Executive Summary in Addressing Hansson’s Private Label Investment in Expanding

Executive Summary
Addressing Hansson’s Private Label
Investment in Expanding
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Key issues
Hansson Private Label’s management must decide whether to expand through investing in increasing the manufacturing plant’s capacity, yet the company has spent money conservatively in the past. HPL is evaluating the option after communicating with a customer, but the customer is committed to buying more products for a limited period. This contact and risky for Hansson, but there are good rewards for investment. Another key issue is that the key retailer customer wants the contract for three years. There is a risk that Hansson will invest too much in a project that lasts up to 20 years, but returns are three years. Expansion of operations necessitates taking more debt, but the retail customer is committed to a three-year purchase of the company’s products, and Hansson may be left with huge debs that affect profitability and cash flows.
Financials
The Earnings Before Taxes, Depreciation, and Amortization (EBITDA) grew from 2003 -2004, but then fell in 2005, then rose in 2006 and 2007 and $ 73.5 in 2007. It is projected that there will be a decline in the profit margins in 2009-2011, but the EBITDA will grow. The EBITDA margin is estimated at 10.31% in 2009 and grows gradually to 18.16% in 2018. Hansson will leverage the economie...