CP Paper case

Topics: Variable cost, Fixed cost, Paper Pages: 4 (2006 words) Published: November 2, 2014

Case StudyPrepared By Trevor Larkan(updated Feb 2014)
C.P. Paper Plc
Sir James Sinclair, Chairman of C.P. Paper plc, the UK’s largest coated paper producer, had opened the early October 2013 offsite strategic review meeting of senior management in the English Cotswolds with a rather somber outlook. He stated that contrary to the rather pleasant weather now prevailing in the English countryside, the company had not met the investment sector’s expectations for the recently ended fiscal year and was also losing market share to its main European competitors. In Sir James’s opinion, one of the primary reasons for the deteriorating market share lay in CP Paper’s inability to compete with the larger and more modern paper machines of key competitors in Germany and Scandinavia. The competitive threat was very real when considering CP Paper’s exports to the important European markets. He closed off his opening comments with the following statement: “Last night I received an e-mail from Wolfgang Neuleck, Chairman of Duispapier AG, indicating that their board had decided to exit the coated paper sector in order to concentrate on their global aspirations in the tissue business. Consequently they would be disposing of, by auction, their manufacturing facility in Hamburg. This could be an ideal opportunity to regain a competitive position in our core business. We have our quarterly board in nine days time and, although this may be a tight deadline, I want to present a recommendation to the board on whether to bid for this facility and, if so, a comprehensive preliminary outline on how much we should pay and how to accomplish it. If it is a go, we could potentially close the acquisition by the end of calendar 2013.” Turning to Peter Smith, CEO of CP Paper, he remarked: “I feel it will be best if you could present the detail at the board meeting after I have outlined our recommendation. Please feel free to bring John Perry who, as Financial Director, may be best placed to...
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