Premier Quality Kenya Dairy Business Plan — Sensitivity and Scenario Analysis

How the plan responds to milk price, yield per cow, feed cost and herd growth moving against it, with downside and upside cases.

Sensitivity and Scenario Analysis

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12.1 The variables that matter
12.2 Scenarios

12.1 The variables that matter

Figure 22. Year 5 profit after tax — single-variable sensitivity.

Driver	Downside (KES)	Upside (KES)	Swing (KES)
Average yield per cow ±15%	937 971	5 219 015	4 281 044
Dairy meal price ±20%	1 212 293	4 944 693	3 732 400
Farmgate milk price ±10%	1 324 885	4 832 101	3 507 216
Share of forage self-grown ±30 points	1 712 293	4 444 693	2 732 400
Breeding stock and manure revenue ±25%	1 970 493	4 186 493	2 216 000
Base case Year 5 profit after tax	3 078 413

Variable	Base case	Break-even point	Comment
Average yield per cow	23 litres a day	18.0 litres a day	The largest single sensitivity. Yield is a management outcome, not a genetic given
Dairy meal price	KES 47 a kilogram	Above KES 68 a kilogram	Feed price inflation compounds with the fodder decision; a cooperative feed mill is the mitigation
Farmgate milk price	KES 50 a litre	KES 41.2 a litre	Announced prices have been rising, but county and cooperative realisation varies
Share of forage self-grown	90%	22.4%	Purchased forage alone moves Year 5 from a KES 3.08m profit to a KES 1.02m loss
Breeding stock and manure revenue	KES 4.43m	Down about 70%	Approximately 20% of Year 5 revenue. If the market softens, retain and grow the herd instead

The ranking has shifted, and it matters where management attention goes

On the corrected cost base and with no tax charge, yield is now the single largest sensitivity: a 15 per cent movement swings Year 5 profit by KES 4 281 044 against a base of KES 3 078 000. Dairy meal price is second at KES 3 732 400 and farmgate price third at KES 3 507 216. The forage decision, which the plan rightly treats as the strategic core, ranks fourth on a plus-or-minus-30-point band — but that understates it, because the forage decision is binary in practice rather than marginal. A farm either has a fodder block or it does not, and the difference between 90 per cent and zero per cent self-grown is KES 4 098 600 a year, which is larger than any of the four. Manage yield daily; decide forage once, before any animal arrives.

12.2 Scenarios

	Downside	Base	Upside
Farmgate price assumption	8% lower	KES 50 a litre	At the announced KES 52
Yield assumption	12% below plan	23 litres a cow	8% above plan
Self-grown forage assumption	25 points lower	90%	Fully self-grown
Year 5 EBITDA	1 147 621	5 233 000	7 496 587
Year 5 EBITDA margin	6.2%	23.8%	31.1%
Year 5 profit after tax	(1 006 966)	3 078 413	5 342 000

The downside combination — a lower farmgate price, a yield shortfall and a partial failure of the fodder block — takes Year 5 to a loss of KES 1.13 million. That is a materially better downside than the original plan implied, because the corrected cost base and the absence of a tax charge both work in the enterprise’s favour, but it is still a loss in the fifth year of trading and it would require restructuring rather than absorption.

The downside is a slow failure, not a fast one

In the downside case the enterprise still produces positive EBITDA from Year 3 and holds a herd, a fodder block and permanent infrastructure with real resale value. What it produces is a company that cannot service its debt on schedule, cannot fund the next season’s heifer purchase, and returns nothing to equity within the projection period. The realistic outcome is a restructuring: extended tenor, deferred principal and a further equity injection at a valuation the promoter will not like. The practical implication for a lender is that the covenant package should test yield and self-grown forage share from the first lactation, not just financial ratios from Year 3 — because by the time a debt service cover ratio has been breached, two lactations and two silage cycles have already been lost.

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