EUROLAND

FOOD-SA

SYNDICATE 6
AHMAD FATIH BARKAH – 29119008
BERNADETA PRAMUDYA WARDHANI – 29119055
EVAN MARCELLINO GENDRA – 29119062
IQLIMA TRISTY AULIA – 29119050
SEILA MUSTIKA INDRA D– 29119127
BACKGROUND
Euroland Foods headquartered in Brussels, Belgium.
Multinational company.

Produced Ice cream ,yoghurt, bottled water, and fruit juices.

Sold through Scandinavia, Britain, Belgium, Netherland,

Luxembourg, Western Germany and Northern France.

Founded in 1942 by Theo Verdin, went public in 1979.

1993 : Listed for trading on London, Frankfurt, and Brussels
exchanges.
BACKGROUND
Revenue :
• 60 % accounted from ice
cream
• In 1982 : 20 % from
yoghurt
• 10% bottled water
• 10% fruit juices
PROBLEMS
1998 : Sales had been static
Low population growth in Europe
market saturation.

Failure in new product.

The Capital Budget was to discuss in the
Board of Directors. 11 major projects
totaled EUR 316 million.

BOD imposed the limit was set at

EUR 120 million.
RESOURCE ALLOCATION
Euroland Foods’s Capital Budget prepared annually committee of senior managers.
Present for BOD approval, BOD integrated by five managers and President Directur Generale.
PDG solicited invesment proposal from managing directors.

Proposal include :
A brief project description, financial analysis, discussion of strategic, qualitative considerations.
Invesment proposals :
Payback and Internal Rate of Return (IRR)
The test established in 1999
Euroland WACC in 2001: 10.6 %
 OWNERSHIP & SHARES
• Verdin Family 20%
• Company Executives 10%
• Venus asset manageent 12%
• Bank of Brugge 9%
• Widely Held 49%
• DER ratio 125% and its higher than
another European consumer - food
industry.
• Management relied on debt financing to
keep sustain firms capital spending and
dividend during pricewar.
OWNERSHIP & SHARES
• Banque de Brugers urged an
aggresive program of debt
reduction
• Price to earnings ratio of 14 times
• Shares of Euroland Food stock
price were priced below the
average in industry.
• 2000 : Major securities issuing
recommendation to investor in
Euroland Foods shares.
• 12 members of the board
directors : 3 of Verdin Family, 4
members of management, 5
outside directors
 MEMBER OF COMMITTEE
SENIOR MANAGER PREPARE THE CAPITAL BUDGET, EACH PROJECT
SPONSORED BY ONE OF THE MANAGER PRESENT.

• Wilhelmina Verdin - Spokeperson for family

• Trudi Lauf - Finance Director
• Heinz Klink - Managing Director for Distribution
• Maarten Leyden - Managing Director for Production and Purchasing
• Marco Ponti - Managing Director of Sales
• Fabiene Morin - Managing Director for Marketing
• Nigel Humbolt - Managing Director for Strategic Planning
 REPLACEMENT & EXPANSION
AVAILABLE TRUCK FLEET
PROJECT Flexible schedule, efficienting route and
delivery time.
Purchases 100 new refrigerated tractor-trailer
trucks in 2001 and 2002
Depreciated trucks in two years costs EUR
4.05 million.
Total Net Invesment EUR 30 miliion
Working Capital : EUR 3 million
Total Cost Savings and sales potential EUR
11.6 million
IRR estimated 7.8 %
Reducing shipping cost and making NEW
new manufacturing and packaging in
PLANT
Dijon, France.
Cost plant EUR 37.5 million
Working capital EUR 7.5 million
Equipment EUR 21 million, would be
amortized
After tax- cash flow EUR 35.6 million
IRR over next 10 years 11.3 %
 EXPANSION OF
A PLANT
Plant capacity expanded 20% for EUR 15
million
Equipment EUR 10.5 million - depreciated over 7
years - for plant 10 years.
Results in capacity EUR 2.25 million a year.
IRR 11.2%
 DEVELOPMENT & ROLL OUT
OF SNACK FOODS
Combining facility production of spice
and nut with dried fruits.
Equipment : EUR 22.5 million
Working Capital Invesments : EUR 4.5
million
Depreciated over seven years
IRR 13.4% and 12%
 PLANT AUTOMATION
CONVEYER SYSTEMS

Water treament of cleaning fruit from dirt

and pesticides without containing poisoinus
chemical to environment.

Equipment EUR 6 million, in 4 years cost

EUR 15 million
Expand product and could sustain expansion
MARKET
by choosing product and geographical EXPANSIONS
situation. SOUTHWARD
& EASTWARDS
Working Capital EUR 30 million
After tax-cash flow EUR 56.3 million for
southward
After tax-cash flow EUR 48.8 million for
eastward
IRR 21.4 %southward
IRR 18.8 %eastward
 DEVELOPMENT &
Significant cost savings for food and
INTRODUCTION
beverages producers
Stimulate growing demand og low-
OF NEW
calories products
ARTIFICIALLY
Need EUR 27 million SWEETENED
Estimated IRR 20.5% YOGURT AND ICE
CREAM
Shorter delays in ordering and order
processing, better con trol of inventory,
NETWORKED,
reduction of spoilage, and faster COMPUTER-BASED
recognition of changes in demand at
the customer level INVENTORY-
Initial outlay of EUR18 mil lion for the
CONTROL SYSTEM
system, followed by EUR4.5 million in FOR WAREHOUSE
the next year for ancillary equipment
AND FIELD
RR was estimated to be 16.2%
REPRESENTATIVES
 Explored six possible related industries,
ACQUISITION identified four small producers of well-
established brands of liqueurs →
OF A LEADING determined a company could be
purchased in the near future, located in
SCHNAPPS? Munich

BRAND AND EUR25 million to buy the company and

ASSOCIATED EUR30 mil lion to renovate the company's
facilities
FACILITIES After-tax cash flows were projected to be
EUR 198.5 million, yielding an IRR of
27.5%
exhibit
No Project Type of Project IRR Payback (years) IRR - ROR
Minimum IRR Actual Maximum Actual

1 Replacement & Expansion of the Efficiency 8.00% 7.82% 4 6 -0.20%

Truck Fleet Improvements
2 A New Plant Product or Market 10.00% 11.30% 5 6 1.30%
Extension
3 Expansion of a Plant Product or Market 10.00% 11.20% 5 6 1.20%
Extension
4 Development and roll out of New Product of 12.00% 13.40% 6 7 1.40%
snack food New Markets
5 Plant automation and coveyor Efficiency 8.00% 8.70% 4 6 0.70%
system Improvements
6 Effluent water treatment at four Safety or Not Test Not Test Not Test
plants Environmental
7 Market expansion southward Product or market 10.00% 21.40% 5 5 9.40%
extension
8 Market expansion eastward Product or market 10.00% 18.80% 5 5 6.80%
extension
9 Development and introduction New Product of 12.00% 20.50% 6 5 8.50%
of new artificialy sweetened New Markets
yogurt and ice cream
10 Networked, computer based Efficiency 8.00% 16.20% 4 3 8.20%
inventory control system for Improvements
warehouses and field

11 Acquistion of a leading schnapps New Product of 12.00% 27.50% 6 5 15.50%

brand and associated facilities New Markets
No Project IRR Payback (years) IRR - ROR Ranking
Minimum IRR Actual Maximum Actual

1 Replacement & Expansion 8.00% 7.82% 4 6 -0.20% -

of the Truck Fleet

2 A New Plant 10.00% 11.30% 5 6 1.30% -

3 Expansion of a Plant 10.00% 11.20% 5 6 1.20% -

4 Development and roll out 12.00% 13.40% 6 7 1.40% -

of snack food
5 Plant automation and 8.00% 8.70% 4 6 0.70% -
coveyor system
6 Market expansion 10.00% 21.40% 5 5 9.40% 2
southward
7 Market expansion eastward 10.00% 18.80% 5 5 6.80% 4

8 Development and 12.00% 20.50% 6 5 8.50% 3

introduction of new
artificialy sweetened
yogurt and ice cream

9 Networked, computer 8.00% 16.20% 4 3 8.20% 5

based inventory control
system for warehouses and
field
10 Acquistion of a leading 12.00% 27.50% 6 5 15.50% 1
schnapps brand and
associated facilities
RECOMMENDATIONS
No Project Invesment Accumulation NPV
Cost

1 Acquistion of a leading 60 60 59.65

schnapps brand and associated
facilities
Market expansion southward 30 90 14.85
3 Development and introduction 27 117 10.97
of new artificialy sweetened
yogurt and ice cream

4 Market expansion eastward 30 147 10.62

5 Networked, computer based 23 170 2.67

inventory control system for
warehouses and field
conclusion
Considering budget, we choose project that fit with
company :

• Acquistion of a leading schnapps brand and

associated facilities.
• Market expansion southward.
• Development and introduction of new
artificially sweetened yogurt and ice cream.
THANKYOU