HYGEIA INTERNATIONAL

Expansion in Nigeria is the issue. Henry Livingstone, vice president of the Africa/Middle East Region of Hygeia International, has just received a proposal from his Nigerian managing director for a major move into poultry production. This would extend Hygeia’s profitable agricultural activities even more in that West African country.

CORPORATE BASE

HYGEIA International is pseudonym for one of the 10 leading pharmaceutical companies of the world. Based in the United States, Hygeia also has laboratories and plants in many countries. Over a third of its net income is earned outside the U.S., and because of growing federal regulation, Hygeia looks abroad for a rising percentage of its future income.

Like other large pharmaceutical films, Hygeia has converted drugs designed for humans to use in farm animals. This opens up a large market with relatively low R & D expense. In addition to veterinary products for the control and treatment of disease, Hygeia produces a variety of feed supplements. Currently, about 15 percent of Hygeia’s total sales of over a billion dollars come from agricultural activities!

Hygeia’s agricultural business includes active participation in mass production of poultry. Today, frying chickens are raised in 100,000-chick batches. Thanks to genetic selection. Scientific feeding, and a strictly controlled environment, fries can be ready for market in 10 weeks. Egg production is similarly engineered. Significantly, these mass production methods provide one of the most efficient conversions of cereal grains into protein known on earth.

Of course, two essential features of such operations are drugs for disease control and feed supplements. Hygeia makes both (as do several competitors). More over, to keep contact with the latest developments, Hygeia has a subsidiary focusing on development of new genetic strains in chickens-for a faster growth, a larger proportion of white meat, more egg, resistance to disease, or other desired characteristics, In the U.S., Hygeia itself does not produce chicken or eggs commercially or sell chicks for the purpose, but it does have experts familiar with the entire technology.

As part of its international expansion, Hygeia has helped promote modern poultry technology in Europe. Latin America and now Nigeria.

POTENTIAL MARKET

A British colony until 1960, Nigeria is growing dramatically; it is by far the leading black African country economically. Its large population of over 90 million (growing 2.7 percent per year) coupled with massive foreign exchange from its crude oil exports ($15 billion in 1980) provide a base for all sorts of expansion.

At the time of independence, Nigeria was a relatively poor developing country with only modest agricultural exports. Probably 90 percent of its population relied on the small village economy, almost unchanged for centuries. Political independence provided the drive, and oil the financial means to modernize. Even now the average annual per capita income of about $500 is unevenly distributed, with many village people being very poor.

National plans call for universal education and the improvement of hospitals, roads and airports, electric plants. Radio and TV ad industry, Lagos, the capital. Already have a population or over a million and so many automobiles that new bridges and a fine elevated highway cannot handle the traffic.

Such a rapid transition naturally creates strains politically. Then most important task is to unite three major tribal groups: the Hausa-Fulani in the north, Ibo in the east, and Yoruba in the west. They speak many different languages (English is the common language) and traditionally are suspicious of each other. A serious civil war occurred from 1967 to 1969 when Biafra tried unsuccessfully to secede. The constitution provides for democratic government, but a series of military coalitions has been necessary to maintain national unity.

Although significance European influence in Nigeria is only about a century old along the southern coast, the Moslem religion and associated ideas have been present in the northern, more and regions since the twelfth century. (Kano, for example continues to center around the s simple village economy with strong emphasis on loyalty to the extended family. The great movement now occurring is from the village to the city, with all the social and economic adjustments tied to such a shift.

The total population growth, and especially the movement to the cities, has created problems of food supplies. Nigeria has much fertile land., but sugar and cereals are being imported. The village society is unsuited to large, but sugar and cereals are being imported. The village society is unsuited to large-scale agricultural technology, and marketing channels are poorly development. Particularly serious is the shortage of protein foods. The production of peanuts is rising slowly, but the amount of meat going into markets is stable at best.

Therefore one facet of the national plan ti increase agricultural output. A system of agricultural agents advice farmers is being established some research

Thinking of ten ventures in the environs of the following cities: Lagos (3), Ibadan (2), Benin (2), Kaduna, Kano, and Makurdi. Three will be parent-stock farms-one each in Lagos, Ibadan, and Benin; the others will be commercial egg farms.8. The financial projection prepared by R. Akobo, our agricultural manager, and checked by M. Suleman, our financial manager, is attached [see Table 1.] you do to have to send us cash: we can simply withhold capital as it becomes needed from remittances due on shipments made to us.

TABLE 1.FINANCIAL SUMMARY(Based on detailed estimated – amounts in thousands of dollars)

Land

Building & equipment

Development Expenses

Total fixed investment

Working Capital

Total investment

Sales

Direct Expenses

Administration, Sales, etc.

Operating profit

Income taxes @ 50%

Net Profit

Government and Bank Financing

Equity

Total investment

Return on equity before Taxes/yr

Return on equity after Taxes/yr

40

960

100

1,100

500

1600

2,300

870

150

1,020

510

510

1000

600

1,600

170%

85%

25

440

60

525

175

700

850

685

45

120

60

60

450

250

700

48%

24%

Sales figures, but not expenses, reduce 20% to allow for contingencies.Actually, most Nigerian taxes will be rebated during first four years.Figures converted from naira to dollars at rate of IN - $1.50.Inflation will increase all estimates, but the proportion should remain the same.

Estimates are for full-scale operations. It will take two to three years to reach this level. Estimates show both cash and net income break even by end of first year and, with tax rebate, full recovery of equity early in third year.