FINANCIAL ANALYSIS

 

 

A customer of ours--well-established as a commercial feed mill--purchased a commodity shed several counties away.   He expected to operate the shed initially at a loss, as he staffed and stocked it.   By the end of the 1st quarter, losses did amount to over $35,000.

During the 2nd quarter, a nearby elevator came up for sale.  Our customer believed eventually there could be profitable synergies between the two facilities.  He purchased the elevator, knowing that it too would operate at a loss, for some time. 

He asked us to forecast the shortfall from the combined operations, using practical assumptions.   When would the shortfall peak?  When might each facility break even?  When might cash begin to reduce, and finally eliminate, the cumulative deficit?

As a DQ FORTIFIER customer, his company qualified for PROGRAM SERVICES.   We were pleased to help him out.   We surveyed the beef and dairy populations of the region and conservatively projected market share growth, based on competitors’ pricing, our customer's costs, and his available staff.  We assumed feed consumption and growth rates that our formulated feeds were already producing for cows, weanlings, background operations and feedlots. 

At the practical rates of growth projected, the cumulative cash shortfall was forecast to peak at the end of the 4th quarter, and recovery of that funding was estimated to occur during the 9th quarter.
As it turned out, our financial analysis was helpful.  Of course there were many “ups and downs” that deviated from the projections.  But through the hard work of his staff and himself--and with our assisting behind the scenes and in the field--our customer's expansion is profitable today, and paying dividends.