of this venture internally and when the venture stabilizes we seek for bank finance, this is in accordance with the recommendations of Cassar and Holmes (2003 cited in Wu, Song and Zeng, 2008) who stated that the best financing pecking order any entrepreneur should follow should be internal finance, issuing debts and then issuing equity. In line with this, the owners of this venture will be injecting about N15 million with the bulk coming from Mr. Adebayo Odunowo to finance this project, but to mitigate moral hazard, control risk and enhance efficiency (Wang and Zhou, 2004) the venture will be staged finance, hence funds will be released in phase and as at when needed. In addition to cash injection, Kemi is bringing in a brand new car valued at N2,650,000 to be used as operational vehicle into the venture thereby increasing the ventures equity

By 2011, when the project would have taken off and income is being generated from the sales of eggs, finance will be sought from the bank to part finance the first phase of the expansion of this venture by way of equipment financing to complement the generated profit that will be reinvested to finance this expansion phase that will commence by Nov. 2011.

9.2. Financial Expenditure 9.2.1. Start-up Expenditure This include all cost of providing necessary infrastructure and assets acquisition for the poultry venture to start-up and all projected expenses related to the acquisition and provision of these assets have already been incorporated in their cost.

Acquisition Land, surveying & related matters Automobile Incorporation of business Buildings (Pen, sick bay and generator house) Support infrastructures (water, electricity) Equipment system Starting birds inventory TOTAL TABLE 6

Amount (N) 1,450,000 2,650,000 80,000 5,500,000 1,000,000 6,000,000 4,312,000 20,992,000

9.2.2. Operating Expenses This is the cost the venture will incur during the course of its operation and since operations will not commence until 1st December 2010 when birds will be expected to be delivered to the farm and since the enterprise fiscal year will be operated on a January to December basis, all expenses incurred will be added to the 2011 financial year meaning that the first fiscal year will start on 1st December 2010 and it will be made up of thirteen months instead of the usual twelve months. Apart from feeding,

medication and workers wages, all which comprises the production cost that takes about 80% of total current expenditure; expenses incurred will be primarily those incurred during the day-to-day running of the farm such as repairs, transportation, bank charges, depreciation and minor sundry expenses however depreciation take the lion share of the expenses because of the huge financial capital involved in providing infrastructures and acquiring fixed assets.

9.3. Important Assumptions The financial projection is based on the following assumptions: Income from egg sales is totally dependent on the eggs laid by the birds, hence annual average egg production should not fall below 75%. Production at the commencement of lay begins at 0% and rises rapidly to a peak at between 85% 90% on which the birds remain for about 3 to 4 months, after production begins to decline gradually until it reaches 50% which is considered the break-even point according to industry perception.

-

There will be no outbreak of disease epidemic such as the bird flu that happened in 2005.

-

There will be good harvest of grains and plant protein sources as poor harvest will affect feed prices as feed constitute a major cost (about 70%) of production.

-

That upward price movement of feed ingredients will not exceed 25%

-

There will be no prolonged political upheaval, workers unrest/strike, fuel scarcity that could hamper the free movement of people as this will prevent our distributors from coming to the farm to pick their egg allocation. The longer this situation last the worse for the venture as the eggs are predisposed to spoilage given their perishable nature.

-

Mortality does not exceed 20% throughout the life of the birds.

-

The import restriction and ban on importation of poultry products will be sustained.

-

There will be no significant change in the exchange rate and import duty on imported equipments, drugs and feed additives.

9.4. Key Financial Indicators While percentage hen day production is the main production parameter for a chicken egg enterprises as all financial parameters are tied to it (see appendix IV); however as an entrepreneur and investor in this venture, the key performance indicators that matter to us the owners are profitability, liquidity and solvency, we are not considering investment indicators such as price/earning ratio since we do not have outside investors. All these indicators apart from assisting us to assess the financial health of our venture (Laureate Online Education, 2008) will assist us to operate the venture efficiently and to identify latent financial problems before they become entrenched. We shall ensure that our financial ratio falls within the recommended ratios.

9.5. Key Financial Statements According to the Company and Allied Matters Act of 1990, section 334 sub-section 1, it states that In case of every company, the directors shall in respect of each year of the company, prepare financial statements for the year This statement include the income statement, balance sheet and statement of cash flow, however according to this Act, as a private limited liability company, we are not expected to prepare statement of cash flow, nevertheless we consider it a key financial statement as it will enhance the overall transparency and quality of the information we shall provide to potential investors and lenders, moreover this statement is as important as other financial statements because it predicts and monitors the inflow and outflow of cash, while the balance sheet provides a clear and vivid picture of the financial health of our enterprise, the income statement measures the profit generated by the venture over time. Based on the projected revenue and expenses, assets and liabilities to be incurred during the course of our operation, we have prepared our projected balance sheet, income statement, cash flow statement and break-even analysis for the first six months.

9.5.1. Projected Profit and Loss Statement Projected loss for the first six months is 617,486 naira, (see appendix V) the reason being that the birds will start laying eggs by the second month of operation, these eggs are so few in number and small in size that it does not attract real income but as the birds progress in age production and egg size will gradually increase until it reaches a peck level. It is expected that after the six month, production would have peaked and the eggs would start to attract market price as the size would have appreciated too,

hence we expect our income situation to improve significantly as shown in Appendix VI. However due to the fact that we have commence the next expansion phase so that the farm will not be out of production in 2012, the next six months will see the venture buying new point-of-lay birds, feed, build the second pen and purchase equipments, this will have a slight impact on our profit because most of the funding for the next phase is on capital project (fixed assets) which will not be completed until November, hence depreciation will not start until January 2012 the bulk of this expenditure is expended on fixed assets.

9.5.2. Projected Balance Sheet The projected balance sheet for the first six months (see appendix VII) shows that the financial health of our venture is fairly good on account of the fact that the equity fund has been marginally eroded due to the initial loss recorded however when the whole year was taken into consideration (see appendix VIII), this situation changed. The retained profit coupled with new fund injections by the owners will be used to finance the next phase of expansion. In Nigeria, despite the prominence of the agricultural sector in the Nigerian economy, there is no local accounting standard based on agriculture (World Bank, 2004), hence we have modified out accounting transaction according to the International Accounting Standard and International Finance reporting Standard. In view of this, we have placed our laying birds as inventory stock because they are assets to us, moreover while the surviving ones will be sold as spent layers at the end of their laying period thereby generating more income for the enterprise, those

that died during the course of normal operation had been factored into the profit and loss account.

9.5.3. Projected Break-Even Analysis For our venture to break even for the first six months of operations, it needs to produce and sell a minimum of 31,485 trays (944,550 pieces) of eggs, (see appendix IX) any single egg laid after this point translate to profit for the venture (see appendix X). When the production of 2011 was taken into consideration, despite the increase in average selling price and drop in per tray variable cost, break-even point for the whole year was a minimum output of 32,240 trays of eggs (see appendices XI and XII).

9.5.4. Projected Cash Flow Statement This venture is a cash-based transaction as all eggs produced will be strictly sold on cash and carry basis and since finance is being sourced internally we are not oblige to prepare one, nevertheless we have prepared our projected cash flow for the first six months of operation (see appendix XIII) and thirteen months of operation. About N7 m cash was generated at the end of 2011, this cash will be plough back into the venture to finance expansion plans of the owners. 9.5.5. Sensitivity Analysis The essence of the sensitivity analysis is to help the venture ascertain its potential gain or loss if there is any positive or negative significant change in the assumptions used in preparing the financial statements. Two major variables that can have serious negative impact on productivity and thus affect the income of the venture is cost of feed and

disease outbreak. High feed cost can cause a drop in income but usually any sustained increase in feed ingredients cost is accompanied with an increase in price of eggs, but if it is not sustained, the farmer can recoup when prices drop significantly during the postharvest season of crops. As the venture growth, we can hedge against price increase by buying stock of maize that will carry the farm through the period of high price since the contribution of price of maize to total feed cost is over 55%. Nevertheless, to be on the safe side, price of feeds during period of scarcity of grains was used in the computation of the financials; while a 5% less than expected production output was used, this is to accommodate any variation in economics realities with little or no impact of the ventures expected income.

As for disease outbreak, most common poultry disease can be prevented; but should in case the farm happens to have a new disease outbreak such as the avian influenza, the worst case scenario is that all the birds will die but the infrastructures which carry the bulk of the financing will remain intact. Hence we can start all over again with minimal financing. This scenario hardly happens because with a sound management practices, this could be averted except when the disease is new to the world.

Based on Bayos experience, the venture is sure of riding on these risks.

10. Exiting and HarvestingThis venture though is a family venture, and in line with other family business in Nigeria coupled with our cultural belief, the owners have no intention of diluting its control and ownership in the short and medium term, they might have a change of mind in future by selling a minority stake of the venture to Asian investors most especially if none of the owners children are interested in running the venture nevertheless focus will be on involving the owners children in the venture as early as possible so as to allow them gain an in-depth understanding of the venture and how things work. Furthermore, their exposure will be further enhanced by allowing them to work in other businesses as this will give them new strategic insight to move the venture pass their generation.

This venture is aiming to be a 150,000 laying birds capacity farm, hence while focus will be on expansion, rapid growth and profit making, the owners intend to harvest once in five years by way of extracting accumulated value created in form of excess after-tax cash flow.

Reference Adepoju, A. A. (2008) Technical Efficiency of Egg Production in Osun State, International Journal of Agricultural Economics & Rural Development, Vol. 1, No. 1, pp. 7-14. [Online] Available from: http://www.lautechaee-edu.com/journal/ijaerd1/ijaerd%20-%201.2%20edition.pdf (Accessed: 13 December 2009) Adeoye G.O., Sridhar M.K.C. and Mohammed O.E. (1994) Poultry Waste Management for Crop Production: Nigerian Experience, Waste Management & Research, Vol. 12, No. 2, pp. 165-172. [Online] Available from: http://wmr.sagepub.com/cgi/content/abstract/12/2/165 (Accessed: 12 January 2010) Adewunmi O. I. (2008) Economics of Poultry Production in Egba Division of Ogun State, Agricultural Journal, Vol. 3, No. 1, pp. 10-13. [Online] Available from: http://www.medwelljournals.com/fulltext/aj/2008/10-13.pdf (Accessed: 6 January 2010) Anand K. G. (2005) Challenges and Opportunities for Marketing of Poultry Products [Online] Available from: http://www.poulvet.com/poultry/articles/marketing_poultry.php (Accessed: 4 January 2010) CAMA (1990) Companies and Allied Matters Act 1990, 1st Ed. Lagos: LawLords Publication Crawford I. M. (1997) Agricultural and Food Marketing Management [Online] Available from: http://www.fao.org/DOCREP/004/W3240E/W3240E00.htm (Accessed: 4 January 2010) Fanatico A. (2006) Alternative Poultry Production Systems and Outdoor Access, [Online] Available from: http://attra.ncat.org/attra-pub/poultryoverview.html (Accessed: 12 January 2010) Kalla D.J.U., Barrier G., Haruna U., Abubakar M., Hamidu B.M., and Murtala N. (2007) Economic Analysis of Broiler Production at Miango, Plateau State, Nigeria, Paper prepared for presentation at the Farm Management Association of Nigeria Conference, Ayetoro, Nigeria, September 4-6. [Online] Available from: http://ageconsearch.umn.edu/bitstream/54388/2/Economic%20analysis%20of%20Broiler%20pr oduction.pdf (Accessed: 6 January 2010) Laureate Online Education (2008) Managing Resources 2nd Ed. Essex: Pearson Nohria N. (1991) Note on Organization Structure [Online Version] Boston, MA: Harvard Business School Publishing. Available from: http://www.hbsp.org (Accessed: 28 December 2009). Obasi P. C. (2003) Demand for Protein Foods in Imo State, Nigeria: The Case of Meat and Fish, Journal of Agriculture and Food Science, Vol. 1, No. 2, pp. 115-124. [Online] Available from: http://www.imsu-jafs.info/2/texts/obasi.pdf (Accessed: 21 December 2009)

Oladeebo J.O. and Ambe-Lamidi A.I. (2007) Profitability, Input Elasticities and Economic Efficiency of Poultry Production among Youth Farmers in Osun State, Nigeria, International Journal of Poultry Science, Vol. 6, No. 12, pp. 994-998. [Online] Available from: http://www.pjbs.org/ijps/fin757.pdf (Accessed: 12 January 2010) Spedding A. (2008) Poultry Production, [Online] Available from: http://www.arthurrankcentre.org.uk/projects/rusource_briefings/rus08/650.pdf (Accessed: 12 January 2010) Stine k. (2002) Production vs. Market Driven Companies [Online] Available from: http://www.polaris-inc.com/index.php?action=resources.ArticleInfo&rowid=27 (Accessed: 4 January 2010) Tewe O. O. and Bokanga M. (2001) Post-Harvest Technologies in Nigerias Livestock Industry: Status, Challenges and Capacities, A Presentation at the GFAR GIPhT Workshop, 1721 September, Entebbe Uganda. [Online] Available from: http://www.foodnet.cgiar.org/Post%20Harvest/Papers/Tewe's%20Final%20paper.htm (Accessed: 21 December 2009) Thompson A. A, Strickland III A. J. and Gamble J. E. (2008). Crafting and Executing Strategy: The Quest for Competitive Advantage, 16th Ed. New York: McGraw-Hill/Irwin Ugwu D. S. (2009) Baseline Study of Small and Medium Scale Poultry Production in Enugu and Lagos States of Nigeria, World Journal of Agricultural Sciences, Vol. 5, No. 1, pp. 27-33. [Online] Available from: http://www.idosi.org/wjas/wjas5(1)/4.pdf (Accessed: 10 January 2010) Wang S. and Zhou H. (2004) Staged Financing in Venture Capital: Moral Hazard and risks, Journal of Corporate Finance, Vol. 10, No. 1, pp. 131-155. [Online] Available from: http://www.sciencedirect.com.ezproxy.liv.ac.uk/science?_ob=MImg&_imagekey=B6VFK46YJ586-14G&_cdi=6013&_user=8324358&_orig=search&_coverDate=01%2F31%2F2004&_sk=9998999 98&view=c&wchp=dGLbVlzzSkWb&md5=0d14fdc9dce571dce8121d22cd9c6d71&ie=/sdarticle.pdf (Accessed: 7 January 2010) World Bank (2004) Report on The Observance of Standard and Codes: Nigeria Accounting and Auditing [Online] Available from: http://www.worldbank.org/ifa/rosc_aa_nga.pdf (Accessed: 11 January 2010) Wu J., Song J. and Zeng C. (2008) An Empirical Evidence of Small Business Financing in China, Management Research News, Vol. 31, No. 12, pp. 959-975. [Online] Available from: http://www.emeraldinsight.com.ezproxy.liv.ac.uk/Insight/viewPDF.jsp?contentType=Article&File name=html/Output/Published/EmeraldFullTextArticle/Pdf/0210311206.pdf (Accessed: 9 January 2010)

APPENDIX I Front View of Pen House

APPENDIX II

APPENDIX III

PROPOSED ORGANOGRAM OF BKEM AGRO LIVESTOCK COMPANY LIMITED

Executive Chairman

Managing Director

Accountant/Admin.

Farm Manager

Veterinarian

Head of Poultry

Head of Security

Poultry Attendants

Security Men

APPENDIX IVEGG PRODUCTION AND SALES PROJECTION FOR THE FIRST SIX MONTHSPENS 1 2 TOTAL (TRAYS) PRODUCTS EGGS MORTALITY TOTAL (NAIRA) DEC 0 0 0 DEC 0 10,000 10,000 JAN 580 0 580 JAN 145,000 18,000 163,000 FEB 4,300 0 4,300 FEB 1,720,000 18,000 1,738,000 MAR 4,900 0 4,900 MAR 1,960,000 18,000 1,978,000 APR 5,500 0 5,500 APR 3,025,000 18,000 3,043,000 MAY 5,500 0 5,500 MAY 3,025,000 18,000 3,043,000 TOTAL 0 20,780 20,780 TOTAL 9,875,000 100,000 9,975,000

EGG PRODUCTION AND SALES PROJECTION FOR JUN - DEC. 2011 PENS 1 2 TOTAL (TRAYS) PRODUCTS EGGS MORTALITY TOTAL (NAIRA) JUN 5,500 0 5,500 JUN 3,025,000 20,000 3,045,000 JUL 5,300 0 5,300 JUL 2,915,000 20,000 2,935,000 AUG 4,700 0 4,700 AUG 2,585,000 20,000 2,605,000 SEPT 4,500 0 4,500 SEPT 2,475,000 20,000 2,495,000 OCT 4,500 0 4,500 OCT 2,475,000 20,000 2,495,000 NOV 4,500 0 4,500 NOV 2,475,000 20,000 2,495,000 DEC 4,500 0 4,500 DEC 2,475,000 20,000 2,495,000 TOTAL 33,500 0 33,500 TOTAL 18,425,000 140,000 18,565,000

Sales assumptions: 1) Eggs laid in Jan are projected to be sold at an average 250 naira per tray due to their pullet (tiny) size. 2) Eggs laid in February and March are projected to be sold at an average of 400 naira per tray due to their small size. 3) Eggs laid as from April and May are projected to be sold at an average of 550 naira per tray. 4) All things being equal, we shall expect and average mortality of about 90 birds per month after December and this will be sold at 200 naira per dead bird.

APPENDIX VINCOME STATEMENT FOR THE FIRST SIX MONTHS Revenues Sales - Eggs Sales - Spent Layers Sales - Mortality Interest Income Other Income Total Revenues Cost of Sales Feed Purchases Production Cost-Mortality Production Cost-Spent Layers Production Cost-Salaries/Wages Production Cost -Drugs & Vaccines Production Cost- Other Total Cost of Sales Gross Profit Expenses Auto (Fuel) Expenses Bank Charges Depreciation Expense Diesel Expense Repairs Expense Salaries Expense Telephone Expense Other Expense Total Expenses Net Income Naira 9,875,000 0 100,000 0 0 9,975,000 % 99.00 0.00 1.00 0.00 0.00 100.00

6,930,000 372,000 0 1,057,998 123,000 0 8,482,998 1,492,002

81.69 4.39 0.00 12.47 1.45 0.00 100.00 14.96

208,000 145,000 1,201,488 270,000 125,000 0 60,000 100,000 2,109,488 -617,486

-33.68 -23.48 -194.58 -43.73 -20.24 0.00 -9.72 -16.19 21.15 -6.19

APPENDIX VIINCOME STATEMENT FOR YEAR ENDING 2011 Revenues Sales - Eggs Sales - Spent Layers Sales - Mortality Interest Income Other Income Total Revenues Cost of Sales Feed Purchases Production Cost-Mortality Production Cost-Spent Layers Production Cost-Salaries/Wages Production Cost -Drugs & Vaccines Production Cost- Other Total Cost of Sales Gross Profit Expenses Auto (Fuel) Expenses Bank Charges Depreciation Expense Diesel Expense Repairs Expense Wages Expense Telephone Expense Other Expense Total Expenses Net Income Naira 28,300,000 0 240,000 0 0 28,540,000 % 99.16 0.00 0.84 0.00 0.00 100.00

18,018,000 744,000 0 2,264,000 291,000 0 21,317,000 7,223,000

84.52 3.49 0.00 10.62 1.37 0.00 100.00 25.31

416,000 290,000 2,402,976 540,000 250,000 28,329 120,000 100,000 4,147,305 3,075,695

13.53 9.43 78.13 17.56 8.13 0.92 3.90 3.25 14.53 10.78

APPENDIX VIIBALANCE SHEET FOR THE FIRST SIX MONTHS ASSETS Current Assets Petty Cash FBN - Current Account 2 Birds Stock Inventory Total Current Assets Property and Equipment Automobiles Cages & Other Equipments Buildings Building Improvement Land Accum. Depreciation-Equipment Accum. Depreciation-Automobile Accum. Depreciation-Buildings Accum. Depreciation-Bldg Imp Total Property and Equipment Total Assets Naira 40,000.00 2,654,001.93 3,940,000.00 Naira

6,634,001.93

2,650,000.00 6,000,000.00 5,500,000.00 1,000,000.00 1,450,000.00 (428,571.43) (331,250.00) (275,000.00) (166,666.50) 15,398,512.07 22,032,514.00

LIABILITIES AND CAPITAL Current Liabilities Accounts Payable Other Current Liabilities Total Current Liabilities Long-Term Liabilities Bank Loan Total Long-Term Liabilities Total Liabilities Capital Paid-in Capital Net Income Total Capital Total Liabilities & Capital

5,000,000.00 0.00 5,000,000.00

0.00 0.00 5,000,000.00

17,650,000.00 (617,486.00) 17,032,514.00 22,032,514.00

APPENDIX VIIIBALANCE SHEET FOR YEAR ENDING 2011 ASSETS Current Assets Petty Cash FBN - Current Account 2 Birds Stock Inventory Total Current Assets Property and Equipment Automobiles Cages & Other Equipments Buildings Building Improvement Land Accum. Depreciation-Equipment Accum. Depreciation-Automobil Accum. Depreciation-Buildings Accum. Depreciation-Bldg Imp Total Property and Equipment Total Assets

40,000.00 6,920,670.86 3,568,000.00 10,528,670.86

2,650,000.00 6,000,000.00 5,500,000.00 1,000,000.00 1,450,000.00 (857,142.86) (662,500.00) (550,000.00) (333,333.00) 14,197,024.14 24,725,695.00

LIABILITIES AND CAPITAL Current Liabilities Accounts Payable Other Current Liabilities Total Current Liabilities Long-Term Liabilities Bank Loan Total Long-Term Liabilities Total Liabilities Capital Paid-in Capital Net Income Total Capital Total Liabilities & Capital

4,000,000.00 0.00 4,000,000.00

0.00 0.00 4,000,000.00

17,650,000.00 3,075,695.00 20,725,695.00 24,725,695.00

APPENDIX IX BREAK-EVEN ANALYSIS FOR BKEM AGRO LIVESTOCK COMPANY LIMITED FOR THE FIRST SIX MONTHS Product: Table eggs

For the Period: Selling Price (P): Break-Even trays (X): Break-Even Sales (S): Fixed Costs Depreciation Bank Charges Auto Expenses Phone Charges Utilities Other (specify) Total Fixed Costs (TFC) Variable Costs Variables Costs based on Dollar Amount per Unit Cost of Feeding Direct Labor Drugs and Vaccines Mortality Sum:

Dec. 1, 2010 - May 30, 2011 N 475.22 31,485 trays N 14,962,252.05 [42] 1,201,488.00 145,000.00 333,000.00 60,000.00 270,000.00 100,000.00 N 2,109,488.00

N N N N N

333.49 50.91 5.92 17.90 408.22

per tray per tray per tray per tray N N 408.22 67.00 14.1%

Total Variable Cost per Unit (V) Contribution Margin per unit (CM) = P - V Contribution Margin Ratio (CMR) = 1 - V / P = CM / P Break-Even Point Break-Even Trays (X) Break-Even Sales (S) X = TFC / (P - V) S = X * P = TFC / CMR

31,485 trays N 14,962,252.05

APPENDIX X Break-Even Chart for Bkem Agro Livestock Company Limited

NOTE: Kindly ignore the dollars sign, the figures are in Naira.

APPENDIX XI BREAK-EVEN ANALYSIS FOR BKEM AGRO LIVESTOCK COMPANY LIMITED FOR THE YEAR ENDING 2011

Product: Table eggsFor the Period: Selling Price (P): Break-Even Units (X): Break-Even Sales (S): Fixed Costs Depreciation Bank Charges Auto Expenses Phone Expenses Utilities Other (specify) Total Fixed Costs (TFC) Variable Costs Variables Costs based on Dollar Amount per Unit Cost of Feeding Direct Labor Drugs and Vaccines Mortality Sum: 2,402,976.00 290,000.00 666,000.00 120,000.00 540,000.00 128,329.00 N 4,147,305.00 Dec. 1, 2010 Dec. 31, 2011 N 521.37 32,240 trays N 16,808,771.83 [42]

N N N N N

331.95 41.71 5.36 13.71 392.73

per tray per tray per tray per tray N N 392.73 128.64 24.7%

Total Variable Cost per Unit (V) Contribution Margin per unit (CM) = P - V Contribution Margin Ratio (CMR) = 1 - V / P = CM / P Break-Even Point Break-Even Trays (X) Break-Even Sales (S) X = TFC / (P - V) S = X * P = TFC / CMR

32,240 trays N 16,808,771.83

APPENDIX XII Break-Even Chart for Bkem Agro Livestock Company Limited For The Year Ending 2011

NOTE: Kindly ignore the dollars sign, the figures are in Naira.

APPENDIX XIIICASH FLOW STATEMENT FOR THE FIRST SIX MONTHS

Cash Flows from Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities Accum. Depreciation-Equipment Accum. Depreciation-Automobile Accum. Depreciation-Buildings Accum. Depreciation-Bldg Imp Birds Stock Inventory Accounts Payable Other Current Liabilities Total Adjustments Net Cash provided by Operations Cash Flows from Investing Activities Used For Cages & Other Equipments Buildings Building Improvement Automobile Land Net cash used in investing

Naira (617,486.00) (617,486.00)

428,571.43 331,250.00 275,000.00 166,666.50 (3,940,000.00) 5,000,000.00 0.00 2,261,487.93 1,644,001.93

(6,000,000.00) (5,500,000.00) (1,000,000.00) (2,650,000.00) (1,450,000.00) (16,600,000.00)

Cash Flows from Financing Activities Proceeds From Paid in capital

17,650,000.00

Net cash used in financing Net increase in cash

17,650,000.00 N 2,694,001.93

APPENDIX XIVCASH FLOW STATEMENT FOR YEAR ENDING 2011

Cash Flows from Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities Accum. Depreciation-Equipment Accum. Depreciation-Automobile Accum. Depreciation-Buildings Accum. Depreciation-Bldg Imp Birds Stock Inventory Accounts Payable Other Current Liabilities Total Adjustments Net Cash provided by Operations Cash Flows from Investing Activities Used For Cages & Other Equipments Buildings Building Improvement Automobile Land Net cash used in investing

3,075,695.00 3,075,695.00

857,142.86 662,500.00 550,000.00 333,333.00 (3,568,000.00) 4,000,000.00 0.00 2,834,975.86 5,910,670.86

(6,000,000.00) (5,500,000.00) (1,000,000.00) (2,650,000.00) (1,450,000.00) (16,600,000.00)

Cash Flows from Financing Activities Proceeds From Paid in capital

17,650,000.00

Net cash used in financing Net increase in cash

17,650,000.00 6,960,670.86