Premier Quality Kenya Dairy Business Plan — Break-Even and Debt Service
Cost per litre of KES 39.40 against a net price of KES 48, and debt service cover across the three-year principal grace period.
Break-Even and Debt Service
Jump to section
- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Opportunity
- 3. Why the Fodder Block Is the Business
- 4. The Production Model
- 5. SWOT and Competitive Position
- 6. Housing, Water and Equipment
- 7. Regulatory and Compliance Framework
- 8. Management and Organisation
- 9. Financial Plan
- 10. Break-Even and Debt Service
- 11. Investment Analysis
- 12. Sensitivity and Scenario Analysis
- 13. Risk Analysis
- 14. Implementation Roadmap
- 15. Key Performance Indicators
- 16. Key Assumptions
- 17. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital and Herd Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 10.1 Break-even
- 10.2 Debt service
10.1 Break-even
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Contribution per litre after feed, KES |
13.93 |
18.03 |
21.05 |
21.79 |
22.46 |
|
Fixed costs net of other revenue, KES |
2 803 000 |
3 684 000 |
3 239 000 |
3 004 000 |
2 972 000 |
|
Operating break-even, litres |
201 220 |
204 326 |
153 872 |
137 861 |
132 324 |
|
Break-even including debt service, litres |
312 491 |
290 294 |
227 506 |
249 828 |
240 951 |
|
Planned litres sold |
83 147 |
163 285 |
239 494 |
307 029 |
365 335 |
|
Margin of safety, percentage points |
-275.8 |
-77.8 |
5.0 |
18.6 |
34.0 |
The enterprise crosses break-even including debt service during Year 3, at 227 506 litres against a planned 239 494 — a margin of safety of five percentage points, which is thin. By Year 5 the margin of safety is 34 points. Years 1 and 2 are below break-even by construction: at 16 and 28 cows the herd is simply too small to carry the fixed cost base and the interest, and that is what the capital structure exists to fund.
|
Break-even measure at Year 5 |
Value |
Interpretation |
|---|---|---|
|
Contribution per litre after feed |
KES 22.46 |
After the milking herd’s feed cost, the largest variable |
|
Break-even including debt service |
240 951 litres |
Against a planned 365 335 litres |
|
Margin of safety |
34.0 points |
How far output can fall before the enterprise stops covering costs and debt |
|
Break-even farmgate price |
KES 41.2 a litre |
Against a plan of KES 50 and an announced KES 52 from 1 August 2026 |
|
Break-even yield |
approximately 18.0 litres a cow a day |
Against a plan of 23 litres |
|
Break-even self-grown forage |
22.4% |
Against a plan of 90%. The steepest sensitivity in the model |
10.2 Debt service
|
KES |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Opening balance |
10 000 000 |
10 000 000 |
10 000 000 |
10 000 000 |
9 110 239 |
|
Interest at 15.5% |
1 550 000 |
1 550 000 |
1 550 000 |
1 550 000 |
1 412 087 |
|
Capital repaid |
— (grace period) |
— (grace period) |
— (grace period) |
889 761 |
1 027 674 |
|
Total debt service |
1 550 000 |
1 550 000 |
1 550 000 |
2 439 761 |
2 439 761 |
|
Closing balance |
10 000 000 |
10 000 000 |
10 000 000 |
9 110 239 |
8 082 565 |
|
EBITDA |
(1 645 000) |
(740 000) |
1 802 000 |
3 687 000 |
5 233 000 |
|
Debt service cover |
-1.06x |
-0.48x |
1.16x |
1.51x |
2.14x |
|
Cover without the grace period |
-0.81x |
-0.36x |
0.89x |
1.82x |
2.58x |
|
Gearing, debt to debt plus equity |
42.7% |
49.1% |
50.3% |
44.7% |
36.0% |
Interest of KES 1 550 000 a year is charged on the full facility through the grace period because no principal is repaid before Year 4. Capital repayments then amortise the balance over the remaining seven years at an annuity of KES 2 439 761, and the Year 5 current portion of KES 1 172 000 represents the Year 6 amortisation on a facility with five years still to run.