1) Profile On Poultry Farm

PROJECT PROFILE ON POULTRY FARM
NOVEMBER 26, 2022

ADDIS ABEBA CITY ADMINISTRATION INVESTMENT COMMISSION
CONSULTANT:- SHIBAG MANAGEMENT AND

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DEVELOPMENT & EIA CONSULTING FIRM
TABLE OF CONTENT
I. EXECUTIVE SUMMARY ........................................................................................................................................4
1. BACKGROUND INFORMATION ............................................................................................................................6
1.1. INTRODUCTION ................................................................................................................................................ 6

1.2. PRODUCT DESCRIPTION ................................................................................................................................ 6
1.3. PROJECT LOCATION AND JUSTIFICATION ................................................................................................................. 7
1.3.1. Location of Addis Ababa ...................................................................................................................... 7
1.3.2. Demography of Addis Ababa ............................................................................................................... 8
1.3.3. Economic activity of Addis Ababa ........................................................................................................8
1.4. WHY IS IT BENEFICIAL TO INVEST IN ADDIS ABABA? ................................................................................................ 10
1.4.1. The city benefit from the investment .................................................................................................11
2. MARKETING STUDY ....................................................................................................................................12
2.1. MARKET ANALYSIS SUMMARY.................................................................................................................... 12

2.2. THE SUPPLY OF POULTRY PRODUCTS (EGG AND MEAT) ............................................................................... 12
2.2.1. Local Supply and current status ......................................................................................................... 12
3. TECHNOLOGY AND ENGINEERING .....................................................................................................................20
3.1. TECHNOLOGY ................................................................................................................................................ 20

3.1.1. Poultry production process ............................................................................................................... 20
3.1.2. Production Capacity and Production Program ................................................................................... 21
3.1.3. Environmental and social impact assessment of the project .............................................................. 22
3.2. ENGINEERING ................................................................................................................................................ 23
3.2.1. Land, buildings and civil works .......................................................................................................... 23
3.2.2. Machinery and equipment ................................................................................................................ 26
4. POULTRY FARM ORGANIZATIONAL STRUCTURE ...............................................................................................27
4.1. MANPOWER REQUIREMENT AND ESTIMATED ANNUAL MANPOWER COSTS ..................................................................27
5. FINANCIAL ANALYSIS .....................................................................................................................................28
5.1. GENERAL .....................................................................................................................................................28
5.2. INITIAL FIXED INVESTMENT COSTS.................................................................................................................. 29

5.3. WORKING CAPITAL.....................................................................................................................................30
5.4. PROJECT FINANCING .....................................................................................................................................30
5.5. PRODUCTION COSTS ...................................................................................................................................31
5.5.1. Material inputs..................................................................................................................................31
5.5.2. Utilities ............................................................................................................................................. 32
5.5.3. Repair and maintenance.................................................................................................................... 33
5.5.4. Salaries and wages............................................................................................................................ 33
5.5.5. Over heads ........................................................................................................................................ 33
5.5.6. Financial costs ..................................................................................................................................34
5.5.7. Depreciation .....................................................................................................................................35
5.6. BREAK EVEN POINT AND ROI ..................................................................................................................... 36

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5.6.1. Break Even point (BEP) ................................................................................................................. 36

5.6.2. Return on investment .................................................................................................................... 36
5.7. PROJECT COSTS .......................................................................................................................................37
5.8. PROJECT BENEFITS ................................................................................................................................37
LIST OF TABLES
Table 1 Estimated number of poultry by type and breed, in Ethiopia .......................................................... 13
Table 2 Egg production , quantity produced and frequency ......................................................................... 13
Table 3Total number of poultry slaughters per year .................................................................................... 13
Table 4 local supply of egg forecasted ......................................................................................................... 14
Table 5 local supple of poultry meat forecasted ........................................................................................... 15
Table 6 Volume of imported poultry egg from 2012 to 2021 in kg .............................................................. 16
Table 7 Volume of imported chicken meat from 2012 to 2021 in kg ........................................................... 17
Table 8 Future forecast of import of Poultry farm by trend adjusted exponential smoothing method .......... 18
Table 9 Projected Demand for poultry farm products Ethiopia .................................................................... 19
Table 10 Production program ...................................................................................................................... 21
Table 11 Building costs ............................................................................................................................... 24
Table 12 Land lease period in Addis Abeba ................................................................................................ 25
Table 13 Land lease floor price in Addis Abeba .......................................................................................... 25
Table 14 Lists of Equipment Requirements for poultry farming .................................................................. 26
Table 15 Annual manpower costs ................................................................................................................ 27
Table 16 Initial Fixed investment costs ........................................................................................................ 29
Table 17 Raw materials input plan in Birr ................................................................................................... 31
Table 18 Utilities of the factory’000”Birr .................................................................................................... 32
Table 19 Overhead costs .............................................................................................................................. 34
Table 20 Depreciation in Birr"000" ............................................................................................................. 35
Table 21 Source of revenue in Birr"000" ..................................................................................................... 38
Table 22 Annual total production costs”000” .............................................................................................. 41
Table 23 Calculation of working capital ...................................................................................................... 42
Table 24 Projected Net income statement "000" .......................................................................................... 43
Table 25 Debt services schedule and computation ....................................................................................... 44
Table 26 Projected Cash flow statement ...................................................................................................... 45
Table 27 Total investment costs”000” ......................................................................................................... 46
Table 28 Total Assets .................................................................................................................................. 46
Table 29 Sources of finance ......................................................................................................................... 47
Table 30 Summary of financial efficiency tests ........................................................................................... 47
Table 31 Calculation of payback period”000” ............................................................................................. 48
Table 32 Calculation of NPV at 17% D.F.”000” ......................................................................................... 49

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I. Executive summary
This project profile is prepared to assess the viability of running poultry farm, in Addis Abeba city
administration. Hence Market, Technical, Organizational and Financial study was made to
investigate the viability of the envisaged project.
This project profile on Poultry farm has been developed to support the decision –making process
based on a cost benefit analysis of the actual project viability. This profile includes marketing study,
production and financial analysis, which are utilized to assist the decision-makers when determining
if the business concept is viable. Ethiopia has a private sector driven Poultry farm industry.
According to the latest data sourced from Ethiopian investment commission there are 371 registered
companies to invest on poultry farming. However out of them only 23 of them are on operational
stage while others are on implementation and pre-implementation stage.
The location of the project will be decided on the basis of access to raw materials, infrastructure
namely power, water, transport and telecom to easy access to international market.
The project at full capacity operation will supply 12,000 cocks’ meat, 10,600 pullets, 36,780 laying
hens, per year based on 260 working days and their shifts of 24 hours per day.
The total investment capital including establishing the factory is Birr 202 million. Out of the total
investment capital, the owners will cover Birr 60.65 million (30 %) while the remaining balances
amounting to Birr 141.53 million (70 %) will be secured from bank in the form of term loan.

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As indicated in the financial study, the cash flow projection of the project shows surplus from the
first year on. The net cash flows of the project range from Birr 12.89 Million in the first year to Birr
22.70 million at the end of the 10th year of operation. At the end of the 10th year of operation period
the cumulative cash balance reaches Birr 231.71 million. The Benefit-cost ratio and Net present
value (NPV) have been calculated at 17% discount factor (D.F) for 10 years of the project activity.
Accordingly, the project has NPV of 103.39 million Birr at 17%D.F. and the benefit-cost ratio of
1.16 at 17% D.F.
Therefore, from the aforementioned overall market technical and financial analysis we can conclude
that the Poultry farm business is a viable and worthwhile.

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1. Background information
1.1. Introduction
This document was undertaken to show poultry farming investment profile in Addis Ababa. In
compiling the report, information from Addis Ababa investment commission, Addis Ababa trade
and industry development, Ethiopian custom commission and published sources have been
augmented.
Presently, in spite of high demand and its crucial importance, poultry farming products are in short
supply and also significant amounts are imported from abroad. This causes freight transportation
costs from the supplier to the Djibouti Port to the users to be high and in some cases inefficient and
unreliable.
The provision of adequate poultry farming is fundamental importance to Ethiopia’s present and
future demand. In Ethiopia, the demand for poultry farming products is expected to increase
considerably in the next few decades as a result of increased population growth, urbanization and
increasing income levels. Thus, identifying potential of poultry farming production is crucial in a
country like Ethiopia.
1.2. Product description
Poultry farming is the process of raising domesticated birds such as chickens, ducks, turkeys and
geese for the purpose of farming meat or eggs for food. Poultry farming is the form of animal
husbandry which raises domesticated birds such as chickens, ducks, turkeys and geese to
produce meat or eggs for food. Poultry – mostly chickens – are farmed in great numbers. More than
60 billion chickens are killed for consumption annually. Chickens raised for eggs are known as
layers, while chickens raised for meat are called broilers.

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Broiler or sometimes broiler-fryer is also used sometimes to refer specifically to younger chickens
under 2.0 kilograms, as compared with the larger roasters.
Broilers or Broiler chickens are birds that are reared solely for the purpose of meat production. Their
genes make them grow faster than native chickens and layers. Within few weeks, broilers can grow
to attain heavy weights that can cause their vents to protrude out or make them crippled and unable
to walk as a result of their excessive weight gain. Broilers’ feeds are made to have excess energy to
enable them gain weight.
Layers are birds reared for the purpose of egg production. They have genes that make them lay eggs
often (I said often and not daily as some people may make you think as if every chicken must lay
egg every day. It is not realistic). Layers tend not to gain weight and their feeds composition is made
in such a way that it helps them lay eggs without much weight .
1.3. Project location and justification
1.3.1. Location of Addis Ababa

Addis Ababa is the seat of the Ethiopian federal government. It is located on the central highlands
of Ethiopia in the middle of Oromia Region. The absolute location is around the intersection point
of 901’48’’N latitude and 38°44′24″E longitudes. This is very near to the geographical center of the
country. It is, therefore, equidistant to the peripheral areas or is equally accessible to almost all parts
of Ethiopia. Addis Ababa is located on a well-watered plateau surrounded by hills and mountains.
The city is in the highlands on the edge of the Ethiopian rift valley or the eastern slopes of the Entoto
Mountain ranges bordering the Great Rift Valley. The total area of Addis Ababa is about 540 km2
of which 18.2 km2 are rural. Addis Ababa’s built-up urban area spans 474 km2. It is also the largest
city in the world located in a landlocked country.

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1.3.2. Demography of Addis Ababa
According to the CSA (2013) population projection, Ethiopia’s total population reaches about 105
million people in 2022. Of the total population 22.9% (24 million people) live in urban areas.
Ethiopia’s urban population is expected to triple by 2037 (World Bank, 2015). Addis Ababa hosts
an estimated 3,859,638 people. Currently, Addis Ababa is experiencing an annual growth rate of
3.8% and is estimated to reach 4,696,629 inhabitants by 2032 (CSA, 2015).
1.3.3. Economic activity of Addis Ababa
The transformation of Addis Ababa has especially been rapid since 1991. According to the data from
the city’s Bureau of Finance and Economic Development (2006), per capital income of Addis Ababa
has grown from USD 788.48 in 2010 to USD 1,359 in 2015. The city also achieved a decline in the
poverty index from a high of 29.6 in 2012 to 22.0 in 2014. Moreover, the current poverty headcount
index for Addis Ababa is estimated at 18.9 while the poverty severity account for 5 and 1.8 index
points respectively. Even though, the poverty status of Addis Ababa has an improvement over
previous years, there is still much work to be done to curb both the incidence and severity of poverty.
The major contributor to the economic growth of the city is the implementation of publicly financed
mega urban projects like condominium housing, the Light Rail Transit, the international airport and
industrial zone development (The state of Addis Ababa, 2017). The existence of international large
and medium-size enterprises in and around Addis Ababa have also significant role in creating huge
opportunity for employment and technology transfer. Furthermore, there are strong demand for
goods and services following the existence of many embassies and inter-governmental organizations
like the African Union, the United Nations Economic Commission for Africa.

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The manufacturing sector’s contribution to Addis Ababa’s GDP is high. Despite the fact that 86%
of the industries in the city are micro and small scale (cottage and handicrafts, and small-scale), the
majority of the country’s large and medium scale industries are found in the city. Noticeable
increases are also registered currently in other aspects of industrial growth.
The service sector is both the largest contributor to the city’s economy and the largest employer. It
contributes to 76.4% of the city’s GDP while industry’s share makes up (almost all) the rest. This
sector is dominated by three major sub-sectors: Transport and communication; Real estate, Renting
and Business services; and Trade, Hotel and Restaurants. According to the state of Ethiopian Cities
2015 report, the service sector has also been responsible for more than 50% of the growth in the
estimated annual growth of the city’s GDP. Although 75% of employment in the city is also
generated in the service sector, a large proportion of the employed work in low skill and low paying
jobs as shop salespersons, petty and 'gullit' traders, sales workers in small shops, domestic helpers
or doorkeepers and restaurant service workers.
Analysis of the economic structure of Addis Ababa reveals that the services sectors (63%) dominates
with industry (36%) in second place indicating that these sectors account for almost all of the Addis
Ababa’s GDP (The State of Addis Ababa, 2017).
Addis Ababa has a great share in the economy of the country due to its attractiveness to businesses,
companies, individuals and foreign direct investment. Overall primacy index of the city is 24.8 based
on urban employment and unemployment survey (CSA 2015). According to the State of Addis
Ababa 2017 report, the simultaneous high rates of economic growth and urbanization in Addis
Ababa indicates a likely further rising dominance of the city in Ethiopia’s economy as well as
growing agglomeration of economic activities in and around the city.

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1.4. Why is it beneficial to invest in Addis Ababa?

Addis Ababa is the largest and most economically significant city in the country. Ethiopia’s urban
population share is only 17 percent (as of 2012, World Bank 2015). The city is the only urban area
in Ethiopia capable of delivering scale economies in terms of concentrated demand, specialization,
diversity and depth of skills, innovation, and technology transfers. Thus, investors will be benefited
in getting capable human power from the market.
The capital is the country’s main industrial hub. The city dominates industrial capacity in almost all
the braches of light manufacturing that Ethiopia prioritizes. As a result Addis Ababa completely
dominates production in various subsectors. This can be taken as the political and social stability of
the city.
Overall, the city has a beautiful environment, favorable location, and strong industrial base. Its
advantage as an economic powerhouse of the country and human resource center are the most
attractive features for local and overseas investors.
Moreover, investors will be getting a comprehensive set of incentives for priority sectors. These
include:
 Customs duty free privilege on capital goods and construction materials, and on spare parts
whose value is not greater than 15% of the imported capital goods’ total value.
 Investors have the right to redeem a refund of customs duty paid on inputs (raw materials
and components) when buying capital goods or construction materials from local
manufacturing industries.
 Income tax exemption of up to 6 years for manufacturing and agro-processing, and up to 9
years for agricultural investment.

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 Additional 2-4 years income tax exemption for exporting investors located within industrial
parks and 10-15 years exemption for industrial park developers.
 Loss Cary forward for half of the tax holiday period. Several export incentives, including
Duty Draw-Back, Voucher, Bonded Factory, and Manufacturing Warehouse, and Export
Credit Guarantee schemes.
1.4.1. The city benefit from the investment

The city will be benefited from investment. These are discussed below.
 Employment opportunity
Investment is expected to provide direct and indirect employment. These range from
unskilled causal workers, semi-skilled and skilled employees.
 Improving growth of the economy
Through the use of locally available materials and exporting products, the investment
contributes towards growth of the economy by contributing to the growth of domestic
product. These eventually attract taxes including VAT which will be payable to the
government hence increasing government revenue while the cost of local materials will be
payable directly to the producers. In addition, domestic products save foreign exchange and
exports also bring money to the country.

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2. Marketing study
2.1. Market analysis summary
The current drive and emphasis by the government on the diversification of the industrial base away
from the other sector presents an opportunity for production industry to a valuable contribution
towards achieving goal. Having undertaken a thorough and comprehensive research of the market
we realized that there was a vast opportunity for domestic products. Aware of the fact operating in
such a market is largely dependent on good networking, the promoter intends to establish networks
and strategic relationships with various wholesalers and retailers to ensure a steady stream of orders.
In so doing the owner intend to ensure that the products they produce are of extremely high quality
and fully serve the customers purpose.
2.2. The Supply of poultry products (Egg and meat)
2.2.1. Local Supply and current status

In Ethiopia there are large scales, medium and household level poultry farming business. Based on
the data obtained from CSA, most of the poultry are lying hens (36.78%), followed by chicks
(30.36%), pullets are estimated to be about 5.22 million in the country, cocks and cockerels are 5.9
million and 2.63 million respectively. However, estimated number of poultry by type and breed,
shown in table 1.

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Table 1 Estimated number of poultry by type and breed, in Ethiopia
Types of poultry All Indigenous Exotic Hybrid

Number % Number % Number % Number %
All poultry 48,955,675 100 40,001,033 81.71 3,637,250 7.43 5,317,392 10.86
Cocks 5,909,081 12.07 4,948,093 10.11 327,559 0.67 633,429 1.29
Cockerels 2,628,359 5.37 2,098,297 4.29 191,899 0.39 338,162 0.69
Pullets 5,228,359 10.68 4,007,891 8.19 518,165 1.06 702,924 1.44
Non laying hens 2,323,074 4.75 1,909,522 3.90 163,924 0.33 249,627 0.51
Chicks 14,862,312 30.36 13,626,574 27.83 429,100 0.88 806,638 1.65
Laying hens 18,003,870 36.78 13,410,657 27.39 2,006,602 4.10 2,586,610 5.28
Sources: - CSA, 2019/20
Table 2 Egg production , quantity produced and frequency
Egg production Indigenous Hybrid Exotic Grand Total

Average number of egg-lying period/ year 5 10 -
Average length of a period (in days) 23 62 143
Average number of eggs/hen/ period 13 51 120
Total egg production (number) 110,569,380 176,443,288 29,808,501 316,821,169
Sources: - CSA,2019/20
Table 3Total number of poultry slaughters per year
Total number of Total number of Total Offerings

poultry sales slaughters number of
death
National level, poultry sales and slaughters 13,241,454 12,894,275 34,706,683 387,071
Sources: - CSA,2019/20

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Table 4 local supply of egg forecasted
Year Number of Indigenous Laying hens Number of Egg in kg Exotic Laying Number Egg in kg Hybrid Laying Number of Egg in kg
poultry 81.71% 33% egg in pcs 7.43% hens of egg in 10.86% hens egg in pcs
pcs
A B C D E F G H I J K L
2021 48,955,675 40,001,682 13,200,555 712,169,945 313,354,776 3,637,407 270,259 137,832,263 60,646,196 5,316,586 280,716 33,685,889 14,821,791
2022 52,627,351 43,001,809 11,778,195 765,582,707 336,856,391 3,910,212 290,529 148,169,663 65,194,652 5,715,330 301,769 36,212,331 15,933,426
2023 56,574,402 46,226,944 12,661,560 823,001,398 362,120,615 4,203,478 312,318 159,282,392 70,084,252 6,143,980 324,402 38,928,257 17,128,433
2024 60,817,482 49,693,965 13,611,177 884,726,506 389,279,663 4,518,739 335,742 171,228,577 75,340,574 6,604,779 348,732 41,847,880 18,413,067
2025 65,378,793 53,421,012 14,632,015 951,080,987 418,475,634 4,857,644 360,923 184,070,704 80,991,110 7,100,137 374,887 44,986,468 19,794,046
2026 70,282,203 57,427,588 15,729,416 1,022,412,063 449,861,308 5,221,968 387,992 197,876,033 87,065,455 7,632,647 403,004 48,360,451 21,278,599
2027 75,553,368 61,734,657 16,909,123 1,099,092,966 483,600,905 5,613,615 417,092 212,716,713 93,595,354 8,205,096 433,229 51,987,488 22,874,495
2028 81,219,871 66,364,757 18,177,307 1,181,524,951 519,870,979 6,034,636 448,373 228,670,462 100,615,003 8,820,478 465,721 55,886,549 24,590,081
2029 87,311,361 71,342,113 19,540,605 1,270,139,309 558,861,296 6,487,234 482,001 245,820,758 108,161,134 9,482,014 500,650 60,078,041 26,434,338
2030 93,859,713 76,692,771 21,006,150 1,365,399,748 600,775,889 6,973,777 518,152 264,257,332 116,273,226 10,193,165 538,199 64,583,893 28,416,913
2031 100,899,191 82,444,729 22,581,611 1,467,804,733 645,834,082 7,496,810 557,013 284,076,621 124,993,713 10,957,652 578,564 69,427,683 30,548,181
2032 108,466,631 88,628,084 24,275,232 1,577,890,093 694,271,641 8,059,071 598,789 305,382,377 134,368,246 11,779,476 621,956 74,634,760 32,839,294

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Table 5 local supple of poultry meat forecasted
Year Number of Indigenous Cocks Non Total meat Exotic Cocks Non Total Hybrid Cocks Non Total
poultry 81.71% laying in kg 7.43% laying meat 10.86% laying meat
hens hens in kg hens in kg
A B C D E F G H I J K L
2021 48,955,675 40,001,682 4,000,168 1,560,066 5,560,234 3,637,407 24,371 12,003 36,374 5,316,586 65,394 26,583 91,977
2022 52,627,351 43,001,809 4,300,181 1,677,071 5,977,251 3,910,212 26,198 12,904 39,102 5,715,330 70,299 28,577 98,875
2023 56,574,402 46,226,944 4,622,694 1,802,851 6,425,545 4,203,478 28,163 13,871 42,035 6,143,980 75,571 30,720 106,291
2024 60,817,482 49,693,965 4,969,397 1,938,065 6,907,461 4,518,739 30,276 14,912 45,187 6,604,779 81,239 33,024 114,263
2025 65,378,793 53,421,012 5,342,101 2,083,419 7,425,521 4,857,644 32,546 16,030 48,576 7,100,137 87,332 35,501 122,832
2026 70,282,203 57,427,588 5,742,759 2,239,676 7,982,435 5,221,968 34,987 17,232 52,220 7,632,647 93,882 38,163 132,045
2027 75,553,368 61,734,657 6,173,466 2,407,652 8,581,117 5,613,615 37,611 18,525 56,136 8,205,096 100,923 41,025 141,948
2028 81,219,871 66,364,757 6,636,476 2,588,226 9,224,701 6,034,636 40,432 19,914 60,346 8,820,478 108,492 44,102 152,594
2029 87,311,361 71,342,113 7,134,211 2,782,342 9,916,554 6,487,234 43,464 21,408 64,872 9,482,014 116,629 47,410 164,039
2030 93,859,713 76,692,771 7,669,277 2,991,018 10,660,295 6,973,777 46,724 23,013 69,738 10,193,165 125,376 50,966 176,342
2031 100,899,191 82,444,729 8,244,473 3,215,344 11,459,817 7,496,810 50,229 24,739 74,968 10,957,652 134,779 54,788 189,567
2032 108,466,631 88,628,084 8,862,808 3,456,495 12,319,304 8,059,071 53,996 26,595 80,591 11,779,476 144,888 38,872 183,760

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2.2.2. Import
The supply of poultry products has been met both through import and domestic production.
Although there is no apparent trend in the growth of imported poultry.
Table 6 Volume of imported poultry egg from 2012 to 2021 in kg
Year Gross weight Net weight (in CIF value in CIF value in Total TAX in Total Tax
(in Kg) Kg) (ETB) USD ETB USD
2012 1,508 1,508 621,008 34,760 106,827 5,979
2013 7,237 7,235 966,528 51,411 39,371 2,094
2014 616 616 444,764 22,080 72,821 3,615
2015 668 611 259,027 12,464 63,421 3,052
2016 1,723 1,715 866,625 40,124 282,396 13,075
2017 12,876 12,798 1,984,995 81,967 418,735 17,291
2018 6,922 6,554 2,628,213 94,984 489,022 17,673
2019 0 0 0 0 0 0
2020 0 0 0 0 0 0
2021 0 0 0 0 0 0
Source: ERCA and compiled by consultant
As it has been shown in table 6 import of poultry which was 1,508 kg at the beginning of the period
(2012) has increased to decrease to nil by the end of, 2021. A closer observation at the data set
reveals that imported poultry egg over the study period has shown varying patterns. Based on the
data obtained from Ethiopia customs Authority, the annual average volume of imported poultry is
4,433 kg from 2012 through 2021.

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Table 7 Volume of imported chicken meat from 2012 to 2021 in kg
Year Gross weight Net weight (in CIF value in CIF value in Total TAX in Total Tax
(in Kg) Kg) (ETB) USD ETB USD
2012 5,721 5,537 519,164 29,059 350,176 19,601
2013 3,291 3,291 406,623 21,629 274,267 14,589
2014 2,141 2,137 220,421 10,942 148,674 7,381
2015 62,919 53,340 2,060,665 99,156 1,338,534 64,408
2016 390 347 76,320 3,534 475 22
2017 26,925 26,897 1,457,527 60,186 634,400 26,197
2018 0 0 0 0 0 0
2019 0 0 0 0 0 0
2020 18,907 18,742 340,843 9,752 231,142 6,613
2021 5,578 5,510 1,192,747 26,912 845,525 19,078
Source: ERCA and compiled by consultant
As it has been shown in table 7 import of poultry meat which was 5,537 kg at the beginning of the
period (2012) has decreased to 5,510 kg by the end of, 2021. A closer observation at the data set
reveals that imported chicken meat over the study period has shown varying patterns. Based on the
data obtained from Ethiopia customs Authority, the annual average volume of imported chicken
meat is 12,867 kg from 2012 through 2021.

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2.2.2.1. Forecasted future import of poultry
Table 8 Future forecast of import of Poultry farm by trend adjusted exponential smoothing method
Year Imported bird egg Trend Adjusted Imported poultry Trend Adjusted
2012 to 2021 in exponential meat 2012 to 2021 in exponential
kg. smoothing method kg. smoothing method
2012 1,508 5,537
2013 7,235 3,291
2014 616 2,137
2015 611 53,340
2016 1,715 347
2017 12,798 26,897
2018 6,554 0
2019 0 0
2020 0 18,742
2021 0 5,510
2022 6,554 5,510
2023 7,275 5,507
2024 7,996 5,505
2025 8,717 5,502
2026 9,437 5,499
2027 10,158 5,497
2028 10,879 5,494
2029 11,600 5,491
2030 12,321 5,488
2031 13,042 5,486
2032 13,763 5,483
2.2.2.2. Poultry Demand Projection
The demand for poultry can be influenced by a number of factors. The demand for poultry is a
function of population, price of feed, price of substitutes, and other exogenous factors . The size of
population and its growth rate, disposable income prices and culture are few among many variables.
From production point of view, poultry farming is raising of birds domestically or commercially,

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primarily for meat and eggs. for the purpose of this study, attempts have been made to forecast the
likely future demand for poultry on the basis of the following assumptions:
i. Local supply of poultry (egg and meat) assumed to be increased by 7.50% every year
ii. According to factsheet Ethiopia, the Ethiopian poultry sector grows 6 to 10 % per year.
iii. Per capital consumption of egg is assumed to be 1.5kg
iv. Per capital consumption of chicken meat is 1kg
v. According to CSA, agricultural sample survey 2020/2021, Number of poultry in 2022 is 48,955,675.
Therefore, in order to estimate the demand for animal feed, the consumption approach is considered.
Table 9 Projected Demand for poultry farm products Ethiopia
Year Number of Potential Demand Potential Demand of

population of egg in kg chicken meat in kg
2022 120,202,679 180,304,019 120,202,679
2023 123,207,746 184,811,619 123,207,746
2024 126,287,940 189,431,910 126,287,940
2025 129,445,138 194,167,707 129,445,138
2026 132,681,267 199,021,901 132,681,267
2027 135,998,298 203,997,447 135,998,298
2028 139,398,256 209,097,384 139,398,256
2029 142,883,212 214,324,818 142,883,212
2030 146,455,292 219,682,938 146,455,292
2031 150,116,675 225,175,013 150,116,675
2032 153,869,592 230,804,388 153,869,592
As it is indicated above the potential demand for egg in 2032 is 230 million and for chicken meat is
153 million.

19
3. Technology and engineering

3.1. Technology
3.1.1. Poultry production process

20
3.1.2. Production Capacity and Production Program
3.1.2.1. Plant capacity
The project at full capacity operation will supply 12,000 cocks’ meat, 10,600 pullets, 36,780 laying
hens, per year based on 260 working days and their shifts of 24 hours per day. The production
capacity is based on projected demand and realistic market share that could be captured. The
production commences three shift and 260 working days a year. The production program does not
include Sundays and national and public holidays. It was also considered that the plant would
conduct annual maintenance on May when the supply of raw materials are low.
3.1.2.2. Production program
The plant initially produces 70 % of its annual rated capacity bound to initial operating problems
such as machine set up and marketing. The production capacity will increase by 10 % and attain its
full capacity by the fourth year of its commencement.
Table 10 Production program
Full
Period Start-up Capacity
Capacity 70% 80% 90% 100%
utilization
Project year 1 2 3 4
Materials input Unit of Quantity at
for poultry farm measure full Capacity
1 Poultry Number 100,000 70,000 80,000 90,000 100,000
Cocks 12,000 8,400 9,600 10,800 12,000
Cockerels 5,400 3,780 4,320 4,860 5,400
Pullets 10,600 7,420 8,480 9,540 10,600
Non-laying hens 5,220 3,654 4,176 4,698 5,220
Chicks 30,000 21,000 24,000 27,000 30,000
Laying hens 36,780 25,746 29,424 33,102 36,780

21
3.1.3. Environmental and social impact assessment of the project
Typically, any developmental projects also trigger a set of environmental and social impacts. These
environmental and social due to development projects occur in different forms. An Environmental
and Social Impact Assessment (ESIA) has to be carried out to study the potential environmental and
social impacts due to the poultry farming. Potential environmental and social impacts due to the
production of poultry farming products on attributes like air quality, noise, water quality, soil, flora,
socio-economic, etc. have to be assessed as part of the ESIA study. Appropriate mitigation measures
to help minimize/avoid impacts from the development have to be recommended in the study. The
measures include avoidance measures, mitigation measures and environmental enhancement
measures. For the purpose of including environmental costs, the costs of wastewater treatment plant
and solid waste incineration systems are included in the cost of machinery and equipment. Social
responsibility cost estimated to be 1% of fixed investment costs.

22
3.2. Engineering
3.2.1. Land, buildings and civil works

The required area (m2) and construction cost for the production facilities essential for the successful
operation of the processing plant is shown in Table 11. A total area ready for the processing plant is
10,000m2 out of which 5,898m2 is to be covered by building while uncovered area of 4,102 m2 is
left open for parking, storage of waste materials and future expansions. In order to estimate the land
lease cost of the project profiles it is assumed that all the project will be located in different land
level from level 1/1 to level 4/3, their current market lease price is from 39,073.31 birr per M 2 to
2,800.71 birr per M 2respectively. Therefore, for the profile a land lease rate of birr 3,885 per M 2
have been taken, which is between the ranges.
The cost of construction of building should be appropriate to the size and expected profitability of
business, costs of building generally differs by the type of construction materials used, the type of
foundation, wall height and location. The current building cost for simple storage and processing
room is from 1,800.00 Birr per m2 to 25,000 Birr per m2. The total construction cost of buildings
2
and civil works, at a rate of Birr 20,000 per m is estimated at Birr 120.96 million. Therefore, the
total cost of land lease and construction of buildings and civil works is estimated at Birr 159.81
million.
The proposed plant layout comprises the following buildings and structures.

23
Table 11 Building costs
No Description Unit Qty Unit cost Total cost

1 Room for Laying stock with egg receiving room M2 1,000 20,000 20,000,000.00
2 Room for Laying stock with egg receiving room M2 1,000 20,000 20,000,000.00
3 Broilers room (flock density 8/m2) M2 1000 20,000 20,000,000.00
4 Chicks room (6 – 8weeks of age) (flock density M2 500 20,000 10,000,000.00

12/m2)
5 Growers room (9 – 12weeks of age) (flock density M2 500 20,000 10,000,000.00
10/m2)
6 Egg storing room with conditioning facility M2 500 20,000 10,000,000.00
7 Hatching room (incubator room) M2 300 20,000 6,000,000.00
8 Office building M2 200 20,000 4,000,000.00
10 Feed store M2 500 20,000 10,000,000.00
11 Isolation room M2 300 20,000 6,000,000.00
12 Compound fencing LS 3,000,000 3,000,000.00

13 Guard house M2 6 20,000 120,000.00
14 Toilet and shower M2 20 20,000 400,000.00
15 Common Septic tank M3 72 20,000 1,440,000.00
Total 5,898 120,960,000.00

24
Table 12 Land lease period in Addis Abeba
Sector of development Period of Down

activity lease payment
Education, health, 90 10%
culture and sports
Industry 70 10%
(manufacturing )
commerce 60 10%
For urban agriculture 15 10%
For others 60 10%
Sources: - city government of Addis Abeba land development and management bureau
Table 13 Land lease floor price in Addis Abeba

S/No Land level Current land lease Current lease price per M2
floor price per M2 (Market price )
1 1/1 2,213.25 39,073.31
2 1/2 2,165.47 36,825.73
3 1/3 1,900.19 34,578.15
4 ¼ 1,552.93 31,119.21
5 1/5 1,531.91 29,096.45
6 2/1 1327.39 27,073.71
7 2/2 1,221.18 25,050.96
8 2/3 1,191.17 23,028.21
9 2/4 1,074.39 21,005.46
10 2/5 1,027.84 18,982.71
11 3/1 994.71 16,959.96
12 3/2 960.21 14,937.21
13 3/3 927.84 12,914.46
14 ¾ 904.77 10,891.71
15 3/5 873.74 8,868.96
16 4/1 814.06 6,846.21
17 4/2 786.45 4,823.46
18 4/3 748.80 2,800.71
Sources: - city government of Addis Abeba land development and management bureau

25
3.2.2. Machinery and equipment

The main plant and machinery consists incubator, Debeaking machine, mixer,
. Major part of the machinery will be imported.
Table 14 Lists of Equipment Requirements for poultry farming
No Description Unit Qty Unit cost Total cost in

In birr birr
1 Incubator (capacity 2000) No 1 1,500,000 1,500,000
2 Incubator (capacity 5,000 -7000eggs) No 1 2,000,000 2,000,000
3 Incubator (capacity 10,000 eggs) No 1 3,000,000 3,000,000
4 Layers & broilers feeding troughs No 300 1,500 450,000.00
5 Layers & broilers watering troughs No 300 1,000 300,000.00
6 Growers feeding troughs No 100 1,500 150,000.00
7 Growers watering troughs No 100 1,000 100,000
8 Feed weighing balance No 5 25,000 125,000.00
9 Hoover (brooder) No 10 15,000 150,000.00
10 Debeaking tool No 5 15,000 45,000.00
11 Egg laying nest (each box has 50 seats) No 100 15,000 1,500,000
12 Egg holding boxes No 1,000 150 150,000.00
13 Feed mixer No 2 150,000 300,000.00
14 Standby generator No 1 2,500,000 2,500,000.00
Total 12,270,000.00
3.2.2.1. Lists of machinery suppliers

26
4. Poultry farm organizational structure

The selection of structure of the envisaged project is made based on the existing structure of
manufacturing plants operating in the country, the capacity, complexity and technology mix of the
plant. Organizational structure principles such as specialization, coordination, and
departmentalization are also considered for design of structure that best suits the envisaged project
4.1. Manpower Requirement and Estimated Annual manpower costs

Table 15 Annual manpower costs
NO Vacancy Amount Monthly salary Total yearly salary

1 General manager 1 40,000 480,000.00
2 Technical manager (Animal p/n expert) 1 30,000 360,000.00
3 Veterinarian 1 20,000 240,000.00
4 Accountant 1 11,500 138,000.00
5 Cashier, & purchaser 1 8,000 96,000.00
6 Product seller 1 17,000 204,000.00
7 Store keeper 1 7,000 84,000.00
8 Record keeper 1 8,000 96,000.00
9 Chick attendant 8 9,000 864,000.00
10 Growers attendant 6 9,000 648,000.00
11 Layers attendant 12 9,000 1,296,000.00
12 Broilers attendant 5 8,000 480,000.00
13 Guards 4 4,000 192,000.00
14 Feed mixers 3 5,000 180,000.00
15 Driver 2 10,000 240,000.00
Total 46 5,598,000.00

27
5. Financial Analysis
5.1. General
The financial analysis evaluation, under consideration has been carried out for poultry farm cost
estimates of the envisaged factory are mainly consisted of capital investment as well as operating
and maintenance costs. The capital investment costs include fixed investment costs (initial fixed
investment and replacement costs) and working capital, while operating and maintenance costs
comprise current expenses related to material inputs, labor, utility, repair and maintenance costs,
spare parts, Overheads, Sales and distribution, interest and depreciation expenses .
The financial analysis and evaluation has been conducted taking assumptions:
1. It is assumed that about 70% of the total capital investment costs including the working
capital requirement could be covered through development bank loans of short and long-
term credits. The remaining balance 30% will be covered by equity capital contribution of
the project owner.
2. Even though the project might secure loans under different term and conditions as well as
from different financial sources, for the purpose of calculation of debt service scheduling,
the current development bank of Ethiopia credit terms and conditions have been used.
Consequently. It is assumed that the project will secure loan facility on the basis of 11.5 %
annual interest rate, and 10 years’ equal installments.
3. Even though the estimated project production life is more 10 years, the financial analysis has
been undertaken for a period interval covering the first 10 years only, during which time

28
most of the capital assets are assumed to be deprecated, debts recovered and pay-back period
accomplished.
4. It is assumed that the project will be start up production activity at 70 % capacity. During
years 2 & year 3 the projects is anticipated to gradually increase capacity utilization to reach
100% in year 4. Therefore, starting from year 4 the project will be operational at full capacity.
5. For the project under reference promotional, sales and distribution expenses have been
estimated at 3% of the sales revenue.
6. Maintenance and spare parts costs are 1.5% of the fixed investment costs.
5.2. Initial Fixed investment costs

Table 16 Initial Fixed investment costs
S/No Fixed investment Unit of Quantity Unit price Total Amount Remarks
type measurement
1 Land Square meter 10,000 3,885 38,850,000.00 The period of land
lease will be 70
birr/M2 years and 10% of
2 Buildings and civil Square meter 5,898 lump sum 120,960,000.00 the total lease
works amount will be
paid in the first
year
Sub total 159,810,000.00
3 Machineries set 2 Lump sum 12,270,000.00
4 Transformer set 1 Lump sum 2,000,000.00
5 Weighbridge Set 1 Lump sum 4,000,000.00
6 Truck and vehicles Pcs 2 Lump sum 6,000,000.00
7 Furniture and Pcs 500,000.00
fixture
SUB TOTAL 24,770,000.00
Fixed capital 184,580,000.00
investment costs
8 pre-operational 2,000,000.00
expenses
Working capital 15,606,000
TOTAL INVESTMENT COSTS 202,186,000.00

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5.3. Working capital
Working capital is the financial means required for smooth operation and maintenance of a project
mathematically, it is a difference between current assets and current liabilities. In the particular case
of the project under consideration, the current assets comprise receivables, inventories (local and
imported material inputs, spare parts, work in progress, and products ready for delivery) and cash in
hand, while current liabilities comprise accounts payable to creditors.
5.4. Project Financing
Fixed capital investment costs and working capital requirements are assumed to be financed by
equity capital of the owner and through loans of short and long-term credits.
As stated earlier even though the company obtains loans under different terms and condition as well
as from different sources, for the purpose of calculation of debt service scheduling the current
development bank of Ethiopia credit terms and conditions have been used. Accordingly it is
assumed that the company will be able to obtain loan 70% of the total investment costs for
construction of different buildings for purchase of machineries, for purchase of truck and vehicles,
for working capital and for purchase of office furniture and pre operation expense which are 0 will
be covered through bank loans that will have to be repaid back within 10 years, during which time
interest will be paid on the loan. The remaining balance that of the total investment costs will be
expected to be covered by equity contribution of the project promoter.

30
5.5. Production costs
As it is depicted in Annex Table 22 major categories of the total production costs are assembled into
the following cost elements.
5.5.1. Material inputs
In the project under study the basic material inputs are chicken, feed and medicine etc. Therefore, the current
prevailing local and international market prices have been used for estimation of material inputs costs. At
full capacity operation the material inputs costs are estimated at Birr 84 million per annum.
Table 17 Raw materials input plan in Birr
Full
Period Start-up Capacity
Capacity 70% 80% 90% 100%
utilization
Materials input Unit of Quantity at Unit
for poultry farm measure full Capacity price
1 Poultry Number 100,000
Cocks 12,000 300 2,520 2,880 3,240 3,600
Cockerels 5,400 250 945 1,080 1,215 1,350
Pullets 10,600 250 1,855 2,120 2,385 2,650
Non-laying hens 5,220 300 1,096 1,253 1,409 1,566
Chicks 30,000 10 210 240 270 300
Laying hens 36,780 350 9,011 10,298 11,586 12,873
8 Feed Quintals 18,250 3,000 38,325 43,800 49,275 54,750
9 Medicine Kg 10,000 500 3,500 4,000 4,500 5,000
10 Packing materials LS 2,000,00 1,400 1,600 1,800 2,000
Total 58,862 67,271 75,680 84,089

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5.5.2. Utilities
In estimating costs of utility expenses for operation and maintenance of the project, Costs of fuel, oil and
lubricant, electricity and water consumptions have been taken in to consideration, the rates of which have
been estimated on the basis of the proposed capacity utilization program of the project and at the current
official charging rates. At full capacity operation the project will have the following utility expense per annum
which amounts to Birr 4.66million.
Table 18 Utilities of the factory’000”Birr
Start-up Full
Utility”000”Birr Capacity
Capacity utilization 70 % 80 % 90 % 100 %
Item description Unit of measurement
Fuel
Gasoline for service vehicle 100km*260days*37Birr/LIT*8km/Li 84.18 96.20 108.1 120.25
Gasoline for transport truck (200km*300days*37Birr/LIT*5km/Li) 932 1,066 1,199 1,332
Sub-Total 1016 1162 1307 1452
Change of oil and lubricant 10% of the fuel consumption 102 116 131 145
Sub-Total 1,118 1,278 1,438 1,597
Electricity 260days*24 hrs*600kwh* 0.69Birr/kwh 1,808 2,066 2,325 2,583
Sub- Total 1,808 2,066 2,325 2,583

Water 365days*100m3/day*10 Birr/m3 255.50 292.00 328.50 365.00
Sub -Total 255.50 292.00 328.50 365.00

Telecommunication
Telephone 5 lines*
500Birr/month/line+18Birr/line/month 31.08 31.08 31.08 31.08
Mobile 5 lines*500 Birr/month/line 30.00 30.00 30.00 30.00
Fax 2line*1,000Birr/month + 17 Birr/line/month 24.40 24.40 24.40 24.40
Internet 2,500 Birr/month 30.00 30.00 30.00 30.00
Sub-Total 115.48 115.48 115.48 115.48
3,297.00 3,752.00 4,207.00 4,661.00

TOTAL

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5.5.3. Repair and maintenance
In the expenses under this title have been considered cost estimates required for annual repair and
maintenance works including spare parts expenses. These costs include the annual repair expenses
of structures and civil works as well as repair and maintenance expenses of machinery and equipment
including accessory and general service facilities. The repair and maintenance and spare parts costs
have been assumed to be (1.5% of fixed costs and spare part costs).
5.5.4. Salaries and wages

The costs of salaries have been calculated in accordance with the manning list proposed under the
“organization and Management” section of this study. In the estimation of salaries and wages, the
official minimum wage has been taken in to account. At full capacity operation the costs of salaries
and wages will amount to Birr 5.98Million.
5.5.5. Over heads
In the expenses under this title have been included land and building taxes, buildings, vehicles as
well as machinery and equipment insurance, vehicles annual inspection; postage, telephone and e.
mail, stationery and office supplies; printing and copying; audit fee; cash indemnity etc. The
overhead costs and divided in to direct overheads and administration overheads.

33
Table 19 Overhead costs
Direct Overhead”000”Birr Year 1 Year 2 Year 3 Year 4

Annual land lease Payment 5,550.00 5,550.00 5,550.00 5,550.00
Insurance
Building and Civil works 0.10% 121 121 121 121
Machinery and Equipment 0.20% 25 25 25 25
Motor vehicle and Truck 1% 60.00 60.00 60.00 60.00
Vehicles annual inspection and 25,000 Birr per annum per vehicle
registration 50.00 50.00 50.00 50.00
Work cloth Two times per annum per workers at
800 Birr 78.40 78.40 78.40 78.40
Cleaning and sanitation An estimate of 300 Birr/day 78.00 78.00 78.00 78.00
Sub Total
5,962 5,962 5,962 5,962
Administration Overhead “000’ Birr
Audit fee 40,000 Birr per annum 40.00 40.00 40.00 40.00
Office cleaning and sanitation 2,000 Birr per month 24.00 24.00 24.00 24.00
Stationery and office supplies 2,000 Birr per month 20.00 20.00 20.00 20.00
Printing and Copy 2,000 Birr per month 24.00 24.00 24.00 24.00
Sub Total 108.00 108.00 108.00 108.00
6,309.32 6,309,32 6,309.32 6,309,32

GRAND TOTAL
5.5.6. Financial costs

As it has been outlined earlier under” project Financing” the current Development Bank of Ethiopia
credit terms and conditions for newly establishing projects have been used to compute the financial
costs, estimated to be incurred in connection with that of the total investment costs assumed to be
covered through loan financing. The amount of the loan capital to be obtained and the financial costs
to be incurred thereof have been determined depending on the amount of fixed investment cost and
pre-production expenses.

34
5.5.7. Depreciation
Depreciation charges should be taken in to account as part of the total production costs in order to
calculate the total production costs, the net working capital and the gross or net-profit. For the given
project under reference, the fixed assets and the pre-production capital expenditures have been
depreciated and amortized respectively on “a straight line” depreciation method basis using the
following rates of the original acquisition costs of the assets:
The rationale uses for the estimation of the depreciation and the amortization rates is based on the
expected service life of the assets and repayment capacity of the project under consideration. Based
on the above charging rates and consideration of the above facts, the total annual depreciation cost
at full capacity operation have been estimated at Birr 29.08 million.
Table 20 Depreciation in Birr"000"
Period Start-up

Item description Original Value
6,048 6,048 6,048 6,048
Structure and civil works 120,960,000.00 5% of original value
1,841 1,841 1,841 1,841
Machinery and equipment 12,270,000.00 15 % of original value
300.00 300.00 300.00 300.00
Transformer 2,000,000.00 15 % of original value
900.00 900.00 900.00 900.00
Motor vehicles and trucks 6,000,000.00 15 % of original value
600.00 600.00 600.00 600.00
Weighbridge 4,000,000.00 15 % of original value
100.00 100.00 100.00 100.00
Office equipment and furniture 500,000.00 20% of original value
500.00 500.00 500.00 500.00
Pre-operation expense 2,000,000.00 25% of original value
Total 10,289 10,289 10,289 10,289

35
5.6. Break Even point and ROI
5.6.1. Break Even point (BEP)

Three kinds of break-even point
A. BEP Sales Revenue(BR)
B. BEP production (Volume)
C. BEP Percentage (%)
A. Break-even point(BEP) Sales
To determine BEP Annual Sales, multiply annual sales found in income statement by the
annual fixed cost, and divided by Annual sales less Annual variable cost.
Annual sales x Annual fixed costs

BEP (sales) = = Annual sales−Annual variables costs
Annual sales = 608,400,000 Birr

Unit selling price = 35 Birr/kg
Annual sales x Annual fixed costs 100,674,000 x 32,271,000
BEP (sales) = = Annual sales−Annual variables costs = = 100,674,000−65,935,000
BEP (Sales) = 93,521,709Birr
Annual fixed costs x 100%

B. BEP percentage = Annual sales−Annual variables costs
32,271,000 x 100%
= 100,674,000−65,935,000
= 93%
5.6.2. Return on investment

Return on investment = Net profit /Total capital requirement
= 10,284,000/202,186,000
= 5%

36
The return on owners’ investment (ROOI)
= Annual net profit /owners’ investment
= 10,284,000/60,655,800
= 17%
5.7. Project costs
Project capital investment costs are the sum of fixed capital investment (fixed investment plus pre-
production capital expenses) and net working capital at full capacity, with fixed capital constituting
the resources required for constructions and civil works, importation and installation of production
machinery (incubators) and equipment and general service facilities, whereas, the working capital
corresponding to the resources needed for operation of the project totally and partially.
As it has been revealed in Annex Table 22 the total annual operating costs excluding depreciation
and interest are estimated to range from 77 million Birr in year 1 to 104 million Birr in year 4 and
then after remain constant for the rest of the project life.
The total annual production costs including depreciation and interest increase from 104 million Birr
in year 1 to 127 million Birr in year 4 then starts declining until it reaches 113 million Birr in year
10.
5.8. Project benefits
For financial analysis and evaluation of the given project, the current material input price, and
packing materials buying price and final packed poultry farm price at the project gate has been taken
as a basis. As it has been stated earlier the project is envisaged to reach full capacity operation four

37
years after commencement of production activities which are assumed to begin with 70% of the
estimated total capacity.
At full capacity operation the project is envisaged to have the following revenue components.
Table 21 Source of revenue in Birr"000"
Period Start-up Full Capacity

70% 80% 90% 100% 100%
Capacity utilization
Project year 1 2 3 4 5
At full
Product type capacity
1 Cocks meat 12,000 16,800 19,200 21,600 24,000 24,000
2 Cockerels 5,400 5,670 6,480 7,290 8,100 8,100
3 Pullets 10,600 11,130 12,720 14,310 15,900 15,900
4 Non-laying hens 5,220 7,308 8,352 9,396 10,440 10,440
5 Chicks 30,000 10,500 12,000 13,500 15,000 15,000
6 Laying hens 36,780 64,365 73,560 82,755 91,950 91,950
7 Manure 730,000 kg 5,110 5,840 6,570 7,300 7,300
Total 120,883 138,152 155,421 172,690 172,690
Thus, according to the computation in Annex Table 24 and Annex Table 26, the net income and cash
flow statements analysis revealed that at full capacity operation the project will generate a total
income (gross revenue) amounting to 143.82 million Birr per annum. The corresponding Annex
Table 24 of “Net Income Statement” shows a steady growth of gross profit starting from -3.4 million
Birr in year 1 reaching the peak of 30.60 million Birr in year 10. In its 10 years of manufacturing
activities, the project is expected to generate a total net profit of 109 million Birr and contribute 59
million Birr to the government treasury in form of 35% income tax.

38
According to the current investment Law, machinery and equipment are anticipated to be imported
duty- free. The liquidity position of the project is very strong. The corresponding Annex Table 26
of “Cash Flow Statement” shows the positive cumulative cash balance of Birr 604 million and the
project will not face any cash shortage throughout its production life.
The computation of the pay-back period as depicted in Annex table 31 indicates that the project will
be able to reimburse itself from its net cash-income within eleven years after commencement of
production activities, the period which is considered to be very good for the project of this nature.
In Annex Table 32 of the Benefit-cost ratio and Net present value (NPV) have been calculated at
17% discount factor (D.F) for 10 years of the project activity. Accordingly, the project has NPV of
103.39 million Birr at 17%D.F. and the benefit-cost ratio of 1.16 at 17% D.F. These results are most
appreciable, especially, when related to the external capital borrowing interest rate which ranges
from 8.50% to 18.5 % for newly establishing projects.
The project under study when implemented will have BEP at about 93% operation of the estimated
full capacity. In addition to this, finally, summary of financial efficiency tests have been conducted
in Annex table 30, Accordingly, all efficiency ratios indicated positive trends and consequently, it
can be inferred that the project can operate in the frame work of free market mechanism on
commercially and financially viable business.

39
ANNEXES

40
ANNEX II
CALCULATION OF ANNUAL PRODUCTION COSTS
Table 22 Annual total production costs”000”
Period Start-up Full capacity
Capacity utilization 70 % 80 % 90 % 100 % 100 %
Project Year 1 2 3 4 5 6 7 8 9 10
Cost category
I. Material inputs 58,862 67,271 75,680 84,089 84,089 84,089 84,089 84,089 84,089 84,089
II. Labor 5,598 5,598 5,598 5,598 5,598 5,598 5,598 5,598 5,598 5,598
III. Utility 3,297 3,752 4,207 4,661 4,661 4,661 4,661 4,661 4,661 4,661
IV. Repair and Maintenance and spare 2,769 2,769 2,769 2,769 2,769 2,769 2,769 2,769 2,769 2,769
parts (1.5 % of fixed costs)
VI Direct overheads 5,962 5,962 5,962 5,962 5,962 5,962 5,962 5,962 5,962 5,962
A. Direct Production costs 76,488 85,352 94,216 103,079 103,079 103,079 103,079 103,079 103,079 103,079
VII. Administration over head 108 108 108 108 108 108 108 108 108 108
VIII. Marketing and Promotional expense 1,007 1,151 1,294 1,438 1,438 1,438 1,438 1,438 1,438 1,438
3 % of sales revenue
B. Operating costs 77,603 86,611 95,618 104,625 104,625 104,625 104,625 104,625 104,625 104,625
Interest 16,276 15,325 14,266 13,085 11,768 10,300 8,662 6,836 4,800 2,530
Depreciation 10,289 10,289 10,289 10,289 9,789 9,689 8,477 6,048 6,048 6,048
C. Total production costs 104,168 112,225 120,173 127,999 126,182 124,614 121,764 117,509 115,473 113,203

41
ANNEX IV
CALCULATION OF WORKING CAPITAL REQUIREMENTS
I. Minimum requirement of current assets and liabilities

A. Accounts receivable: 30 days at total production costs minus depreciation and interest
B. Inventory
1. Material inputs: 30days
2. Spare parts : 90 days
3. Work under process: two days at direct costs
4. Product ready for delivery: 8 days at direct costs plus administration overheads
C. Cash on hand : 90 days
D. Accounts payable 52 days for material inputs and utilities
ii. Working capital requirement
Table 23 Calculation of working capital
Minimum Coeff- Project year

Days of icient Start up Full capacity
coverage of
Cost category turnover
1 2 3 4 5 6 7 8 9 10
I. Current asset
A. A/R 26 10 7,760 8,661 9,562 10,463 10,463 10,463 10,463 10,463 10,463 10,463
B. Inventory
1. Material inputs 26 10 5,886 6,727 7,568 8,409 8,409 8,409 8,409 8,409 8,409 8,409
2. Spare parts 90 4 692 692 692 692 692 692 692 692 692 692
3. Work under process 2 130 588 657 725 793 793 793 793 793 793 793
4. Product ready for delivery 8 32.5 2,461 2,734 3,007 3,280 3,280 3,280 3,280 3,280 3,280 3,280
C. Cash on hand
4,434 4,547 4,661 4,775 4,775 4,775 4,775 4,775 4,775 4,775
D. Current assets 21,822 24,018 26,215 28,411 28,411 28,411 28,411 28,411 28,411 28,411
II. Current liabilities 6,216 7,102 7,989 8,875 8,875 8,875 8,875 8,875 8,875 8,875
A. A/p 26 10
III. Working capital
A. Net working capital 15,606 16,916 18,226 19,536 19,536 19,536 19,536 19,536 19,536 19,536
B. Increasing in working capital
15,606 1,310 1,310 1,310 0 0 0 0 0 0
CONSULTANT:- SHIBAG MANAGEMENT AND DEVELOPMENT & EIA CONSULTING FIRM 42

ANNEX VI
PROJECTED NET INCOME STATMENT
Table 24 Projected Net income statement "000"
Period Start up Full capacity
Project year 1 2 3 4 5 6 7 8 9 10
Item description
120,883 138,152 155,421 172,690 172,690 172,690 172,690 172,690 172,690 172,690
Product sales revenue
104,168 112,225 120,173 127,999 126,182 124,614 121,764 117,509 115,473 113,203
Less total production costs
Gross profit 16,715 25,927 35,248 44,691 46,508 48,076 50,926 55,181 57,217 59,487
Tax 5,850 9,074 12,337 15,642 16,278 16,827 17,824 19,313 20,026 20,820
Net profit 10,865 16,853 22,911 29,049 30,230 31,249 33,102 35,868 37,191 38,667
Accumulated undistributed
profit 10,865 27,717 50,629 79,678 109,908 141,157 174,259 210,127 247,318 285,984

ANNEX VII
DEBT SERVICE SCHEDULE AND COMPUTATION
PAYMENT OF EQUAL ANNUAL INSTALLMENTS
Table 25 Debt services schedule and computation
Item description Project year

1 2 3 4 5 6 7 8 9 10
A. Investment and working capital
1. Investment
2. Increment working capital
Total
B. Loan receipts and balances
1. Loan receipts 141,530
2. Outstanding balance at
end of year 141,530 133,268 124,056 113,784 102,331 89,561 75,323 59,447 41,745 22,007
a. First year loan
Total
A. Debt service
1. First year Loan
a. Interest 16,276 15,325 14,266 13,085 11,768 10,300 8,662 6,836 4,800 2,530
b. Repayment of principal 8,262 9,212 10,272 11,453 12,770 14,238 15,876 17,702 19,737 22,007

ANNEX VIII
CASH-FLOW STATEMENT
FOR
FINANCIAL PLANING
Table 26 Projected Cash flow statement

Capacity utilization 70% 80% 90% 100%
Project year 1 2 3 4 5 6 7 8 9 10
Item description
A. Cash - inflow 329,285 140,348 157,618 174,886 172,690 172,690 172,690 172,690 172,690 172,690
1. Financial resource 208,402 2,196 2,197 2,196
(total)
2. Sales revenue 120,883 138,152 155,421 172,690 172,690 172,690 172,690 172,690 172,690 172,690
B. Cash – outflow 316,393 122,418 134,690 147,001 145,441 145,990 146,987 148,476 149,188 149,982
1. Total assets schedule 208,402 2,196 2,197 2,196
including replacement
2. Operating costs 77,603 86,611 95,618 104,625 104,625 104,625 104,625 104,625 104,625 104,625
3. Debt service (total)
a. Interest 16,276 15,325 14,266 13,085 11,768 10,300 8,662 6,836 4,800 2,530
b. Repayment 8,262 9,212 10,272 11,453 12,770 14,238 15,876 17,702 19,737 22,007
4. Tax 5,850 9,074 12,337 15,642 16,278 16,827 17,824 19,313 20,026 20,820
C. Surplus (Deficit) 12,892 17,930 22,928 27,885 27,249 26,700 25,703 24,214 23,502 22,708
D. Cumulative cash balance 12,892 30,822 53,750 81,635 108,884 135,584 161,287 185,501 209,003 231,711

ANNEX XII
TOTAL INVESTMENT COSTS
Table 27 Total investment costs”000”

Project year 1 2 3 4 5 6 7 8 9 10 11
Investment Category
1. Fixed investment costs
a. Initial fixed investment costs 184,580
b. Replacement
2. Pre-operational capital expenditure 2,000
3. Working capital increase 15,606 1,310 1,310 1,310
Total investment costs 202,186 1,310 1,310 1,310
ANNEX XIII
TOTAL ASSETS
Table 28 Total Assets

Project year 1 2 3 4 5 6 7 8 9 10 11 12
Investment Category
1. Fixed investment costs
c. Initial fixed investment costs 184,580
 Cost of land
d. Replacement
2. Pre-operational capital expenditure 2,000
3. Current assets increase 21,822 2,196 2,197 2,196
Total assets 208,402 2,196 2,197 2,196

ANNEX XIV
SOURCES OF FINANCE
Table 29 Sources of finance

Project year 1 2 3 4 5 6 7 8 9 10 Total
Sources of finance
1. Equity capital 60,656 1,310 1,310 1,310
2. Loan capital 141,530
3. Current liabilities 6,216 886 887 886
Total finance 208,402 2,196 2,197 2,196
ANNEX XI
SUMMARY OF FINANCIAL EFFECIENCY TESTS
Table 30 Summary of financial efficiency tests
Project year
Project year 1 2 3 4 5 6 7 8 9 10
Capacity utilization 70% 80% 90% 100%
Financial ratio in %
1. Gross profit : Revenue 14% 19% 23% 26% 27% 28% 29% 32% 33% 34%
2. Net profit : Revenue 9% 12% 15% 17% 18% 18% 19% 21% 22% 22%
3. Net profit : initial investment 5% 8% 11% 14% 15% 15% 16% 17% 18% 19%
4. Net profit : Equity 18% 27% 36% 45% 47% 48% 51% 56% 58% 60%
5. Gross profit : Initial investment 8% 13% 17% 22% 23% 23% 25% 27% 28% 29%
6. Operating costs : Revenue 64% 63% 62% 61% 61% 61% 61% 61% 61% 61%

ANNEX XV
CALCULATIONS OF PAYBACK PERIOD
Table 31 Calculation of payback period”000”
Amount Paid Back Total

Year Net Profit Depreciation Total investment End of year
1 10,865 10,289 21,154 202,186 -181,032
2 16,853 10,289 27,142 1,310 -155,200
3 22,911 10,289 33,200 1,310 -123,310
4 29,049 10,289 39,338 1,310 -85,282
5 30,230 9,789 40,019 -45,263
6 31,249 9,689 40,938 -4,325
7 33,102 8,477 41,579 +37,254

ANNEX XVI
CALCULATIONS OF NET PRESENT VALUE AT 17% D.F.
Table 32 Calculation of NPV at 17% D.F.”000”
Project Gross Present value Project costs

year Revenue 1/(1+i)n At at 17% Total Operating Total Present value
17% investment costs at 17%
1 120,883 0.854701 202,186 77,603
103,319 279,789 239,136
2 138,152 0.730514 1,310 86,611
100,922 87,921 64,228
3 155,421 0.624371 1,310 95,618
97,040 96,928 60,519
4 172,690 0.53365 1,310 104,625
92,156 105,935 56,532
5 172,690 0.456111 104,625
78,766 104,625 47,721
6 172,690 0.389839 104,625
67,321 104,625 40,787
7 172,690 0.333195 104,625
57,539 104,625 34,861
8 172,690 0.284782 104,625
49,179 104,625 29,795
9 172,690 0.243404 104,625
42,033 104,625 25,466
10 172,690 0.208037 104,625
35,926 104,625 21,766
Total
724,202 620,810
A. Benefit- cost ratio At 17% D.F. = 1.16
B. NPV At 17% D.F. = 103,392,000 Birr

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PROJECT PROFILE ON POULTRY FARM

PROJECT PROFILE ON POULTRY FARM

NOVEMBER 26, 2022

CONSULTANT:- SHIBAG MANAGEMENT AND

1. BACKGROUND INFORMATION ............................................................................................................................6

1.1. INTRODUCTION ................................................................................................................................................ 6

2. MARKETING STUDY ....................................................................................................................................12

2.1. MARKET ANALYSIS SUMMARY.................................................................................................................... 12

3. TECHNOLOGY AND ENGINEERING .....................................................................................................................20

3.1. TECHNOLOGY ................................................................................................................................................ 20

4. POULTRY FARM ORGANIZATIONAL STRUCTURE ...............................................................................................27

4.1. MANPOWER REQUIREMENT AND ESTIMATED ANNUAL MANPOWER COSTS ..................................................................27

5. FINANCIAL ANALYSIS .....................................................................................................................................28

5.1. GENERAL .....................................................................................................................................................28

5.2. INITIAL FIXED INVESTMENT COSTS.................................................................................................................. 29

CONSULTANT:- SHIBAG MANAGEMENT AND

5.6.1. Break Even point (BEP) ................................................................................................................. 36

5.7. PROJECT COSTS .......................................................................................................................................37

5.8. PROJECT BENEFITS ................................................................................................................................37

CONSULTANT:- SHIBAG MANAGEMENT AND

investigate the viability of the envisaged project.

stage while others are on implementation and pre-implementation stage.

CONSULTANT:- SHIBAG MANAGEMENT AND

1.16 at 17% D.F.

that the Poultry farm business is a viable and worthwhile.

CONSULTANT:- SHIBAG MANAGEMENT AND

country like Ethiopia.

1.2. Product description

layers, while chickens raised for meat are called broilers.

CONSULTANT:- SHIBAG MANAGEMENT AND

under 2.0 kilograms, as compared with the larger roasters.

enable them gain weight.

1.3. Project location and justification

1.3.1. Location of Addis Ababa

city in the world located in a landlocked country.

CONSULTANT:- SHIBAG MANAGEMENT AND

1.3.2. Demography of Addis Ababa

3.8% and is estimated to reach 4,696,629 inhabitants by 2032 (CSA, 2015).

1.3.3. Economic activity of Addis Ababa

CONSULTANT:- SHIBAG MANAGEMENT AND

increases are also registered currently in other aspects of industrial growth.

or doorkeepers and restaurant service workers.

Ababa’s GDP (The State of Addis Ababa, 2017).

growing agglomeration of economic activities in and around the city.

CONSULTANT:- SHIBAG MANAGEMENT AND

1.4. Why is it beneficial to invest in Addis Ababa?

in Ethiopia capable of delivering scale economies in terms of concentrated demand, specialization,

in getting capable human power from the market.

attractive features for local and overseas investors.

 Income tax exemption of up to 6 years for manufacturing and agro-processing, and up to 9

years for agricultural investment.

CONSULTANT:- SHIBAG MANAGEMENT AND

parks and 10-15 years exemption for industrial park developers.

Credit Guarantee schemes.

1.4.1. The city benefit from the investment

unskilled causal workers, semi-skilled and skilled employees.

 Improving growth of the economy

contributes towards growth of the economy by contributing to the growth of domestic

exports also bring money to the country.