FINANCING FARMERS.

Auckland Star, Volume LXX, Issue 201, 26 August 1939, Page 4

FINANCING FARMERS.

DAIRY COMFANY'S ACTIVITItS. GREAT CO-OPERATIVE ENTERPRISE. ASSETS EXCEED £2,800,000. At a time when governments are displaying a marked tendency to take under their control—partial or completely—the primary industries, it is interesting to note the development of a great co-operative enterprise and the methods whereby it has secured and maintained a leading position in the world's markets. The Xe% Zealand Co-operative Dairy Company has just completed its twentieth year. Its record during that period has been one of amazing progress. There have been the usual ups and downs common to all enterprises, but taken over the full period there has been no serious check to its onward march. During the year which has just concluded turnover, due chiefly to climatic and partly to labour problems, was down £128,000, yet the figures still reached the impressive total of £8,800,000. and its position is unchallenged as the world's biggest dairy company.

Balance-sheet figures

An examination of the company's bal-ance-sheets throws an interesting light upon the methods employed in the financing of a large proportion of the farmers in the Auckland province. The following table supplies the chief items from the last three balance-sheets: — LIABILITIES. 1937. 1038. 1039. Paid capital . 1,296,268 1,218.908 1.100 263 Reserves .. . 94,693 100,061 100,480 Due to suppliers .... "50,099 075,000 684,163 Sundry crecli- .. to r s 210,397 242,712 106,328 sundry depositors . . 63,063 70,387 70,000 S u 1> s i diary companion. 10,012 — 1° 368 Banks 160,006 307.35S 593^430 Contingent liabilities at May 31 last were:—l. ncalled capital on investment shares, £59.741. and guarantee to Rural Intermediate Credit Board, £4295. Floating debenture charges issued by the company and held by its bankers as security totalled £385,000. ASSETS. 1937. 103 S. 1039. „ £ & £ Property and plant 922,503 554.436 863,330 S 11 b s i diary coy. shares 202,993 200,903 200,993 Other coy. shares .. . 143,414 143,554 142,727 Sundry debtors . . 223,102 443,057 280,090 S u b s i diary coy. accts. 21.901 138.474 14" 042 Stocks 1,112,100 1,138,809 1,212,492 Supply zoning purchase . 3,200 10,060 S 400 Total assets 2,629,010 2,900,013 2,556,600 The company s output last season totalled nearly C 6.000 tons, and its turnover of nearly £9,000,000 was financed with a capital backing of £1,299.000. The capital is held in £1 shares and is owned entirely by suppliers. The .bulk is invested 111 property and plant. These appear in the latest balance-sheet as £863.000. but it is probable that the whole of the capital is represented in that item alone, for it lias always .been the practice of the company to make liberal provision for depreciation each year, while expenditure necessary to keep properties and plant in first-class condition lias been found out of revenue.

Supplementing the capital of the shareholders who own the concern is credit in form or another totalling over £1,500,000. Assets at last balancing time were valued at £2,856,000, easily the most imposing total of any financial organisa--7 V t ]' C Dominion apart from the banks and leading insurance organisations. No Dividends. There is no question of dividends for shareholders in the main company, as the business is run purely on a co-opera-ti\o basis, and shareholder suppliers get the whole of the receipts, loss expenses and capital requirements each year. There is no profit and loss account, but thepe is a reserve fund, which has been built up from year to year from various sources, including profits from subsidiaries. These reserves, which totalled £100,480 at last balancing, are deemed necessary to provide against such contingencies as sudden market depreciation of stocks against which advances have been made. Glen Afton Collieries. In the progressive development of its co-operative enterprise the directors have deemed it advisable from time to time to extend its activities in order to obtain the most favourable terms for its suppliers in the purchase of various commodities. The hrst important venture in this connection was the formation of Glen Afton Collieries, promoted with the primary object of supplying the factories and individual farmers with cheap fuel. The company secured one of the best mines in the Dominion, and, with a steadily expanding turnover, this has been a profitable enterprise. Sales of c-jal for the year ended Mav 31 amounted to 259,700 tons, and the value of the turnover was £206.638. Lasft, year's net profit was £16,636 after making rebates to suppliers and factories at £17,850. This places the profit and loss account in credit to the amount of £31,007. Fertiliser Business. Another notable extension took place in 1927. when the company embarked in the fertiliser business. The method adopted was to purchase a substantial interest in Challenge Phosphate Company, a holding of £50,000, thus ensuring distribution of fertilisers to its shareholders on co-opera-tive principles. Here again the directors' policy appears to have been completely justified by results. The demand for the company's output has increased to such an extent that at different stages extensions to buildings and plant have had to be made. Practical Assistance. In 1926 another subsidiary, the New Zealand Dairy Finance Company, was formed, with anominal capital of '£75.000 paid up to £25,000, to assist in providing finance for suppliers, and by the end of last financial year over £1,250,000 had been advanced by this company. B«d debts over the 13 years' operations amounted to £2412; a remarkably low figure. The last balance-sheet shows that from this small capital of £25.000 as a backing the company had been able to arrange current advances still outstanding amounting to £157.218. At a later date another financing enterprise, the New Zealand Dairy Farm Mortgage Company, was establislted with a

view to assisting suppliers on favourable mortgage terms. This company iia> a paid capital of £100,000 and its loans on mortgage at last balancing totalled £214,026. All of these activities -were dealt with in the accounts and report issued by tha directors recently. Apart from the consolidated balance-sheet summarised above, there are a profit and loss account for the butter factories, separate balancesheets of each cheese factory, profit and loss accounts of three milk powder and two casein factories, the company's trading department, Glen Afton Collieries, and the New Zealand Dairy Finance Company, and the New Zealand Dairy Farm Mortgage Company. Marketing Methods. In its marketing policy the directors have adhered consistently to the consignment system, and in this way have given practical support to the principle that the Dominion's produce should not be subjected to the machinations of speculators. This principle received emphatic endorsement by the present Government when it assumed control of the export of the Dominion's dairy produce. As far back as 1929 it established a patting factory in London, where butter sent from the Dominion in bulk form was cut into pats and marketed under the wellknown Anchor brand. For national adverI tisiug purposes the value ot this method can scarcely be exaggerated, and other firms having taken it up, the output of Anchor and other "patted" lines has increased enormously. Selling Floor in London. In 1927 a company known as Amalgamated Dairies, Limited, was formed for the purpose of taking over the marketing of the company's products and since that date it has been in control at the selling end with Mr. J. B. Wright, one of the most, notable figures in Tooley Street, as chief London representative. It is a remarkable tribute to the company's widely spread and efficient distributing organisation throughout the United Kingdom that the Marketing Department created by the New Zealand Government had no hesitation in sanctioning a continuation of the services supplied by this company. Empire Scope. An elaboration of the existing marketing system was promoted in 1929, with the establishment of Empire Dairies, a company designed to unite the selling of produce by various supply countries of the British Commonwealth of Nations. Arrangements were made for representation of New Zealand, Australia, Canada and South Africa in the new organisation. Behind the project is the principle consistently proclaimed by Mr. William Goodfellow, the founder of the New Zealand Co-operative Dairy Company, namely, that unity among suppliers is necessary to face on reasonably equal terms the combination that is invariably secured at the buying end. In other words, a group of buying interests, bidding through one agent, "can always get the better of a deal where the sellers are competing one against the other for the same market. Already Empire Dairies, which has offices and an extensive selling floor in Tooley Street, London, as well as branches at Glasgow. Liverpool, Manchester, Bristol, Cardiff, Birmingham, Newcastle-on-Tyne and Nottingham, has secured a big percentage of Australian butter, as well as Canadian, Irish and South African produce. In the multifarious activities of this huge concern, briefly outlined above, sound financial methods, a scrupulous adherence to co-operative principles, a bold policy outlook and efficient administration stand out as the leading features.