212.

PROFILE ON CATTLE
SLAUGHTERING HOUSE
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TABLE OF CONTENTS

PAGE

I. SUMMARY 212 - 3

II. PRODUCT DESCRIPTION & APPLICATION 212 - 3

III. MARKET STUDY AND PLANT CAPACITY 212 - 4

A. MARKET STUDY 212 - 4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 212 - 7

IV. RAW MATERIALS AND INPUTS 212 - 8

A. RAW & AUXILIARY MATERIALS 212 - 8
B. UTILITIES 212 - 9

V. TECHNOLOGY & ENGINEERING 212 - 10

A. TECHNOLOGY 212 - 10
B. ENGINEERING 212 - 12

VI. MANPOWER & TRAINING REQUIREMENT 212 - 13

A. MANPOWER REQUIREMENT 212 - 13
B. TRAINING REQUIREMENT 212 - 14

VII. FINANCIAL ANALYSIS 212 - 15

A. TOTAL INITIAL INVESTMENT COST 212 - 15
B. PRODUCTION COST 212 - 16
C. FINANCIAL EVALUATION 212 - 17
D. ECONOMIC BENEFITS 212 - 17
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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 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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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.
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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)

Expenditure Consumption Per No. of Persons in Total

Group Person (gm) the Group Consumption
(Tone)
<600 - 1,251,249 -
600 – 999 552 1,907,902 1,053
1,000 – 1,399 411 2,351,416 966
1,400 – 1,999 1,074 4,545,900 4,882
2,000 – 2,599 1,478 5,388,520 7,964
2,600 – 3,399 1,975 7,989,689 15,780
3,400 – 4,199 2,052 7,442,894 15,273
4,200 – 5,399 2,845 8,393,797 23,886
5,400 – 6,599 3,356 5,486,414 18,412
6,600 – 8,999 5,371 6,276,199 33,709
9,000 – 12,599 6,242 3,049,346 19,034
12,600 – 16,199 9,353 906,022 8,474
16,200 – 19,999 12,833 479,185 6,149
> 20,000 17,512 485,706 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
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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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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 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

Sr. Material Qty. Unit Cost Cost ('000 Birr)

No.
1 Electric power 85,630 kWh 0.4736 40,554
2 Water 2,400 m3 3.10 7,440
3 Furnace fuel 90,000lt. 3.34 300,600
Total - - 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.
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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

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
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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.
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Table 4.1
MACHINERY AND EQUIPMENT REQUIREMENT

Sr. Description Qty.

No.
1 Stunning box 1
2 Stunning Pistol 1
3 Live Scale 1
4 carriage plant 25m
5 Cattle Race 16
6 Bleeding Hoist 2
7 Washbasin with sterilizer 1
8 Bleeding shackle 10
9 Bleeding rail 30Ml
10 Horn Cutter 2
11 Washbasin with sterilizer 1
12 Rail for return of shackle 30Ml
13 Cutter for legs 2
14 Dressing rail 30Ml
15 Washbasin with sterilizer 1
16 Brisket saw with sterilizer 1
17 Washbasin with sterilizer 1
18 Splitting saw with sterilizer 1
19 Container for condemned carcasses 1
20 Inspecting platform 1
21 Washbasin with sterilizer 1
22 Shower 1
23 Trimming platform 1
24 Quartering saw with sterilizer 1
25 Rails for quartering and dispatch 60Ml
26 Roller hooks 800
27 Trolley for hooks 2
28 Blood pump 1
29 Head shower 1
30 Washbasin with sterilizer 1
31 Evisceration Table 1
32 Container for condemned intestines 1
33 Table for hide cleaning 2
34 Table for de-skinning of heads 1
35 Table for trimming of head meat 1
36 Trolley for head skin 1
37 Table for cleaning of stomachs & intestine 2
38 Tray for empty stomachs 30
39 Tray for plucks 100
40 Boiler 1
41 Digester 1
42 Autoclave 1
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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.
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Table 5.1
MANPOWER REQUIREMENT AND ESTIMATED
ANNUAL LABOUR COST (BIRR)

Sr. A. Description Req. Monthly Annual

No. No. salary salary
1 Plant Manager 1 1,500 18,000
2 Secretary 1 500 6,000
3 Finance & Administration 1 1250 15,000
Manager
4 General Service 1 900 10,800
5 Production and Technical 1 1250 15,000
Manager
6 Production Head 1 900 10,800
7 Technical Head 1 900 10,800
8 Commercial Manager 1 900 10,800
9 Accountant 1 750 9,000
10 Personnel 1 750 9,000
11 Time-keeper 1 450 5,400
12 Store-keeper 1 600 7,200
13 Quality control head 1 1200 14,400
14 Chemist 1 900 10,800
15 General Mechanic 1 900 10,800
16 Assistant Mechanic 1 450 5,400
17 Electrician 1 600 7,200
18 Operators 6 3,600 43,200
19 laborers 10 3,000 36,000
20 Driver 1 450 5,400
21 Guard 3 900 10,800
22 Cleaner 2 500 6,000
Sub-Total 39 23150 277800
Employees benefit 20% of 55,560
basic salary
Grand Total 39 333,360

B. TRAINING REQUIREMENT

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

Source of finance 30 % equity
70 % loan
Tax holidays 3 years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30days
Raw material, import 90days
Work in progress 1 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 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.
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Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (‘000 Birr)
1 Land lease value 30
2 Building and Civil Work 1,500.00
3 Plant Machinery and Equipment 3,200.00
4 Office Furniture and Equipment 25
5 Pre-production Expenditure* 50
6 Working Capital 40.4
Total Investment cost 4,845.4
Foreign Share 37

* N.B Pre-production expenditure includes interest during construction ( Birr

232.85 thousand ) and Birr50 thousand costs of registration, licensing and
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.
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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

3. Pay Back Period

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.

4. Internal Rate of Return and Net Present Value

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.