Break-Even

Jump to section

• Overview & contents
• i. Important Notice
• 1. Executive Summary
• 2. The South African Egg Market
• 3. Avian Influenza: The Risk That Defines This Business
• 4. SWOT and Competitive Position
• 5. The Five-Stage Roadmap
• 6. The Funding Ladder
• 7. Flock Performance
• 8. Feed Strategy
• 9. Point-of-Lay Pullet Sourcing
• 10. Biosecurity
• 11. Route to Market and Pricing
• 12. Operations and People
• 13. Regulation and Compliance
• 14. Unit Economics
• 15. Capital Expenditure
• 16. Financial Projections
• 17. Break-Even
• 18. Sensitivity and the Grant Question
• 19. Risk Management
• 20. Implementation Roadmap
• 21. Returns
• 22. Key Performance Indicators
• 23. Key Assumptions
• 24. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Stage Capital Schedules
• C. Appendix C: Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Funding Application Checklist
• F. Appendix F: Glossary

Break-even in a layer enterprise is expressed as a flock size rather than a revenue figure, because the number of hens in lay is the variable the operator actually controls and the number every funding decision turns on.

Measured against its own contemporaneous cost base the farm crosses break-even during Year 3, when 3 900 average hens in lay exceed the 3 205 the Year 3 fixed cost base requires. That is consistent with EBITDA turning positive at R213 000 in the same year. By Year 5 the flock of 21 000 average hens in lay stands 13 589 hens above a break-even requirement of 7 411 — headroom of 183 per cent.

17.1 Why the requirement rises and why that is not a problem

The break-even flock rises from 1 188 hens in Stage 1 to 7 411 by Stage 5 because the fixed cost base grows almost tenfold as the business adds staff, vehicles, a grading room, a mill and the overheads of a commercial operation. What matters is that gross margin per hen rises faster in absolute terms than the fixed base does relative to the flock: gross margin per hen improves 53.7 per cent from R242.42 to R372.71 while the flock grows sixty-fourfold.