Egg Farming Business Plan South Africa

Illustrative layer farm business plan: 60,000 hens, R52.9m funding and 1.45m dozen eggs a year, with a break-even price only 8% below plan.

North West Egg Sales — the Year 3 break-even egg price ladder against the planned realised price

Business Plan & Investment Proposal · South Africa

Egg Farming Business Plan — South Africa

North West Egg Sales (Pty) Ltd · The Break-Even Price Is Eight Per Cent Below Plan.

A modern commercial layer farm and packhouse at Potchefstroom serving the N12 corridor
— 60 000 layer hens across three houses producing 1.45 million dozen eggs a year, sold through
retail and wholesale, spaza and informal traders, hospitality and a farm-gate shop. R52.9 million of funding
across equity, senior debt and asset finance, returning 16 per cent IRR at 2.1 times in the base case.
Figures are illustrative.

60 000Layer hens

1.45mDozen eggs a year

R52.9mFunding requirement

16% / 2.1xBase-case IRR and MOIC

This plan is unusually willing to show a reader where it breaks. In Year 3 the
farm needs R25.20 a dozen to service its debt and plans on realising R27.29 — a cushion of eight per cent, on a
commodity whose price the farm does not set. The deck states that in its own words: the cushion is real and thin. It
goes further in the scenarios, where the downside case returns minus 4.4 per cent and an avian influenza stress
returns 13.4 per cent, both breaching cover, and says these must be priced in rather than set aside. The
operating shape behind that is straightforward. Three houses reach full lay by Year 2, which takes revenue from
R25.3 million to R40.1 million and then stops — the houses are full, so everything after is price.
EBITDA settles at 20 to 22 per cent and the base case returns 16 per cent IRR at 2.1 times.

How much room there actually is

The price the plan assumes, against the price below which the debt stops being serviceable.

R27.29Planned price a dozenThe realised price the whole plan is built on, in Year 3. Everything above it is margin; everything below it comes off the equity return.

against

R25.20Debt-service break-evenEight per cent lower. That is the entire cushion between servicing the loan and not, on a commodity whose price the farm does not set.

Key measures

Six measures that determine whether this farm and its funding stand up.

8%The price cushionDebt service breaks even at R25.20 a dozen against a planned R27.29. The deck calls that cushion real and thin, and it is the number to test first.

R52.9mFunding requirementR24.0m equity, R26.25m senior term loan and R2.68m asset finance. 84% builds the farm, 12% buys the first flock.

60 000Layer hens at full layAcross three houses, producing 1.45 million dozen eggs a year from a packhouse on the N12 corridor.

Year 2Where volume growth stopsAll three houses are in lay by Year 2. Revenue rises from R40.1m only with price after that, because the houses are already full.

16% / 2.1xBase-case equity IRR and MOICAgainst minus 4.4% in the downside and 13.4% under an avian influenza stress. Two of four modelled cases breach covenants.

20–22%Settled EBITDA marginNet profit positive from Year 2. Note the Year 4 dip in both lines — that is the flock replacement cycle, not a deterioration.

Revenue and earnings

Revenue and EBITDA on the base case. The realised egg price and the feed cost are the two
assumptions that matter most, and both are stressed in Section 30.

Revenue build — and where the growth stops

Year 1R25.3m · first year of lay
Year 2R40.1m · all three houses
Year 3R42.5m ·
Year 4R43.8m ·
Year 5R46.9m ·

Revenue jumps from R25.3m to R40.1m as the second and third houses come into lay, then rises only with price. The houses are full from Year 2, so volume growth ends there.

EBITDA and net profit by year

Year 1R3.2m EBITDA · net −R1.6m
Year 2R8.4m EBITDA · net +R2.1m
Year 3R9.3m EBITDA · +R2.4m
Year 4R8.5m EBITDA · +R2.0m
Year 5R10.1m EBITDA · +R3.3m

EBITDA settles at 20–22% of revenue and net profit turns positive in Year 2. Note Year 4: both dip as the flock is replaced, which is the normal rhythm of a layer operation rather than a problem.

How to read this plan

The cushion is eight per cent, and the deck says so

Debt service breaks even at R25.20 a dozen against a planned R27.29. The plan states plainly that the cushion is real and thin, on a commodity whose price the farm does not control.

Two of four scenarios breach covenants

The downside case returns minus 4.4% and the avian influenza stress 13.4%, both breaching cover. The deck says these must be priced in rather than treated as tail risk.

Volume growth ends in Year 2

All three houses are in lay by then. Revenue moves from R40.1m only with price thereafter, so this is a price and cost story from Year 2 onward, not a growth one.

Feed is the exposure that sets the margin

A layer farm converts feed into eggs at a fixed biological rate. With the selling price capped by the market, input cost is where the margin is won or lost.

The Year 4 dip is the flock cycle

EBITDA and net profit both fall in Year 4 as the flock is replaced. That is the normal rhythm of a layer operation and worth recognising before reading it as deterioration.

Selected exhibits

Thirty-one sections, drawn from the presentation.

Appendices

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