Eggs production farm free -range breeding hens

I. SUMMARY OF BUSINESS PLAN

1.1. Subject and main development directions

The subject of the business plan is the construction of a farm production for consumer eggs in slow-breeding located in village, Jaczewek, Mazowieckie Voivodship, 60 km from Warsaw (capital city).
The Inwestor, HILDECO Ltd. has its own investment area of 46.000 m2. The property is fully developed. In the first stage of the investment, HILDECO intends to build 1 hen house for 9,900 laying hens. In the future, it is planning a gradual extension of the farm to 7 - 9 hen houses, in which it will be possible to hold from 82 thousand items up to 106 thousand pcs of laying. The next investment stages will require less expenditure (about 800,000 zlotys per one house) because they would only apply to the hen house, its equipment and the laying hen. Infrastructure completed in the first stage of the investment (fencing, waterworks, roads, parking lots, wells, cesspool, social part, cold store, egg sorting, etc.) in 80% exhausts the investment assumptions for future chicken houses located in this area.
The subject of this business plan is an investment project for one hen house by 10,000 pcs of laying.
The production of food eggs, in litter yard and free run is a growing industry characterized by high parameters of investment profitability, justified by the expected, favorable developmental changes of markets, both domestic and foreign.

1.2. Planned expenditures

Planned investment expenditures for the construction of 1 (first) hen house is in amount of PLN 1,600,000. (including the ground and prepared infrastructure for the remaining hen houses expected to be implemented).
Currently the expenditures already incurred amounted to PLN 585,000, excluding labor input over a four-year period and revaluation of the land value 46,000 sq. m.
The further investment requires additional expenditures in the amount of PLN 1,050,000
Additionally, the demand for working capital is the following:
1. purchase of a laying hen pack, inventory, VAT tax – PLN 200,000
2. the VAT tax coming from the investment – PLN 233,450
Summarizing, In order to complete the first stage, the investor would like to take an investment loan in the amount of PLN 1 015.000 plus a short-term working capital loan to cover VAT tax on investments in the amount of PLN 233,450.
Other demand for working capital in the amount of min. PLN 250,000 the investor has his own founds.
The investment implementation period is closed in 3-4 months. The expected date of starting the farm is July 2018

1.3. Final expenditures

1st stage: PLN 1,283,450 or EUR 306,000
• PLN 1,015,000 loan
• PLN 233,450 short-term working capital loan to cover VAT tax
2nd stage: PLN 800,000 (hen house) X 8 = PLN 6,400,000 or EUR 1,530,000

1.4. Planned results
The farm based on one hen house will have 9,990 hens. Annual production will range from 2.8 million to 3 million pieces of food eggs in free-range farming - class 1 (differences in the quantity result from the fact that production cycles do not coincide with calendar years. The production cycle of one herd lasts 16 months). The egg sale prices are assumed to be at the level of eggs from litter - class 2, so the calculations are based on a very prudent price level (eggs from slow-breeding are about 5 gr of groszy more expensive on the art compared to the eggs from litter).
Annual revenue: from PLN 1,360,000 to 1,470,000 (depending on the cycle)
EBITDA: PLN 410,000 to PLN 630,000 (depending on the cycle)
EBITDA margin: from 29% to 43% (depending on the cycle)
NPV: PLN 2,000,000 (for 10 years with a discount rate of 5%)
IRR: 22.7% (for 10 years)
Return period: 5 years from the beginning of the investment or 4 years from the completion of the investment.

1.5. Final conclusions

The investment is attractive in many respects:
• very good financial results,
• a significant potential for the growth of egg consumption in Poland in relation to European consumption. Egg consumption in Poland is about 60% of egg consumption in Europe.
• In Poland and Europe, the consumption of eggs from barn and free-range cattle grows in place of egg consumption in cage farming. Also in this respect, the European market is ahead of the Polish market, which may indicate the expected change in the structure of egg consumption in Poland, rewarding the consumption of barn and free-range eggs.
• very short period of investment implementation. Commissioning already in the 4th month
• modern technology, based on the best Western solutions, guarantees high welfare parameters (lower mortality of the herd, greater healthiness, prolonged lay period)
• the possibility of further expansion of the farm, raising its investment efficiency and market share.

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