Dairy Production Business Plan 2010 E.

Table of Contents
Executive summary ......................................................................................................................... 3
DESCRIPTION OF THE PROJECT ................................................................................................... 4
PROFILE OF THE ENTREPRENEURS .............................................................................................. 5
PROJECT’S CONTRIBUTIONS TO THE LOCAL ECONOMY.............................................................. 5
Chapter 1 ......................................................................................................................................... 6
Sales and Marketing Plan ................................................................................................................ 6
1.1 DESCRIPTION OF THE PRODUCT ............................................................................................ 6
1.2 COMPARISON OF PRODUCT WITH ITS COMPETITORS .......................................................... 6
1.3 BUSINESS LOCATION ............................................................................................................. 6
1.4 MARKET BACKGROUND ......................................................................................................... 7
1.5 MAJOR CUSTOMERS .............................................................................................................. 7
1.6 Estimated Total Demand ....................................................................................................... 8
1.7 PLANT CAPACITY .................................................................................................................. 8
1.8 PROJECTED MARKET SHARE .................................................................................................. 8
1.9 SELLING PRICE........................................................................................................................ 8
1.10 SALES FORECAST.................................................................................................................. 9
1.11 PROMOTIONAL MEASURES ................................................................................................. 9
1.12 MARKETING STRATEGY........................................................................................................ 9
1.13 MARKETING BUDGET........................................................................................................... 9
Chapter 2 ....................................................................................................................................... 10
Production Plan ............................................................................................................................. 10
2.1 PRODUCTION PROCESS ....................................................................................................... 10
2.2 MAINTENANCE AND REPAIRS.............................................................................................. 11
2.3 SOURCE OF MACHINERY ..................................................................................................... 11
2.4 PLANNED CAPACITY ............................................................................................................. 11
2.5 FUTURE CAPACITY ............................................................................................................... 11
2.6 TERMS AND CONDITIONS OF PURCHASE OF MACHINERY .................................................. 11
2.7 PRODUCTION SITE LOCATION AND LAYOUT ....................................................................... 11
Chapter 3 ....................................................................................................................................... 12
Organization and Management plan............................................................................................. 12

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3.1 FORM OF BUSINESS ............................................................................................................. 12
3.2 ORGANIZATIONAL STRUCTURE ........................................................................................... 12
3.3 BUSINESS EXPERIENCE AND QUALIFICATIONS OF THE ENTREPRENEUR ............................ 12
3.4 PRE-OPERATING ACTIVITIES ................................................................................................ 14
Chapter 4 ....................................................................................................................................... 16
Financial Plan ................................................................................................................................. 16
4.1 MACHINERY AND EQUIPMENT ................................................................................... 16
4.2 LAND, BUILDINGS AND CIVIL WORKS ...................................................................... 16
4.3 STAFFING .......................................................................................................................... 16
4.4 FINANCIAL ASSUMPTIONS ........................................................................................... 16
TOTAL INITIAL INVESTMENT COST ............................................................................................ 17
FINANCIAL ANALYSIS ................................................................................................................. 18

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Executive summary
Ethiopia has the largest livestock population in Africa and the contribution of livestock
and livestock products to the agricultural economy is significant. Recent figures indicate
that the livestock sector contributes about 12-16% of national GDP, 30-35% of
agricultural GDP, 15% of export earnings and 30% of agricultural employment.
Livestock contribute to the livelihoods of 60-70% of the population.

Smallholder farmers represent about 85% of the population and are responsible for 98%
of the milk production. Productivity however is relatively low, quality feeds are difficult
to obtain and support services are inadequate. There is an immediate and growing
shortage of dairy products in all major cities of Ethiopia and the trends of economic
prospects for dairy industry performance and development are rather good both at small
holder level and on more commercial level. During the last decades the import
dependency of Ethiopia for milk and milk products has increased. To bridge the gap
between supply and demand, dairy imports increased significantly partly due to increased
food aid (WFP) milk powder imports, reached a peak of 314,700 metric tons in 1986.
Further, it is estimated that imported milk powder accounted for 23 percent of Addis
Ababa market.

Rapidly increasing population size with a growing urban population is resulting in a

growing demand for dairy products. Dairy development can lead to income generating
activities in the rural areas increasing farm incomes and employment opportunities.
However, the available high potential land is intensively cultivated and fodder supply is
insufficient leading to often serious environmental consequences as inappropriate
husbandry measures are applied in non-suitable areas. Besides low milk production
levels, milk collection, processing and marketing are not developed. A chain approach
aimed at a sustainable development of the dairy sector is lacking.

The Government aims at stimulating dairy industry (milk marketing and processing) in
potential areas. It is believed that development of milk marketing structure will create the
incentive to improve production. Urban, peri-urban and rural milk production systems are
dominated by informal marketing systems. The formal market also appears to be
expanding with the private sector (Sebeta Agro Industry, several other private milk-
processing plants) entering the dairy processing industry in Addis Ababa. Besides,
smallholder dairy production, also commercial specialized dairy farms around the urban
centers start to develop with their own processing facilities and marketing schemes.
There have been and still are several initiatives to stimulate milk production, collection,
processing and marketing at village level (among other Land O’ Lakes, Finnish Bilateral
Aid, ILRI, various NGO’s often related to local development).

Conducive government policies, laws and regulations as part of the economic

liberalization program besides investment incentives are necessary to smooth the progress
of easy entry in to and expand the investment opportunities in the Ethiopian dairy
industry. To this effect, with the objective of promoting smallholder and commercial
dairy production and the inflow of foreign capital and technology into thecountry, the
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Ethiopian government provides various packages of fiscal incentives to both foreign and
domestic investors engaged in establishing new enterprises and expansions. The
prominent provisions of the Ethiopian investment regulatory environment like equity
restrictions (obligation of local partners, foreign ownership of agricultural land);
incentives to investors (duty and VAT) exemption on machineries, equipments and raw
materials, tax holiday, liberal depreciation rate, loss-carry forward, among others.

It must be clearly embedded that to build a successful and sustainable dairy industry, all
parts of possible entry points for intervention across the milk value chain have to be
identified; from cow to consumer. Possible interventions on the supply side could be
strengthening of raw milk supply, improving milk collection centers, provision of feed,
logistics and breed improvement. In the processing chain quality improvement, business
linkages, training, and technology transfer are important activities to be considered.
Different parts of the value chain need different kinds of support and intervention where
the situation of course requires various case to case interventions. Several entry points
could be identified across the dairy value chain with varied degree of resource
requirement and level of competitions.

The development of successful and sustainable dairy industry could be realized by

strategic interventions into all parts of possible entry points along the milk value chain. In
view of that, several entry points including the innovation of new products are identified
as intervention opportunity with varied degree of resource requirement and level of
competitions.

A closer look at livestock sub-sector in general and the dairy industry in particular reveals
that, this huge resource do not make a substantial contribution to the national income
taking into account its size due to numerous socio-environmental factors. These
constraints include a variety of socio-economic and institutional considerations. The
major socio-environmental factors represent underlying opportunities for increased trade
that may be tapped by dairy businesses in Ethiopia and COMESA to expand trade and
enhance their long term return on investment goals are: low per capita consumption, low
demand and high transaction costs, poor animal health, lack feed, low productivity and
genetics, quality and health problems, lack of institutional support, lack of infrastructure,
lack of access to land and credit, seasonality of supply, collection problem and long
fasting periods.
The analysis of the support market and dairy business services revel that the dairy
industry is immature and young, competition barely exist, basic services are either not
existing or inadequate. In general, it offers wide opportunity for investment in dairy and
related businesses.

DESCRIPTION OF THE PROJECT

MENA private milk-processing plant is a company that is located in akaki subcity at 2km
from Tirunesh Beijing Hospital to the East. Primarly It aims to produce good quality of
milk along with other dairy products like yogurt, cheese, butter and so on.

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The total project cost amounts about 17 million birr and we propose to finance this
capital requirement by a loan of birr 10 million, balance of Birr 2 million by our own
capacity and we propose to sell the remaining 5 million to interested investors.

PROFILE OF THE ENTREPRENEURS

The business is owned by four good friends: Fasika, million, mathios and ebbisa, who are
graduates of AAiT school of civil engineering.

we were motivated to go into the production of dairy after noticing that the market supply
of dairy products in our capital Addis doesn’t meet the demand.

We gathered information and studied the process of milk production from several
literatures and made some studies through interviews and after collecting several datas.

we have studied to determine the Commercial, technical and financial viability of the
Project, that is producing and marketing good quality of dairy products for supplying the
product In the local sub city and surrounding areas.

PROJECT’S CONTRIBUTIONS TO THE LOCAL ECONOMY

The project will employ 14 employees, excluding members of the entrepreneurs. It aims
to raise the quality standard of dairy products like milk, yogurt, cheese, butter and so on
.It will also result in healthy Competition by forcing existing milk producers in the Area
to improve their product quality.

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Chapter 1

Sales and Marketing Plan

1.1 DESCRIPTION OF THE PRODUCT
Milk Consumption in Ethiopia shows that most consumers prefer purchasing of raw milk
because of its natural flavor (high fat content), availability and lower price. Specific
upper income market segments prefer and can afford packaged processed milk.
Packaging costs alone may add up to 25% of the cost of processed milk depending on the
type of packaging used. Polythene sachets of processed milk are cheaper alternatives.

Ethiopians consume less dairy products than other African countries and far less than the
world consumption. The present national average capita consumption of milk is
19kg/year as compared to 27 kg for other African countries and 100kg to the world per
capita consumption (FAO, 2003). The recommended per capita milk consumption is 200
liters/year. On the other hand, they regularly consume other dairy products such as butter,
ayib (cottage cheese) and fermented milk.

Processing raw milk produces a number of products such as, pasteurized milk, yogurt,
cheese and butter. The project is going to collect raw milk from producers (5000
liters per day) for the first five years and (5500 liters per day) starting from year six up
to ten. in a select milk-shed area, further process into pasteurized milk, cheese, butter,
and yogurt. The output of each product type is as follows; 1425 liters of pasteurized milk,
250kg of cheese, 15kg of butter, and 950kg of yogurt. The final product will be
distributed to urban areas that are increasingly consuming these by-products, especially
cheese. The products will be supplied to retailers and in some instances to direct end-
users such as hotels, restaurants, and café’s.

1.2 COMPARISON OF PRODUCT WITH ITS COMPETITORS

we have long observed that the price of dairy products in our capital is not at a reasonable
price especially the powdered cream milk. So we intend to get into the market by
introducing a fresh natural dairy products at reasonable lower price compared to other
products, though producing quality milk is our prime objective. Milk production is
minimal as local producers are still largely dependent on local breeds with an average
daily production of 1.5 liters per day. Hybrid and exotic breeds account for only 0.93
percent and 0.12 percent, of the total number of cattle. We intend to supply quality milk
mainly from hybrid and exotic breeds In which we can produce up to 25 liters per cow
making a huge amount of difference in the production cycle.

1.3 BUSINESS LOCATION

The business will be located in akaki sub city at 2km from Tirunesh Beijing Hospital and
the trunk road of Addis to Nazareth. We chose this location due to The Production

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operation can easily be supervised by the owners, it is close to its targeted markets and it
is easily accessible to the customers as it has got access road to the production site and
The majority of milk shed districts cover most of the urban and peri-urban centres and
regional towns. Moreover, these districts have good telephone, electricity and road
networks.

1.4 MARKET BACKGROUND

Dairying is practiced almost all over Ethiopia involving a vast number of small or
medium or large-sized, subsistence or market-oriented farms. Based on climate, land
holdings and integration with crop production as criterion, dairy production systems are
recognized in Ethiopia; namely the rural dairy system which is part of the subsistence
farming system and includes pastoralists, agro-pastoralists, and mixed crop–livestock
producers; the peri-urban; and urban dairy systems. The first system (pastoralism,
agro-pastoralism and highland mixed smallholder production system) were found to
contribute to 98%, while the peri -urban and urban dairy farms produce only 2% of the
total milk production of the country (Sintayehu et al 2008).

Ethiopia leads the continent of Africa in cattle population and has the tenth largest in the
world. The country was reported to have approximately 52 million cattle in 2012;
the female constituting about 55.57 percent. During the same reporting period, it was
also estimated that 10.6 million milking cows and 7.2 million dairy cows were kept by
households. In terms of regional distribution, the SNNPR had the largest dairy cows
population, closely followed by the Oromia region and with the Amhara region having
third place with a 6% share or slightly over 3 million cattle’s.

Fig 1: regional distribution of dairy cows

Despite the country’s large cattle population, the dairy sector has not yet fully
developed.

1.5 MAJOR CUSTOMERS

The final product will be distributed to urban areas that are increasingly consuming these
by-products, especially cheese. The products will be supplied to retailers and in some
instances to direct end-users such as hotels, restaurants, and café’s.

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1.6 Estimated Total Demand

Ethiopia’s per capita milk consumption rate is 23.38 liters per annum, with an estimated
population size of 85 million; it is assumed that the current milk demand is approximately
19.8 million hectoliters.

DEMAND PROJECTIONS (2017-2022)

Year Pasteurized Milk Butter Cheese Yogurt
(HL) (Tons) (Tons) (Tons)
2017 380,047 4,453 2,072 308
2018 404,645 4,729 2,198 327
2019 430,791 5,021 2,331 347
2020 458,580 5,332 2,473 368
2021 488,114 5,661 2,623 391
2022 519,501 6,011 2,783 415

Table 1: demand projections from 2017-2022

1.7 PLANT CAPACITY

Based on the projection demand level for dairy products, the envisaged plant will have
a capacity of processing 1,800,000 liters of raw milk per annum producing 513,000 liters
of pasteurized milk, 90,000 kilograms of cheese, 342,000 liters of yogurt, and 5,400
kilograms of butter per annum at full operation capacity. This capacity is proposed
on the basis of a single 8-hour shift per day and 360 working days per annum. The
processing plant will start production at 85% of its installed capacity, which will
grow to 90% in the second year. Full capacity production will be attained in the third
year and onwards.

1.8 PROJECTED MARKET SHARE

Market share is the percentage of an industry or market’s total sales that is earned by a
particular company over a specified time period. it is calculated by taking the company’s
sales over the period and dividing by the total sales of the industry over the same period.
So the projected market share is 2.5% in our case.

1.9 SELLING PRICE

The price of pasteurized milk in Addis Ababa is approximately varies between 26
birr to 28 birr per liter, while the price of raw milk varies between 18 birr to 24 birr. For
the proposed project, the suggested price is 23 birr per Ltrs, at the lower tier of pricing, to
increase sales and awareness of product. Cheese, butter, and yogurt products suggested

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sales price is at existing average market rates of 90birr, 190birr, and 34birr per kilogram
respectively.

1.10 SALES FORECAST

If the total demand is 150,000 liters/month and the projected market share is 2.5%, the
project’s potential market site is 150,000*(2.5/100) or 3750 liters per month. However,
for practical purpose, only 70% of the projected market will be considered for sales
forecast, so 3750m3*(70/100) or 2625 liters per month. We believe that the market is
expanding rapidly as the population is increasing with high demand. Conservatively, we
intend that our sale volume will increase by 10% every year and attain 100% of the
projected market share by the third year.

1.11 PROMOTIONAL MEASURES

In order to secure the goodwill of the customers, one month credit will be extended to
those who regularly buy in bulk. Other promotional measures to help in marketing, the
product will be free delivery for volume purchases, use of mouth advertisement by
satisfied clients, use of posters, and regular and prompt supply by the manufacturer.

1.12 MARKETING STRATEGY

The project's marketing strategy is based on the following strategies:

a) Product strategy - it has a good quality product.

b) Pricing strategy - its supplying price is lower than the other products.

c) Promotion strategy – Advertisement

- Prompt and efficient service

d) Distribution strategy – distribution by 3 minivans to our customer’s residence and

commercial areas.

1.13 MARKETING BUDGET

MENA private milk-processing plant will have very modest cost to promote and
distribute its product. It will rely mostly on word of mouth promotion by satisfied
customers as well as endorsement by the customers of the product because of its superior
quality and television commercial due to its large accessibility. Hence, the cost it will
incur will be occasional posters advertisement for a total annual marketing budget of
12,000birr and 53,000 birr for the television commercial (annually).

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Chapter 2

Production Plan
2.1 PRODUCTION PROCESS
Processing of raw milk mainly involves heat treatment operation usually known as
pasteurization and sterilization. A weighed amount of raw milk is pumped to a
clarifier by means of the milk pump, where it is removed of microscopic impurities.
Clarified milk is then sent to the cooler where it is cooled to about 2-5oC, then pumped to
the storage tank. The milk is, then, preheated and pasteurized to a temperature of about
80oC by heat exchange. Further, by the effect of ultra-high temperature sterilizer,
the fatty ingredients are homogenized in the homogenizer and recycled to the ultra-
high temperature sterilizer where it is pasteurized instantly in about 2 seconds at high
temperature of 135oC. Finally, cooling is achieved by means of chilled water to lower
the temperature to 3oC, after which the milk is stored in the surge tank for filling
into suitable containers for various uses. After such a process, a specified quantity of the
milk is sold as a pasteurized product while the remaining portion is further processed in
the plant for the production of other milk products such as butter and cheese.

Whole milk is partially or totally separated to produce standardized whole milk with
3.25% milk fat, low fat milks, 1 - 2% milk fat, and skim milk. After separation, cream is
held in stainless steel tanks and refrigerated at (4 - 7oC). The separated cream is
pasteurized in order to destroy bacteria. Following pasteurization, rapid cooling is
conducted to facilitate the formation of butter by a churning process. By
continuous churning, the enteringcream will be pasteurized giving tempered cream,
which is further agitated vigorously by beater bars. This action causes stripping of the
fat globule membrane and aggregation of the fat into chunks. Finally, a
continuous ribbon of yellow butter streams from the end of the continuous churn
and butter as a product drops into a hopper, where it is transferred to packing
machinery.

Cheese is made from pasteurized skim milk, and in form of discrete particles classified as
small or large curd. A curd forms when the increasing lactic acid of milk during
fermentation attains the isoelectric point of casein at pH 4.6. This soft curd additionally
contains lactose, salt and water. Afterwards, the curd matrix is cut and cooked to about
126oF (52oC). Separation of whey from the curd is rapid, and is followed by two or three
water washings at warm to chill temperatures. Washing removes whey from residues and
acts as a cooking medium. After drainage of the last wash water, the chilled curd is
blended with a viscous, salted cream dressing to give 4.2% fat and 1% salt, and is
packaged.

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2.2 MAINTENANCE AND REPAIRS
Because of the quality control, health and environmental effect, the machineries have to
be maintained and repaired frequently.

2.3 SOURCE OF MACHINERY

The macheneries used in the process of milk production are going to be imported from
abroad.

2.4 PLANNED CAPACITY

The factory has a production capacity of 6000 liters of milk per day of operation. the
factory will initially operate at 80% Capacity, 90% in it’s second year and 100% capacity
starting from the 3rd year.

2.5 FUTURE CAPACITY

Extra Capacity will be used only when demand is sufficiently large to justify working
Overtime.

2.6 TERMS AND CONDITIONS OF PURCHASE OF MACHINERY

The machineries will be Paid at the time of installation.

2.7 PRODUCTION SITE LOCATION AND LAYOUT

The Total land area required is 1,000 square meters out of which 300 square
meters are built – up area. The construction cost of buildings and civil works at a rate
of Birr 4,500 per m2 is estimated at 1.35 million.

Land can be leased from the City Administration, and as such, the cost of leasing land in
the outskirts of Addis Ababa is estimated to be 8000 per m2. The total cost of leasing land
for 70 years is 8million birr.

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Chapter 3

Organization and Management plan

3.1 FORM OF BUSINESS
The business will be registered under the name "MENA private milk-processing plant" as
a group proprietorship and owned by 4 friends: Fasika, Million, Mathios and Ebessa. It
will have its business address located at Akaki sub city.

3.2 ORGANIZATIONAL STRUCTURE

The business will be managed by the owners but all of them have their own management
tasks. Fasika melse will act as a general manager, Million demie as a personnel manager,
Mathios Kassahun as a production manager and Ebessa as a marketing manager. A
supervisor will be hired to manage the production process when the owners are not
around.

3.3 BUSINESS EXPERIENCE AND QUALIFICATIONS OF THE ENTREPRENEUR

The entrepreneurs are graduates of civil engineering in 2018. No other prior experience
after graduation.

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Organizational Chart

MENA private milk-processing plant

General Manager

(Fasika)

(Endale)
Secretary

(to be hired)

Marketing Production Personnel manager

manager manager
(Million)
(Ebessa) (Mathios)

Supervisor

(To be hired)

Daily Laborer

(To be hired)

Chart91 : Organizational Chart of the company

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3.4 PRE-OPERATING ACTIVITIES
We have listed down the following activities to be undertaken before we can operate our
business:

1. Registering the business - 2 days

2. Preparing the business plan - 4 weeks

3. Applying for a loan and approval - 3 weeks

4. Contacting machinery suppliers - 1 week

5. Installing machineries - 4 weeks

6. Hiring labor - 2 days

7. Purchasing raw materials - 2 days

8. Trial production - 1 week

We aim to start our operation approximately three months after our loan application, or
six weeks after release of our loan.

These pre-operating activities with their corresponding timetable appear in Table in a

Gantt chart.

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MENA private milk-processing plant

Pre operating Activities

Activities Time table in Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13

1. Registering the Business

2. Preparing the Business Plan

3. Applying/Approval of Loan

4. Contacting machinery Suppliers

5. Installing the Machinery

6. Hiring Labour

7. Purchasing Raw Material

8. Trial Production

Table 2: Gantt chart

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Chapter 4

Financial Plan
4.1 MACHINERY AND EQUIPMENT
The plant machinery, equipment required for the project is estimated to cost
5,130,000 Birr. These include the necessary inputs and equipments to produce milk,
cheese, butter, and yogurt.

4.2 LAND, BUILDINGS AND CIVIL WORKS

Total land area required is 1,000 square meters out of which 300 square meters
are built – up area. The construction cost of buildings and civil works at a rate of Birr
4,500 per m2 is estimated at 4,500,000 Birr.
Land can be leased from the City Administration, and as such, the cost of leasing land
in the outskirts of Addis Ababa is estimated to be 8,000 Birr per m2. The total cost of
leasing land for 70 years(With 20 years of payment) is 8,000,000 Birr, since Ethiopian
Investment Commission (EIC) states on Proclamation No. 721/2011, Article 20 A
person to whom lease-hold of urban land is permitted must make advance payment
not less than 10 percent of the total lease payment which will be 800,000 birr for
our case.
4.3 STAFFING
The total human resource required for the envisaged plant is 14 persons. The estimated
annual salary (Average salary of 4000 Birr/month) requirement is anticipated to be
672,000 Birr. At time of processing machine installation, training will be provided to
operators and management team on how to properly operate and maintain equipment.
4.4 FINANCIAL ASSUMPTIONS
The financial model of the project is based on the following assumptions;

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Product Mix & Sales

Product Mix Raw Milk (Ltr) Product (Kg) Product (Kg) Price (kg) ETB
Milk (30%) 1,500 1,425 513,000 22 10,260,000
Cheese (50%) 2,500 250 90,000 90 8,100,000
Butter - 15 5,400 190 1,026,000
Yogurt (20%) 1,000 950 342,000 34 11,628,000
5,000 Daily Annualy 31,014,000

Raw Material Cost

Product Mix Milk (Ltr) Price (Ltr) ETB
Milk (30%) 1,500 16 8,640,000
Cheese (50%) 2,500 16 14,400,000
Butter - -
Yogurt (20%) 1,000 16 5,760,000
5,000 16 28,800,000
1000 16 5,760,000
Raw Material Cost 23,040,000
5500 16 31,680,000
1500 16 8,640,000
Raw Material Cost 23,040,000

Product Yield
Product Yield (ltr)
Milk 95.0%
Cheese 10.0%
Butter 1.0%
Yogurt 95.0%

No of Milk Cow Feeding Cost /day Total Feeding(Daily) Total Feeding Cost(Annual)
40 100 Birr 4,000 1,440,000 Birr
60 100 Birr 6,000 2,160,000 Birr

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated to be 16,980,000. The
following table summarizes the total investment cost breakdown;

Investment Type ETB

Cattle Buying Expense 800,000
Land Lease 800,000
Building and Civil work 4,500,000
Machinery and Equipment 5,130,000
Vehicles 700,000
Office Furniture and Equipment 50,000
Working Capital 5,000,000
Total Investment Cost 16,980,000

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FINANCIAL ANALYSIS
Based on the projected financial statement, the project will generate profit throughout the projected
period (10 years). Annual average net profit after tax is projected to be 6 Million with n average
margin of 15.5 %. The IRR of the project will be 25.5%, indicating the financial viability of the
business.
Revenue
1 2 3 4 5 6 7 8 9 10
Milk
11,286,000 12,414,600 13,656,060 13,656,060 13,656,060 15,021,666 15,021,666 15,021,666 15,021,666 15,021,666
Cheese
8,100,000 8,505,000 8,930,250 8,930,250 8,930,250 10,716,300 10,716,300 10,716,300 10,716,300 10,716,300
Butter
1,026,000 1,077,300 1,131,165 1,131,165 1,131,165 1,244,282 1,244,282 1,244,282 1,244,282 1,244,282
Yogurt
11,628,000 11,628,000 11,628,000 11,628,000 11,628,000 13,953,600 13,953,600 13,953,600 13,953,600 13,953,600
Total Revenue
32,040,000 33,624,900 35,345,475 35,345,475 35,345,475 40,935,848 40,935,848 40,935,848 40,935,848 40,935,848
Raw Material
(Milk) 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000
Packaging
1,400,000 1,400,000 1,400,000 1,400,000 1,400,000 1,540,000 1,540,000 1,540,000 1,540,000 1,540,000
Total Raw
Material Cost 24,400,000 24,400,000 24,400,000 24,400,000 24,400,000 24,540,000 24,540,000 24,540,000 24,540,000 24,540,000

Feeding Cost
1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000
Salary
672,000 705,600 740,880 777,924 816,820 857,661 900,544 945,571 992,850 1,042,493
Office Supplies
50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Marketing
65,000 68,250 71,663 75,246 79,008 82,958 87,106 91,462 96,035 100,836
Maintenance
(2.5%) 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000
Utilities
30,000 30,600 31,212 31,836 32,473 33,122 33,785 34,461 35,150 35,853
Fuel &
Lubricants 250,000 256,250 262,656 269,223 275,953 282,852 289,923 297,171 304,601 312,216
Total Overhead
Cost 1,367,000 1,410,700 1,456,411 1,504,229 1,554,254 1,606,594 1,661,359 1,718,665 1,778,635 1,841,397

Annual Leas
Payment 940,000 940,000 940,000 940,000 940,000 940,000 940,000 940,000 940,000 940,000

EBITD 4,333,000 5,874,200 7,549,064 7,501,246 7,451,221 12,249,254 12,194,489 12,137,182 12,077,212 12,014,450

Depreciation
750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000
Total Operating
Cost 3,583,000 5,124,200 6,799,064 6,751,246 6,701,221 11,499,254 11,444,489 11,387,182 11,327,212 11,264,450

Income Tax 1,074,900 1,537,260 2,039,719 2,025,374 2,010,366 3,449,776 3,433,347 3,416,155 3,398,164 3,379,335

Net Income 2,508,100 3,586,940 4,759,345 4,725,873 4,690,854 8,049,477 8,011,142 7,971,028 7,929,049 7,885,115
Net Profit
Margin 8% 11% 13% 13% 13% 20% 20% 19% 19% 19%

AAiT, SCEE Page 18

Dairy Production Business Plan 2010 E.C

MARR = 15 % (Assumption)
𝐹 𝐹1 𝐹2 𝐹3 𝐹
𝑃 = ∑ (1+𝑖)𝑁 =(1+𝑖)1 + (1+𝑖)2 + (1+𝑖)3 + ⋯ (1+𝑖)10 = 26.3 M

NPV = 26.3M – 16.9M = 9.4 M

Internal Rate of Return (IRR)

𝐹
∑ (1+𝑖)𝑁 – 16.9 M = 0

𝑖 = 25.5 % > MARR = 15 %.........Good

Return Period
N Project Cumulative Cash
1 2.5 M 4.1 M
2 3.6 M 8.3 M
3 4.76 M 12.7 M
4 4.72 M 17.4 M
5 4.7 M 22.5 M
6 8.0 M 28.1 M
7 8.0 M 34.3 M
8 7.9 M 41.3 M
9 7.9 M 49.2 M
10 7.88 M 58.2 M

PBP= 4 + (16.9 – 15.58) / 4.7 = 4.28 Years

AAiT, SCEE Page 19