Sensitivity and Scenario Analysis

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• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Unit Economics of Brick Making
• 3. Market Analysis
• 4. Products and Positioning
• 5. SWOT and Competitive Position
• 6. Site, Plant and Production
• 7. Route to Market and Sales Strategy
• 8. Regulatory, Environmental and Quality Compliance
• 9. Management and Organisation
• 10. Capital Requirement and Funding
• 11. Financial Projections
• 12. Break-Even Analysis
• 13. Debt Service and Working Capital
• 14. Investment Returns
• 15. Sensitivity and Scenario Analysis
• 16. Value Creation Levers
• 17. Risk Management
• 18. Implementation Timeline
• 19. Conditions for Success and Exit Options
• 20. Key Performance Indicators
• 21. Key Assumptions
• 22. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital and Depreciation Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

15.1 Single-variable sensitivity

• Price is the existential variable. A 7.5 per cent fall in achieved prices takes the return from 15.5 per cent to minus 27.3 per cent — a swing of nearly 43 points. In a commodity market with a local competitor holding depreciated plant, this is not a tail risk; it is a standard competitive response to a new entrant taking share, and it is the reason Section 3.2 states plainly that a plan assuming it will win on price is a plan to lose money.
• Cement is the second existential variable, and it is outside management’s control. A 15 per cent cement price increase takes the return to minus 1.8 per cent. Cement is 29 per cent of revenue, bought from a concentrated supplier group, and subject to energy and carbon cost pressures that have historically been passed through faster than masonry producers can recover them.
• Volume matters, but less than price. A 15 per cent shortfall gives minus 1.8 per cent; a 15 per cent overshoot gives 31.3 per cent. The asymmetry is instructive: because the plant is already close to break-even, losing volume hurts far more than gaining it helps.
• Cost and capital discipline are secondary but not trivial. A 10 per cent operating cost overrun costs roughly six points of return and a 15 per cent capital overrun roughly two, because operating costs recur while capital does not.

The grid shows the interaction. At planned prices the plant needs roughly 82 per cent utilisation to hold Year 3 EBITDA above R4 million; at prices 7.5 per cent below plan it does not reach that figure at any utilisation shown, including 100 per cent. Utilisation buys tolerance on price only up to a point, because price affects every unit sold while volume affects only the marginal ones.

15.2 Scenarios