Three Proposals, One Line Running at 55%

First quantify the squeeze

The debtor extension is the most immediate number. Sales to the three chains: 71% × KES 1.4bn = KES 994m. Forty-five extra days of credit = 994 × 45/365 ≈ KES 122.5m of additional working capital - more than half of proposal (i)'s cost, and it is required whether or not any project proceeds.

Evaluate against consistent criteria

Criterion	(i) Second line	(ii) Outgrowers	(iii) Cut 30 jobs
Strategic fit	Weak: the constraint is demand, not capacity - the existing line runs at 55%	Strong: attacks cost of goods and supply reliability	None: a cash fix, not a strategy
Cash impact	−220m, plus +122.5m working capital	−45m, saves 12% of input cost	Short-term positive
Speed of benefit	Years	Next season	Immediate
Risk	High: no confirmed export orders	Low, reversible	High: capability loss, union dispute
Feasibility	Doubtful	Good	Legally possible but costly

Recommendation

1. Proceed with (ii) now - KES 45m to cut input cost 12% is the only proposal that improves margin against an 18% price undercut.
2. Address (iii) selectively, not across the board. The maintenance backlog and the production manager's resignation mean capacity is already degraded; taking out 30 jobs will show up as downtime and quality losses. Substitute a targeted efficiency review, a recruitment freeze and overtime control.
3. Defer (i), or approve only a conditional first phase, until signed offtake contracts for the tetra line cover at least 60% of its output. A second line at 55% utilisation is buying capacity the market has not asked for.
4. Attack the debtor terms commercially, not with capital: a 1.5–2% early-settlement discount or supply-chain finance is cheaper than carrying KES 122.5m.

The package is affordable, sequenced by speed of payback, and does not bet the balance sheet on unproven demand.

Legal floor first

If redundancies follow, the Employment Act 2007 requires, at least one month before termination: written notice to the union and to the labour officer of the area, stating the reasons and the number and categories affected; fair and objective selection criteria; payment of terminal dues including notice, accrued leave and service pay of not less than 15 days' pay per completed year of service. Procedural fairness is litigated more often than the economics, so document each step.

Sequence that reduces the damage

1. Engage the union before the board decision is announced - the shop-floor meeting is an opportunity, not a threat. Circulate the numbers (utilisation, debtor days, maintenance backlog) so the case is factual.
2. Offer alternatives to redundancy: short-time working, redeployment to the outgrower scheme's collection and cold-storage operations, natural attrition, and voluntary exit.
3. Address absenteeism directly - 11% is roughly 20 full-time equivalents lost. A short engagement survey and shift-level attendance data will show whether the cause is health, transport or supervision; fixing it recovers capacity without a single termination.
4. Fill the production manager gap immediately, on an interim basis, so the change has an owner.
5. Communicate one story to all stakeholders - staff, the three supermarket customers, the bank and the county - with dates and named owners. Silence is filled with rumour.

The test is whether the board can defend the selection criteria to a labour officer and the process to the remaining staff.

Operational

• Line utilisation and overall equipment effectiveness - the core fact is 55% utilisation; adding capital before it rises destroys value.
• Unplanned downtime hours - a direct read-out on whether the KES 34m maintenance backlog is being worked down or deferred again.
• Cost per litre and input cost per kilogram of fruit - the measure of whether the outgrower scheme is delivering the promised 12%.
• Absenteeism % and voluntary attrition - the early-warning signs of the people risk.

Commercial

• Customer concentration (top three as % of sales) - currently 71%, the single biggest structural risk on the board's register.
• Gross margin by SKU and by customer - an 18% price undercut cannot be answered without knowing which lines lose money.
• Price realisation versus the imported-concentrate competitor - a market-share measure, not just a revenue measure.

Financial

• Debtor days and the ageing of the three chains' balances - the KES 122.5m working-capital effect.
• Cash conversion cycle and headroom against covenants - cash, not profit, is what the extension of terms attacks.
• Capital expenditure against the approved freeze - to detect unauthorised spending.

How to use them: a one-page scorecard with a red/amber/green threshold and a named owner per measure, reviewed before the substantive board agenda. Measures without a threshold and an owner are reporting, not control.