what a pile of schist, page-18

Bacci

You could shoot your own argument down in some ways. My comments then:

1. Gearing. If you reflect that market cap is in its truest form a reflection of required returns on equity. As the risk adjusted return requirement increases the sp drops thus in reality any positive movement in sp and hence Market cap can either reflect increased income or reduced perceived risk premium required or increased capital. The interesting component is when a cap raising produces a higher sp which then must reflect that the risk premium is dropping. The other theoretical process is too measure the real value of the asset (the Plant) and take into account that value. I would suggest anything that has a replacement cost of (your figures $2bn) would have a substantially higher value in economic terms today. After all that theoretical ideology my gut feel has always been that in a manufacturing environment a 1 to 1 ratio with shareholders capital is a fair position - obviously assuming that the asset is productive which on an operational level this one is.

2. Repairs and maintenance - Sorry but you cannot use a replacement cost basis to determine adequate maintenance spend. For example you can pay more for parts that have a every lasting life and certain heavy equipment without wear can last virtually forever. If your assumption is true than no Solvay plant is being adequately maintained. The European plants dont spend anywhere near what you suggest otherwise they would not make any money they trade at the world price which PSH does as well.

Thus I dont accept your assertions re either and intend exploring them directly with management after release of results.

As before only hold a few to be on register.