Diamond Chemicals Plc Case Study

Table of Contents

Executive Summary:        

Problem Description:        

Conclusion:        

Diamond Chemicals Plc

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Executive Summary:

Diamond Chemicals - one of the global leaders in production of polypropylene, a polymer used in an extremely wide variety of products from carpet fibers to automobile parts was under financial pressure, After a worldwide economic slowdown and accumulation of shares by a single investor Sir David Benjamin, Diamond Chemicals, with earning per share dropping in half  over a year’s time £60.00 in 1999 to £30.00 in 2000.

The declining financial situation along with Merseyside’s outdated process flows and labor intensive operation has triggered Merseyside’s Plant Manager – Lucy Morris to develop and present a capital project plan to senior management which aims at renovating the production line which would result in increased throughputs and energy savings thereby building higher competitive advantage over its 7 other major rivals in the chemical production business.

While the idea and benefits of the project seemed pretty clear to the Plant Manager herself, Diamond Chemicals followed a systematic approach to approving capital projects taking into consideration 4 distinctive performance factors:

• Impact on earnings per share
• Payback
• Discounted Cash Flow
• Internal Rate of Return

This report examines the overall journey Lucy Morris and her Controller Fred Greystock had to undergo while preparing to present the project and the roadblocks such a capital project would face when presented to management in the form of constraints, disagreement and resistance to change from the concerned departments and how they prepared to engage with those stakeholders to ensure the project of modernized production facility is accepted in order to achieve their ultimate goal of optimized profitability.

Problem Description:

At a time of global economic slowdown in 1999, the chemical production company, Diamond chemicals was facing severe financial losses. They had two plants one in Rotterdam Holland and another plant at Merseyside England with Lucy Morris being the assigned Plant Manager for the latter and had been reviewing the production operations and found major areas of improvement in the production process of polypropylene as a result of the review.

Morris had spent some time reviewing the production operations and found major areas of improvement in the production process of polypropylene as a result of the review.