Victoria Chemicals plc (A): The Merseyside Project
March 12, 2012.
FIN 560 A: Advanced Financial Management
Victoria chemicals plc, is evaluating the Merseyside project that the plant manager Morris wants to propose to senior management. Morris Greystock, the controller of the Merseyside plant had noticed a decline in stock price from 250 pence per share in 2006 to 180 pense per share in 2007 and he knew that something had to be done. The project is mainly about renovating and rationalizing the production line in order to make up for deferred maintenance and to exploit opportunities that can make productivity more efficient. This case study will look at Victoria Chemicals operating environment as well as indentify major problems associated with the proposed project, recommend alternatives, and do a financial analysis for the alternatives.
Background of Firm:
Victoria Chemicals, is a major competitor worldwide chemicals industry, it is a leading producer of polypropylene, which is a polymer known for its strength and malleability. The production of polypropylene pellets starts at Merseyside. These pellets are refined gas received in tank cars known as propylene. In the first stage of the production, polymerization, the propylene gas was essentially combined with diluents in a large vessel. The second stage produces a finished plastic, which is extruded into pellets for shipment to the customer.
Victoria Chemicals has two plants that produce polypropylene which are located in Liverpool, England, and Rotterdam, Holland. They were built in 1967 and are identical in age and design. These two plant supply customers in Europe and Middle East. Based on the strategic Analysis, it was estimated that they are seven major competitors of Victoria chemicals in its market region (Exhibit 1) and many other...