Conclusion and Recommendation

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

Premier Quality Kenya Dairy Limited is a viable enterprise under the assumptions set out in this plan, but it is not an easy one and it is not quick. It consumes cash for three years, depends on a biological cycle that management cannot compress, and produces a Year 5 profit after tax of approximately KES 3.08 million on a project cost of KES 27.35 million.

What makes it work is not the milk price, which the promoter does not control, and not the genetics, which can be bought. It is the fodder block. Growing forage on the farm rather than buying it is worth KES 4 098 600 a year by Year 5 — more than the entire profit of the enterprise — and the plan is structured so that the fodder is established, and the first silage conserved, before a single animal is purchased.

17.1 What the numbers support

▪ A cost position that survives the price environment. Milk produced at KES 39.40 a litre by Year 5 against a net realised price of KES 48, and a break-even farmgate price of KES 41.20 against a plan of KES 50 and an announced KES 52.

▪ A financeable structure, with the right grace period. Debt service cover of 1.16 times in Year 3 rising to 2.14 times by Year 5, supported by a three-year principal grace without which cover would be 0.89 times.

▪ A diversified revenue base. Breeding stock, culls and manure at 20 per cent of Year 5 revenue, and a fallback of retaining surplus heifers to grow the milking herd if that market softens.

▪ A terminal asset worth more than the equity subscribed. A 52-cow milking herd, 72 head of young stock and a developed fodder block valued conservatively at KES 24.67 million, against KES 17.35 million of equity.

17.2 What the numbers do not support

▪ Cash returns within the projection period. Cumulative profit after tax is still negative KES 2.99 million at Year 5 and cumulative project cash flow negative KES 20.82 million. An investor seeking income within three years should not fund this project.

▪ A KES 21 million project cost. Forty-two in-calf heifers at KES 200 000 each cannot be funded from a KES 5 million contingency line that must also carry a genuine contingency, and the purchases fall in the cash-negative years.

▪ Purchased forage. At market-purchased forage Year 5 turns from a KES 3.08 million profit to a KES 1.02 million loss. Below about 22 per cent self-grown the enterprise makes no money at any scale in this plan.

▪ Debt service from Year 1. Without the three-year grace the facility breaches on its first meaningful test, and no operational improvement available to a 36-cow herd closes the gap.

17.3 Recommendation