Diamond Chemicals Plc

In: Business and Management

Submitted By rawyhellou
Words 4053
Pages 17
UV2493
Rev. Apr. 30, 2015

Diamond Chemicals PLC (A): The Merseyside Project

Late one afternoon in January 2001, 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 Diamond Chemicals PLC’s Merseyside Works in Liverpool, England.
Greystock, Diamond’s controller, was referring to a capital project that Morris wanted to propose to senior management. The project consisted of a GBP9 million expenditure to renovate and rationalize the polypropylene production line at the Merseyside plant to make up for deferred maintenance and exploit opportunities to achieve increased production efficiency.1
Diamond Chemicals was under pressure from investors to improve its financial performance because of both the worldwide economic slowdown and the accumulation of the firm’s common shares by a well-known corporate raider, Sir David Benjamin. Earnings per share had fallen to GBP30.00 at the end of the year 2000 from around
GBP60.00 at the end of 1999. Morris thus believed that the time was ripe to obtain funding from corporate headquarters for a modernization program for the Merseyside Works—or at least, she had believed so until
Greystock presented her with several questions that had only recently surfaced.
Diamond Chemicals and Polypropylene

Diamond 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 (from medical products and packaging film to 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 began…...

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