Value capital productivity

EP = value of products - raw materials costs - annualized capital cost - energy cost... 

Sources of finance for company acquisitions as mentioned above can be from reserves or maybe taken a senior or subordinated debt. Alternatively a bond may be issued with various characteristics offering an annuity, a balloon payment or a combination of the two. A variety of convertible structures have been utilized for this purpose as asset sales and the use of the target s balance sheet. There has also been a place for royalty transactions where the future-value of product cash flows are securitized to provide capital in the near term to achieve a company acquisition. 

On the business unit level, regardless of the type of business, chemical companies should focus on capital productivity as the key value driver of ROIC besides margins. 

Since gas players have invested cautiously despite continuous growth, they have managed to increase their capital productivity and prevent value leakage during the last five years. Compared with specialty chemicals companies, industrial gases players have shown a relatively stable market-to-book ratio over the last ten years. Current valuation levels are driven by a relatively stable operating performance and substantial growth expectations. 

Cost. Cost considerations must include not only delivered cost and installation, but particularly the cost of lost production. The value of products from a process plant is generally so much greater than the cost of any one piece of equipment that loss of production due to inadequate equipment capacity or excessive downtime quickly outweighs any capital cost savings achieved by undersizing equipment. 

The high capital and energy costs associated with conventional corn wet-milling, and the continued growth of the industry, has renewed interest in developing alternative starch production methods. These new processes attempt to lower capital and energy requirements and, in some cases, may result in new value-added products. The alternative processes can be divided into processes which decrease diffusion time, which use mechanical shear to enhance separation of starch and protein, and which use a different chemistry to create separation of starch and protein. 

Most of the machinery and containment vessels required for chemical processing are expensive, in part because of the high degree of automation used by this industry. This means that the labor requirement is relatively low, based on the value of products. Put in another way, in the U.S., the investment in chemical plant per employee has amounted to about 30,000 per worker at the time when the average for all manufacturing stood at 14,000 per worker. In the U.K., this ratio of capital investment per employee in the chemical industry versus the investment by all manufacturing is very similar to the experience in the U.S.A. In 1963, these figures stood at 7,000 and 3,000 pounds, and in 1972, 17,000 and 7,000 pounds, respectively [2]. 

One of the most important problems in process design and process control is how to incorporate dynamic controllability quantitatively into conventional steady-state design. Normally, steady-state economics considers capital and energy costs to calculate a total annual cost, a net present value, etc. If the value of products and the costs of raw materials are included, the annual profit can be calculated. The process that minimizes total annual cost or maximizes annual profit is the besf design. 

Products and services and customers are inextricably linked. An enterprise s value proposition is expressed in the value—the products and services—it delivers to its customers. In the New Economy, these linkages will become more formalized as organizations innovate and produce new products with their customers. Customer capital will grow when the enterprise and its customers learn from each other. Collaborative innovation will be in everyone s best interest. 

When a company desires to use a process that is covered by patents owned by another company, a license may sometimes be negotiated. The license fee may be a one-time fee, in which case that fee is included in the capital investment as a one-time royalty or paid-up license, Cfoyai- A more common arrangement is to pay an initial license fee, included in the capital investment, and an annual royalty based on the amount or dollar value of product sold. The amount of the annual royalty depends on the uniqueness of the process and the chemical being produced, with a range of 1-5% of product sales. In the absence of data, an initial royalty fee of 2% of C dc may be assumed together with an annual royalty of 3% of product sales. 

A weakness notable in many commodity company cultures is an inability to capitalize on the value of product differences where they exist. Instead, they view product differences as a sales tool, whereby they can obtain or hold business at the same price as the competitor, instead of using the situation to charge a premium. Often, this results in an inability to pay for R D above product maintenance levels. This weakness obviously works against the development of specialfy producfs. If fhe managemenf of a commodity culture company wishes to diversify info specialfies, it would be well advised to set up such a business as a relatively independent entity or risk almost certain failure. In some companies, fhis approach is known as "infrapreneuring."... 

Wells are worked over to increase production, reduce operating cost or reinstate their technical integrity. In terms of economics alone (neglecting safety aspects) a workover can be justified if the net present value of the workover activity is positive (and assuming no other constraints exist). The appropriate discount rate is the company s cost of capital. 

---