VICTORIA CHEMICALS plc (A)

VICTORIA CHEMICALS plc (A)

Presented by Group 2 :Aldy Rifianto, Dedy Mardianto

Floriana Nataly, HiralalityaLextro Kristiano Concorda

Natallia Winata, Wita PuspadillaYosua Bangun

The Merseyside Project

THE MERSEYSIDE PROJECTSUMMARY

PROBLEM IDENTIFICATION

ALTERNATIVE SOLUTION

RECOMENDATION

• 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

SUMMARY

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. The Earnings was fallen to 180 pence per share at the end of 2007 from around 250 pence per share at the end of 2006.

SUMMARY

Lucy 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) GBP 12 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.

SUMMARY

SUMMARY

• Beside The Polypropylene plant at Merseyside also has Etylene Propylene Copolymer rubber (EPC).

• EPC remainded a relatively small product in the European chemical Industry.

• Victoria, the Largest supplier of EPC, Produced the entire volume at Merseyside.

• EPC had been only marginally profitable to Victoria because of the entry by compatitors and the development of competing synthetic-rubber compounds over the past five years

SUMMARY

The Merseyside project would be in the engineering-efficiency category :

• Impact on earning per share = had to be positive.

• Payback = maximum six years.

• Discounted cash flow = had to be positive.

• Internal rate of return had to be greater than 10%.

PROBLEM INDENTIFICATION• Victoria Chemicals must

improve its Financial Performance and raise the Earnings per share

• The Merseyside Production process was constructed in 1967.

• The Price of Polypropylene very competitive

• There is 7 Major Competitors manufactured polypropylene with various cost Level.

PROBLEM INDENTIFICATION

Company Plant Location Built In

Plant Annual output

(metric tons)

Production Cost per Ton

(indexed to low cost producer)

CBTG A.G Saarbrun 1981 350.000 1,00 Victoria Chem. Liverpool 1967 250.000 1,09 Victoria Chem. Rotterdam 1967 250.000 1,09 Hosche A.G Hamburg 1977 300.000 1,02 Montecassino SpA Genoa 1961 120.000 1,11 Saone-Poulet S.A Merseille 1972 175.000 1,07 Vaysol S.A Antwerp 1976 220.000 1,06 Next 10 Largest Plants 450.000 1,19


• The Director of sales analysis that the industry of Polypropylene is in a downturn and it lookslike a oversupply is in the works. This means that we will probably have to shift capacity away from Rotterdam toward Merseyside in order to move the added volume. Is this a really a gain for Victoria Chemicals? Why spend money just so one plant can cannibalize another?


• EPC Plant at Meyerside also need to renovation to keep produce the Etylene Propylene Copolymer.

• If EPC Project calculate seperately from Polypropylene Project it was negative NPV and the company ignore it.

• If EPC Plant never do Renovation, Victoria Company will have to exit the EPC business during in 3 years.

ALTERNATIF SOLUTION

The Proposed Capital Program• Morris proposed an expenditure of GBP 12

Million on this Program.• The Entire Polymerization line would need to

be shut down for 45 days.• Will Loss the customer during shut down can

not supply to customer.• greystock.xlsx

ALTERNATIVE SOLUTION

• The Condition of Calculation was :

Assumptions :Annual Output (metric tons) 250.000 Investment Outlay (mill.) 12,00Output Gain/Original Output 7,0% Discount rate 10%Price/ton (pounds sterling) 675 Depreciable Life (years) 15Inflation Rate (prices and costs) 0,0% Overhead/Investment 3,50%Gross Margin (ex. Deprec.) 12,50% Salvage Value 0Old Gross Margin 11,50% WIP Inventory/Cost of Goods 3%Tax Rate 30,0% Months Downtime, Construction 1,5Energy Savings/Sales Yr. 1-5 1,25% After-tax Scrap Proceeds 0

Yr. 6-10 0,80% Preliminary Engineering Costs 0,5Yr. 11-15 0,00%

Lampiran 1



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

1 Estimate of Incremental Gross ProfitNew Output (tons) 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500Lost Output--Construction (33.438)New Sales (Millions) 157,99 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56New Gross Margin 13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50% 12,50%New Gross Profit 21,72 24,83 24,83 24,83 24,83 24,01 24,01 24,01 24,01 24,01 22,57 22,57 22,57 22,57 22,57

Old Output 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000Old Sales 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75Old Gross Profit 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41Incremental Gross Profit 2,32 5,42 5,42 5,42 5,42 4,61 4,61 4,61 4,61 4,61 3,16 3,16 3,16 3,16 3,16

2 Estimate of Incremental WIP InventoryNew WIP Inventory 4,67 4,67 4,67 4,67 4,67 4,70 4,70 4,70 4,70 4,70 4,74 4,74 4,74 4,74 4,74Old WIP Inventory 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48Incremental WIP Inventory 0,19 0,19 0,19 0,19 0,19 0,22 0,22 0,22 0,22 0,22 0,26 0,26 0,26 0,26 0,26

3 Estimate of Incremental DepreciationNew Depreciation 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32 0,32

4 Overhead 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,425 Prelim. Engineering Costs 0,506 Pretax Incremental Profit -0,20 3,61 3,80 3,96 4,10 3,41 3,51 3,60 3,87 3,87 2,42 2,42 2,42 2,42 2,427 Tax Expense -0,06 1,08 1,14 1,19 1,23 1,02 1,05 1,08 1,16 1,16 0,73 0,73 0,73 0,73 0,738 After-tax Profit -0,14 2,53 2,66 2,77 2,87 2,38 2,46 2,52 2,71 2,71 1,70 1,70 1,70 1,70 1,709 Cash Flow Adjustments

Less Capital Expenditures -12,00 Add back Depreciation 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32 0,32 Less Added WIP inventory -0,19 0,00 0,00 0,00 0,00 -0,03 0,00 0,00 0,00 0,00 -0,04 0,00 0,00 0,00 0,00

10 Free Cash Flow -12,00 1,27 3,92 3,86 3,81 3,77 3,14 3,14 3,11 3,03 3,03 1,97 2,02 2,02 2,02 2,02

AVG Annual Add to EPS = 0,023 PAYBACK (years) = 3,80 NPV = 10,45 IRR = 24,08%

GREYSTOCK'S MERSEYSIDE PROJ ECT(Financial values in millions of British Pounds)

Lampiran 2



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

1 Estimate of Incremental Gross ProfitNew Output (tons) 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500Lost Output--Construction (33.438)New Sales (Millions) 157,99 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56New Gross Margin 13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50% 12,50%New Gross Profit 21,72 24,83 24,83 24,83 24,83 24,01 24,01 24,01 24,01 24,01 22,57 22,57 22,57 22,57 22,57


2 Estimate of Incremental WIP InventoryNew WIP Inventory 4,09 4,67 4,67 4,67 4,67 4,70 4,70 4,70 4,70 4,70 4,74 4,74 4,74 4,74 4,74Old WIP Inventory 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48Incremental WIP Inventory -0,39 0,19 0,19 0,19 0,19 0,22 0,22 0,22 0,22 0,22 0,26 0,26 0,26 0,26 0,26

3 Estimate of Incremental DepreciationNew Depreciation 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32 0,32

4 Overhead 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,425 Prelim. Engineering Costs 0,506 Pretax Incremental Profit -0,20 3,61 3,80 3,96 4,10 3,41 3,51 3,60 3,87 3,87 2,42 2,42 2,42 2,42 2,427 Tax Expense -0,06 1,08 1,14 1,19 1,23 1,02 1,05 1,08 1,16 1,16 0,73 0,73 0,73 0,73 0,738 After-tax Profit -0,14 2,53 2,66 2,77 2,87 2,38 2,46 2,52 2,71 2,71 1,70 1,70 1,70 1,70 1,709 Cash Flow Adjustments

Less Capital Expenditures -12,00 Add back Depreciation 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32 0,32 Less Added WIP inventory 0,39 -0,58 0,00 0,00 0,00 -0,02 0,00 0,00 0,00 0,00 -0,04 0,00 0,00 0,00 0,00

10 Free Cash Flow -12,00 1,85 3,33 3,86 3,81 3,77 3,14 3,14 3,11 3,03 3,03 1,97 2,02 2,02 2,02 2,02

AVG Annual Additio to EPS = 0,023 PAYBACK (years) = 3,80 NPV = 10,50 IRR = 24,30%

MERSEYSIDE PROJ ECT(Financial values in millions of British Pounds)

ALTERNATIVE SOLUTIONConcern of The Transport Division :• Will Need a New Tank Car to anticipated growth of the firm in other

areas because of increased throughtput of the machine.• The Investment of a New Tank Car estimated to be GBP 2 million in 2010• The New Tank Car would have a depreciable life of 10 years using DDB

Depreciation for the first 8 years and straight-line depreciation for the last two years. Tank car.xlsx

Assumptions :Annual Output (metric tons) 250.000 Investment Outlay (mill.) - Plant 12Output Gain/Original Output 7% Investment in Tank Cars 2Price/ton (pounds sterling) 675 Discount rate 10%Inflation (prices and costs) 0,00% Depreciable Life (years) Plant 15 Gross Margin (ex. Deprec.) 12,50% Depreciable Life (yrs.) Tank Cars 10 Old Gross Margin 11,50% Overhead/Investment 3,50%Tax Rate 30% Salvage Value 0%Energy Savings/Sales Yr. 1-5 1,25% WIP Inventory/Cost of Goods Sold 3%

Yr. 6-10 0,80% Months Downtime, Construction 1,50Yr. 11-15 0,00% Preliminary Engineering Costs 0,50

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

1 Estimate of Incremental Gross ProfitNew Output 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500Lost Output--Construction (33.438)New Sales (Millions) 157,99 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56 180,56New Gross Margin 13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50%New Gross Profit 21,72 24,83 24,83 24,83 24,83 24,01 24,01 24,01 24,01 24,01 22,57 22,57 22,57 22,57

Old Output 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000Old Sales 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75Old Gross Profit 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41Incremental Gross Profit 2,32 5,42 5,42 5,42 5,42 4,61 4,61 4,61 4,61 4,61 3,16 3,16 3,16 3,16

2 Estimate of Incremental WIP InventoryNew WIP Inventory 4,09 4,67 4,67 4,67 4,67 4,70 4,70 4,70 4,70 4,70 4,74 4,74 4,74 4,74Old WIP Inventory 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48 4,48Incremental WIP Inventory -0,39 0,19 0,19 0,19 0,19 0,22 0,22 0,22 0,22 0,22 0,26 0,26 0,26 0,26

3 Estimate of Incremental Depreciation+ New Depreciation-Plant 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32+ New Depreciation, Tank Cars 0,40 0,32 0,26 0,20 0,16 0,13 0,10 0,08 0,17 0,17 0,00 0,00Total Change in Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,42 0,40 0,49 0,49 0,32 0,32

4 Overhead 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,425 Prelim. Engineering Costs 0,506 Pretax Incremental Profit -0,20 3,61 3,40 3,64 3,84 3,20 3,35 3,47 3,76 3,78 2,26 2,26 2,42 2,427 Tax Expense -0,06 1,08 1,02 1,09 1,15 0,96 1,00 1,04 1,13 1,14 0,68 0,68 0,73 0,738 After-tax Profit -0,14 2,53 2,38 2,55 2,69 2,24 2,34 2,43 2,63 2,65 1,58 1,58 1,70 1,70

9 Cash Flow AdjustmentsAdd back Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,42 0,40 0,49 0,49 0,32 0,32Added WIP inventory -0,39 -0,58 0,00 0,00 0,00 -0,02 0,00 0,00 0,00 0,00 -0,04 0,00 0,00 0,00Capital Investment -12,00 -2,00

108. Free Cash Flow -12,00 1,07 3,33 1,98 3,91 3,85 3,20 3,18 3,15 3,06 3,05 2,02 2,07 2,02 2,02

AVG Annual Additio to EPS = 0,022 PAYBACK (years) = 4,40 NPV = 8,62 IRR = 21,03%

MERSEYSIDE PROJ ECT(With a New Tank Car Investment)

(Financial values in millions of British Pounds)

ALTERNATIVE SOLUTIONConcern of The Marketing Department :• With a new project will reduce the

cost at Merseyside and Victoria Chemicals might be able to take business from the plants of competitors such as Saone-Poulet or Vaysol.

• Cannibalize business at Rotterdam in his preliminary analysis of the Merseyside Project.

• Morris still wanted to review Greystock’s analysis in detail the potential loss of business volume at rotterdam

• Loss Rotterdam.xlsx

AssumptionsAnnual Output (metric tons) 250.000 Investment Outlay (mill.) - Plant 12Output Gain/Original Output 7% Investment in Tank Cars 2Price/ton (pounds sterling) 675 Discount rate 10%Inflation (prices and costs) 0% Depreciable Life (years) Plant 15Gross Margin (ex. Deprec.) 12,50% Depreciable Life (yrs.) Tank Cars 10 Old Gross Margin 11,50% Overhead/Investment 3,5%Tax Rate 30% Salvage Value 0Energy Savings/Sales Yr. 1-5 1,25% WIP Inventory/Cost of Goods 3,0%

Yr. 6-10 0,8% Months Downtime, Construction 1,50Yr. 11-15 0,0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Old Output 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000Old Sales 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75 168,75Old Gross Profit 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41 19,41

Lost Rotterdam Output (MT) 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500 17.500Lost Revenue 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81 11,81Lost Rotterdam Gross Profit 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36 1,36

Incremental Gross Profit 0,96 4,06 4,06 4,06 4,06 3,25 3,25 3,25 3,25 3,25 1,81 1,81 1,81 1,81


3 Estimate of Incremental Depreciation+ New Depreciation, Plant 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32+ New Depreciation,Tank Cars 0,40 0,32 0,26 0,20 0,16 0,13 0,13 0,13 0,13 0,13 0,00 0,00

Total Change in Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,45 0,45 0,45 0,45 0,32 0,324 Overhead 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,425 Prelim. Engineering Costs 0,50

6 Pretax Incremental Profit -1,56 2,26 2,04 2,28 2,48 1,84 1,99 2,11 2,38 2,38 0,94 0,94 1,07 1,077 Tax Expense -0,47 0,68 0,61 0,68 0,75 0,55 0,60 0,63 0,71 0,71 0,28 0,28 0,32 0,328 After-tax Profit -1,09 1,58 1,43 1,60 1,74 1,29 1,39 1,48 1,67 1,67 0,65 0,65 0,75 0,75

9 Cash Flow AdjustmentsAdd back Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,45 0,45 0,45 0,45 0,32 0,32Change in WIP Inventory At Merseyside 0,39 -0,19 -0,19 -0,19 -0,19 -0,22 -0,22 -0,22 -0,22 -0,22 -0,26 -0,26 -0,26 -0,26 At Rotterdam -0,39 0,19 0,19 0,19 0,19 0,22 0,22 0,22 0,22 0,22 0,26 0,26 0,26 0,26Capital Investment -12,00 -2,00

10 Free Cash Flow -12,00 0,51 2,97 1,03 2,96 2,90 2,28 2,23 2,20 2,12 2,12 1,10 1,10 1,07 1,07


(Loss of business volume at Rotterdam)(Financial values in millions of British Pounds)

ALTERNATIVE SOLUTIONConcern of The Treasury Staff:

The Treasury staff think this impounds a long term inflation expectation of 3% per year and target rate of return is 7%

• inflasi.xlsx



0 1 2 3 4 5 6 7 8 9 10 11 12 13 14Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Old Output 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000 250.000Old Sales 168,75 173,81 179,03 184,40 189,93 195,63 201,50 207,54 213,77 220,18 226,79 233,59 240,60 247,82Old Gross Profit 19,41 19,99 20,59 21,21 21,84 22,50 23,17 23,87 24,58 25,32 26,08 26,86 27,67 28,50Incremental Gross Profit 2,32 5,58 5,75 5,92 6,10 5,34 5,50 5,67 5,84 6,01 4,25 4,38 4,51 4,65


3 Estimate of Incremental Depreciation+ New Depreciation-Plant 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32+ New Depreciation, Tank Cars 0,40 0,32 0,26 0,20 0,16 0,13 0,10 0,08 0,17 0,17 0,00 0,00Total Change in Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,42 0,40 0,49 0,49 0,32 0,32

4 Overhead 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,425 Prelim. Engineering Costs 0,506 Pretax Incremental Profit -0,20 3,78 3,73 4,14 4,52 3,94 4,24 4,53 4,99 5,19 3,34 3,47 3,77 3,917 Tax Expense -0,06 1,13 1,12 1,24 1,36 1,18 1,27 1,36 1,50 1,56 1,00 1,04 1,13 1,178 After-tax Profit -0,14 2,64 2,61 2,90 3,17 2,75 2,97 3,17 3,50 3,63 2,34 2,43 2,64 2,73

9 Cash Flow AdjustmentsAdd back Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,42 0,40 0,49 0,49 0,32 0,32Added WIP inventory -0,39 -0,59 -0,01 -0,01 -0,01 -0,03 -0,01 -0,01 -0,01 -0,01 -0,07 -0,01 -0,01 -0,01Capital Investment -12,00 -2,00

108. Free Cash Flow -12,00 1,07 3,44 2,21 4,26 4,32 3,71 3,80 3,88 3,91 4,03 2,76 2,91 2,95 3,04


MERSEYSIDE PROJ ECT(With Inflation)


RECOMENDATION• The Merseyside plant must to modernize the machine to

increase the throughout and lower cost of energy.• The Transport Division need to purchase the new tank cars at

Merseyside (estimate purchase GBP 2 Million in 2010).• Merseyside can save stock everymonth or transfer stock from

Rotterdam• We Are not agree about Merseyside will oversupply and

Cannibalize the Rotterdam supply. • Reasonable if the Treasury Staff concern about Inflation 3%

per year and Rate of Return 7% per year. • Rejected EPC Project .• inflasi 2.xlsx

Lampiran 5



0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

1 Estimate of Incremental Gross ProfitNew Output 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500Lost Output--ConstructionNew Sales (Millions) 180,56 185,98 191,56 197,31 203,22 209,32 215,60 222,07 228,73 235,59 242,66 249,94 257,44 265,16 273,12New Gross Margin 13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50% 12,50%New Gross Profit 24,83 25,57 26,34 27,13 27,94 27,84 28,67 29,54 30,42 31,33 30,33 31,24 32,18 33,15 34,14


2 Estimate of Incremental WIP InventoryNew WIP Inventory 4,67 4,81 4,96 5,11 5,26 5,44 5,61 5,78 5,95 6,13 6,37 6,56 6,76 6,96 7,17Old WIP Inventory 4,48 4,61 4,75 4,90 5,04 5,19 5,35 5,51 5,68 5,85 6,02 6,20 6,39 6,58 6,78Incremental WIP Inventory 0,19 0,20 0,20 0,21 0,22 0,25 0,26 0,27 0,27 0,28 0,35 0,36 0,37 0,38 0,39

3 Estimate of Incremental Depreciation+ New Depreciation-Plant 1,60 1,39 1,20 1,04 0,90 0,78 0,68 0,59 0,32 0,32 0,32 0,32 0,32 0,32 0,32+ New Depreciation, Tank Cars 0,40 0,32 0,26 0,20 0,16 0,13 0,10 0,08 0,17 0,17 0,00 0,00 0,00Total Change in Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,42 0,40 0,49 0,49 0,32 0,32 0,32

4 Overhead 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,42 0,425 Prelim. Engineering Costs 0,506 Pretax Incremental Profit 2,90 3,78 3,73 4,14 4,52 3,94 4,24 4,53 4,99 5,19 3,34 3,47 3,77 3,91 4,057 Tax Expense 0,87 1,13 1,12 1,24 1,36 1,18 1,27 1,36 1,50 1,56 1,00 1,04 1,13 1,17 1,218 After-tax Profit 2,03 2,64 2,61 2,90 3,17 2,75 2,97 3,17 3,50 3,63 2,34 2,43 2,64 2,73 2,83

9 Cash Flow AdjustmentsAdd back Depreciation 1,60 1,39 1,60 1,36 1,16 0,99 0,84 0,72 0,42 0,40 0,49 0,49 0,32 0,32 0,32Added WIP inventory 0,19 -0,01 -0,01 -0,01 -0,01 -0,03 -0,01 -0,01 -0,01 -0,01 -0,07 -0,01 -0,01 -0,01 -0,01Capital Investment -12,00 -2,00

108. Free Cash Flow -12,00 3,82 4,02 2,21 4,26 4,32 3,71 3,80 3,88 3,91 4,03 2,76 2,91 2,95 3,04 3,14


MERSEYSIDE PROJ ECT(With Inflation)


VICTORIA CHEMICALS plc (A)

Documents

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