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Victoria Chemicals A

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by

Jack Chavez

on 16 April 2013

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Transcript of Victoria Chemicals A

Merseyside, England Rotterdam, The Netherlands Both plants are of similar scale, age and design.

The Merseyside plant was constructed in 1967 and, when compared to the competition, is considered old, erratic, and more labor intensive. The Plants Based on this criteria being met, we feel that we have the data to support this project and bring Victoria Chemicals into the 21st century.
Project should be funded. Conclusion •Consistent Cash flow and discount rates in assumption of inflation

•Unrealistic assumption of 0% inflation rate

•The NPV is not determined by inflation Concerns of the Treasury Staff •Proposed separate modernization
–Cost GBP1 million
–Increase cash flow by GBP25,000
–Reduce cost to produce EPC
–Result in negative NPV of project
•Downside
–Conflict of interest as bonus is tied to plant size
–Hide critical information from the investors Assistant plant manager To appease the needs of management to gain funding for the project, these performance indicators had to be determined.
1. Impact on earnings per share
2. Payback
3. Discounted Cash Flow
4. Internal Rate of Return. Key Issue -Lucy Morris - plant manager of Merseyside Works in Liverpool.

-Price per share had fallen from 250 pence in 2006 to 180 pence a year later.
-Felt that a modernization program to increase efficiency was needed.
The project would cost about 12 Million GBP. The Players Polypropylene is a polymer created from a gas, propylene, into a commodity used in many products, ie. medicals devices, packing, carpet fibers and car components. The Product Victoria Chemicals produces polypropylene at Merseyside, England and in Rotterdam, Holland. Background Jack D. Chavez, M.S. Ed
Christopher DuCret
Uthman Erogbogbo
Marko Kasapov Victoria Chemicals plc (A)
The Merseyside Project Questions? •Facing Cannibalization
– If projected is accepted, Internal cannibalization will occur to compensate for the increased volume as there will be a shift in resources and capacity away from the Rotterdam plant and towards in Merseyside
– Due to recession in the economy and competition, there may be oversupply Sales and marketing department
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