ALEMU INTEGRATED FARMS LTD
PALM OIL PLANTATION
ODHOLU GBOJI,AHOADA-WEST
AHOADA - MBIAMA HIGHWAY
FEASIBILITY STUDY FOR THE ESTABLISHMENT OF
AN OIL PALM PLANTATION MILL IN AHOADA WEST
LOCAL GOVERNMENT AREA RIVERS STATE
LOCATION: ALEMU FARMS,
ODHOLU GBOJI VILLAGE
AHOADA-MBIAMA HIGHWAY
CLIENT: ALEMU INTEGRATED FARMS LTD
OWNER: 2, ALEMU CLOSE, TOMBIA EXTENSION,
GRA, PHASE 2, PORT HARCOURT, NIG.
TEL: 083-886314, 08033035822
FAX: 084-464884
E-mail:
[email protected]
Consultants: AIDALAN ASSOCIATES LTD
Team: Bomo Albert-Oguara,Lead
Consultant.
Theodore
Ogbolu,Associate Consultant.
TABLE OF CONTENT
1. Executive Summary 5
2. Introduction 6
3. Justification of project 10
4. Objective of report 11
5. Study of scope 11
6. Product/Service Description 13
7. The Promoter 19
8. Marketing Plan 19
9. Market Trend 21
10. Defining Strategy 23
10. Market structure 26
11. Competition Analysis 26
12 Marketing strategy 26
13. Technical Analysis 27
14. Management of Mill and Plantation 28
15. SWOT Analysis 30
16. Critical Success Factors 31
17 Financial Projections 32
18 Conclusion, Finding, Recommendation 34
19. Appendices 37
TABLES AND FIGURES
TABLE
Page
1. Estimated yields per hectare planted per year 5
2. Projected tree planting plan 6
3. Estimated annual yield per hectare from year of plantation
7
4. Several uses of palm oil 8
5. Summary of oil palm unit of operations 9
6. Estimated yields and monthly distribution pattern 15
7. Financial projections 19
FIGURES
1. Oil palm hectare in Nigeria 3
2. Oil palm processing unit operations
10/11
3. Potential consumption of palm oil per year
15
4. Swot Analysis 18
LIST OF ACRONYMS
CPO - Crude Palm Oil
FAO - Food and Agriculture Organization
FFA - Free Fatty Acid
FFB - Fresh Fruit Bunch
NIFOR - Nigeria Institute for oil palm
PKO - Palm Kernel Oil
PKC - Palm Kernel Cake
SPO - Special palm Oil
RBDO - Refined Bleached Deodorized oil
TPO - Technical Palm Oil
EXECUTIVE SUMMARY
Alemu Integrated Farms Ltd. proposes to develop a medium scale palm oil
plantation and mill of Tenera a hybrid palm nut(between Dura and Pesifera)
planted approximately on a 102ha farm land in Odholu Ogboji Village of
Ahoada West Local Government Council Rivers State.
It is the intention of Alemu Integrated farms Ltd. to impact the immediate
economy of the community where its palm oil plantation is located through
direct and indirect employment of rural dwellers living around its
vicinity. But more importantly to boost rural incomes and raise living
standards.
Investment on them will be in excess of N200 million in the short to medium
term of which shareholders of Alemu Integrated Farms Ltd. have committed
over N70 million in the planting of over:
20,000 – 30,000 palm seedling between years 2012 - 2014
Purchase of a 10 ton (10,000kg) per day palm oil mill capacity of
fresh fruit Bunches (FFB) of palm fruit
Construction of Industrial area, which includes the mill, quarters
for mill staff, security post and a snake administrative building.
Given Seasonality, the expectation is that the plant will operate at rear
capacity for four months of the year, (April-July) and less than this or
half capacity for the rest of the year (August – March).
Therefore it is estimated that the plant will operate at an average
capacity of 5 tons (5,000kg) per day throughout the year.
Total capital expenditure is put at N390,000,000 including land purchase
(350HA), 10 ton (10,000kg) per day mill equipment, seedlings planting of
over 100,000 Tenera trees, and the construction of the industrial area
housing the mill and palm kernel cracking unit, staff quarters for workers
and security personnel.
In year 2016, it is accepted that a palm kernel oil processing plant will
be commissioned to optimize gains in the value chain.
Pay back period is estimated to be between 10-12 years provided more
investments continue to be made to upgrade activities in the value chain
within the first three years of commencement of operations. A moratorium of
three years is therefore advised.
This feasibility study is focused on oil palm, its products and direct by-
products. Whereas from the palm tree derives palm oil, palm, wine and wood
product; three dominant products of the oil palm are technical palm
oil(TPO),special palm oil(SPO) and palm kernel oil(PKO),with the palm
kernel cake and sludge as significant by-products that serve as input into
the production of animal feed. Such is the versatility of the oil palm
tree.
The literature, based on extensive studies has shown that the market
largely exists for three oil palm products namely, technical palm oil(TPO)
with free fatty acid (FFA) of between 5-30%;special palm oil(SPO) with less
FFA of less than 5%;palm kernel oil(PKO),a by-product of the palm oil
product whose demand has grown over the years as an industrial raw
material. Present production is estimated at about 200,000tonnes per annum.
It is also estimated that the small scale producers of palm oil using
traditional methods account for about 80% of local production (688,500
tons) whilst the medium and large estates account for 161,500 tons or 20%
of total annual production. Lack of information about how to access the
market for SPO supply to secondary processors and the lack of technical
ability to produce to specification of industrial production are some of
the factors militating against the small scale producers .
The conclusion is that there is great growth opportunity for the palm oil
industry over the short to long term, especially for medium to large
estates due to the huge demand-supply gap and existing capacity
deficiencies. As a corollary, there are major opportunities along the palm
oil value chain to be exploited by investors such like Alemu integrated
farms Ltd.
1.0 INTRODUCTION
Palm oil is the world's yielding oil crop with an out put 5-10 times
greater per hectare than other leading oils, such as ground nut, beniseed,
coconut, sunflower etc.
Rapidly expanding populating and changing consumption patterns as well as
increasing demand from the food industry have resulted in sustained high
prices for crude palm oil.
These market forces have driven the sustained growth the industry has
witnessed in the last decade.
Analyst predict further global demand acceleration for palm oil in the
short term potentially of a 36% increase by 2013 and more than 65% by 2020
(Mielke, 2011).
Rosy as the picture may be, success is not or cannot always be guaranteed.
Palm oil yields vary across the oil palm value chain, based on management
practices, genetics and geography (soil yield).
Yields range from less than one to more than 7 metric tonnes crude palm oil
per hectare. Besides this, the dynamics of the industry can pose challenges
such as land and labour shortages social conflicts erratic weather
pattern's rising fuel and fertilizer.
Oil palm is indigenous to the coastal plain migrating inland as a staple
crop. For millions of Nigerians, oil palm cultivation and processing is a
way of life. Nigeria used to be the world's largest producer of palm oil
responsible for about 43% total would production in the early 1960s'. It
now accounts for only 0.82% of global production. Malaysia and Indonesia
together account for more than 50% of world production.
Nigeria's production of crude oil palm comes from dispersed small holders
who harvest semi-wild fruits and use manual processing techniques. Several
hundreds of thousands, are spread over the oil palm belt in an estimated
area of 1.65 million to 2.4 million hectares, up to a maximum of 3 million
hectares under cultivation. The small holder is the king of palm
cultivation in Nigeria. Small holders cover a range of 1-5 hectares of
land. The wild Dura exists alongside the semi-wild plantations which when
put together with the small holdings is accountable for 80% of Nigeria's
palm oil production. Private estate holdings run by companies are fairly
large and account for 20%
Alemu Integrated farms Ltd is projected to grow to a 200hectares of oil
palm plantation over the long term; thus categorizing it as a medium sized
plantation.
This said noteworthy is the fact that many of large plantations were the
product of past attempts by the Federal Government in its drive to
implement the establishment of large scale oil palm plantations. Many of
these attempts ended in failure. Most were collaborations between the FGN
and the European Union of 1990s. This included the Risonpalm Ltd Plantation
in Rivers State on an estate of 66,750 hectares of oil palm, thought to be
one of the largest of such efforts.
International organization such as the World Bank, the UN's Industrial
Development Organization, UNIDO have continued to play complementary roles
to those of FGN, most with poor results.
Attitudinal shifts of governments at local and national levels have seen to
the eventual inheritance of abandoned government oil palm plantations by
privates sector producers under various privatization schemes.
In tandem with this shift, the key lies in the promotion of private sector
participation in oil palm plantation which holds the key to the revival of
the industry. Private sector participation has witnessed increased interest
and investment from abroad, with the involvement of firms such as Presco, a
subsidiary of Belgian company SIAT, S.A, in Edo state with 6000 hectares
and in Delta State, 3,000 hectares.
Figure 1
Type Hectarage
Wild grove 2,300,000
Small holder 117,625
Estate 96, 465
Total 2,514,090
Source: Oil Seeds Association of Nigeria (OSAN) 2003, Raw Materials
Research and Development Council (RMRDC) 2004
The Italian Company Fri-RC Green Power equally has taken over the Abia Palm
Ltd. at Ohambele, a concessioned plantation of 11,292 hectares, with
opportunity for concession extension up to 100,000 hectares.
The Okomu oil palm company, located in Edo Estate, a Federal Government
pilot scheme in 1976 under its oil palm rehabilitation programme,
represents we believe, the only success pasis in a desert of failures. The
success largely owes to the privation of the estate in 1990 and subsequent
take over of the reins of management by SOCFINAF, of Holland, with a
53.32% share in Okomu oil Palm Plc, SOCFINAF, is the single largest
shareholder of the company.
Okomu covers a survey area of 15,580 hectares out of which 12,500 hectares
could be planted with oil palm.
At present, 8,800 hectares is planted and mature along side an extension of
4,000 hectares of rubber, a palm oil mill of 30 tons per hour capacity.
Several other major oil palm production plants are dispersed along the
coastal plains of Cross River, Akwa Ibom and Edo States respectively. These
are complemented by numerous local production plants using fruit bunches
sourced from wild fruit trees as well as small holders of between one to 10
hectares of land.
ALEMU Farms, a subsidiary of Nakspec West Africa Ltd. is a 350 hectares oil
palm plantation situated in Ahoada-West Local Government Area of Rivers
State. As shown overleaf, tree plantings commenced in year 2012 with
seedling of 4000, 7000 in 2013 and 10,000 projected for 2014. All these
activities, land clearing, preparation and tree plantings have been under
taken by the promoters from funds dedicated from their earnings elsewhere.
Also cited on the estate, is a poultry farm of 8,000 birds, growing to
30,000 birds in the third quarter of year 2015, a fish farm of between
50,000-100,000 fingerlings, a plantation of 5,000 plantain suckers and
sweet potato of 3,000 plantings.
With good agronomic and farm management, it is hoped that these young trees
will grow into maturity and begin to yield fruits for harvesting. See table
two below for the estimated yield per hectare planted per year
TABLE 2
ESTIMATED FFB YIELDS AFTER PLANTING RELATION TO PLANT CAPACITY
YEAR / YIELD IN M/T
"Hectares "1 "2 "3 "4 "
"2012 "4,000 "- "2015 " "
"2013 "7,000 "- "2016 " "
"2014 "12,000 "- "2017 " "
"2015 "20,000 "- "2018 "3.0 "
"2016 "25,000 "- "2019 "4.25 "
"2017 "30,000 "- "2020 "5.5 "
"2018 "- "- "- "6.0 "
"2019 "- "- "- "7.25 "
"2020 "- "- "- "8.2 "
2.0 JUSTIFICATION OF PROJECT:
Nigeria from analysis is a net importer of crude oil palm, from being the
world's largest producer in 1950's and till the mid-1960s at 650,000 metric
tones.
According to Index Mundi an online date source, domestic crude oil palm
production stands at 850,000/MT as at 2012 against a consumption of over
1,000,000/MT per annum. Official figures puts the short fall in consumption
at between 150,000 M/T per annum, and a 500,000 MT/PA a gap new investments
in crude oil palm production should help to fill.
The market for crude oil palm, is divided into two segments, consumer and
industrial, with the former consumption standing at 90% in the form of
technical palm oil or TPO and industrial or special palm oil SPO at 10%;
used for the production of refined vegetable oil and other food products,
annual shortage is also experienced in the TPO and SPO segments of the
market-300,000 MT per annum (TPO) and 200,000TM (SPO) per annum which is
filled through importation.
It has also been established that 90% of palm oil is consumed by the food
industry while the non-food industry consumes the remaining 10%. Foods such
as noodles, shortenings, cereals, washing detergents and soap, all use palm
oil in their production process. For instance, the noodles industry alone
consumed 72,000 metric tones of imported palm oil. Due to the failure of
the domestic market meeting the demands of the industrial, some leading
industrial producers like PZ Cussons have integrated backwards in a
strategic move to secure for themselves, a vital stage in the oil palm
value chain, by investing in oil palm plantations.
2.1 OBJECTIVE OF REPORT:
The raison deter of this study is to establish the viability of investment
in a 30 tons per a day, scalable to 10 tons per hour oil palm production
plant as the promoters contribution towards the reduction in the gap of
domestic production of palm oil.
It is also the hope of the promoter to integrate forward into the refining
and bleaching of oil palm for the production of refined vegetable oil in a
value added process that increases the profitability of the initial
investment.
2.2 STUDY SCOPE
Feasibility is for the ascertainment of the viability of the establishment
of a 10 ton per day crude oil palm mill scalable to 10 tons per hour per
day industrial plant with value-chain optimization possibilities which the
oil palm makes possible. Further investments will therefore be recommended
in forward integration of value addition towards the production of palm
kernel oil, PKO, hence to vegetable oil with further chemicalisation of
process.
This study is based on current planting activities by the promoters on a
land acquisition of about 350 hectares of land in the Ahoada West Local
Government Area of Rivers State, Nigeria.
A land area of 20 hectares is currently under cultivation with over 10,000
young tenera oil palm seedling. A further 90 hectares is projected for
clearing and cultivation bringing the total cultivated land portion to 100
hectares over a six year period (table 2). Given the gestation period of 3
½ to 4 years for maturity of the tenera species, projected take off of the
mill in 2014, shall be with wild fruits (Dura) from suppliers in and around
the industrial location of the mill. Studies show an abundance of small oil
palm plantations, including harvested oil palm bunches from the wild oil
palm tress to complement those from the small plantations.
The oil mill shall be built on 6 hectares of land to take care of future
expansion. Take off infrastructure will include a 20 room building for
living quarters for staff,an administration building including workshop.
This will also feature security facility to be manned by a joint task force
of army and police.
Also to feature will be the industrial area with receiving facilities for
fruit bunches for processing preparatory to milling
Table 4
Estimated annual yield per hectare (from year of plantation)
"Year "
"Food products "Non-food products "
"Cooking oil "Cosmetics "
"Deep-frying oils "Detergents and soap "
"Margarine "Drugs "
"Shortenings "Cardles "
"Spreads "Lubricating oil "
"Alternative fats "Grease "
"Confectionary fats "Chemicals "
"Ice creams "Paints and coatings "
"Nutrition "Electronics "
" "Leather. "
For the processing plant under the purview of this plan it is envisaged
that a fully integrated machinery configuration which combines several
process operations/ digestion pressing and fibre/nut separation) into one
continuous assembly shall be recommended.
We have found out through study that these machines so configured fit into
two key process groupings, namely batch and semi-continuous processes.See
figure four for illustration
A summary of oil palm unit of operations indicated in figure six is given
as to purpose of each stage of the operation.
Table 6
"S/NO "UNIT OPERATION "PURPOSE "
" "Fruit "To loosen fruit base from spikelets and allow "
" "fragmentation "ripening processes to abate "
" "Bunch chopping "To facilitate manual removal of fruit "
" "Fruit sorting "To remove and sort fruit from spikelets "
" "Fruit boiling "To sterilize and stop enzymatic spoilage "
" " "coagulate protein and expose microscopic oil "
" " "cells "
" "Fruit digestion "To rupture oil-bearing cells to allow flow "
" " "during extraction while separating fibre from "
" " "nuts "
" "Pulp pressing "To release fluid palm oil using applied "
" " "pressure on rupture "
" "Oil clarification "To boil mixture of oil and water to remove "
" " "water soluble gums and resins in the oil dry "
" " "decanted oil by further heating "
" "Oil drying "To separate de-oiled fibre from palm nuts "
" "Second pressing "To recover residual oil for use as soap feed "
" " "stock "
" "Nut drying "To sun or dry by other means for later "
" " "cracking processing as feed stock "
FIGURE 1.0
Oil Palm Processing unit operations
FIGURE 3 . 1
As shown in figure 4, above, the extraction and processing of palm oil from
palm fruit, can be accomplished either using the batch process or the semi-
continuous dry process which is semi driver by machinery the batch process
is completely manual .
3.1 BATCH SYSTEM
This system works on successive loads of boiled fruit directly from
sterilization of clarification. It involves the use of a vertical digester
with a perforated bottom plate to poured a batch of fruit and then the oil
digested is mashed up in hot water, which is then screw-pressed through
pressure exertion and oil is expelled, all in one operation.
Though very simple and manual, extraction efficiency of oil from water
using this method is low, given that oil/water emulsion is difficult to
separate from the fibre mass.
3.2 SEMI CONTINOUS PROCESS
Our first observation about the semi-continuous process is that it involves
for more machinery than the batch system, it is 'dry' in the sense that far
less water is required for processing.
Once a semi continuous process has been fully achieved to attain
continuity, the capital investment outlay has gone beyond the small scale.
This level of automation requires a large increase of working capital for
raw material which comes with increased mechanization.
The downside of the 'dry' system however is that the process leaves
substantial residue of oil in the press cake, put at 2-3%. Depending type
of screw press, efficiency rates range between 60-70 percent for spindle
presses 80-87 percent for hydraulic presses and 75-80 percent for Caltech
presses.
First extraction rates range between 12-15 percent for spindles 14-16
percent for hydraulics 17-19percent for motorized screw presses (Rouziere,
1995)
THE PROMOTER
NAME: NAKSEC WEST AFRICA LTD (THROUGH
ALEMU INTEGRATED FARMS LTD.
ADDRESS: ALEMU CLOSE TOMBIA EXTENSION
GRA PHASE 2, PORT HARCOURT, NIGERIA
TELEPHONE: 084 – 886314
MOBILE: 080 – 33035822
FAX: 08037401999
EMAIL:
[email protected],
[email protected]
4.0 STATUS OF PROMOTER
Naksec West Africa Ltd, is a limited liability company registered in
Nigeria. it has been involved in the oil and gas industry in Nigeria for
over a decade; whose chief executive has cognate experience of over 30
years in industry; more than twenty of which has been spent in project
management of complex procurement supply, engineering and construction of
oil and gas production facilities. Promoter has been involved in the
procurement supply and installation of machinery for oil production for
various clients since the founding of NAKSEC West Africa Ltd. Back in 2010,
the decision was taken to invest in the establishment of an oil palm milk
to process the fruits from the plantation to which a 350(hectare) land
acquisition was made. This acquisition has come in installments as the
states land tenure system would hardly permit such huge acquisition in one
fell swoop. Planting of young oil palm trees of the tenera species
commenced in 2011. So far a land area of over 20 hectares has been
cultivated with oil palm planting interspersed with those of plantain
sucker. Over 4,000 plantain suckers have so far been planted. Oil palm
plantings are in excess of 10,000 young trees, with further plantings
planned for 2014 and 2015 to reach 20,000 trees. Further plantings planned
for 2014 and 2015 are expected to reach 100,000 trees. Table one provides a
synopsis of future planting activities.
5.0 MARKETING PLAN
Market Assessment:
The market for palm oil and its by-products is assured; demand for the
product is well in excess of one million tonnes per annum whilst local
production stands at 850,000 metric tonnes palm oil and 200,000 tonnes
(PKO) per annum as at 2012. Official data puts the shortfall at well over
500,000 metric tones per annum, represented by consumer and industrial
consumption. The domestic market is segmented into consumer and industrial
with the consumer sub-market accounting for 90% of demand, and the
industrial segment taking up the rest. Industrial palm oil, also known as
special palm oil, SPO is used as feed stock in the production of refined
oil on the one hand, and food products on the other market gap as
identified above is filled through importation. Backward integration by
industrial and food products of such as noodles, vegetable oil, biscuits,
chips migraines, and soap and detergents and cosmetics have formed
alliances to invest in oil palm plantations geared towards crude oil palm
production to satisfy their never ending raw material needs. Seemingly a
threat, we observe however, in the medium to long term, that Nigeria lacks
the capacity to satisfy its ever growing population on one hand, and its
ever expanding industrial needs. We also will state that given the paucity
of data generally about the economy, the demand profile of palm oil may be
understated.
FIGURE 4
Potential Consumption per annum (Ton) for Alemu palm oil
CUSTOMERS YR1 YR2 YR3
DOMESTIC 12 20 28
FOOD INDUSTRY 16 24 32
SOAP AND COSMESTICS
INDUSTRY 20 28 36
TOTAL 48 72 96
NOTE: It is assumed that plantings will begin to bear fruits in year 2017
from our projection for the plantation which will impact production
Finally government policy which seeks to replace crude palm oil importation
with increased domestic capacity production means market opportunities for
investment in oil palm milling is guaranteed to be a viable one in the
medium to long term.
5.1 MARKET TREND
The crude oil palm, market is basically a generic one with mineral
competition it is a seller market wherein demand pressure for the commodity
is dictated by the demand from industrial buyers as well as by seasonality.
We note the seasonal nature of rainfall patterns in the West African Region
where 2 rainfall seasons predominate oil palm bears fruit in response to
rainfall patterns in the west African Region where 2 rainfall seasons
predominate oil palm bears fruit in response to rainfall patterns even
through yield is distributed all year round, but reverently. The peak
season is between April and June each year, up until July sometimes
depending on the rainfall pattern for the year. In particular peak seasons
experience glut with attendant price/demand moderation, spiking during the
rains when fruiting is low.
Table 7
Estimated yields and monthly distribution pattern of oil palm production
"Month "% yield "Seasonal distribution "
"March "9 " "
"April "12 " "
"May "16 "50% "
"June "13 " "
"July "8 " "
"August "7 " "
"September "8 "34% "
"October "11 " "
"November "7 " "
"December "5 "16% "
"January "3 " "
"February "1 " "
Peak season of April of June/July, which represents 50% of annual yield is
generally available for processing. Plant must ensure therefore, capability
of processing the peak season output. By this time plant personnel are
expected to work two shifts to be able to cope with fruit yield.
Off Peak ( November – February (4 months)
Peak ( March – June (4 months)
Mid point ( July – October (4 months)
5.2 DEFINING THE MARKET
Data available to this study through the Oil Palm Grower Association of
Nigeria (ODGAN), states that about 200,000 persons are employed in the oil
palm trade alone in Imo state. The producer group of actors account for
over 35% of all actors in the CPO value chain which means over 70,000 small
holders, farmers and plantation owners are involved.
Another 20,000 processors and 100 millers are also involved, with about
100,000 trading in palm oil as wholesalers or retailers with agency. The
remaining 30,000 constitute the labour force involved in plantation
maintenance, harvesting of FFb and logistics. 50% of these numbers
constitute actors in the palm oil value chain in Imo State, which in turn
influences the price of CPO in the environ of this project. the influence
of demand supply gap need not be overstated. Inferentially, we can deduce
that the Imo State oil palm trade should serve as the reference point for
all other players in the industry within the zone of this would be industry
in Odholu Gboji, Ahoada-West, Rivers State.
DEMAND/SUPPLY GAP FOR SPO VALUE ADDED PRODUCTS IN RANDOMLY SELECTED AND
SAMPLED END MARKETS
" "Findings/ Data "Honey well "Dufil Prime Foods "
" " "superfine Foods "Plc "
" " "Ltd " "
"1 "Majors suppliers of RBDO "Golden Oil, Presco "Sudit dedicated one"
" " "and Sudit "plant to Dufil "
"2 "Average monthly "350 tonnes "4,000 tonnes "
" "requirement of RBDO " " "
"3 "Importation of SPO "No "Yes Malaysia SPO; "
" " " "is about & 900 per "
" " " "ton equivalent to "
" " " "N144,000 while SPO "
" " " "from Okomu Plc is "
" " " "N220,000.00 / MT "
"4 "Acquisition cost of RBDO "N260,000 – 270,000 "Same "
" " "MT " "
"5 "Challenges encountered in"Congealing of "Same "
" "getting RBDO "product during " "
" " "rainy season " "
" " "Control of product " "
" " "in transit so that " "
" " "the driver will not" "
" " "tamper with the " "
" " "quantity or even " "
" " "quality. Price " "
" " "fluctuation " "
"6 "Strategic "Automation of "Involved in "
" " "Production system "mechanized oil palm"
" " "Backward "plantation of not "
" " "integration "less than 100,000 "
" " " "ha "
" " " " "
Nigeria's position in the world in the oil palm trade-production, export,
import and consumption (for food and non-food purposes) in 2010/2011. All
figures are in million tones
"Production "47.9 (Indonesia, 23.6, Malaysia, 18.2 Thailand 1.3, "
" "Nigeria 0.85, Columbia 0.8 other 3.2) "
"Exports "36.8 (Indonesia 16.2, Malaysia 16.3, other 4.1)` "
"Imports "35.6 (India 6.7; China 5.7; EU-27, 4.9, Pakistan 2.1, "
" "Bangladesh 1.0; USA 1.0, other 14.2) "
"Consumption "47.1 (India 7.1, Indonesia 6.7; China 5.8; Malaysia "
" "3.4; Pakistan 2.0, Nigeria 1.2; Thailand 1.0, USA 1.0,"
" "Bangladesh 1.0, others 12.9) "
Sources: Lipid library, 2012 adapted by Aidalan Associates Limited
5.3 MARKET PRICE STRUCTURE
The crude oil palm market is not price sensitive in the sense of a packaged
fast moving consumer goods product price sensitivity is relative to
availability which in turn obeys the seasonality law. The oil palm market
experiences price spike during the difficult rainy season, with
accompanying reduced production activities due largely to low yields from
oil palm trees during he period. Speculative pricing and hoarding during
the peak season, offen leads to price hiking by speculators during the off
peak season when supply is limited. This activity requires that the crude
oil palm must be kept in ambient temperature to ensure quality and taste
before its release into the market.
This activity requires large amount of capital to stock in plastic barrels
and drums storage of processed oil palm is usually in 200kg plastic drums
for long term storage sales to the trade however are in 20ltrs Jerry cans.
For the bulk breaking takes place at the retail end into 1.5 – 3.5 litrs
plastic bottles which sell at the retail price of between N880 – N1,900.00
respectively. Large oil palm companies like Okomu in Edo State are adding
value by branding their retail offerings and selling through modern outlets
such as supermarkets and departments area. We are unable to ascertain how
well this method of marketing is at present as at the time of writing this
report. Suffice to say however marketing activities such as this does point
to future developments that the promoter may explore and exploit.
5.4 COMPETITION ANALYSIS
The crude oil palm is a seller market; it is one devoid of competition in
the sense that we know it to be. This is so because of the supply gap
identified in our introduction to this study, a gap of over #500,000 M/T
per annum for which production facilities are unable to fill in the short
to medium term. The paucity of investment in oil palm production of any
worth further exacerbates the supply gap. Large scale producers such Okomu
Presco,as well as Presco all in Edo State, Ceat/Risonpalm in Rivers State,
Abiapalm Ltd in Abia State, along side a plethora of small scale village
based producer using traditional method of oil palm production are unable
to fully meet the supply needs of Nigeria.
5.5 MARKETING STRATEGY:
A key component of market accessibility in the oil palm industry is used of
wholesalers who buy and hold stock, either to resell to the retail trade
supply to industrial users as raw material inputs or speculate this later
tactic is done to optimize higher prices during the low peak season,
November-February. Our proposal shall be for a two track approach, namely:-
1) Direct marketing to large buyers such as RIVOC in Port Harcourt
2) Registered distributors in the company's books who shall be pre-
qualified on the basis of ability to purchase a minimum of 100 metric
tones per month or 1200 metric tones per annum to quality.
Packaging for sale shall be in 200litres plastic drums, which is the arrant
industry standard for delivery. This in turn can be broken-down into
20litres plastic jerry can for retail sale for domestic use. It has been
established that the 20litre Jerry cans are further broken down into lower
litrages of 1 – 3 and sold in super stores and road side kiosks
6.0 TECHNICAL ANALYSIS
As shown in figure 4, the extraction and processing of palm oil can be
accomplished either using the batch (or wet) process or the semi-continuous
dry process, driven partially by machinery. The semi-continuous dry process
is the preferred method of palm oil extraction and is hereby recommended
(please section on product/service description for a fully treatment of the
subject). The mill under consideration is a thirty (10) tones per day oil
mill scalable to 10tons per hour in the medium term
6.1 TECHNOLOGY/EQUIPMENT REQUIREMENT
The full configuration of palm oil processing involves the bunch thresher,
the fruit sterilizer digester, press (spindle or screw) clarifier and
storage tank. Together they form a complete complement of a 10 ton per day
palm oil mill; scable to 10tons per hour. Mill site is located on the
outskirts of the semi-urban area of Ahoada – West Local Government Council
Rivers State with abundant supply of skilled and semi-skilled labour. The
industrial site sits on a 1000 by 500square metres (and encompassing the
mill a twenty room residential building for workers, an administrative
building, including workshop).
7.0 MANAGEMENT OF MILL AND PLANTATION:
Management of the palm oil mill requires a production manager who shall be
in charge of all production and operational oversight for oil palm
processing activities. He will be supported by a mill/technical manager
whose background shall be in agricultural engineering; responsible for the
smooth and optional running of the mill. A plantation manager shall be
required with a background in agronomy; who shall be in charge of the
plantation currently under cultivation; as well as fruit bunches received
from third party suppliers. It is envisaged that fruit bunches from around
the mill site shall form the initial supply sources for processing since
maturity of the first plantings (2012) will not take place until first
quarter of year 2016 at the earliest.
PROPOSED COMPANY STRUCTURE / ORGANOGRAM
7.1 CAPABILITIES:
Existing managerial capabilities assures the project of efficient
management.
It is the expectation that experienced hands will be recruited from outside
the environs of the palm oil plantation to augment existing competences
already acquired during the project phase of the planning and development
of the oil mill .
SWOT ANALYSIS
"Strength: "Weakness: "
"Strong demand for products, "Low skills base, "
"Large market all year round. "Lack of experience in oil "
"Well Capitalized with strong "plantation and production "
"entrepreneurial drive by promoter. " "
"Locational advantage " "
"Opportunities: "Threats: "
"Suitable climate for oil palm "Seasonal nature affects output of "
"development "FFB's hence production. "
"Surplus labour skilled and "Low entry barrier for new entrants "
"unskilled Growth potentials "Losses and theft of FFBS and poor "
"enhanced due to value chain "handling during harvesting and "
"extendibility "quartering for production. "
"Availability of raw materials (Dura"Backward integration by secondary "
"species which grows in the wild, "processors. "
"small holders) " "
7.2 CRITICAL SUCCESS FACTORS:
1. Adequate working capital availability particularity during the peak
and mid point periods for purchase of FFB's. This will minimize down
times of production during the first years of the plantation. Bear in
mind young trees planted in year 2012 will begin to fruit in the third
or last quarter of 2016
2. Adequate security to prevent or minimize poaching by villages and
runagates. Day/night patrols, especially during peak and mid point
months of harvesting is most critical.
3. Minimization of losses due to internal thefts of FFBs and processed
palm oil by staff
4. Minimization of overhead costs
5. Optimization of peak harvesting months for peak production.
6. Organizational capabilities built on the foundation of sound
business
Enterprise management both for the palm oil plantation and the
Mill
Operations.
8.0 FINANCIAL ANALYSIS
The size of the palm oil market is in the region of the N220 billion per
annum contributing about 4.5% to Nigeria's Gross Domestic Product, GDP.
Annual growth rates is estimated at 8% to 15% which when considered means
that the palm oil market will continue to expand in tandem with population
growth and economic development
Future volume projections annually will be between N237 Billion and N253
billion over the next decade.
Below in tables 10 and 11 we provide unit analysis of production using a 10
ten per day profile. Next to this is the financial projection for four
years 2014-2017. These projections are highly conservative as they reflect
the paucity of actual data. They represent only figures for palm oil
production and do not include cost and revenues for the other investments
on the plantation (Poultry, Cassava, Plantain, fisheries and sweet potato)
Analysis of variable cost and revenue involved in the processing of fresh
fruit burches, based on 10 tonne FFB.
Table 10
" "DESCRIPTION "COST "REVENUE "
" " "N K "N "
" " " "K "
"1 "Cost of palm fruit processed 10 "225,305.00 " "
" "tonnes " " "
"2 "Cost of processing "3,030.00 " "
"3 "Palm oil sales " "308,000.00 "
"4 "Palm kernel sales " "17,600.00 "
"5 "Total " "325,600.00 "
"6 "Profit on 10 ton of FFB processed " "97,265.00 "
Note that cost and revenue variability reflects the seasonal nature of the
palm oil plantation business as it fluctuates with the quantum of harvested
FFB's and attendant processing cost as well as revenue derivable there
from.
Table 11
FINANCIAL PROJECTIONS
"CAPITAL "2014 "2015 "2016 "2017 "
"Mill equipment "17,900,000 "- "15,000,000 "- "
"Land/building & others"370,000,00 "- "- "- "
"Seedlings (panted) "16,590,000 "4,000,000 "5,000,000 "6,000,000 "
"TOTAL CAPITAL "394,490,000 "4,000,000 "20,000,000 "6,000,000 "
" " "Add 5% "Add 5% " "
"Operating expenses " " " " "
"Palm fruit bunches " "26,503,738 "26,503,738 "30,828,924 "
"Mill operators (5) " "1,200,000 "1,500,000 "2,500,000 "
"Plantation workers " "2,000,000 "2,200,000 "2,500,000 "
"5-20 " " " " "
"Management " "2,440,000 "2,440,000 "2,600,000 "
"Travel "1,300,000 "2,000,000 "1,500,000 "1,500,000 "
"Plantation transport /" "1,000,000 "1,500,000 "2,000,00 "
"logistics " " " " "
"Mill (water, " "500,000 "600,000 "6,000,000 "
"electricity) " " " " "
"Maintenance /repair " "200,000 "200,000 "300,000 "
"Taxes/levies " "1,000,000 "2,000,000 "2,000,000 "
"Miscellaneous "250,000 "100,000 "100,000 "200,000 "
"Total operating " "36,943,738 "38,543,738 "50,428,924 "
"expenses " " " " "
"Annual income " " " " "
"Palm oil " "38,400,000 "40,463,738 "52,486,924."
" " " " "90 "
"Palm kernel oil " " "7,000,000 "10,000,000 "
"Palm kernel cake " " "1,500,000 "3,000,000 "
"Other income " "500,000 " " "
"Total income " "38,900,000 "48,963,738 "65,486,924."
" " " " "0 "
"Net income/loss "(1,550,000) "1,956,262 "10,420,000 "15,058,000."
" " " " "9 "
9.0 CONCLUSIONS, FINDINGS, RECOMMENDATIONS
Our conclusion based on projections points to the feasibility of the
project and a rewarding financial investment in the palm oil plantation
industry.
Given the numerous activities and investable opportunities in the palm oil
plantation value chain, it is a verifiable fact that the business has a
future provided sound business and investment practices are undertaken both
on the plantation side as well as processing and marketing aspects.
A business succession plan is therefore imperative to secure these both in
the present and post investment phases of the business. We also highlight
the need to emplace an organizational culture that conveys a sense of
seriousness of purpose, shared value, mission and objectives as to why the
project was embarked upon by the promoter(s) ab nitio.
Having said this, we will not fail to underscore the social and economic
impact an investment of this magnitude will have on the local economy of
the village of Odholu Gboji and its neighbours through employment, supply
of FFBS and other ancillary services to the industry. Living standards will
be lifted; just so other services will be attracted into the vicinity of
the industry. We foresee the creation of an oil palm plantation cluster,
attracting other services in the value chain with Alemu Integrated Farms
Ltd serving as the cluster's governor provided it is able to develop the
needed and relevant competencies.
9.1 FINDINGS
It is established through the course of field data gathering for this study
that the Umuagwo – Umuapu axis of Imo State actually dictates the price
movement of palm oil and its derivatives. This assertion is validated by
the PIND report on the value chain scoping study of the palm oil industry
2012. It is also established that secondary processors of special palm oil,
SPO, are concentrated in the Lagos and Onitsha axis of Nigeria; that most
of them are producing at about 40% of their installed capacity.
Golden oil industry Ltd, situated in Onitsha, for instance, imports the
bulk of its, SPO, from Malaysia in order to meets its annual production/
commercial target of over 15,000tons of vegetable oil. It is also
established that the demand-supply gap of over 500,000 tones for SPO and
PKO will increase due to population increases and continuous improvements
in living standards.
This supply gap may exacerbate in the short to medium term, as lack of
funding and clear Policy initiatives for the industry have not spurred new
investments in the sub-sector; thus leaving the space to the small holder
traditional producer who may hold sway into the foreseeable future.
We also establish that the demand-supply gap will continue to holds way;
stabilizing the prices of various products in the short to medium term. A
price band of 200,000 – 270,000.00 naira per ton is established for SPO and
PKO and has held over the last five years. However, the price of imported
SPO is lower at N144,000.00 per ton of lower quality. The Nigeria palm oil
industry needs to improve its efficiency to be able to produce at lower
costs for competitive pricing of products.
We further establish that more large estate plantation investments need to
be put on stream to close the huge demand-supply gap which may continue to
spiral due to increase in population and higher standards of living.
9.2 RECOMMENDATIONS
The following are our recommendations for the future growth of this start-
up. Ahemu Integrated Farms Ltd, should from the start-up of operations
ensure the institution of proper corporate governance practices as an
organizational culture. Proper accounting books must be kept.
The best and only the best should be recruited to fill posts available.
Every effort should be made to avoid over manning as this increases
overhead costs. We recommend that a three to five year strategic plan for
the growth of the plantation should be instituted as a follow-up to this
study, as it is by no means exhaustive given the constraints of data and
record keeping the authors experienced during the preparation of this
report.
We recommend good agronomic practices for the sound growth of young trees
and health of those that will mature from year 2015/2016. An appropriate
measure of fertilizer and herbicides in quantity and time ensures this.
We also recommend continuous investment into the poultry, plantain and
fisheries business, basically to optimize the synergy and strategic fit
between the businesses.
APPENDICES.
Appendix1
PALM OIL PLANTATION VALUE CHAIN
A graphic illustration of the palm oil industry value chain and
applications
Upstream:
Mid Stream
Down Stream
APPENDIX 2
PALM OIL MARKETING CHAIN THE CHAIN VARIES FROM COUNTRY TO COUNTRY DEPENDING
ON THE STAGE OF ITS PALM OIL INDUSTRY DEVELOPMENT
Source: Van Gelder J-W (2004); UNITED NATIONS Conference on Trade And
Development, 2014
APPENDIX 3
VALUE CHAN MAPPING OF PALM OIL PLANTATION CLUSTERS IN RIVERS STATE
-----------------------
Bunch reception
Bunch sterilization
Separation of bunches
Bunch Threshing
Digestion of fruit
Pulp pressing
Nut recovery
Nut & fibre
Separation
Clarification
Nut drying
Oil drying
Nut cracking
Oil storage
Nut separation
Customer
Refinery
Palm kernel
Storage for
Packaging
Kernel oil
Processing
Customer
BOILED/STERILIZED FRUIT
BATCH PROCESS
SEMI-CONTINOUS 'DRY'PROCESS
WET FLUSH PROCESS
'DRY' DIRECT SCREW-PRESSING
INTEGRATED DIGESTER AND PRESS
DIGEST
OIL+WATER+NOS MIXTURE
'DRY' DIRECT SCREW-PRESSING
OIL+NOS
Clean and
Separate
fibre and nuts
CLARIFY
OIL+NOS
PRESS
Screw
spindle
hydraulic
Cake of fibre,nut
And residual
OIL+NOS
CLARIFY
Animal feed
industry
Chemical and other industry
Detergents and cosmetics industry
Food industry
RBO/PKO
Faith acids faith alcohols, esters glycerine a.o
RBD Stearin
RBD Olein
Refinery
Refinery
Oleo chemical plant
Refined bleached deodorized palm oil (RBDO)
Palm kernel Cake/meal
Palm kernel oil PKO
crushing plant
Refinery
Palm Kernels
CPO Mill
Crude palm oil
Fresh fruit bunches
Oil palm plantation
End Markets
HH consumers TPO
Commercial uses TPO P=N230,000 IT
Industrial users SPO/PKO
Rural P=N240,000 Ton
Urban P=N2560,000 ton
Retailing
Palm oil retailers P=N230,000 ton
Secondary processing
Aggregation & whole sale
Palm oil dealers P=N200,000 ton
Palm kernel collectors
Presco automated plant & refinery
Traditional processing
Mini/Medium processors
Primary processing
Wild groves N91,655HA
Wild groves small/medium holder N=57,000Ha
Large Estate SIAT Nig. Ltd UBIMA Estate
Production
Seedling
NIFOR
IRCHO
Channel 1 traditional TPO
Channel 2 l TPO / SPO
Plantation
Fresh fruit bunches
Milling
Crude palm oil palm kernel oil
Trading / transport
Refining
RBD Palm oil
Fractionation
RBD stearin (20%)
Olein (80%)
Double
Fractionation
Palm mid
Fractionation
Hydrogenation
Interesterification
Oleo
Chemical
Processing
Splitting
Glycerol/fatty acids
Reduction
Fatty alcohols
Ammidisation
Fatty nitrogen
Admin. Asst.
Maintenance technician
Mill Operators
Admin Officer
Sales Clerk
Harvesters, Cutters, farm laborers
Accountant
Sales officer
Supervisor
Agronomist
Mill Mgr
Fin/Admin Mgr
Sales Mgr.
Plantation Farm Mgr.
Managing Director
Board of Directors
