Capital Projects: Equity builders or Money Pits?

摘要

Too many capacity expansions have brought most segments of the industry to a serious state of overcapacity, which has resulted in price "stagflation," made profits problematic and eroded shareholder value. And even though they disagree about the extent of the damage, experts agree that the paper industry has, in general, been a poor steward of investment capital. Destruction of shareholder value since 1987 has been in the range of $20 to $25 billion, according to Paul Hornack, associate partner in the forest products group of Andersen Consulting, El Segundo, Ca. Luiz Kaufmann, former president and CEO of Brazil's Aracruz S.A., has stated that the industry's failure to realize an adequate return on its enormous investments in capital plant and equipment has resulted in the loss of $27 billion of shareholder value in the same time span. Jacobs Sirrine Consultants says its research puts the estimated negative return at $30 billion over the last 10 years.