Euroland Food

Group
Mayuyo, Jessica M.
Villanueva, Camille V.
Sadac, Junacy Shanye
Chang, Daniel
Galvez, Christine Shaira
De Leon, Reina Camille S.
Valen, Aira Geyle C.
Nepomuceno, Carmina O.
Bacani

BACKGROUND OF THE STUDY

About the company
Eurolands Food
Wilhelmina
Verdin
Trudi Lauf
shareholders ownership
Heinz Klink
Maarten Leyden
Ice cream
members ofSHAREHOLDERS
senior Yogurt
management
committee
% OF OWNERSHIP Marco Ponti
Bottled water
Verdin Family
20%
Fabienne Morin
Fruit juices
Nigel Humbolt
Company Executives
10%

Founded in 1924 by Theo Verdin

Venus Asset Management

Banque du Bruges et des
Pays Bas
Others

12%
9%
49%

BACKGROUND OF THE STUDY

About the case

11 major projects amounting more than

PROJECTS
316 million

Replacement and expansion of the truck fleet

A new plant
Expansion of a plant
Development
and
roll-out
of snack foods
TYPE
OF
PROJECT
MINIMUM
Plant automation and conveyor systems
ACCEPTABL
Effluent-water treatment at four plants
E IRR
Market expansion southward
product/markets
12%
Market New
expansion
eastward
Development
and introduction of new artificially
Product/market
10%
sweetened yogurt and ice cream
extension
Networked, computer-based inventory-control
system
for warehouses and field representatives
Efficiency
8%
Acquisition
of a leading schnapps brand and
improvements
associated facilities

spending limit of 120 million

IRR and payback

EXPENDITURES
( MILLIONS)
33
45
15
27
MINIMUM
21
ACCEPTABLE
PAYBACK6 PERIOD
30
6 years
30
27
5 years

estimated WACC for 2001 is 10.6%

debt-equity ratio = 125%

stock price is below average

Safety/environmental

No test

22.5

4 years
60

No test

Investment Measures
Used
Internal Rate of

Return
Advantages
Disadvantages

Payback Period
Advantages
Disadvantages

Rank Based On Purely Economic

Consideration
Project
Acquisition
Effuent Water
Go South
Artificial
Sweetener
Inventory Control
Go East
Snack Food
New Plant
Expand Plant
Auto Conveyer
Truck

IRR
Cost (in millions)
60
6
30

15.50%
15.10%
9.40%

27
25.5
30
27
45
15
21
33

8.50%
8.20%
6.80%
1.40%
1.30%
1.20%
0.70%
-0.20%

Rank Based On Purely Economic

Consideration
Payback
Project
Cost (in millions)
Inventory Control
25.5
Effuent Water
6
Artificial Sweetener
27
Acquisition
Go South
30
Go East
30
Snack Food
27
New Plant
45
Expand Plant
15
Auto Conveyer
21
Truck
33

3
4
5
5
5
5
6
6
6
6
7

Rank Based On Purely Economic

Profitability Index
Consideration
Project
Acquisition
Effuent Water
Go South
Artificial Sweetener
Go East
Snack Food
Inventory Control
New Plant
Expand Plant
Auto Conveyer
Truck

Cost (in millions)

60
6
30
27
30
27
25.5
45
15
21
33

3.39
1.67
1.5
1.41
1.35
1.2
1.15
1.06
1.05
1.02
0.99

Rank Based On Any Other

Consideration
QUALITATIVE MEASURES Are Used
6- Effluent Water Treatment at four plants
1- Replacement and Expansion of the truck fleet
5- Plant automation and Conveyor Systems
9-New Artificially Sweetened yogurt and Ice cream
10-Acquisition of a leading schnapps brand and associated
facilities