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PROFILE ON CATTLE
SLAUGHTERING HOUSE
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TABLE OF CONTENTS
PAGE
I. SUMMARY 212 - 3
A. TECHNOLOGY 212 - 10
B. ENGINEERING 212 - 12
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 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%.
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 People’s regional state,
SNNPR.
The slaughterhouse also processes the by-products to produce usable products like
glue, animal tallow and bone meal for animal feed.
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A. MARKET STUDY
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.
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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)
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
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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 Demand
2008 2380
2009 2499
2010 2624
2011 2756
2012 2893
2013 3038
2014 3190
2015 3349
2016 3517
2017 3693
2018 3877
2019 4071
2020 4275
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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.
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 1 2 3-10
Capacity Utilization [%] 80 90 100
Production [heads] 1,920 2,160 2,400
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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
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.
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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
B. ENGINEERING
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.
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Table 4.1
MACHINERY AND EQUIPMENT REQUIREMENT
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
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.
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Table 5.1
MANPOWER REQUIREMENT AND ESTIMATED
ANNUAL LABOUR COST (BIRR)
B. TRAINING REQUIREMENT
There is no need for training since the slaughtering house service is simple.
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The financial analysis of the cattle slaughtering house project is based on the data
presented in the previous chapters and the following assumptions:-
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.
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Table 7.1
INITIAL INVESTMENT COST
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.
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Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items Cost %
Utilities
114.79 10.58
Maintenance and repair
50 4.61
Labour direct
166.68 15.36
Factory overheads
55.56 5.12
Administration Costs
111.12 10.24
Total Operating Costs
498.15 45.92
Depreciation
370 34.11
Cost of Finance
216.73 19.98
Total Production Cost 1,084.88 100
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.
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BE = Fixed Cost = 39 %
Sales – Variable Cost
The investment cost and income statement projection are used to project the pay-back
period. The project’s initial investment will be fully recovered within 6 years.
Based on the cash flow statement, the calculated IRR of the project is 14 % and the
net present value at 8.5% discount rate is Birr 844,430.
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.