Euroland Foods S.A.

Euroland Foods S.A.

Weihan Zhang

Marshall University

Euroland Foods S.A.

Introduction:

This case discusses Euroland Foods' the eleven projects that was financial reporting. This case indicates that Euroland Foods draft the company's capital budgeting in the New Year, but the eleven projects spend EUR316million far beyond EUR120 million spending limit prescribed by the board. It will be a challenge for senior managements to allocate funds for these projects .This case will analysis the project which is more beneficial to the company. It will include new product introduction, acquisitions, market expansion, improve efficiency, preventive maintenance, safety and pollution control.

Company’s Background:

The Euroland Foods was established in 1924 by the Belgian farmer Theo Verdin. This was a multinational company in the production of high quality food, such as ice cream, yogurt, fruit juices and bottled water. Ice cream, the most popular product, had a loyal customer base that was causing ice cream accounted for about 60% of company's revenue. Yogurt, was introduced by Verdin in 1982, contributed about 20% of revenue, the rest of the bottled water and fruit juice were equally divided about 10%. These products have been sold to some Europe countries, such as Britain, Belgium, Luxembourg, the Netherlands, Scandinavia, northern France and western Germany.
Because Verdin focused on product development and shrewd marketing, the company grow steadily over the years. The company continued to grow and went public in 1979. By 1993, the Euroland Foods was listed for trading on Frankfurt, London and Brussels exchanges. As the company continues to grow, it faced some financial considerations that need management focus.

Company’s current situation:

The board of directors of Euroland Foods has 12 members that included three Verdin family's members, the four management and five outside directors. Each member has different tradable shares, such as the Verdin family owns 20% share, the company's executives holds 10%, Venus Asset Management holding 12% of Venus and Banque du Bruges et des Pays Bas holding 9%.

The company's problems began in the Euroland Foods' sales all the time being static since 1998. Through these data, managers found that the problem were the northern European market saturation and low population grow. Some observers attributed these problems to the introduction of new products. Most members wanted the company to expand market share, and introduce more innovative products to increase more sales and revenue. Company needs a plan to reduce debt, and improve the return on investment, because of the company debt- to- equity ratio of 125%. Because of this problem, the senior managers discussed eleven proposals and two financial test payback and internal rate of return (IRR).

In 1999, the management committee according to requirement established a new capital project acceptance. Those asking to see the table below:

Euroland Foods had seven the excellent managers who prepared capital budget. Verdin Wilhelmina, one of seven executives, who was the founder of the company and the spokesman of the board of directors. Trudi Lauf was the financial director, he introduced the modern financial control and system in 1995. Heinz Klink was the managing director responsible for the allocation. Maarten Leyden was responsible for production and procurement. Marco Ponti was a sales manager. Fabienne Morin was marketing general manager, Nigel Humbolt was responsible for strategic planning. They spent a lot of time to discuss, through experimental tests, they choose two to four alternative capital budgets, and discusses the eleven suggestions to solve the problem.

Analysis of eleven projects:

Committee has allocated the found in a series of projects, the summary table and a detailed description is as follows: