Deutsche Brauerei Report

Deutsche Brauerei

2011

Tuesday, February 15, 2011

Problem:

As of 2000, there are a few main problems with our company that we must address to grow and succeed in the future. As a member of the board of directors, we must look out for the best interests of our shareholders, which happen to be the Schweitzer family. The problems that will be stated below are all interconnecting, regarding the future performance of Deutsche Brauerei.

The first problem we have is our dividend policy. The dividend policy we currently have pays 75% of net income, in which Lukas Schweitzer, our managing director, is proposing to increase the dividends for this quarter, based on one fourth of the dividends projected to be paid in 2001, ultimately “pre paying” the dividends. The next problem we have is our forecasted financial budget for 2001, which we feel might be unrealistic to a certain extent. Decrease in sales growth from 1999-2000, might be a trending sign that the expected growth for the Ukraine market will not be sufficient enough to cover the 7 million investment of a new plant and equipment. Oleg Pinchuk, our sales and marketing manager, who forecasted our budget for 2001, expects that our capacity will be exhausted by the end of 2001, ultimately stating that this investment is needed to meet the demand of the Ukrainian market. The problem then arises of how we are going to finance this need. Forecasted debt/equity ratio of 77% in 2001, brings on the issue of default risk, which is highly correlated with whether or not we can collect on account receivables from the Ukrainian distributorships. Comparing the distributorships in Germany to those in the Ukraine, days in receivables for the Ukraine are more than double that of Germany, which we feel can have an effect on the profits and dividends that are forecasted for 2001, if we cannot collect on time. The final problem we have is the proposed increase by Lukas Schweitzer for Oleg Pinchuk’s compensation. The proposed...