Questions 4.1 - 4.3

4.1 (4%)
Explain the change in LGS A/S’s warehouse structure.

4.2 (6%)
Assess how the new logistics centre will affect LGS A/S’s logistics efficiency.

4.3 (4%)
Assess how the new logistics centre will affect LGS A/S’s return on investment (ROI) in the short and long term.

Assignment 4

Distribution management and financial analysis

LGS A/S is one of Europe’s largest agri-food companies, supplying farmers with feed for pigs, cattle and poultry as well as seed corn and agricultural lime and plant protection products.

The company has just inaugurated a new logistics centre that will serve farmers throughout Denmark. Previously, LGS A/S had a number of small warehouses spread out geographically across the country. They have now been gathered at a single location to optimise logistics and the customer experience. The new logistics centre has more than 2,400 product numbers, and 80 trucks drive in and out of the terminal each day to ensure high service levels, with deliveries to farmers guaranteed within three days. LGS A/S expects the logistics centre close to the motorway network to strengthen its competitiveness in both the short and long term.

The new logistics centre is also a win for the company’s customers, who will experience an improved level of service from order to delivery. Customers can use the company’s website and app to mark on a map where they want their goods delivered, and it will also be possible to follow their orders via Track & Trace.

Questions 3.1 - 3.4

3.1 (4%)
Explain which of the scarce resources used in fertiliser production are capacity resources and which are variable resources.

3.2 (6%)
Determine how many bags of NP100 and NP200 fertiliser must be produced in the coming week to achieve the biggest possible contribution margin while taking into account the current limitations.

The information you need can be found in Appendix 3 of the Excel file.

3.3 (4%)
Calculate how big a contribution margin the company will lose in the coming week due to the scarce resources.

3.4 (4%)
Assess whether Danish Fertilizer should accept the employees’ offer of working overtime.

Assignment 3

Optimisation of scarce resources

Danish Fertilizer was established in 1901 as a local cooperative. Following a number of mergers and acquisitions, the company is now an international player with about 5,000 employees. The group comprises more than 100 companies in Denmark and abroad which are mainly engaged in the sale of compound feed, vitamin mixes and artificial fertiliser.

In recent years, the group has been focusing extensively on sustainability, and has committed to the goal of achieving a climate-neutral food industry by 2050. Danish Fertilizer has therefore developed two new types of fertiliser which are more environmentally friendly: NP100 and NP200. At one of the group’s factories, investments have been made in a production facility which is being used to produce these two types of fertiliser. The same factory also has a packaging plant where the fertiliser is filled into bags. Producing fertiliser also requires various chemicals, including ammonia, which makes the plants grow. Ammonia production uses large amounts of energy and accounts for approx. 1.5% of the world’s CO2 emissions. However, it is now possible to produce sustainable ammonia by means of the Haber–Bosch process and water electrolysis for producing hydrogen. There are only a few producers of this type of ammonia, and therefore it is only available in limited quantities.

An agreement has been made with a Danish supplier of ‘green’ ammonia to supply 1,500 kg (1,500,000 g) for the coming week’s production.

The NP100 and NP200 fertiliser production plant has a capacity of 60 hours (216,000 seconds) for the coming week. The packaging plant has a weekly capacity of 20 hours (72,000 seconds) for the packaging of fertiliser.

The production of one bag of NP100 requires 250 g of green ammonia, and the processing time is 35 seconds, while it takes 10 seconds on the packaging machine. The production of one bag of NP200 requires 300 g of green ammonia, and the processing time is 50 seconds, while it takes 9 seconds on the packaging machine.

The company has a contribution margin per bag of DKK 100 for NP100 and DKK 140 for NP200.

A maximum of 6,000 bags of NP100 and 6,000 bags of NP200 can be sold each week.

The employees in the packaging department have agreed to work overtime to increase capacity on the packaging machine. This will provide additional capacity of up to 10 hours (36,000 seconds), and an additional payment of DKK 200 per hour has been agreed.

Questions 2.1 - 2.6

2.1 (4%)
Explain the reason for the investment.

2.2 (4%)
Present the net cash flow of the proposed investment.

The information you need can be found in Appendix 2 of the Excel file.

2.3 (4%)
Assess whether the investment is profitable.

2.4 (4%)
Calculate the minimum sales volume required in year 5 for the investment to be profitable.

2.5 (4%)
Discuss whether Plæneservice A/S should expand to Funen and invest in three new electric vans.

2.6 (4%)
Explain why the discount rate (required rate of return) is higher than the effective interest rate on the offered loan.

Assignment 2

Investment

Plæneservice A/S offers various lawn and turf care service packages throughout most of Denmark. Customers can take out a subscription that includes three service visits during a season. During a service visit, the grass is inspected, after which it is overseeded, and weedkiller and fertiliser are applied as required.

The company’s vision can be found on its website:

We will make lawns and pitches in Denmark more beautiful and healthy in a simple and effective way for the individual owner.

• We will be the best lawn and turf care company on the market
• We will provide outstanding customer service and deliver top-quality service packages
• We will be environmentally friendly

The company was established almost 10 years ago by two colleagues, Rasmus and Kasper, who both have more than 20 years of experience as greenkeepers. The idea came about because they were often asked by private individuals about how to look after lawns. The service packages have been a great success, and the company now has more than 100 employees. In addition, the company has invested in many vans, which are used for the service visits.

Until recently, it has only been possible for customers in Jutland and on Zealand to subscribe to the company’s service packages. The two owners are therefore considering expanding operations to Funen. However, it would be necessary to invest in three new electric vans and the accompanying lawn care equipment in order to be able to cover Funen. In recent years, the company has become more environmentally aware, and has developed a ‘green’ profile. Kasper has therefore obtained a quote for three electric vans, which cost DKK 2,655,000, plus equipment totalling DKK 600,000. The lifespan of the electric vans is estimated at 5 years, after which the expected scrap value is DKK 450,000.

Based on previous experience, Rasmus and Kasper have estimated the number of subscriptions on Funen for the next 5 years – the figures can be found in Appendix 2 of the Excel file. They expect to see a large increase in the number of subscriptions in year 5, although there is some uncertainty about this. The price of an annual subscription is DKK 2,995. The variable costs of grass seed, fertiliser, weedkiller etc. are estimated at DKK 1,200 a year per subscription.

The company’s annual cash capacity costs are expected to increase by DKK 1,530,000, as there will be additional costs associated with operating the electric vans, employees and marketing etc. The company has been offered a bank loan with an effective interest rate of 8% per annum, and has set the discount rate (required rate of return) at 14% per annum.

Questions 1.1 - 1.7

1.1 (10%)
Based on the accompanying material, explain which factors have impacted DLF Seed’s financial development from 2020/21 to 2022/23.

1.2 (10%)
Analyse the development in the index figures for earnings and asset use efficiency (capital adjustment) from 2020/21 to 2022/23 based on these factors. See question 1.1.

The key figures can be found in Appendix 1 of the Excel file.

1.3 (5%)
Assess how the development in the index figures affected the profit margin ratio and the asset turnover ratio from 2020/21 to 2022/23.

The key figures can be found in Appendix 1 of the Excel file.

1.4 (4%)
Discuss whether the development in the gearing from 0.84 times in 2021/22 to 1.46 times in 2022/23 is appropriate.

The key figures can be found in Appendix 1 of the Excel file.

1.5 (5%)
Analyse DLF Seeds A/S’s horizontal balance sheet structure from 2020/21 to 2022/23.

The key figures can be found in Appendix 1 of the Excel file.

1.6 (5%)
Assess which parts of DLF Seeds A/S’s value chain are particularly value-creating.

1.7 (5%)
Assess whether DLF Seeds A/S prioritises shareholder value or stakeholder value.

Assignment 1

Company analysis

DLF Seeds A/S is a global seed company that develops, produces and markets seeds. The products are sold and distributed in more than 100 countries, and the company employs more than 2,200 people worldwide.

In addition to several departments in Denmark, where the majority of grass seed production takes place, DLF Seeds A/S also has subsidiaries and production facilities in North America, South America and New Zealand. Through the presence of companies and development and testing facilities in the largest production and consumption areas in the world, DLF Seeds A/S ensures that its products are adapted and tested in different climatic conditions.

The business areas are:

• Forage seeds for agriculture
• Lawn and turf grass seed for professionals
• Lawn and turf grass seed for the consumer market
• Corn seed
• Cover crops (soil improvement and diverse fauna)
• Beet seed
• Vegetable seeds
• Seed potatoes

On its website, DLF Seeds A/S writes:
“With a market share of approx. 50% in Europe and 33% worldwide, there is a good chance that the livestock that supply your dairy products, lamb and beef and the wool for your sweater have received the forage they need in the form of our grasses. If you enjoy sport, you have probably watched your favourite team score on our turf. And if you just enjoy relaxing on the grass in your garden, your lawn might well have started its life as seed in one of our grass mixes.”

Watch the following video about the company:

DLF Seeds A/S’s vision is:
“DLF offers industry-leading, proprietary seed solutions that connect science, innovation and application in support of efficient, sustainable cultivation of our planet.”

DLF Seeds A/S also wants to be seen as a reliable, credible and transparent company – by our employees, customers, suppliers and stakeholders in general. DLF Seeds A/S sees its employees as its outside face to the world, and therefore it is particularly important that our employees live up to the company’s values.

Values:

• Innovation and entrepreneurship: We continuously develop our business, our products and the way we work, acknowledging the courage and risk willingness that this may require.
• Global synergies: We want to realise synergies through sharing of knowledge, collaboration and developing together as a business, as an organisation and as individuals.
• Environmental sustainability: We support environmental sustainability by developing sustainable products and operating in an environmentally sustainable way.
• Empowerment: We empower our people and our local business units to act in the best interest of the company based on their professional insight and knowledge of local conditions.

As a result of DLF Seeds A/S’s continuous focus on innovation and entrepreneurship as well as environmental sustainability, the company was selected as a case for the daily newspaper Børsen’s ‘Sustainable Cases 2023’. The reason for this was that “DLF, as a global market leader within forage and turf/lawn seed, works strategically to develop more resource-efficient plants. This happens through product development in targeted projects and has resulted in high-performance and robust strains that ensure greater food security, while grass also has a positive climate impact.”

In its 2022/23 financial year, DLF Seeds A/S had 2,282 employees, generated revenue totalling DKK 8,756 million, and posted a profit before tax of DKK 421 million.

This assignment comes with the following material:

Articles:

• Danish grass seed group captures a third of the global market, Jyllands-Posten, 23 September 2022
• Seed company spends millions on developing drought-tolerant grass, Børsen, 12 June 2023
• Green Danish giant posts record sales of DKK 8.8 billion, Børsen, 1 November 2023

Key figures:

• Prepared accounting and key figures for DLF Seed A/S for the years 2020/21 to 2022/23. See Appendix 1 of the Excel file.

Instructions

This material consists of four assignments. Each assignment has a number of questions which have all been given an approximate weighting. The weightings are used in the overall exam assessment.

All the assignments must be completed independently of each other. The assignments come with an accompanying Excel file, which has a number of appendices containing data and templates. In addition, there is a Word document containing all the questions.

Download:

The Word document with all the questions can be downloaded here: Word file

The Excel document with all the appendices can be downloaded here: Excel file

Remember:

Save the files to your computer before you start to use them.

Communication with anyone else during the exam is not permitted.