PHYS1160 assigment
UV1192
Rev. Mar 9, 2011
VICTORIA CHEMICALS PLC (A): THE MERSEYSIDE PROJECT
Late one afternoon in January 2008, Frank Greystock told Lucy Morris, “No one seems satisfied with the analysis so far, but the suggested changes could kill the project. If solid projects like this can’t swim past the corporate piranhas, the company will never modernize.”
Morris was plant manager of Victoria Chemicals’ Merseyside Works in Liverpool,
England. Her controller, Frank Greystock, was discussing a capital project that Morris wanted to propose to senior management. The project consisted of a (British pounds) GBP12 million expenditure to renovate and rationalize the polypropylene production line at the Merseyside plant in order to make up for deferred maintenance and to exploit opportunities to achieve increased production efficiency.
Victoria Chemicals was under pressure from investors to improve its financial performance because of the accumulation of the firm’s common shares by a well-known corporate raider, Sir David Benjamin. Earnings had fallen to 180 pence per share at the end of
2007 from around 250 pence per share at the end of 2006. Morris thus believed that the time was ripe to obtain funding from corporate headquarters for a modernization program for the
Merseyside Works—at least she had believed this until Greystock presented her with several questions that had only recently surfaced.
Victoria Chemicals and Polypropylene
Victoria Chemicals, a major competitor in the worldwide chemicals industry, was a leading producer of polypropylene, a polymer used in an extremely wide variety of products
(ranging from medical products to packaging film, carpet fibers, and automobile components) and known for its strength and malleability. Polypropylene was essentially priced as a commodity. The production of polypropylene pellets at Merseyside Works began with propylene, a refined gas received in tank cars. Propylene was purchased from four refineries in
Rev. Mar 9, 2011
VICTORIA CHEMICALS PLC (A): THE MERSEYSIDE PROJECT
Late one afternoon in January 2008, Frank Greystock told Lucy Morris, “No one seems satisfied with the analysis so far, but the suggested changes could kill the project. If solid projects like this can’t swim past the corporate piranhas, the company will never modernize.”
Morris was plant manager of Victoria Chemicals’ Merseyside Works in Liverpool,
England. Her controller, Frank Greystock, was discussing a capital project that Morris wanted to propose to senior management. The project consisted of a (British pounds) GBP12 million expenditure to renovate and rationalize the polypropylene production line at the Merseyside plant in order to make up for deferred maintenance and to exploit opportunities to achieve increased production efficiency.
Victoria Chemicals was under pressure from investors to improve its financial performance because of the accumulation of the firm’s common shares by a well-known corporate raider, Sir David Benjamin. Earnings had fallen to 180 pence per share at the end of
2007 from around 250 pence per share at the end of 2006. Morris thus believed that the time was ripe to obtain funding from corporate headquarters for a modernization program for the
Merseyside Works—at least she had believed this until Greystock presented her with several questions that had only recently surfaced.
Victoria Chemicals and Polypropylene
Victoria Chemicals, a major competitor in the worldwide chemicals industry, was a leading producer of polypropylene, a polymer used in an extremely wide variety of products
(ranging from medical products to packaging film, carpet fibers, and automobile components) and known for its strength and malleability. Polypropylene was essentially priced as a commodity. The production of polypropylene pellets at Merseyside Works began with propylene, a refined gas received in tank cars. Propylene was purchased from four refineries in