N.Z. FARMERS' CO-OP. ASSOCIATION.

Ashburton Guardian, Volume 63, Issue 309, 9 October 1943, Page 4

N.Z. FARMERS' CO-OP. ASSOCIATION.

ANNUAL MEETING TO-DAY, ANOTHER INCREASE IN PROFIT. POSITION INHERENTLY SOUND. Y (Sp.) CHRISTCHURCH, This Day. The sixty-first annual meeting of shareholders of the New Zealand Farmers’ Co-operative Association of Canterbury was held this morning, the vice-chairman (Mr F. E. Jones) presiding in the absence of the chairman (Mr C. P. Agar) who is indisposed. The report and balance sheet were adopted on the motion of Mr Jones, seconded by Mr C. G. Jarman. The chairman’s address, read by the secretary (Mr George Gibson) was as follows: — Before I proceed with the business of the meeting, it is with very deep regret thatT have to report the death during the year of Mr Ebenezer Hay. Mr Hay was known throughout the Dominion as a man of great ability and sound judgment whose efforts on behalf of the farming community will be sadly missed. He became a member'of our Board in 1925 and rendered valuable service during the period of reconstruction. We have suffered a severe loss through his death. It is my privilege to move the adoption of the sixty-second annual report and balance sheet and I would take this opportunity of making a few observations on the activities of the Association for the year just closed and to outline to the shareholders some thoughts the Board of Directors has as regards future activities. Conditions during the past year have for several reasons been difficult but under a state of war this is unavoidable, and therefore in reviewing the operations of the Association one has to remember that such a review is made against a background of world events and local difficulties which have taken place during the same period. Shortage of Goods. Throughout the year because of conditions brought about by tile war <r. we were faced with an increasing shortage- of consumer goods and we had extremely heavy calls on our staffs for service—approximately 200 are with the Armed Forces. Many difficulties and problems faced our organisation. Goods, which, although not under Government rationing were in short supply, had to be ■apportioned to our clients as fairly and evenly as possible. Despite the difficulty of this work and the inevitable disappointment of many clients when we are unable to completely fill their orders, I am glad to report that over the whole Association our many clients have accepted the position, and we thank them for the manner in which they have continued to support us with their custom throughout the year. ~ i I think I can safely say that we have obtained our share of any supplies that were available, and we have spared no effort to ensure the best possible service under the conditions which .were ruling, and which continue to affect our operations. I mention these problems of reduced trained staff and shortage of goods because it seems to be that these were the main difficulties of our year’s operations. In . view of these conditions it; is indeed satisfactory to report that the trading and general activities for the year resulted in a net profit of £71,023 —or an increase of £6742 over the previous year’s figure of £64,281. Maintenance. Depreciation written off for the year was £13,162 as against £11,63S in 1942 when I advised you in my address that £2OOO had been provided from Plant Depreciation Reserve. ■ In spite of difficult conditions your Directors have endeavoured throughout the year to provide adequate maintenance both of buildings and plant, in fact every effort has been made to catch up on the lag that inevitably occurred in the past days of difficulties. I think shareholders will have noticed throughout Head Office and branches of the Association, a steady improvement in appearance and condition of both buildings and plant. Despite labour difficulties, wherever it is" possible, it is the policy of your Directors to keep abreast with maintenance work and improvements, so far as materials and labour will allow. In order to allow for post war expansion, consideration is also being given to the question 'of modernising head office premises and extending same so as to provide for other activities and general expansion. Profit and Loss Account. Turning for a few moments to the figures of the Association’s activities, I would draw your attention to the fact that despite- the difficulties we have experienced, our gross earnings from ~ merchandise, grain, commissions, .etc., reached the figure of £255,820 or £11,469 more than the previous year’s figure of £244,351. I have on previous occasions referred to the widespread nature of the Association’s activities. It is with satisfaction that I am able to report that unavoidable loss of earnings in some sections through shortage of goods has been more than made up by substantial increases in earnings from our commissions and other activities, in which sections of our business we have had considerable expansion. „ On the expenses side the omnibus item of salaries, wages, general expenses, etc., totals £168,699 against £165,723 last pear, or a slii&ll increase

of £2976. In view of a general increase in costs this figure must be considered satisfactory. The Association pays £IBOO for War Risk Insurance each year and we- should be justified in expecting a reduction in, or the elimination of, this item. The paid-up capital has increased by £235, being .payment of calls in arrears. Calls paid in advance stand at £2406, or. an advance of £153 for the year. The amount at credit of current accounts is £265,238, against £260,327 in the previous year, or a small increase of £4911. The amount due to sundry creditors is £73,212 , against £84,917', a decrease of £11,705. Last year’s figure included wool retention moneys due to our clients which had been received by us prior to July 31, but were paid out in August: otherwise the figures are practically the same and cover normal trade commitments. On the assets side of the balancesheet the item freehold and leasehold pi-operties shows a decrease of £2872. Diu-ing the year we purchased the Farmers’ Insurance building, adjoining our Cashel Street premises. Machinery, plant and fixtures stand at £41,741, against £46,372, a decrease of £4631. She writing-off of depreciation accounts for the decrease in both these items. Stocks of goods on hand stand at £274,320, against £257,583, a decrease of £13,563. This reduction is brought about by the general difficulty in obtaining supplies and under all the circumstances I think we can say our. stocks are being well maintained. Advances against land, stock, etc., total £249,651 this year, last year’s figure being £268,850, while general debtors are £129,207, as against £134,133. Improved Liquid Position. I referred last year to the Association’s strong liquid position. You will see that this has improved, as -we hold the -following: £ Government Stock and War Loan .. .. .. 175,034 Short-date investments .. 201,307 Bank credit and cash .. 76,807 Total .. .. •• £453,148 The policy of your directors is to have adequate funds available at all times to meet all calls that may be made on us. It must not be overlooked that the money lying to the credit of current accounts, £265,238, is payable oh demand at any time, and this is in addition to our normal trade commitments.

Although the profit disclosed £71,023 6s 3d, is satisfactory, and I am sure will he pleasing to shareholders, the net sum left after provision 1 for taxation of £49,970 only provides for the payment of dividends of £20,454, and leaves a small amount of £569 6s 3d available to transfer to provision for taxation reserve account. It will readily he realised, that when 70 per cent. of.the profits of an organisation is taken for taxation, the period over which any business can stand this heavy strain is limited, and it is hoped that with the reduction which it is assumed will occur in war expenditure, there will be some substantial relief from the heavy burden of taxation. Dividend Recommended. The directors’ recommendations are that the net profit of £71,023 shall be dealt with as follows: £ s. d.

These dividends, if agreed to by the meeting, will be paid immediately, and it should be noted that the Association has paid both National and Social Security taxes, and that the dividends are therefore free of these taxes in the hands of shareholders. Before closing my remarks on the year’s. Avorking, 1 l'eel that some reference should be made to the acute shortage of labour for farm Avork. We knoAV of many cases where our clients have had the utmost difficulty in maintaining production on their properties because of this shortage of manpoAver.

The assistance given by the military at harvest time Avas certainly appreciated, but it only provided for the harvesting of crops, and did not in any sense provide a permanent relief of this pressing problem. As it is essential in the interests of our war effort that our production must at least, be maintained, if not. increased, I cannot too strongly stress the urgent necessity for a review of our manpower problem, and particularly its effect on production. This Association, Avith its coverage throughout Canterbury and Marlborough, plays an important part asregards production and general service to the farming community. Our farmer clients enjoy low commission rates, which we claim is in the main due to the activities of this Association, and Avherever possible our policy is to improve our service and lower our charges to the farming community.

The directors realise that to expand the activities of this. Association we must enjoy the confidence and the goodAvill of the farmer. We also realise that to enjoy this goodwill we must play our part in the true spirit

of co-operation and do something to warrant; the enjoyment of that very necessary support to our activities. The directors feel that the most important policy that we can adopt in order to assist production and our farmer clients, is to provide our advances at as low a rate of interest as is possible, and I am sure you will be pleased to know that the board has decided that the rate of interest to our farmer clients shall not exceed 5 per cent. When one takes into consideration that we are paying 4£ per cent, interest to our stockholders it will be appreciated that this maximum charge of 5 per cent, is indeed a service rendered by the Association and one which we feel .sure will further enhance our prestige and goodwill and lead to an expansion of our general activities. Another service that we think can with advantage be supplied, not only to our farmer clients and their wives and families, but also to the general customers of the. Association, is the provision of a lounge, which we hope will be the meeting-place for our clients and customers. Whilst under existing conditions it will not be possible to do the things we would like done, shareholders can rest assured that as and when floor coverings and other necessary goods are available, these will be provided. Business Inherently Sound.

Whilst the business of the Association is inherently sound and our prospects under post-war conditions are good, there is a link Avith the past that in fairness to all shareholders Ave think should receive consideration. I refer to Article 116 of the Articles of Association Avhicli determines the distribution of profits of the Association and limits the payment of the ordinary dividend to 2 per cent, unless there is a proportionate increase to all other classes of shareholders on anything paid above the 2 per cent. The effect of this 'is that neither the first, “A” or “B” preference or the ordinary shareholders can at any time expect to receive more than the rate of dividend laid doAvn under Article 116.

In its present form an increased payment of 1 per cent, on ordinary shares, Avhich amounts to only £1147, Avould require £146,000 more profit than that shoAvn this year taking the present rates of income tax, excess profits tax and national and social security tax into consideration. The reason for this is that the article provides that payment can only be made proportionately to the various classes of shareholders, —therefore an increase in the rate of the ordinary* dividend from 2 per cent, to 3 per cent, requires an automatic increase in the first preference dividend from 4t per cent, to 62 per cent., and the “A” preference and the “B” preference from 4 per cent, to 6 per cent. While the present high rate of taxation exists, no one can A’isualise an increase in the rate of dividends, but if Ave believe in our future, we must, as an Association plan for the days of success in trading, in general activities and loAver taxation which should provide the possibility of an added return to our shareholders. The article as at present Avorded does not help our b ug i liess activities when it is remembered that Ave have over 10,000 ordinary shareholders, and the fact that the Association’s ordinary dividend is limited to 2 per cent., tends to detract from our standing and prestige with the community in general. I think all classes of shareholders Avill agree that it is unreasonable to have the 2 per cent, limitation on ordinary shares. Payment of Dividends. This matter was raised by a shareholder at the annual meeting In 1941, and has been under consideration since then, but it has been found impossible to do anything unless Article 116 is deleted and another article is substituted.

Your directors after giving this matter consideration propose to bring before the various classes of shareholders, proposals Avhich will provide for the payment of dividends as under:

Firstly—4J per cent, cumulative on first preference, shares. Secondly—4 per cent, cumulative on “A” preference shares. Thirdly—4 per cent, cumulative on “B” preference shares. Fourthly—Up to 4 per cent, on ordinary shares. Fifthly—That any additional dividend paid shall be on all classes of shares at the same added rate per cent.

In other words, if the ordinary shareholders enjoy a 5 per cent, dividend, 1 per cent. Avoukl also have to he added to the other classes of shares, making the first preference dividend 5% per cent., the “A” and the “B” preference 5 per cent. The adoption of the above proposals by the various classes of shareholders, is an action planned for the future. It Avould not be possible under to-day’s rates of taxation to consider increasing the rates of dividends; on the other hand it Avill lie readily agreed that if under Article 116 injustice to shareholders as a whole obtains, its substitution by a more equitable article, should receive early consideration. In our opinion the alteration is for the good not only of shareholders but ultimately will be of benefit to the Association’s business as a Avhole. In conclusion may f express my thanks to my fellow directors for their loyal support and co-operation throughout the year. To’ Mr G. Gibson (our secretary), to Mr L. G. K. Steven (our merchandise manager), the branch managers and departmental heads and staff generally, i express on your behalf and personally, our thanks and appreciation of the services rendered and the results achieved under a yesir of great difficulties. On the motion of Mr Jones a A’ote of sympathy was passed Avith the relatives of the late Mr Ebenezer Hay. The following directors, who retired

by rotation Avere re-elected: Messrs C. P. Agar, J. W. Black, T. A. McKellar, G. W. R. Osborne and J. Paton. Mr Agar was re-elected chairman and Mr Jones Avas re-elected vicechairman. Messrs W. E. Best and Neale Avere re-elected auditors. On the motion of Mr H. E. Robbins, seconded by Mr F. Knight, a vote of thanks was accorded the directors and staff,

Dividend of 4i p.c. on first preference shares 6,750 0 0 Dividend of 4 per cent on “A” preference shares 8,000 0 0 Dividend of 4 per cent on “B” preference shares 3,440 0 0 Dividend of 2 per cent on paid-up capital of ordinary shares 1 .. 2,294 0 0 'Total dividends to shareholders 20,484 0 0 Provision for taxation on year’s profits49,970 0 0 Transfer balance to provision for taxation rev serve 569 6 3 £71,023 6 3