Victoria Chemicals
CASE 1
- A CASE STUDY OF VICTORIA CHEMICALS
Corporate Finance (FEG304)
Table of Contents
1.0) Introduction
This report contains two case studies in the discourse of Corporate Finance, more specifically capital investment strategy. The cases are applied on the fictional company Victoria Chemicals and are divided into (A): “The Merseyside Project and Victoria Chemicals” and (B): “The Merseyside and Rotterdam project”. The cases are picked from the book “Case Studies in Finance – managing for Corporate Value Creation” written by Robert. F. Bruner.
1.1) Background
Victoria Chemicals is a fiction company that processes polypropylene. The company is in fact even a leading producer of the substance, used in a variety of different products such as medical products and packaging films. The company has two factories; one in Merseyside, Liverpool and one in Rotterdam, Holland. The plant in Liverpool is old and therefore has a higher demand for the factors of production. Otherwise, the two factories are identical (design, scale, age & etcetera). Victoria Chemicals has six tough competitors in the market for Polypropylene production, operating at various cost levels.
The years previous to 2008 were tough times for Victoria Chemicals. The earnings per shares (EPS) fell from 250 pence per share to 180 pence. This resulted in a higher pressure from the investors for the company to improve the financial performance. In 2008, the new plant manager, Lucy Morris came up with a plan containing a capital expenditure of GBP 12 million to renovate the producing plant in Merseyside and there through reach an optimal level of producing with maximum production profitability. Lucy Morris brought this idea to the company’s senior management for approval. The idea was then referred for consultation. Different concerns came up from the Transport Division, ICG Sales and Marketing Department, the Assistant Plant Manager and the Treasury Staff.
We will
- A CASE STUDY OF VICTORIA CHEMICALS
Corporate Finance (FEG304)
Table of Contents
1.0) Introduction
This report contains two case studies in the discourse of Corporate Finance, more specifically capital investment strategy. The cases are applied on the fictional company Victoria Chemicals and are divided into (A): “The Merseyside Project and Victoria Chemicals” and (B): “The Merseyside and Rotterdam project”. The cases are picked from the book “Case Studies in Finance – managing for Corporate Value Creation” written by Robert. F. Bruner.
1.1) Background
Victoria Chemicals is a fiction company that processes polypropylene. The company is in fact even a leading producer of the substance, used in a variety of different products such as medical products and packaging films. The company has two factories; one in Merseyside, Liverpool and one in Rotterdam, Holland. The plant in Liverpool is old and therefore has a higher demand for the factors of production. Otherwise, the two factories are identical (design, scale, age & etcetera). Victoria Chemicals has six tough competitors in the market for Polypropylene production, operating at various cost levels.
The years previous to 2008 were tough times for Victoria Chemicals. The earnings per shares (EPS) fell from 250 pence per share to 180 pence. This resulted in a higher pressure from the investors for the company to improve the financial performance. In 2008, the new plant manager, Lucy Morris came up with a plan containing a capital expenditure of GBP 12 million to renovate the producing plant in Merseyside and there through reach an optimal level of producing with maximum production profitability. Lucy Morris brought this idea to the company’s senior management for approval. The idea was then referred for consultation. Different concerns came up from the Transport Division, ICG Sales and Marketing Department, the Assistant Plant Manager and the Treasury Staff.
We will