Feasibility

study for
meat
Processing
Plant

8th July, 2020

1
Table of Contents
Feasibility study for meat processing plant ........................................................................................ 1

Disclaimer ........................................................................................................................................... 4

Measurement Table ............................................................................................................................. 5

ABBREVIATIONS............................................................................................................................. 6

Executive summary ............................................................................................................................. 7

1. Introduction ..................................................................................................................................... 8

Market analysis ............................................................................................................................... 9

2. Methodology ................................................................................................................................. 10

3. Rationale for establishing the plant ............................................................................................... 10

3.1 Economic Factors..................................................................................................................... 10

3.2 Social Factors........................................................................................................................... 11

3.3 Environmental Factors ............................................................................................................ 11

3.4 Impact of COVID-19 crisis on operation .................................................................................. 12

4. Pre-Feasibility study for the plant ................................................................................................. 13

4.1 Process flow chart of compliant meat processing unit ........................................................... 13

4.2 Additional factors .................................................................................................................... 13

4.3 Design and setup of the plant ................................................................................................. 14

4.4 Quality control ......................................................................................................................... 14

5. Required Features for the establishment of the plant .................................................................... 15

5.1 Land and Infrastructure ........................................................................................................... 15

5.2 Required resources for operationalization .............................................................................. 16

5.3 Production Scope and Supply Chain ........................................................................................ 17

5.4 Human Resources .................................................................................................................... 17

6. Project Cost ................................................................................................................................... 20

7. Financial Analysis ......................................................................................................................... 21

7.1 Projected Income Statement ................................................................................................... 21

7.2 Projected Balance Sheet .......................................................................................................... 23

7.3 Projected Cash Flow Statement............................................................................................... 25

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8. Key assumptions ........................................................................................................................... 27

8.1 Project Capacity Assumptions ................................................................................................. 27

8.2 Cost of Goods Sold Assumption ............................................................................................... 27

8.3 Revenue Assumptions.............................................................................................................. 28

8.4 Economic Assumptions ............................................................................................................ 28

8.5 Expense Assumptions .............................................................................................................. 29

8.6 Depreciation Expense Assumptions......................................................................................... 29

8.7 Cash Flow Assumptions ........................................................................................................... 29

References ......................................................................................................................................... 30

3
Disclaimer
The information in this document is to provide a general idea to potential investors for the
financial feasibility to establish a meat processing plant based on adequate practices. The
information and data in the report has been gathered from reliable sources and due
diligence has been taken to compile the document; however, it is based upon certain
assumptions which may differ from case to case. The information may vary due to any
change in any of the concerned factors and the actual results may differ from the
information presented. UNIDO, its employees or consultants do not assume any liability for
any financial or any other losses as a result of the study. The information presented does
not reflect the position of UNIDO Secretariat or Japan International Cooperation Agency
(JICA). The potential investor or user of this study is encouraged to take further
professional and expert advice before taking any decision to act upon this information.

4
Measurement Table
1 US Dollar 160.38 Pakistani Rupees

1 Square Yard 9 Square foot

1 Ton 1000 kilograms

1 Hectare 2.47105 Acres

1 Kilo gram 1000 grams

1 Marla 272 square feet

1 Kanal 5440 square foot

5
ABBREVIATIONS

KP Khyber Pakhtunkhwa
KPFSHFA Khyber Pakhtunkhwa Food Safety and Halal Food Authority
UNIDO United Nations industrial development organization
TBT Technical barriers to trade
WTO World Trade Organization
SPS Sanitary and phytosanitary standards
SMEDA Small and Medium Enterprises Development Authority
PKR. Pakistan Rupee (Rs.)
kg Kilogram
UAE United Arab Emirates
KM Kilometer
GST Goods and services tax
US United States
D.I Khan Dera Ismail Khan
L&DD Livestock & Dairy Development Department
SOP Standard operating procedures
GHP Good Hygiene Practices
GMP Good Manufacturing Practices
HACCP Hazard Analysis and Critical Control Point

PAFAID The Project on Agri-Food and Agro-Industry Development Assistance

in Pakistan
MNFSR Ministry of National Food Security and Research
AQD Animal Quarantine Department
FAO Food and Agriculture Organization
WHO World Health Organization

6
Executive summary
Livestock plays an important role in the economy of Khyber Pakhtunkhwa and the
livelihoods of a large majority of rural population is dependent on the sector. Despite the
abundant supply of livestock and poultry, the province has failed to reap the benefits of a
growing demand for processed meat products. There province has very limited food safety
compliant meat processing and value addition facilities. This is due to lack of knowledge
and skills, infrastructure, finance as well as access to food safety services provided by
governmental bodies or private sector.

The proposed feasibility study will calculate the economic viability of being able to operate
a compliant meat processing plant, providing food safety compliant processed meat
products. Supply of food safety compliant food product will help reduce food borne
illnesses which also creates productivity loss and also enable the province to access the
high-end markets nationally as well as the export market which has a huge potential.

The proposed meat processing plant will have the capacity to process 4 tons of meat per
day and will operate 5 days a week as on Tuesday and Wednesday sale of meat is
prohibited all over Pakistan. The products line will include chicken nuggets, beef burger
patties, sausages and seekh kebab. The initial capacity of the plant will be 70% in year 1
and reaching the maximum capacity of 95% in year 5 based on increased demand and
customer base. Meat will be processed in a food safety compliant manner with proper
automated facilities for processing, packaging, cold storage, transportation etc. The
processed products can be also exported after acquiring required national and international
certifications.

The proposed plant requires a total investment of Rs.233 million which includes a capital
cost of Rs.218.41 million and total working capital of Rs.14.58 million. Based on the
calculations of this report the proposed plant will have a net profit of Rs.22.8 million in
year 1 with a steady growth and net profit of Rs.76.16 million in year 5. The plant will
provide employment to 50 people directly and additional jobs can be created if the capacity
is increased. The proposed plant can be established in any of the major city in KP which
has access to basic services like electricity, water and human resources.

7
1. Introduction
Livestock, particularly cattle value chain, serves as a primary income source to many
households in Khyber Pakhtunkhwa (KP), providing 11 percent of the agricultural GDP. In
addition to cattle, there is a large population of buffaloes, sheep, goats and camel along
with poultry, horses and mules. According to the latest available statistics from KP
Statistical Yearbook 2015-16, the increasing cattle population reached 6.06 million which
counts around 15 percent of the total cattle population of (42.8 millions) of Pakistan. The
provinces livestock resources exceed the local consumption and meat and meat products
can be exported to other provinces as well as the international market without any food
security issues. KP is also famous for its meat cuisine like chapli kebabs, seekh kebabs,
tikkas which can serve as a gastronomic tourism in the country.

As per the district-wise data, there is sufficient supply of different types of livestock in
Hazara district, in Swat valley as well as in Peshawar. Subsequently, D.I. Khan District has
the largest cattle population with 411,432 with 832 slaughtered animals, Abbottabad
111,415 with 3,327 slaughtered animals, Swat 253,790 with 3,124 slaughtered animals,
Peshawar 223,150 with 6,203 slaughtered animals from the year 2015-16.

In Pakistan meat is usually produced and consumed as fresh meat. In KP specifically there
is very minimal value addition and meat processing. There are a few modern meat
processing plants operating in Peshawar such as Euro food and farmers that are supplying
value added and processed meat products to the domestic market. These processed meat
products include sausages, kofta’s, seekh kebab, chapli kebab, and burger patties etc. that
are consumed widely in the local market as well as internationally.

In general, meat processing, value addition and importance of food safety has generally
been neglected in the past, mainly also resulting from the lack of awareness on this vital
domain. Overall, despite the abundant livestock resources, the province has failed to tap
into the huge market for processed meat products. For these reasons, the purpose of the
proposed meat processing plant would be to prove the economic viability of meat
processing and value addition in a compliant, safe and hygienic manner. The processing
plant will have a positive socio-economic impact not only on the local market economy but
also on the health of the consumers.

8
Market analysis

There are currently three private meat processing plants operational in Peshawar district
and little to no value addition happening in the other districts of KP. Meat processing plants
in KP can be very beneficial in adding value to the huge livestock resources and serve as an
import substituted product in case it is able to comply with the requirements and quality of
buyers from high-end markets. Processed meat products are consumed in huge quantities
throughout Pakistan and there is a high potential for halal meat products in the international
market as well.

However, when it comes to national and international trade, locally processed meat
products need to compete with large-scale producers, nationally in other provinces like
Sindh and Punjab and Internationally with China, India, and Turkey, having modernized
and well-equipped meat sectors. For this reason, the introduction of new technologies can
further improve the economy of scale and in turn efficiency of the value chain.

1.1.1 Current challenges for investment

The main challenges for the proposed processing plant in KP include lack of human and
financial resources. There is a lack of awareness with regards to the benefits of these
processing technologies and techniques. Other challenges include lack of credit facilities
and in some areas the security situation can also create risks for investors. Areas further
away from major cities lack basic facilities such as like proper road networks, sewage,
water and electricity. In addition to the investment related to the facility, additional
investment might be required to establish adequate practices for the sector. The provincial
government and community-based organizations should also play their role in promoting
and facilitating any private sector investments from other provinces. With regard to the
upgrade of their facilities, general lack to value addition and food safety services, such as
coaching and training along with non-existence of vocational training on meat processing
can further decrease the safety and the quality of the product.

1.1.2 Status of industrial processing

Currently, in KP there are only three to four small to medium size private meat processing
companies operating in Peshawar and little to no processing and value addition is taking
place in the other districts of KP. The major market share is captured by meat processors
from the Punjab and Sindh provinces.

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2. Methodology
This study is a result of a consultative process where UNIDO experts conducted
discussions with various stakeholders in November and December 2019. An additional
detailed analysis was also conducted on the cattle meat value chain and its related enabling
environment. Further discussions and inputs were received on the project approach from
stakeholders including KPFSHFA, Agriculture Department and academia. The outcome of
the report will be shared with relevant departments and will be finalized in consultation
with all stakeholders to ensure the credibility and reliability of the information.

3. Rationale for establishing the plant

This section will explain the economic, social and environmental viability of establishing
meat processing plants in KP.

3.1 Economic Factors

Livestock farming is also a dominant occupation of the farming community, with more than
15 million animal heads inhabiting the province. The province has abundant livestock and
dairy resources for local consumption as well as for export purposes. The provinces geo-
strategic location, access to other provinces and demand of halal meat products globally
and in neighboring Afghanistan as well as the Middle Eastern countries provides a huge
potential for the halal processed meat sector. Meat value added products in a food safety
compliant manner can be sold to high-end domestic market as well as exported
internationally. Value added products can be sold at a higher margin which can also further
improve the livelihood of actors involved in the value chain. For international export, the
application of adequate product packaging, complying with technical barriers to trade
(TBT) measures, and establishment of a traceability scheme will be required along with
relevant phytosanitary certifications.

3.1.1 Government incentives for the sector

The Livestock & Dairy Development Department (L&DD) has multiple ongoing and new
initiatives to enhance health and production of animals by developing effective vaccines
against diseases, improving livestock breeding and establishing veterinaries. Ante- and
post-mortem examinations are carried out by the inspectors of the L&DD at the registered
slaughterhouses which might require additional support to comply with national and

10
international requirements. KPFSHFA plays an essential role in enforcing food safety and
hygiene standards among food business operators by developing SOPs for the meat sector
and organizing awareness campaigns. The Government has already commenced with the
procurement of equipment for a meat laboratory and in addition to that started to organize
the relevant actors in a platform. Overall spending by the government on infrastructure,
water availability, energy and security will remove further bottle necks and expand the
opportunity for business in the province.

3.1.2 Export potential

According to Harvard’s atlas of economic complexity meat exports of Asian countries
alone in 2017 was USD 119 billion with Pakistan’s share only at USD 247 million. Export
of specifically frozen beef from Pakistan was USD 39.4 million while neighboring India’s
exports were at USD 3.92 billion. Pakistan’s exports of sausages or other value added meat
products is insignificant. Despite the abundant livestock resources and huge demand for
meat and halal meat products internationally, the potential is yet to be tapped. One of the
main reasons for low export volume is the absence of food safety compliant and certified
meat processing plants as per international standards. Slaughtering, storage, packaging,
transportation and certifications services remain a huge issue when it comes to export of
meat products. However, huge potentials still remain within Pakistan due to the population
size of the country. Furthermore, if the required infrastructure is made available there is a
huge market potential for meat products from Pakistan in Europe, North America, Middle
East, Japan, China, Afghanistan and Malaysia.

3.2 Social Factors

KP’s economy is heavily dependent on agriculture and livestock sectors with more than 15
million animal heads inhabiting the province. There is a large segment of the rural
population whose livelihoods and dependent on meat value chain related activities. The
usual household usually contains of one bread earner who is providing financial support to
the entire family. The meat processing plant will improve livelihoods of the actors
involved by enabling them to target the high-end markets. Consequently, women are the
most vulnerable to poverty and discrimination due to their socio-economic situation and
they can be hardly approached. The plant should make special arrangements to offer job
opportunities especially to youth and women within the local cultural norms.

3.3 Environmental Factors

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The processing plant will maintain the environmental safeguarding of its ecosystem,
through sustaining the existing flora and fauna and not introducing any material or product
that will affect or change them in a negative way. Additionally, the infrastructure and
services that need to be developed and implemented will be planned in an environmental
friendly way; where the introduction of proper waste management practices will be
encouraged. The processing plant does not aim to upscale the current consumption of
processed meat products rather improve the level of compliance, quality and hygiene and
creating value addition.

3.4 Impact of COVID-19 crisis on operation

Promoting adequate practices from food and labour safety aspect is essential to ensure
business continuity and avoid potential disruption in value chains, leading to economic loss
and food insecurity. For this reason, it is extremely important to follow the guidelines
developed by FAO and WHO with the title COVID-19 and food safety: guidance for food
businesses. As a first experience among industrialized nations, the implementation of
adequate physical distancing among workers can lead to reduced output and lower capacity
but on the other hand still ensures the safety and health of workers. This has to be strongly
considered at this stage for the conduction of any feasibility study; however, as this
pandemic shall be considered as a periodic challenge, the financial calculation of this
feasibility study does not take into account. Overall, food business operators are strongly
encouraged to apply the FAO/WHO guidance and also include them in their business
continuity plan for mitigation of future risk.

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4. Pre-Feasibility study for the plant
This section will outline the procedure, design and setup, quality control and additional
factors required for the establishment of the meat processing plant.

4.1 Process flow chart of compliant meat processing unit

Meat Quality Meat Chopping Grinding

Testing and Blast
Freezing

Product Shaping Added into Bowl Ingredient

Chopper and Mixing
Mixing Unit

Smoking and Quick Freeze Packaging

Cooking

4.2 Additional factors

The location of the processing plant should be within proximity to the city and have access
to basic facilities like water, electricity, proper road network as well as be accessible to

13
workers. It will also be important to identify skilled labor force and trainings of the
personnel based on the capacity building framework planned to be developed as part of
“The Project on Agri-Food and Agro-Industry Development Assistance in Pakistan”
(PAFAID) initiative. Proper supply of quality animals, storage, packaging and
transportation along with proper marketing techniques, establishing business networks and
linkage to markets will ensure success of establishing the plant.

4.3 Design and setup of the plant

The location, physical layout, basic services, installations and equipment must be
considered before establishing the meat processing plant. In addition, it is important to keep
in mind that the infrastructure meets specific requirements for processing of meat intended
for human consumption. The design must follow good hygienic practice (GHP) planned to
be developed during “The Project for Agri-food and Agro-industry Development
Assistance in Pakistan” (PAFAID) initiative.

The feasibility study does not take into consideration slaughtering of animals at the facility.
In case slaughtering is done at the facility separate areas will be required for animal holding
and slaughtering, following the relevant laws, standards and requirements. The plant must
be equipped with proper areas for coolers and freezers, processing areas (smoking,
cooking) and employee welfare areas. The floors must be of solid material and washable
with proper drainage and disposal system. These requirements are obligatory in order to
guarantee processing of meat in a food safety compliant manner.

4.4 Quality control

The processing plant shall follow and comply with the national or provincial technical
regulations and/or with the requirements of relevant food safety certifications selected by
the operator. The design and the setup of the processing plant has to follow the
requirements of these standards and accordingly the provided design and setup showcases a
best practice and adjustments have to be made depending on the capacity as well as the
resources of the operator. The processing plant shall also have at least one personnel in
place during the operation of the facility that can monitor food safety practices and
introduce corrective actions when and where required on a constant basis.

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5. Required Features for the establishment of the plant
The proposed meat processing plant will have the capacity to process 4 tons of meat per
day as per requirements of food safety compliance. This section will identify the preferred
and required features for the establishment of the meat processing plant.

5.1 Land and Infrastructure

The processing plant is to be established preferably in the industrial area with access to
water, electricity, proper road network and human resources. The space requirement for the
proposed meat processing plant is 46,008 square feet which will include open area, covered
area for meat processing and offices, raw material storage, cold storage, washrooms, admin
rooms and loading and unloading area including parking. The total land to be acquired for
the unit is 12 kanal keeping in view future expansions of operations. The land is to be
acquired for the plant at Rs. 5 million per kanal. This cost will vary in different areas and
cities.

The cost of construction per square feet for open area is estimated at Rs. 600, meat
processing and office space at Rs. 3500, cold storage at Rs. 3100 and the admin rooms at
Rs.2100. The details of land are given in table 1.1 and space requirement and cost related to
building and infrastructure are given in table 1.2.

Table 1.1
Description Expected Area Unit Cost in PKR Total Cost in PKR

Land 12 Kanal 5,000,000 60,000,000

Table 1.2 Building & Infrastructure

Estimated
Expected area Unit Cost in
No. Description Cost in Pak
(Square Feet) Pak Rupees
Rupees
1 Open area meat processing 2500 600 1500000
facility
2 Covered area meat processing 5440 3,500 19040000
plant
3 Management building 2720 2600 7072000

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 4 Raw material Storage 2720 1700 4624000
5 Staff washrooms 544 2,000 1088000
6 Cold storage area 1632 3100 5059200
7 Pavement/driveway 5000 600 3000000
8 Cafeteria and parking area 1088 2100 2284800

9 Duty staff accommodation and 1360 2100 2856000

admin rooms
10 Ground/Boundary wall 23004 120 2760480

Total Area 46008 49284480

5.2 Required resources for operationalization

This section will outline the required equipment, furniture and fixtures and office
equipment required to set up the processing plant with price estimates. (Table 2.1, Table 2.2
and Table 2.3)

Table 2.1 Machinery/ Equipment for meat processing plant

Total Cost
No. Machine Quantity Unit cost
estimates
1 Automatic meat processing line 1 65,000,000 65,000,000
including bowl chopper, mixing unit,
vacuum filler, formic shape, smoke
house and fryer
2 Cold storage 1 8,000,000 8,000,000
3 Packaging line 1 10,000,000 10,000,000
4 Refrigerated vehicle 2 5,600,000 11,200,000
5 Generators and solar system 2 250,000 500,000
6 Tube well for water supply 1 250,000 250,000
7 Miscellaneous 1 2,000,000 2,000,000
Total 96,950,000

The miscellaneous costs will be used to ensure that the floor, walls, ceilings in wet areas are
smooth and easily cleanable, junctions where the walls meet the floor are properly sealed,
ensure proper airflow and ventilation and construction of external effluent disposal system
and solid waste disposal systems. The cost will also include working clothes including
gloves, boots, hair covers and aprons.

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Table 2.2 Furniture & Fixture

Unit cost in Pak Total cost in Pak

No Description
Rupees Rupees
1 Furniture 1,000,000 1,000,000
2 Flooring (per square feet) 2,600 7,072,000
3 Electrical wire & lights 1,200,000 1,200,000
Total 9,272,000

Table 2.3 Office Equipment

Quantity Unit cost in Total cost in

No Description
needed Pak Rupees Pak Rupees
1 Air Conditioner Inverter (1.5 ton) 8 80,000 640,000
2 Printers 2 22,000 44,000
3 Desktop Computers 4 65,000 260,000
4 Internet Service 1 30,000 30,000
5 Security Cameras 1 500,000 500,000
6 Telephone Exchange 1 240,000 240,000
7 Fax machine 1 45,000 45,000
8 Photocopier with scanner 1 150,000 150,000
Total 1,909,000

5.3 Production Scope and Supply Chain

Proper supply chain will help maintain the quality of meat products produced. Production
of food safety compliant meat products will not only be consumed locally but can also be
exported to other countries. Increased population growth, increase in disposable incomes of
middle to high income families, increased food safety awareness and increased penetration
in newer smaller markets in peri-urban and rural areas have increased the demand for
processed meat products. The processing plant will process and package up to 5 tons of
meat per day.

5.4 Human Resources

To run the processing plant operations smoothly, details of required human resources along
with number of employees and monthly salary are suggested as below: (Table 3.1)

17
 Expected Unit
No. of Total salary in
No Human Resource Salary (PKR) in
Employees Pak rupees
Pak Rupees
01 Owner/Manager/CEO 1 173,000 173,000
02 Admin Officer 2 25,000 50,000
03 HR Manager 1 35,000 35,000
04 Cleaning Staff 5 18,000 90,000
05 Veterinary Doctor 1 70,000 70,000
06 Food Safety Expert 1 55,000 55,000
07 Food Technologist 2 50,000 100,000
08 Meat packers / processors 25 20,000 500,000
09 Marketing Manager 1 50,000 50,000
10 Marketing Assistants 3 25,000 75,000
11 Accounts Officer /Cashier 1 28,000 28,000
12 Security Guard 2 20,000 40,000
13 Drivers 2 18,000 36,000
14 Electrician 1 20,000 20,000
15 Sanitation Expert 1 35,000 35,000
16 Security Guard 1 30,000 30,000
Total 50 1,387,000

The processing plant will provide employment to 50 people directly; however, additional
marketing and sales personnel, trainers and indirect employment will also be created
depending on the capacity and operations of the processing plant. The management will be
responsible for cleaning and disinfection on a regular basis and maintaining the hygienic
standard.

5.5 Sensitivity indicators

a) Attracting small holders (≤ 10 animals)

Livestock is one of the major contributors in KP’s agriculture sector and has a huge
potential for growth due to natural resources and preference of meat by locally and
internationally. Majority of the livestock farmers in the province are small holders with 5-
10 animals. There is generally little knowledge among small holders on value addition
18
practices as well as these value addition and processing facilities require huge investments.
The proposed plant will create increased demand for local livestock and through value
addition will be able to access high end and export markets which will in turn also benefit
the small holders. The facility will also connect the different actors involved in the value
chain including farmers, slaughterhouse, wholesale dealers, superstores and exporters.

b) Suppliers
The livestock sector provides food of animal origin to population of more than 35.53
million people of which 82% are rural dwellers having great dependence on agriculture and
livestock. The province produced 580.410 ton meat annually and majority farmers (>90%)
in KP involved in livestock production are rearing animals as subsistence farming. They
provide their animals to these slaughterhouses, butchers and processing plants to earn a
living which can be improved by accessing local high end markets and the export market
through increased demand. Despite abundant livestock resources and huge export potential
very little value addition takes place in the province.

c) Price fluctuations
Packaged (frozen) meat product prices are not regulated by the local government until
today. There might be some fluctuation in the price of raw material as prices of meat
generally fall in winter season and increase during religious festivals like Eid. The price
has to be set by the plant operator based on the cost of production and market rates.

d) Maintaining standards
Presently, food operators in KP are regulated by District government, L&DD and
KPFSHFA. The meat processing facility needs to comply with standards set nationally and
by following good hygiene practices (GHP) and HACCP in the future. Export market can
be tapped into by conforming with the World Trade Organization’s (WTO) Sanitary and
Phytosanitary (SPS) measures, Halal requirements and ISO 22000.

e) Exchange rate fluctuation

The exchange rate of Pakistani rupee has been stable for the last few months after a volatile
period of over six months after the present government took over. Pakistani rupee was
devalued against dollar to reduce the current account deficit through reducing the balance
of trade deficit.
The volatile exchange rate affects the business community more than everyone, because of
the uncertainty it exhibits. Kandilov (2008) revealed that exchange rate volatility has large
negative effect on the agricultural trade between countries. The effect is much larger for
developing countries exporters than the developed countries’ exporters. But in Pakistan it is
19
expected that after the downward adjust of Pakistan rupee against US dollar, the exchange
rate will remain stable in near future and will be helpful to agricultural and livestock and
food related exports.

6. Project Cost
Project Cost

Description Price (PKR)

Land 60,000,000
Building & Infrastructure 49,284,480
Machinery 96,950,000
Furniture and Fixtures 9,272,000
Office Equipment 1,909,000
Pre-operating costs (Licensing etc) 1,000,000
Total Capital Cost 218,415,480
Working Capital
Raw Material Inventory 9,790,505
Upfront Insurance Payment 1,977,180.00
Cash 2,816,835
Total Working Capital 14,584,520
Total Project Cost 233,000,000

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7. Financial Analysis

7.1 Projected Income Statement

Projected Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5
Amount in (PKR)

Revenue 587,335,324 723,167,694 858,594,482 1,019,382,490 1,210,281,085

Cost of Goods Sold 505,391,036 617,713,106 729,530,715 862,083,499 1,019,234,032

Gross Profit 81,944,288 105,454,588 129,063,767 157,298,992 191,047,054

General administrative & selling

expenses

Administration Expense 5,873,353.24 7,231,676.94 8,585,944.82 10,193,824.90 12,102,810.85

Office Expense 587,335.32 723,167.69 858,594.48 1,019,382.49 1,210,281.09

Travelling Expense 293,667.66 361,583.85 429,297.24 509,691.25 605,140.54

Communication Expense 60,000 66,000 72,600 79,860 87,846

Salaries 16,644,000 18,308,400 20,139,240 22,153,164 24,368,480

Promotional Expense 17,620,059.72 21,695,030.81 25,757,834.46 30,581,474.71 36,308,432.56

Insurance Expense

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 1,977,180 1,779,462 1,581,744 1,384,026 1,186,308

Ammortization Expense 200,000 200,000 200,000 200,000 200,000

Professional fees 58,734 72,317 85,859 101,938 121,028

Depreciation Expense 6,046,548 6,046,548 6,046,548 6,046,548 6,046,548

Subtotal 49,360,877 56,484,186 63,757,662 72,269,910 82,236,876

Operating Income 32,583,410 48,970,402 65,306,105 85,029,082 108,810,178

Other income
Gain / (loss) on sale of assets

Earnings Before Interest & Taxes 32,583,410 48,970,402 65,306,105 85,029,082 108,810,178

Interest Expense

Earnings Before Tax 32,583,410 48,970,402 65,306,105 85,029,082 108,810,178

Tax 9,775,023 14,691,121 19,591,831 25,508,725 32,643,053

NET PROFIT/(LOSS) AFTER
TAX 22,808,387 34,279,281 45,714,273 59,520,357 76,167,125

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7.2 Projected Balance Sheet

Projected Balance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets

Cash & Bank 2,816,835 23,924,510 68,485,811 124,142,562 192,448,882 277,691,601

Accounts Recievable - 17,130,614 21,092,391 25,042,339 29,731,989 35,299,865

Raw material Inventory 9,790,505 11,623,961 13,800,767 16,385,221 19,453,663 21,399,029

Processed Meat Products
Inventory - 9,520,485 11,232,546 13,261,632 15,666,751 18,517,929

Pre-paid Insurance 1,977,180 1,779,462 1,581,744 1,384,026 1,186,308 988,590

Total Current Assets 14,584,520 63,979,032 116,193,259 180,215,780 258,487,593 353,897,014

Fixed Assets

Land 60,000,000 60,000,000 60,000,000 60,000,000 60,000,000 60,000,000

Building & Infrastructure 49,284,480 44,356,032 39,427,584 34,499,136 29,570,688 24,642,240
Machinery 96,950,000 87,255,000 77,560,000 67,865,000 58,170,000 48,475,000
Office Equipment 1,909,000 1,718,100 1,527,200 1,336,300 1,145,400 954,500
Furniture & Fixtures 9,272,000 8,344,800 7,417,600 6,490,400 5,563,200 4,636,000

Total Fixed Assets 217,415,480 201,673,932 185,932,384 170,190,836 154,449,288 138,707,740

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Intangible assets
Pre-operation costs 1,000,000 800,000 600,000 400,000 200,000 0

Total Intangible Assets 1,000,000 800,000 600,000 400,000 200,000 0

Total Assets 233,000,000 266,452,964 302,725,643 350,806,616 413,136,881 492,604,754

Laibilities & Shareholders'

Equity
Currenct Liabilities

Accounts Payable - 10,644,577 12,637,975 15,004,674 17,814,582 21,115,330

Total Current Liabilities - 10,644,577 12,637,975 15,004,674 17,814,582 21,115,330

Other Liabilities
Deferred tax
Long term debt

Total Long Term Liabilities - - - - - -

Shareholders' Equity

Paid-up capital 233,000,000 233,000,000 233,000,000 233,000,000 233,000,000 233,000,000

Retained Earnings 22,808,387 57,087,669 102,801,942 162,322,299 238,489,424

Total Equity 233,000,000 255,808,387 290,087,669 335,801,942 395,322,299 471,489,424

Total Capital & Liabilities 233,000,000 266,452,964 302,725,643 350,806,616 413,136,881 492,604,754

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7.3 Projected Cash Flow Statement

Projected Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Operating activities

Net profit - 22,808,387 34,279,281 45,714,273 59,520,357 76,167,125

Add: depreciation expense - 15,741,548 15,741,548 15,741,548 15,741,548 15,741,548

Amortization expesne - 200,000 200,000 200,000 200,000 200,000

Accounts recievbale - (17,130,614) (3,961,777) (3,949,948) (4,689,650) (5,567,876)

Raw material inventory (9,790,505) (1,833,457) (2,176,806) (2,584,454) (3,068,442) (1,945,366)

Processed Meat Products
Inventory - (9,520,485) (1,712,061) (2,029,085) (2,405,119) (2,851,178)

Advance insurance premium (1,977,180) 197,718 197,718 197,718 197,718 197,718

Accounts payable - 10,644,577 1,993,398 2,366,699 2,809,908 3,300,748

Cash provided by operations (11,767,685) 21,107,675 44,561,301 55,656,751 68,306,320 85,242,719

Financing activities
Change in long term debt
Change in short term debt

Issuance of shares 233,000,000

Purchase of (treasury) shares

Cash by financing activities 233,000,000 - - - - -

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Investing activities

Capital expenditure (218,415,480)

Acquisitions

Cash by investing activities (218,415,480) - - - - -

Net Cash 2,816,835 21,107,675 44,561,301 55,656,751 68,306,320 85,242,719

Cash balance brought forward 2,816,835 2,816,835 23,924,510 68,485,811 124,142,562 192,448,882

Cash avaialble for appropriation 2,816,835 23,924,510 68,485,811 124,142,562 192,448,882 277,691,601
Owner's Withdrawals

Cash carried forward 2,816,835 23,924,510 68,485,811 124,142,562 192,448,882 277,691,601

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8. Key assumptions

8.1 Project Capacity Assumptions

Production Capacity
Description Calculation
Maximum Capacity Daily (tons) 4
Working days in a week 5
Weeks in a year 52
Capacity Year 1 70%
Capacity Year 2 76%
Capacity Year 3 82%
Capacity Year 4 88%
Capacity Year 5 95%
Division of Production Capacity
Chicken Nuggets (400 gram) 25%
Beef Seekh Kebab (540 gram) 25%
Beef Burger Patties (1000 gram) 25%
Beef Sausages (350 gram) 25%

8.2 Cost of Goods Sold Assumption

Cost of Goods Sold Assumptions

Description Calculation
Cost of Raw Material as percentage of selling
price 70%
Cost of Meat as percentage of RM 50%
Cost of Additives as percentage of RM 5%
Cost of Plants & Labour as percentage of RM 45%
Wastage 2%
Transportation Cost (as percentage of total sales) 5.00%
Packaging cost per pack
Chicken Nuggets (400 gram) 40
Beef Seekh Kebab (540 gram) 54

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 Beef Burger Patties (1000 gram) 100
Beef Sausages (350 gram) 35
Other Manufacturing Costs (annual basis):

Electricity 19,000,000

Direct Water Cost 2,400,000

8.3 Revenue Assumptions

Revenue Assumptions
Description Calculation
Sale Price:
Chicken Nuggets (400 gram) 205
Beef Seekh Kebab (540 gram) 665
Beef Burger Patties (1000 gram) 795
Beef Sausages (350 gram) 310
Sale Price Growth Rate/ Year 10%
Raw Material Inventory (in days) 5
Processed Products Inventory (in days) 5

8.4 Economic Assumptions

Economic Assumptions
Description Annual % increase
Electricity Price Growth Rate 10%
Water Price Growth Rate 10%
Salary Growth Rate 10%
Feed cost Growth Rate 10%
Packaging Cost Growth Rate 10%
Communications Cost Growth Rate 10%
Selling price growth rate 10%
Materials Cost Growth Rate 10%
Tax Rate 30%

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8.5 Expense Assumptions

Expense Assumptions
Administrative Expense (% of total revenue) 1%
Office Expense (% of administrative expense) 10%
Travelling Expense (% of administrative expense) 5%
Salaries 16,644,000
Telephone and Internet Expense 60,000
Professional Fee (Legal, Audit etc) 0.01%
Machinery & Equipment Insurance Rate 2%
Promotion Expense 3.0%

8.6 Depreciation Expense Assumptions

Depreciation Expense Assumptions

Depreciation method Straight line

Machinery & Equipment 10%

Furniture & Fixtures 10%

Office Equipment 10%
Building & Infrastructure 10%
Amortization of pre operating costs 20%

8.7 Cash Flow Assumptions

Cash flow Assumptions

Accounts Recievable Cycle (In Days) 15

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 Accounts Payable Cycle (In Days) 15
Credit Sales as % of total sales 70%
Credit Purchases as % of total purchases 50%

References
 Trade and Markets Division. (2013) Food outlook: Biannual report on global food
markets. Published by Food and Agriculture organization (FAO). pp. 139

 Kandilov, I.T., (2008). The effect of Exchange Rate Volatility on Agricultural

Trade. Amercian Journal of Agricultural Economics. Vol. 90, No.4, pp. 1028-1043.
https://www.jstor.org/stable/20492351?seq=1#metadata_info_tab_contents

 Pre-Feasibility Study Meat Processing Unit and Slaughter House. 2019.

 Cluster Profile Meat Processing Cluster. Lahore. Small and Medium Enterprises
Development Authority, Ministry of Industries & Production, Government of
Pakistan

 https://atlas.cid.harvard.edu/explore?country=undefined&product=795&year=2017
&productClass=HS&target=Product&partner=undefined&startYear=undefined

 https://atlas.cid.harvard.edu/explore?country=undefined&product=657&year=2017
&productClass=HS&target=Product&partner=undefined&startYear=undefined

 Guide to Designing a Small Red Meat Plant with Two Sizes of Model Designs.
2009. Iowa State University

 https://qne.com.pk/brand/pk (PK Foods online store)

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