212.

PROFILE ON CATTLE SLAUGHTERING HOUSE

212-2 TABLE OF CONTENTS

PAGE

I.

SUMMARY

212 - 3

II.

PRODUCT DESCRIPTION & APPLICATION

212 - 3

III.

MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY B. PLANT CAPACITY & PRODUCTION PROGRAMME

212 - 4 212 - 4 212 - 7

IV.

RAW MATERIALS AND INPUTS A. RAW & AUXILIARY MATERIALS B. UTILITIES

212 - 8 212 - 8 212 - 9

V.

TECHNOLOGY & ENGINEERING A. TECHNOLOGY B. ENGINEERING

212 - 10 212 - 10 212 - 12

VI.

MANPOWER & TRAINING REQUIREMENT A. MANPOWER REQUIREMENT B. TRAINING REQUIREMENT

212 - 13 212 - 13 212 - 14

VII.

FINANCIAL ANALYSIS A. TOTAL INITIAL INVESTMENT COST B. PRODUCTION COST C. FINANCIAL EVALUATION D. ECONOMIC BENEFITS

212 - 15 212 - 15 212 - 16 212 - 17 212 - 17

212-3 I. SUMMARY

This profile envisages the establishment of a cattle slaughtering house with a capacity of 2,400 heads per annum.

The present demand for the proposed service is estimated at 2,267 heads per annum. The demand is expected to reach at 4,275 heads by the year 2017.

The plant will create employment opportunities for 39 persons.

The total investment requirement is estimated at about Birr 4.84 million, out of which Birr 3.2 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 14 % and a net present value (NPV) of Birr 844,430 discounted at 8.5%.

II.

PRODUCT DESCRIPTION AND APPLICATION

Cattle slaughterhouse is an establishment where animals like cattle, sheep, goats, pigs and camels are slaughtered for butchers, households, hotels and institutions like hospitals, universities, colleges, military camp, etc. As the need for neat meat rises with urbanization, small to medium slaughterhouse equipped with the necessary facilities is appropriate to South Nations Nationalities and Peoples regional state, SNNPR.

The slaughterhouse also processes the by-products to produce usable products like glue, animal tallow and bone meal for animal feed.

212-4

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET STUDY

1.

Supply and Present Demand

Small to medium slaughterhouses equipped for complete processing are well suited for medium cities and daily supply of the population with fresh meat. The need for meat and properly organized slaughterhouses is on the rise with urbanization.

The in existence of modern slaughter hoses and lack of awareness on the part of the community has resulted in the increase of illegal slaughter of cattle, sheep, goat and the like. Illegal slaughter of these animals is creating unfavorable effects on the environment in addition to the health hazards of the population. Moreover, a number of animal by products such as hides and skins, horns, blood, ophal etc are wasted which have economic importance if they are properly handled by legally established slaughterhouses.

In this project profile the town of Butajira is selected as a sample town to asses the market situation for the envisaged service. Butajira, being not different from other towns and cities of the country, suffers from illegal slaughter of animals. In order to solve the problem the municipality of the town has earlier constructed a slaughterhouse which had facilities under one rood but self contained slaughter halls partitioned by roof high wall to serve both Christians and Moslems. However, the slaughterhouse has not been used by ether group due to religious reasons. Therefore, the slaughtering of cattle in the town is mostly done in other locations in the town.

The solution for curbing illegal slaughter of animals is to increase access for legally established slaughterhouses and create awareness on the negative impacts of illegally slaughtering of animals among the population.

212-5

To estimate the present demand for slaughtering service an end-users approach has been adopted. Accordingly, the 2000/01 Household Income, Consumption and

Expenditure Survey of CSA is used as base as depicted in Table 3.1.

Table 3.1 CONSUMPTION OF MEAT BY EXPENDITURE GROUP (2000/01)

Expenditure Group

Consumption Per Person (gm)

No. of Persons in the Group

Total Consumption (Tone)

<600 600 999 1,000 1,399 1,400 1,999 2,000 2,599 2,600 3,399 3,400 4,199 4,200 5,399 5,400 6,599 6,600 8,999 9,000 12,599 12,600 16,199 16,200 19,999 > 20,000

552 411 1,074 1,478 1,975 2,052 2,845 3,356 5,371 6,242 9,353 12,833 17,512

1,251,249 1,907,902 2,351,416 4,545,900 5,388,520 7,989,689 7,442,894 8,393,797 5,486,414 6,276,199 3,049,346 906,022 479,185 485,706

1,053 966 4,882 7,964 15,780 15,273 23,886 18,412 33,709 19,034 8,474 6,149 8,506

Grand Total

55,954,239

164,084

Source: - Income, Consumption and Expenditure Survey 2000/01 CSA.

As shown in Table 3.1, the national demand for the product during the time of the survey was 164,084 tones per annum. Taking the total population size during the same period (i.e 55.95 million), the per capita consumption of meat is computed to be

212-6 3.93 kg. Accordingly taking the present population size of Butajira town the, the current (2007) demand for the product is estimated at 272,000 kg or about 2,267 heads of cattle per annum.

2.

Projected Demand

The demand for slaughterhouse is a derived demand of meat. The demand for meat is mainly influenced by population growth and income. Urban population in the past years has been growing by more than 4% per annum while GDP is 7%. By

considering these two factors demand for slaughtered cattle is assumed to grow by 5% per annum. The projected demand is presented in Table 3.2.

Table 3.2 PROJECTED DEMAND FOR SLAUGHTERED CATTLE (N0)

Projected Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Demand 2380 2499 2624 2756 2893 3038 3190 3349 3517 3693 3877 4071 4275

212-7

1.

Pricing and Distribution

The abattoir that is operating in Addis Ababa charges Birr 72 per cattle for butcher shops and Birr 45 per cattle for special occasion slaughtering services such as wedding ceremony.

The above prices for the slaughtering services are proposed for the envisaged project.

B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

The proposed annual processing capacity of the envisaged plant only taking a share of 96% to the forecasted demand of the year 2009 is 2,400 cattle, based on 300 working days a year and a single shift of 8 hours per day. The capacity can be increased by increasing the number of working hours per day.

2.

Production Programme

The plant is assumed to start production at 80% of its rated capacity in the first year and increase its production to 90% in the second year considering the problem of illegal slaughtering. The plant will operate at full capacity (100%) starting from third year. Table 3.4 PRODUCTION PROGRAMME

Year Capacity Utilization [%] Production [heads]

1 80 1,920

2 90 2,160

3-10 100 2,400

212-8 IV. INPUTS

The inputs required by the project are utilities such as electric power, furnace oil and water. The total annual cost of utilities at full capacity is estimated to be Birr

348,594. The annual requirement of these utilities along with cost is shown in Table 4.2. Table 4.2 UTILITIES REQUIREMENT AND COST

Sr. No. 1 2 3

Material

Qty.

Unit Cost

Cost ('000 Birr)

Electric power Water Furnace fuel Total

85,630 kWh 2,400 m3 90,000lt. -

0.4736 3.10 3.34 -

40,554 7,440 300,600 348,594

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

The animals supplied to the slaughterhouse are weighed on a cattle balance and then unloaded along the reception ramp into pens for rest.

The cattle undergo a medical check up for the presence of any disease before they are slaughtered. They are stunned by a gun in a box and afterwards slaughtered and removed to the bleeding line where blood is collected in a basin. The carcasses are loaded by electric hoist from the slaughter line to the processing line. Loading, spreading of rear legs and de-hiding are carried out on a three level plat form, and final de-hiding done on a two level plat form by means of a pneumatic knife.

212-9 The horns are removed by electric saw, and the heads inspected and washed. The brisket is opened by electric saw, this entails inspected and extracted. Stomach and casings are transported for cleaning. Carcasses are split into halves which are washed and inspected. The meat is cut on tables in a cutting room by means of electric or hand operated saws and knives. Then the meat is washed to remove blood and kept in the chilled room till supplied to the customers.

By products include non-edible fat, bone meal, glue, horn etc. The efficient utilization of by products is essential for the economic operation of a processing plant. The total annual revenue obtained from the sale of these by products is estimated at Birr 800,000.

The envisaged plant needs waste water treatment plant that uses physico-chemical system in order to abate the environmental pollution. The treatment process involves settling, filtration, addition of flocculates and mixing, and floatation. The sludge from the treatment plant is used as fertilizer.

2.

Source of Technology

The machinery and equipment required by the slaughterhouse can be obtained by contacting the following companies through the address given:

1.

KPSAR ENGINEERING WORKS. Tel. 91-11-5440092. Fax 91 - 11-546 2626. INDIA.

2.

Endeco S.P.A. Prato Della Valle 81-padova Tel. +39049655433 Fax. +39049655697 E-mail: endeco@endeco.it Web site: www. endeco.it

212-10 B. ENGINEERING

1.

Machinery and Equipment

The list of machinery and equipment is given in Table 4.1.

The total cost of

equipment and machinery required to achieve the aforementioned capacity is estimated to be Birr 3.2 million, of which 2.72 million is required in foreign currency.

212-11 Table 4.1 MACHINERY AND EQUIPMENT REQUIREMENT

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

Description Stunning box Stunning Pistol Live Scale carriage plant Cattle Race Bleeding Hoist Washbasin with sterilizer Bleeding shackle Bleeding rail Horn Cutter Washbasin with sterilizer Rail for return of shackle Cutter for legs Dressing rail Washbasin with sterilizer Brisket saw with sterilizer Washbasin with sterilizer Splitting saw with sterilizer Container for condemned carcasses Inspecting platform Washbasin with sterilizer Shower Trimming platform Quartering saw with sterilizer Rails for quartering and dispatch Roller hooks Trolley for hooks Blood pump Head shower Washbasin with sterilizer Evisceration Table Container for condemned intestines Table for hide cleaning Table for de-skinning of heads Table for trimming of head meat Trolley for head skin Table for cleaning of stomachs & intestine Tray for empty stomachs Tray for plucks Boiler Digester Autoclave

Qty. 1 1 1 25m 16 2 1 10 30Ml 2 1 30Ml 2 30Ml 1 1 1 1 1 1 1 1 1 1 60Ml 800 2 1 1 1 1 1 2 1 1 1 2 30 100 1 1 1

212-12 2. Building and Civil Works

The envisaged Slaughterhouse will require a total land area of 2,500 m2, of which 1000 m2 will be covered by factory and office buildings, stores, etc. The total cost of building and civil works at a rate of Birr 1,500 per m2 will be Birr 1,500,000. Cost for holding of land at lease rate of Birr 0.15 per m2 for 80 years is estimated at Birr 30,000.Therefore, the total cost for land holding, building and civil works is estimated at Birr 1,530,000.

3.

Proposed Location

The envisaged slaughterhouse is proposed to be located at Butajira town.

VI.

MANPOWER AND TRAINING REQUIREMENTS

A.

MANPOWER REQUIREMENT

The manpower requirement of the plant will be 39 persons. The total manpower cost including fringe benefit is estimated at Birr 333,360. Table 5.1 shows the details of manpower requirement of the plant and estimated annual labor cost including fringe benefits.

212-13 Table 5.1 MANPOWER REQUIREMENT AND ESTIMATED ANNUAL LABOUR COST (BIRR)

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

A. Description Plant Manager Secretary Finance & Administration Manager General Service Production and Technical Manager Production Head Technical Head Commercial Manager Accountant Personnel Time-keeper Store-keeper Quality control head Chemist General Mechanic Assistant Mechanic Electrician Operators laborers Driver Guard Cleaner Sub-Total Employees benefit 20% of basic salary Grand Total

Req. No. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 6 10 1 3 2 39

Monthly salary 1,500 500 1250 900 1250 900 900 900 750 750 450 600 1200 900 900 450 600 3,600 3,000 450 900 500 23150

Annual salary 18,000 6,000 15,000 10,800 15,000 10,800 10,800 10,800 9,000 9,000 5,400 7,200 14,400 10,800 10,800 5,400 7,200 43,200 36,000 5,400 10,800 6,000 277800 55,560 333,360

39

B.

TRAINING REQUIREMENT

There is no need for training since the slaughtering house service is simple.

212-14

VII.

FINANCIAL ANALYSIS

The financial analysis of the cattle slaughtering house project is based on the data presented in the previous chapters and the following assumptions:-

Construction period Source of finance

1 year 30 % equity 70 % loan

Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Raw material, import Work in progress Finished products Cash in hand Accounts payable

3 years 8% 8.5% 30 days 30days 90days 1 days 30 days 5 days 30 days

A.

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 4.84 million, of which 37 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.

212-15 Table 7.1 INITIAL INVESTMENT COST

Sr. No. 1 2 3 4 5 6 Land lease value Building and Civil Work Plant Machinery and Equipment Office Furniture and Equipment Pre-production Expenditure* Working Capital Total Investment cost Foreign Share Cost Items

Total Cost (000 Birr) 30 1,500.00 3,200.00 25 50 40.4 4,845.4 37

N.B

Pre-production expenditure includes interest during construction ( Birr thousand ) and Birr50 thousand costs of registration, licensing and

232.85

formation of the company including legal fees, commissioning expenses, etc.

B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 1.08 million (see Table 7.2). The utility cost accounts for 10.58 per cent, while repair and maintenance take 4.61 per cent of the production cost.

212-16 Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Utilities Maintenance and repair Labour direct Factory overheads Administration Costs Total Operating Costs Depreciation Cost of Finance Total Production Cost

Cost 114.79 50 166.68 55.56 111.12 498.15 370 216.73 1,084.88

% 10.58 4.61 15.36 5.12 10.24 45.92 34.11 19.98 100

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.

2.

Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full capacity ( year 3) is estimated by using income statement projection.

212-17 BE = Fixed Cost = 39 %

Sales Variable Cost

3.

Pay Back Period

The investment cost and income statement projection are used to project the pay-back period. The projects initial investment will be fully recovered within 6 years.

4.

Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is net present value at 8.5% discount rate is Birr 844,430.

14 % and the

D.

ECONOMIC BENEFITS

The project can create employment for 39 persons. In addition to supply of the domestic needs, the project will generate Birr 1.02 million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports.