Lichtenburg Nut Company Business Plan — Business Model

How the business earns from farm gate to jar, and why integration rather than processing alone drives the margin.

Section 11 of 37

Business Model

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10.1 How capital becomes returns

The company converts capital into returns through a chain that is worth setting out explicitly, because the weak link in that chain is what the financial analysis later exposes.

Table 26. Capital to returns: the conversion chain

Stage	What happens	Key metric	Year 5 value
Capital	R105m of Phase 1 plant, R17m of Phase 2, R31m of Phase 3 and R41m of working capital	Total invested capital	R114m
Assets and capability	A 3,400 t plant with integrated shelling, colour sorting and in-house aflatoxin testing	Capacity utilisation	89%
Products	Four streams at four price points from one production train	Blended realised price	R71.3/kg
Customers	Retail private label, own brand, industrial and institutional, snack nut listings	Volume	3,000 t
Revenue	Gross revenue less trade discounts and rebates	Net revenue	R214m
Contribution	Net revenue less groundnuts, packaging, energy, rejects and distribution	Gross margin	25.8%
EBITDA	Contribution less factory overhead, payroll, marketing and administration	EBITDA margin	11.8%
Cash flow	EBITDA less working capital, tax and maintenance capital	Free cash flow to the firm	R17.4m
Investor returns	Equity value at exit less net debt, plus dividends from Year 7	Return on invested capital	9.5%

The chain holds until the final row. Every operational metric is credible for a food manufacturer of this scale. The return on invested capital is not, because the capital required per rand of revenue is too high for the margin the industry supports. Section 31 examines this directly.

10.2 Business model canvas

Key partners

15 to 20 contracted groundnut growers in North West and northern Free State
One anchor national grocery retailer under a multi-year private label agreement
A third-party logistics provider operating from a Gauteng cross-dock
Equipment suppliers providing installation and a service contract on the roasting and milling train
An accredited external laboratory providing confirmatory aflatoxin testing

Key activities

Pre-season grower contracting and agronomic support
Intake, drying, storage, shelling and grading
Colour sorting, blanching, roasting, milling, homogenising and chilling
Filling and packing across jar, pail, drum and flexible formats
Quality assurance, laboratory testing and batch record keeping
Retail and industrial account management

Key resources

The Lichtenburg plant and its integrated shelling capability
The in-house HPLC and ELISA laboratory
Grower relationships, formalised through contracts and the grower trust shareholding
FSSC 22000 certification and retailer approval status
The Tsala brand and its listings
A R40m revolving facility sized for the seasonal groundnut position

Cost structure

Groundnuts: 40% of net revenue at Year 5
Packaging: 10%
Energy, ingredients, quality and inbound freight: 10%
Payroll across factory and administration: 13%
Distribution: 4%
Marketing and trade activation: 3%
Other fixed overhead including rent, rates, maintenance and quality systems: 9%

10.3 Unit economics

Figure 1. Groundnuts absorb 40% of net revenue; 25.8 cents in the rand reaches gross profit

Table 27. Year 5 unit economics per kilogram of finished product

Cost element	R per kg	% of net revenue	Fixed or variable	Principal driver
Net revenue	71.28	100.0%		Price and mix
Groundnut kernels	(28.49)	40.0%	Variable	In-shell price, shelling recovery, input ratio
By-product credit	1.37	-1.9%	Variable	Shell biomass energy offset and off-grade kernel sales
Quality rejects and downgrades	(0.61)	0.9%	Variable	4% of intake at 55% value loss
Packaging	(7.41)	10.4%	Variable	Format mix; jars cost 3.4x pails per kilogram
Ingredients, energy, quality and inbound freight	(7.08)	9.9%	Variable	Roasting energy is the largest component
Factory payroll	(6.54)	9.2%	Fixed	Headcount and shift pattern
Fixed factory overhead	(4.10)	5.7%	Fixed	Rent, maintenance, rates, quality systems

Gross profit	18.41	25.8%
Distribution	(2.65)	3.7%	Variable	Lichtenburg to national distribution centres
Marketing and trade activation	(1.96)	2.7%	Semi-variable	Own brand and snack nut support
Administration payroll and fixed overhead	(5.36)	7.5%	Fixed	Head office and compliance

EBITDA	8.44	11.8%