SA Best Peanut Butter Business Plan — Investment Analysis

The project and equity returns, the DFI facility in the structure, and what the numbers do and do not support.

Investment Analysis

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9.1 Returns
9.2 Sensitivity of the return to the exit assumption
9.3 What the return depends on

9.1 Returns

Measure	Base case	Comment
Total funding requirement	R74 120 000	Plus a R26 000 000 working capital facility
Capital invested in the project	R57 720 000	Capital expenditure plus non-working-capital pre-operational cost
Promoter and investor equity	R33 120 000	44.7% of the funding requirement
Project internal rate of return	15.5%	Unlevered, five years plus a terminal value at 7.0x EBITDA
Return to equity	12.6%	After debt service and facility movement
Net present value at 12%	R11 068 922	Positive
Net present value at 15%	R1 371 884	Marginal
Net present value at 18%	(R6 893 839)	Negative
Payback period	8.8 years	On unlevered project cash flow; well beyond the projection
Terminal value	R122 299 107	7.0x Year 5 EBITDA
Cumulative project cash flow before terminal value	(R51 125 699)	The return is realised on the terminal position
Assessed loss carried forward at Year 5	R17 519 710	A real shelter against Year 6 and Year 7 earnings, not valued here

Figure 20. Cumulative project cash flow before terminal value.

This is a brand-building investment, not a five-year financial return

A project return of 15.5 per cent with net present value negative at 18 per cent does not clear a conventional private equity hurdle, and the plan does not pretend otherwise. Payback is 8.8 years on unlevered cash flow and the business consumes cash for three years before it repays. The case for investing rests on three things the five-year model understates. Branded food businesses are valued on brand equity and shelf position, which compound after Year 5 rather than within it. The category has a structural trust deficit created by repeated recalls, which a credible manufacturer can convert into listings that are extremely difficult to displace once held. And the tariff change has materially improved the position of domestic manufacture for the first time in years. An investor who needs the return inside five years should look elsewhere; one building a food brand should read Section 10.3 and decide whether they can tolerate the downside.

9.2 Sensitivity of the return to the exit assumption

Figure 21. Project return under alternative exit assumptions.

Exit multiple of Year 5 EBITDA	Terminal value (R)	Project IRR	Equity IRR
5.0x	87 356 505	8.9%	-0.2%
6.0x	104 827 806	12.4%	6.9%
7.0x	122 299 107	15.5%	12.6%
8.0x	139 770 408	18.3%	17.4%
9.0x	157 241 709	20.8%	21.5%

The base case applies seven times Year 5 EBITDA, which is consistent with branded food assets in a defensive category. At five times the project returns 11.6 per cent; at nine times it returns 18.5 per cent. The multiple is doing a great deal of work here, and what it is really pricing is the durability of the own-brand shelf position and the credibility of the food safety record. A manufacturer with five years of clean release data in a category that has recalled twice in two years is worth a materially different multiple from one without it.

9.3 What the return depends on

Lever	Effect on Year 5 EBITDA	Assessment
Selling prices 8% higher	+R12 401 200	The largest lever, and largely a function of mix and listing quality
Kernel price 12% lower	+R8 810 700	Outside the plant’s control; a groundnut rebate would deliver it
Volume 15% higher	+R6 028 484	Capacity exists on two shifts; the constraint is listings, not plant
Own-brand mix 10 points higher	+R2 691 800	The most controllable lever, and the one the plan is built around
Intake rejection 3 points lower	+R2 220 950	Supplier qualification. Rejecting bad kernels is expensive; buying from suppliers who send them is worse
Conversion cost 12% lower	+R1 739 350	The weakest lever, and R890 a tonne of it is testing that must not be cut

Two observations follow. The largest levers — price and kernel cost — are the two the plant least controls, which is the signature of a spread business. And the most controllable lever, own-brand mix, is worth R5 454 550 across the range tested, which is why the sales function and the listing budget are funded from launch rather than deferred until the plant is running.

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