COMPANY REPORT AUSTRALIAN CONSOLIDATED INDUSTRIES, LTD.

Press, Volume XCVII, Issue 28701, 26 September 1958, Page 12

COMPANY REPORT AUSTRALIAN CONSOLIDATED INDUSTRIES, LTD.

Chairman’s Address

Address of Chairman of Directors, Mr J. A. Forrest, at the 36th Annual Meeting of Shareholders, held at the registered office of the company, 429-434 Spencer Street, Melbourne, on Wednesday, September 17, 1958.

Ladies and Gentlemen, Directorate During the year your t directors decided to appoint two additional directors to the board. Mr G. Gordon Russell, of Sydney, and Mr D. H. Sargood, of. Melbourne, accepted invitations to join the board, and we welcome them here today. Both of these gentlemen have had wide business experience, and they are of great assistance to the board in its deliberations. Mr Haile’s Overseas Visits Mr G. Haile—one of the company’s assistant general managers —has spent several months in the United Kingdom, Europe and America, where he has completed important negotiations with overseas companies, which will be of great benefit to the A.C.I. organisation. Some details of these matters will be mentioned when I come later in my remarks, to the affairs of the subsidiary companies concerned. In keeping with our policy of maintaining close contact with developments in other countries, several other executive officers have also travelled overseas during recent months. Form of Balance-sheet Doubtless, shareholders will have noticed the changed form of presentation of the annual accounts on this occasion. We have always endeavoured to make the formal part of the accounts as simple and as clear as possible, and this year it was decided that we would commence a series of articles td tell shareholders and others interested something of the activities of the A.C.I. group. We have started with a simple story in layman’s language briefly setting out some of the details of the manufacture of glass containers, and we trust that you have found this interesting. If so, this feature will be continued and, year by year, we hope to present various other aspects of the operations of the’group. Review of Accounts It is gratifying to be able to tell you that the turnover for the year of the A.C.I. group in Australia and overseas created a new record, most companies in the group contributing to this result. Sales to outside customers were actually 11 per cent, higher than for the previous year, and the benefit of this substantial increase in turnover is shown in the higher profit disclosed in the accounts in your hands. No changes in selling prices of our major products occurred during the year. The selling prices of most of our standard products have not been raised for over five years—a really notable achievement in face of steadily rising costs. The net profit shown in the accounts for the year was £1,779,000, as compared with £1,522,000 last year. The results for this year are the highest in the history of the company, and reflect credit upon the general manager and his assistants. Before striking the profit for the year, we wrote off £2.101,000 for depreciation, and also provided an amount of £325,000 toward the increased cost of replacement of fixed assets —a total of £2,426,000 as compared with a total charge for these purposes in the previous year of £ 1,916,000 —a difference of £510,000. You will also see that, after transferring £529,000 to general reserves throughout the group, there is a total unappropriated balance of £1,103,000 to be carried forward to next year’s accounts. Shareholders’ funds disclosed by the consolidated balance-sheet now exceed £22 million. Paid-up capital is £9,900,000 and this is supported by reserves and unappropriated profits of £12,900,000. On the assets side of the balance sheet the principal items to which I refer are the two complimentary items of cash and stocks. The value shown for all stocks on hand this year is £2 million less than last year, due, to a substantial extent, to a reduction in the volume of stocks held throughout the group. This, in turn, is the principal reason for the increase of £3 million in our holding of cash at balance date. Last year was a year of consolidation, and capital expenditure on fixed assets was at a lower rate than in recent years. However, various projects are under active development, and the present cash balance will be largely absorbed this financial year. Other movements in the balance sheet are normal in relation to the widespread nature of our activities, and do not call for any particular comment, except that I might mention that the aggregate market value of our listed investments is considerably in excess of book value.

Depreciation and Taxation In my remarks last year I expressed appreciation of the higher allowances about to be granted by the Australian tax authorities for depreciation, and we have taken full advantage of the concession in our accounts. The effect is shown in the figures I quoted a •few moments ago, and we have consequently felt justified in reducing the amount of the supplementary provision for replacements which we have been impelled to make in recent years. I also expressed last year the hope that, in the 1958 Budget, allowances for depreciation of commercial and industrial buildings would be granted. However, this did not occur—apparently, the merit of this allowance is still not recognised by the Australian authorities, although it is so recognised in almost every other country of which we know.

In spjte of the non-allowance of such items for taxation purposes in Australia, we have, of course, made adequate provisions in our accounts for depreciation of all our buildings. As regards the economic position generally, it is agreed that the Government is faced with difficult fiscal problems in the current year, but it is disappointing to see that the 1958 Budget contained little or no incentive for

the industrial expansion necessary to maintain full employment and to absorb the many migrants we are welcoming to our shores. The real burden of taxation on companies and individuals is actually increasing. The nation can continue without incentives for a certain time, but enthusiasm will flag unless some more positive attitude is soon taken up. The position was stated by one of the Australian banks in its review of the Budget in these words:— “Doubts must be felt as to whether the Government has gone far enough to ensure that aggregate demand will keep pace with rising productive capacity. “This might well have been assured had the Budget also provided for reduced taxation, and thereby given, at this rather vital stage, a real and direct stimulus to business effort, and to individual purchasing power. Additionally, some easing of taxes—particularly pay-roll tax, which, being unrelated to net earnings, directly inflates costs—would have helped to improve further productive efficiency. . . . And, of course, in our high cost economy, productivity advances are vital. ...” That is a very clear summary of the position. Staff Superannuation Fund During the last year all the arrangements for liberalisation of retiring pensions to older members of the staff were completed and the financial details settled. A new superannuation fund has been set up, and the first of five annual instalments has been paid to this fund on account of the aggregate contribution required from the company. By arrangement with the Taxation Department the balance of this contribution has been advanced to the new fund as a loan to enable it to commence operating, and the loan will be extinguished by the remaining annual instalments over the next four years. The scheme for liberalisation covered employees due to retire during the period of 10 years, commencing on July 1, 1957. It is realised that the needs of employees who are outside this group have also to be considered, and your board will examine this aspect at'an early date. The ultimate cost of placing superannuation benefits for these staff members on a sound actuarial basis is not known, but will probably be substantial, and we ■ have thought it wise to make a first provision of £50,000 this year toward the eventual cost.

Operations of the Subsidiary Companies As usual, I will briefly survey those features of the operations of the subsidiary companies during the year, which may ’be of interest to shareholders and, at the same time, will mention some of our ideas regarding development. Sales Promotion Activities—An important feature of our activities during the year was the formation of a new subsidiary company— A.C.I. Sales Pty., Ltd—to coordinate the sales promotion and marketing operations for several of our manufacturing companies. A.C.I. Sales Pty., Ltd., will operate throughout Australia, providing an efficient sales force which will give us a more complete coverage of the market than it has been possible to obtain previously. At this stage, the new company is intended primarily as a re-organisation of the sales divisions of the subsidiary companies concerned.

The new company will commence operations in its own name on October 1 next, and will concentrate at first on pressed glassware and Agee pyrexware, Laminex products. Crown lightingware, building materials, Hytest axes and tools, incandescent lamps and our full range of plastics production. We confidently anticipate worthwhile results from this move.

Glass Containers.—Sales of glass containers during the 1958 financial period were approximately the same as in the previous year. During the year canned beer came on the market, but little impact has been felt on the usage of glass containers. The trend will be watched carefully, but it is gratifying to report that there has been a strong general demand for glass containers in recent months.

An interesting development which is steadily widening is the use of permanent ceramic labels for bottles. This treatment is particularly popular for aerated water bottles, but is also extending to other lines. Pressed and Blown Glassware.— Crown Crystal Glass Pty., Ltd., had andther good year with record sales. Sales have been helped by our policy of continually presenting new lines, which have had a ready market acceptance.

We have always produced large quantities of tumblers, and recently purchased in the United States a new machine for the manufacture of this type of ware. This machine is very modern and versatile, and when operating in a few months’ time, will produce an article fully comparable with the tumblers now being imported into Australia. Sheet and Decorative Rolled Glass. —Production and sales of Australian Window Glass Pty., Ltd., were again satisfactory throughout the year, and prospects for the current year appear good. Further development of our plans to establish a second plant in Victoria awaits the outcome of the. inquiry into the position of the industry which will be opened by the Tariff Board next month. Fibre Glass. —During the year. Glass Fibres (Aust.) Pty., Ltd., carried out much developmental work, resulting in increased manufacturing efficiency, and an improved product. We have recently concluded an arrangement with the OwensCorning Fibreglass Corporation of the United States which will give our company access to the manufacturing techniques and proce-

dures of the American company in exchange for a part-interest in Glass Fibres (Aust.) Pty., Ltd. This partnership should prove most beneficial, and will hasten the day when our company will be able to extend its range of products to include many textile lines at present being imported.

The manufacture of insulating materials continues, and the production of chopped strand mat, to which I referred commenced some months ago.

Engineering.—Our engineering companies play an important part in the group’s activities, and their turnover is substantial. Not only is engineering work a vital factor in the success of our manufacturing companies (particularly those in glass), but there is a wide range of products and services for general sale, as described on pages 22 and 23 of the balancesheet this year. Bernard-Smith Pty., Ltd—This company has completed a successful year’s operations, during which its workshops were kept fully occupied. In addition to structural steel work for square-framed city buildings and power stations, the company has, as usual, carried out much shop and field construction work for the oil refineries and for the chemical industry in various parts of Australia and overseas.

The tankage and heat exchanger divisions of the company also had a busy year. Lennox Heavy Transport and Erection Company Pty., Ltd. (in association with Bernard-Smith Pty., Ltd.) carried out much field erection work and, on the transport side, executed some of the heaviest moves of machinery and equipment which have ever been carried by road in Australia. Hytest Axe and Tool Pty M Ltd. —Our Hytest axes which are marketed in four ranges, are the largest selling brand on the Australian market. Additional plant is being installed to enable production of larger and more varied types of forgings. Plastics.—Reorganisation of our manufacturing facilities in plastics has resulted in increased efficiency and better service to our customers throughout Australia. New developments during the year include the production of cellular polythene wadding for glass container closures, high impact styrene sheet, and flexible P.V.C. tubing for bubble packs of a wide range of products. Metal Stamping and Spinning. —An important auxiliary to the manufacture of glass containers is the production of the necessary closures. We are continually improving and widening the range and types of closures, both metal and plastic, suitable for use with any article packed in glass, and maintain close contact with overseas developments in this trade. You will be interested to know that A.C.I. Metal Stamping and Spinning Pty., Ltd., in addition to closures, is now turning out metal containers for the cosmetic industry. and is also producing a wide range of metal components for lightingware. * Laminex Pty., Ltd.—Notwithstanding stronger competition from other local manufacturers and from imports, sales of Laminex products further increased during last year. New colours and patterns added to the range of decorative Laminex were popular with the trade, and the uses of this versatile product have recently been extended to include vertical application in large commercial buildings and also panelling in ship building and repairing. The new ferry to be launched next year for the Bass Strait service will feature Laminex, as do the new suburban trains being put into service in Melbourne. We have recently marketed a wide range of adhesives, which are the first of the products being made under licence from England. These were well received, and we are encouraged to extend this section of the business.

Corrugated Paper and Cartons. —A.C.I. Fibre Packages Pty., Ltd., has completed another successful year, during which a new record output was achieved. Further experimental work has been carried out by the corrugating industry generally into the use of corrugated cartons for the packing of fresh fruit and tomatoes. Results to date are encouraging, and if finally successful will open up a large new market for cartons and corrugated board.

I might mention that in recent years our three corrugating plants in New Zealand have attained very large outputs, and it has, therefore, been decided that those plants, formerly conducted as departments of our glass manufacturing companies, should logically be part of A.C.I. Fibre Packages Pty. Ltd. The changed setup Came into force on October 1, last, and has already justified itself.

Alsynite.—Alsynite (Aust.) Pty. Ltd., and its subsidiary—Ray-O-Lite (Aust.) Pty., Ltd.—which are owned jointly by this company and by W. J. Manufacturing Company, Ltd,, of Sydney—enjoyed a profitable year, and further additions to production capacity were necessary.

The sales of Alsynite panels and of Ray-O-Lite awnings were good, and the demand is expanding satisfactorily. New designs and profiles are meeting with ready customer acceptance in the industrial, commercial and domestic fields, for purposes such as sidewall and roof lighting, patio covers, carports and the like.

Redono Tiles.—The demand for Redondo wall tiles continues to expand and, in addition to the new kiln which started production last October, further plant has been installed in the last few months. New Zealand All the group’s productive units in New Zealand last year enjoyed increased turnover, and showed satisfactory results. The recent imposition of strict import controls by the New Zealand authorities has caused a rapid increase in demand for our products to replace lines previously imported. The board therefore decided to expand activities in New Zealand and increased manufacturing capacity is being provided as quickly as possible in glass, corrugated cardboard.

plastics and Laminex. It is anticipated that this expansion programme will cost over £A500,000 during the next few months. The difficulties of the New Zealand authorities are appreciated and it is our desire to assist in every way.

Singapore and Bangkok Both our plants showed good results in the past year, but the current year, unfortunately, will almost certainly be less satisfactory, particularly in Singapore. Trade in that area is depressed partly through political uncertainties, but principally because of the almost entire loss of the Indonesian market. There has been considerable industrial unrest in recent months, and the outlodk is not promising. Our Bangkok plant is operating profitably, although below full capacity, but we are hopeful that the present recession there will be short-lived.

Our managements in both places are keen and enthusiastic, doing a good job in the face of difficult conditions, and I feel that these young men deserve special mention.

Prospects for Current Year I am pleased to say that trading figures of the subsidiary companies for the first five months ' of their current financial year, i.e., to August 31, are ahead of the previous year, but it is, of course, too early to forecast the probable : result for the full year. We anticipate good figures, but thert . are many uncertain factors I which could affect the results. The international situation, thedepressed markets for many., primary products (particularly I wool), and the uneven economic position in Australia generally all have an important bearing. However, the improvement in seasonal conditions in the last few weeks will help greatly, and the widely diversified interests which we have developed in recent years should prove a stabilising factor in the company’s affairs. Vote of Thanks to Staff I would like to pay tribute to the faithful and capable work of management and staff which has played such a big part in producing the pleasing results of the past year. We are proud of the happy and friendly relations existing between the company and its employees, and I am sure you would wish me to convey to all your appreciation of what they have done. We owe much to the

untiring labours of Mr A. ESmith, our general manager, and of Messrs G. Haile and H. J. Quinn, the two assistant general managers, but I am sure they would be the first to acknowledge that the success achieved i« based on the willing co-operation and teamwork of staff and employees at all levels throughout the group. The accounts for the year and the details contained in this address all show how accurate was my prophecy last year, when I said that their enthusiasm and vigour augured well for the future. —P.B.A.