PROFIT SHOWN.

Auckland Star, Volume LXII, Issue 234, 3 October 1931, Page 11

PROFIT SHOWN.

GOOD POSITION.

FARMERS' AUCTIONEERING CO.

NO PAYMENT OF DrVTDBND. DIRECTORS CONGRATULATED. (By- Telegraph—Own Correspondent,) HAMILTON, this day. At the 24th annual meeting of the Farmers' Co-operative Auctioneering Co., Ltd., this morning, there was the smallest attendance of shareholders for years. The chairman of directors, Mr. Walter Seavill, in moving the adoption of the report and balance-sheet, said: —

With my fellow directors, I very much regret being unable to recommend a dividend on ordinary share capital. The difficult times experienced throughout the past year, and from which we havenot yet emerged, I think are generally recognised as a reflex of world-wide conditions. All are suffering—Governments, financial institutions, manufacturers, shipping companies, commercial institutions and primary producers. The company's welfare is so wrapped up with the latter that their difficulties and greatly reduced incomes must of necessity be reflected in the company's earnings. The results as disclosed by the profit and loss account, which gives our gross and net earnings, were not unexpected: gross profits have shrunk, through the abnormally low prices ruling, and the inability of many clients to meet their obligations, by £43,123 14/8, and despite expenses being reduced by £10.058 9/3, the net result is a profit of only £13,195 11/9. Compared with other similar institutions it may be said that in this we are fortunate. However, the balance-sheet I am pleased and proud to say shows that we have not only been able to maintain our sound financial position, but have slightly improved it.

Capital Account. —The total subscribed capital is £658,267, the calledup capital being £479,953, which, is all paid up. Reserve Account. —The reserve account. £29,763 18/1, is unaltered. Mortgages.—The only mortgage owing bj the company is £385 19/3, a small Government mortgage with which it would be inadvisable to interfere. Deposits.—Fixed deposits with the company amounted to £23,761; this liability is fixed for varying periods, with maturing dates evenly spread. Shareholders' Current Accounts. —The sum total at credit of current accounts was £5012 6/3. It will no doubt be gratifying tq shareholders to know that no large liability exists as far as call money is concerned. Sundry Creditors. —The amount of £45,827 1/7 appears in the balancesheet at the credit of sundry creditors, which is £3993 4/1 less than the previous year. The whole of this liability has since been paid. London Office.—£l94s 10/9 appears in the balance-sheet as a liability to London office.

Bank of New Zealand. —The overdraft at the Bank of New Zealand at July 31 amounted to £23,632 3/9. Total Liabilities. —Liabilities, excluding capital and reserves, totalled £101,211 11/S, and the assets amounted to £623,405 9/10, revealing a percentage of liabilities to assets of only 16.23 per cent. Assets. Properties. —The value of our properties in Hamilton and the various districts in which the company operates now stands at: Freehold, £166,951; leasehold, £2511; totalling £169,462. Maintenance, renewals and repairs have been charged, against current expenses. Machinery, Working 'Plant, Office Furniture and Fittings.— £11,652 covers the whole of the working plant, machinery, office furniture and fittings engaged in the business. Considerable depreciation has been provided for, and these items are more than covered by capital values.

Sundry debtors and bills receivable totalled £316,086 12/10, a decrease of £52,567 17/10 on last year's figures. Investments. —Investments total £39,SB3 4/3. Of this sum £27,700 is invested in War Loan inscribed stock, from which has been deducted a reserve for anv depreciated value, viz., £1333 2/9. The balance in the investments is represented by mortgages and other securities held by the company. Stocks of General Merchandise. —The stocks of merchandise have been valued by competent valuers at £86,321 12/9, as against last year, a decrease of £10,843 12/7. Percentage of Expenses.—The percentage of expenses to gross profits equals 87.24 per cent.

Summary of Position. Briefly summarised, the position is as follows:— Paid-up capital ...... £479,953 Total liabilities ....... £101,211 Total assets ....... £623,405 Turnover ._ £1,195,407 Gross profits —~~. £103,453 Expenses .... £ 90,258 Net profit £13 ; 19o Livestock Market. The ruling economic conditions have been reflected to a marked degree in the livestock market. The prices obtained by the grazier for his beef have shown him a very small, if any, margin of profit. The absence of export trade has been the chief cause of the local market remaining so low through the winter months. During the year the highest price realised for prime ox beef was 28/ per 1001b, as compared with 40/ per 1001b in the preceding year.

There has been a fair demand for dairy cattle, but at prices showing a considerable decline as compared with former years. A noticeable feature in this section was the falling oft in paddock sales, farmers, wisely I think, preferring to purchase their requirements at current prices in the yards. The prolonged and severe winter has shown its effect on dairy heifers, and most of the animals offered during the past few months were in a more or less poor condition.

The drought in the Gisborne district last summer brought about a large influx of store cattle to the Waikato. and no doubt a good proportion of these will again be on the market during the spring months. Prices offering at the pedigree dairy stock sales, of which we have had a fair share, were somewhat disappointing, except in the case of old-established breeders. Prices for fat sheep were the lowest realised for many years, and in the autumn large numbers of fat ewes changed hands from as low as 5/ to 6/, and wethers S/ to 10/. Considerable business was done in the store sheep section. Large numbers came through from the East Coast district, which enabled farmers to fill their requirements to better advantage than for many years past.

There, has bee-- a* good demand, for draught horses, especially for" useful light to medium farm sorts. At the recent spring fairs nearly all the horses yarded changed hands at satisfactory prices. The number of pigs yarded at the principal centres has continued to increase, but prices obtained were lower than in previous years. Farmers, however, were able to purchase their stores at lower rates, thus ensuring a better margin of profit. We held practically the 3ame number of clearing sales as last year, but prices fluctuated to a marked extent, due to the uneven quality of the stock offered. One very pleasing feature of the years operations was the increased volume of livestock business passing through the hands of the company. This was particularly noticeable in the sheep section. Cattle sold were slightly fewer in point of numbers, but over 100,000 more sheep and 2000 more pigs were dealt with.

Wool Prospects. The Auckland sale on November 25 was the opening sale of the 1930-31 series, and woolgrowers throughout New Zealand awaited the result, which to all and sundry was very disappointing, the average price realised being 4.57 d per lb, and the average price per bale £6 14/8. Prices fluctuated, with a downward tendency, until March. At the January sale the average price realised was 3.9 d per lb, £5 15/7 per bale. The advent of Japanese competition towards the latter part of the season caused prices to rise, and at the third sale, held on March 27, a pleasing and somewhat unexpected rise of approximately 3d a lb took place, the average price per lb being 6.88 d, whilst the average price per bale rose to £9 13/7.

The company catalogued 11,382 bales, which was more evenly distributed over the three sales than usual. This to no small extent facilitated handling, and enabled us to utilise our store space to the best advantage. jNo one can forecast with any exactitude what the future holds in store. It is hoped that the low price prevailing will in a measure stimulate trade, and from latest fashion reports to hand wool is coming more into favour with the feminine portion of the community. I am optimistic enough to think that bottom has been reached, and that with confidence once more restored, firmer prices may be looked forward to.

Merchandise. General trading conditions throughout the year have been difficult, the restricted spending power of the community naturally being reflected in reduced turnover and consequent lower profits. Prices generally have remained firm. Although with a number of oversea commodities values have somewhat receded, this has been more than offset ; by the adverse exchange rate, which factor, in conjunction with prospective higher Customs tariff, may increase replacement costs. Although business has been difficult to obtain, our various branches have been well supported, and this department of the company's business in the main has given satisfactory results. The comllll[3lllllll!lHlE3!li||i|||||||||[3|iniUlllllQlU!llHllliai]llllllllllE3inillUini

pany'a policy of selling goods of only the highest quality, combined with efficient"service, will, I hope, merit your continued support. Shipping.

Ship owners, like the rest of the community, have had a trying season. Adverse exchange, increased duties, and the restricted importations by merchants have been important factors in reducing their earnings. It has been found necessary to 6end ships out to the Dominion in ballast to lift refrigerated and general cargo, and in a number of instances they have had to be dispatched on their return voyage only partly filled, exporters electing to hold in Isevr Zealand awaiting a better market. This does not apply to the last few months, as, owing to the rise in price of our meat, the refrigerated space allotted has been readily filled. The position regarding general cargo, however, has not shown much improvement, and all recent departures have had abundance of empty space.

The United Kingdom has absorbed increased quantities of both lamb and butter. With regard to the latter, the high duty imposed by Canada has practically stopped export to that country. Passenger Traffic—The depression has practically stopped the tourist traffic, most passengers to-day being those who find travel a necessity for business reasons. Tourist Agencies. —Few overseas bookings have been recorded, though we have secured a fair proportion of local holidaymakers.

During the year we became associated with the formation of a stevedoring company, in which we hold a controlling interest. I am pleased to say that the results up to date are quite satisfactory, and the prospects are that this will considerably augment our earnings in the future and consolidate our position with the Cunard and Commonwealth and Dominion line, of which we are Auckland agents. Insurance Department. This department has again shown satisfactory results for the year's working, and, as chief agents of the New Zealand Insurance Co., Ltd., in this district, we expect to do a steadily increasing volume of business.

Clients may be tempted to economise by reducing their insurance cover or refraining altogether * from protecting themselves against loss through fire or accident. Such a step, I consider, would be most imprudent, and, indeed, every precaution should be taken, at the present time to avoid unnecessary financial losses. The company has recently added to its scope of operations by accepting the local agency for the Producers and Citizens' Co-operative Assurance Co., Ltd.. This is a life insurance company,, and it has several attractive proposals, which, I feel sure, will commend themselves to shareholders and others. Particular attention is drawn to the advisability of making adequate provision for the incidence of probate duty.

General Outlook. With regard to the future, it is only my firm conviction that the clouds of slump which are now obscuring the sunshine of prosperity will eventually be dispersed by the soft winds of confidence, which deters me from saying that the remarks I made a year ago in the general outlook are just as applicable to-day as they were then. However, though I still assert that the application of the principles I submitted to you at that time is still lacking, and the riddle which the world has been set is as yet unsolved, I am confident that, if only by the trial and subsequent rejection of methods which prove to be palliatives and not remedies, we are getting appreciably nearer than we were twelve months ago to finding the road which will lead us to prosperity. The trouble has been, and still is, that in many instances, instead, of facing the situation candidly by admitting we are on the wrong road, and must retrace our steps, we try to cut across country to reach our objective, only to find that no track exists.

Politicians, bankers, journalists and business men have been advancing their own theories or exploding those of others as to the cause of the slackness of trade and its consequent repercussion on the labour market, and many of them are very helpful in forming public opinion and enabling thoughtful people to come to some sort of a conclusion. For what it is worth, I submit with all modesty, and far from claiming any monopoly in the idea, what I consider would put the world well on the way to a renewal of confidence in trade, industry and production, and the restoration of better times; and that is, to put it in a nutshell, remove all restrictions from free movement of goods and freedom of contract with labour. Legislation has brought us almost to an impasse. Give the people liberty to make their own arrangements with one another. The results could not be worse; on the contrary, I feel sure such a move would usher in an era of prosperity. •

No Short Cut. The shortness in the supply of gold in most countries, free trade in Great Britain, tariffs elsewhere, trade union restrictions and the general consequences of the war, are all advanced by the exponents of various schools of thought as contributing causes to the present sorry state of affairs, but I think the i:3iiiiiiiiiiiiHii!iiiiiii!iniiiiiiii!iiinniiiiiiunn!iii!iiii!iiuiiiiiiiimi!»:«

following extract from an article which recently appeared in the "London Times" has much to recommend it: '"The hoarding of the precious metal in Washington and Paris is not in itself the cause of the depression. It is merely a symptom. . . . No general revival can be expected until fundamental obstacles to international trade are removed. What is really needed is not general inflation, but the demobilisation of' excessive tariffs and the scaling down of war.debts to a reasonable level, and, above all, the abandonment of the attempt on the part of producers to circumvent ih.e inevitable laws of supply and demand. (Further.) There is no short cut to world prosperity by the path of monetary manipulation."

However nrucli it may be deplored in some quarters, and be regarded as inhumanitarian, that -wages should be subject to the law of supply and demand, in the long run there is no escaping that law and its inevitable consequences. Wages in the past have .often risen in response to this law, and it is only logical that they should fall- _ High wages do not make prosperity; instead prosperity make 3 high wages. The buyer determines the price.

State Enterprises. It is a fundamental mistake for the State to engage in business enterprises, especially when the position is aggravated by its doing so on other than a competitive basis. To quote a wellknown English writer on economics:— "Government that in theory represents a union of effort and a saving of force sprawls like an octopus over the land. It has become like a dead weight upon us, and wherever it touches industry it cripples it. It runs railways and makes a deficit; it builds ships and loses money on them; it operates the ships and loses more money; it piles up taxes to fill the vacuum and when it has killed employment opens a bureau of unemployment and issues a report on the depression of industry. Now, the only way to restore prosperity is to give back again to the individual the opportunity to make money, to make lots of it, and when he has got it, to keep it. President Hoover recently said: T am firmly opposed to the Government entering any. business, the purpose of which is to enter into competition with our citizens. It is the negation of the ideals on which our civilisation is based.'"

Surely tlie proper function of a Government is to protect life, health and property, punish, crime, care for the helpless and remove"' all hindrances to the freedom of its citizens in trading, the encouragement of labour and the investment of capital Not till this is brought about do I see any hope of the handieapis under which both Labour and Capital suffer being removed. As I mentioned a year ago, I consider free trade -within the Empire, with a tariff against foreign goods, would prove an advantage- to New Zealand primary producers, but beyond that point I prefer not to go, as it is a highly-debatable subject, and what, the ultimate effect on Great Britain and her Dominions would be is largely a matter for conjecture.

Reducing Overhead Costs. A time of trial such as we are now experiencing has at any rate one good effect, and that is, it has compelled people to explore every avenue with a view to reducing overhead costs, and thia company has been no exception. We have reduced expenses some £10,000, and other schemes are in course of preparation, which I am hopeful will effect further savings without loss of efficiency. Many of the savings which have been brought about are too recent in origin to affect more than partially the accounts for the year under review, but next year their full force will be reflected.

Necessity is the mother, not only of invention, but of economy, and success may be confidently expected by hard work out of economy. To run this business so that it will show a profit is an object we are making every effort to attain, and if the thoughtful consideration by your board of all matters affecting the company's welfare, the exercise of prudent judgment based on wide experience by the general manager and the heads of branches and departments, and the loyal co-operation of the staff generally, bring about the consummation they deserve, this will be accomplished.

The best efforts of those working for the' success of the company are, however, foredoomed to failure if the shareholders do not also do their utmost to help. I have much pleasure in acknowledging the loyalty of the great majority of our shareholders to the company, and only ask that their support —which after all is only an expression of common sense —may be intensified if possible during the current year, by their doing 100 per cent of their business through their own concern and by inducing others to do the same.

Directors Congratulated. t In seconding the adoption of the report and balance-sheet, Dr. F. D. Pinfold congratulated the chairman on his very able address. Nobody would deny that very difficult times had been experienced by trading concerns during the past fewyears, and, subject to a few minor criticisms which he would make, he offered the directors hearty congratulations upon the position. As one of the shareholders he regretted that there would be no dividend this year, but he thought they need shed very few tears when they considered the security of their capital. (Applause.) Comparison with eight other similar trading concerns in New Zealand was to the distinct advantage of this company. The percentage of liabilities to assets of the Farmers' Auctioneering Company was 16 per cent. This was a matter for great congratulation. The position of none of the eight other companies he had mentioned could anywhere approach the satisfactory position of their company. With paid-up capital amounting to half a million sterling it was a great wonder to the speaker that there had not been grave capital losses instead of a profit of over £13,000.

Burden of Taxation, Shareholders, Dr. Pinfold said, had the right to expect the directors to investigate every avenue of expenditure, with a view* to economies. He noted with pleasure that wages and salaries laad been reduced by 10 per cent, and that the directors had voluntarily cut their honorariums by 15 per cent. He noticed that of the assets, £315,567 represented sundry debtors. This was a large sum. If it represented judicial advances to the company's farmer clients the position would be 0.K., but if the company had been giving unlimited credit there" was cause for some concern. The speaker mentioned that in 15 years the companv had paid no less a sum than £162,000 ir taxation. To him it seemed an absurd position that a farmers' company, working on co-operative lines in the interests of farmers, should have to pay out thh enormous sum in taxes. While such £ system of taxation existed he could se< no prosperity for any co-operative trad ing company; it was an octopus Strang gling legitimate industry.

Reply by Secretary. Replying to Dr. Pinfold's query regarding the amount due by sundry debtors, Mr. "A C. Bushell (secretary) said the amount represented an aggregation of thousands of accounts _ spread over the wide territory in which _the company operated. The amount mainly was due hy the farming community, fco£ of necessity provision had been made for bad or doubtful debts. Prudence had been exercised without credit being restricted, and all farmers had been able to obtain their requirements so long as they were able to meet their obligations. Mr. Blanchard criticised the item "expenses" in the balance-sheet, and considered this should be shown v in greater detail. He expressed the opinion that the auditors should make some valuation of the securities.

Exemplary Methods. Hr. P. C. Hay congratulated the directors on their achievement. The company was in a more liquid position than any other concern of a similar nature in the country. If other companies had operated on the same lines as their company during the past few years, New Zealand would, he believed, be in. a unique position, in the world to-day. (Applause.) He had not the slightest doubt that the company had done better this year than the figures showed. If the directors had not placed aside certain sums for contingency they would not have been doing their duty to shareholders.

Referring to the rise in butter prices at Home, the chairman said the position could hardly be expected to reflect advantageously in New Zealand, yet. There were fewer men working for the company than this time last year, and wages generally had been reduced. Regarding the saleyards, as mentioned by Mr. Rlanchard, consolidation had taken place in Whakatane, Ohaupo, and other centres. Balance-sheet Adopted.

The report and balance-sheet were adopted. It was decided that the auditors' remuneration be £500 per annum, or such lesser amount as tlie directors might think fit. Mr. D. Hay was reappointed shareholders 1 scrutineer. Mr. A. E. Manning, in moving a hearty vote of thanks to the staff, said their employees were not only loyal but efficient, and received no very great remuneration. He had, since becoming a director, com- in touch with various departments, and had been highly gratifisd at the splendid co-operation which was in evidence. The motion was carried by acclamation. Messrs. E. M. EdTrins and H. J. Gill, the two retiring directors, were reelected • unopposed, and Messrs. C W. Armstrong and B. P. Hazard were reappointed auditors.