The New Zealand Refrigerating Co. Ltd. Review Of Operations

Press, Volume CII, Issue 30076, 9 March 1963, Page 17

The New Zealand Refrigerating Co. Ltd. Review Of Operations

, Ayhe seventy-fifth annual general meeting of stockholders held on February 21, 1963, in the new Head Office Building of the Company, 159 Hereford street, Christchurch, the chairman o directors, Mr W. H. Nicholls, reported as follows: Before commencing the formal business of the day there ar jj tWO J ma i tte S s "hich I wish to refer. The first is the very sudden death of our late chairman, Mr C. P. Agar. He collapsed on January 18 just shortly after signing the accounts now under review, and passed away three days later

“Mr Agar joined the Board on December 15, 1832, was appointed ViceChairman in 1936, and on the death of Mr W. H. E. Flint he was appointed Chairman on February 19, 1958. There is no need for me to tell you of the unique position Mr Agar held in practically all phases of primary industry, both in production and in marketing, during a long and active career. We shall greatly miss his counsel and his intimate knowledge of men and affairs. I will ask you to stand in silence for a minute as a mark of respect to his memory. “The second matter concerns this new Head Office building in which we are holding this 75th Annual Meeting of Stockholders. "It is with great pleasure that we welcome you to our new home on the old site. For over three years we have occupied temporary premises under rather difficult conditions and although we hope that our efficiency has not been impaired, we have suffered many inconveniences. You will agree I am sure that this new building. which has been carefully planned along modern lines and will provide for expansion, is a fitting headquarters for a company of our standing. At a later stage this afternoon you will have the opportunity to inspect the whole building and to have the layout explained to you. It is proposed that our Staff will take up occupation as from the morning of Monday, February 25. It has been a long wait but the inconvenience suffered' by the Staff will be fully compensated by the conditions for the future and by working in a new building of gracious proportions with excellent natural light on the north, west and south sides.

"The decision made nearly four years ago to rebuild because of the prohibitive cost of remodelling, was I am sure you will agree a wise one. To renovate, in spite of cost, would still have left us with a building which would not conform to modern standards as regards earthquake, fire and sanitation, nor would we have had any room for expansion.

THE ANNUAL ACCOUNTS “The results of our operations for the year ended October 31, 1962, again contrast most vividly with those of the previous year, and reflect the outturn of what proved to be a period of satisfactory trading and processing. It will be of interest to you to know that, from the trading angle, not only meat, but all by-products except Tallow met firm to rising markets.

"The Consolidated Accounts to which I am now going to refer, because they show the overall position of the Parent Company and its subsidiaries, show a profit, after providing for taxation and contingencies. but before charging depreciation and Head Office Expenses, of £1,067,568. This is an improvement on last year of £739.339. The nett balance in this section after providing for depreciation and Head Offic'e Expenses is a profit of £679.531 as compared with a small Group Profit of £30,913 in the previous year’s accounts.

“Your Directors recommend that transfers be made as set out in the second section of the Profit and Loss Account. These are (a) Dividend of 8 per cent on Paidup Capital absorbing £160.000; •b> Transfer to Market Fluctuations Reserve of £250.000 (bearing in mind that £200.000 was withdrawn from the Reserve last year and that the Company’s market risk increases with increased turnover); (c) Transfer of £200.000 to Building Reserve. This transfer is in the opinion of your Board considered necessary in the light of the Capital expenditure on work in progress to which we are committed, and also in view of the substantial projected capital development at Works planned for the next few years.

“If your Board's recommendations are approved, this would leave an amount of £428,425, to be carried forward in the Consolidated Accounts as compared with £361.524 brought forward from last year. The Directors' Report deals of course with the profits in the Parent company's accounts, and the figures quoted above include also the profits retained in the hands of our overseas subsidiaries.

“Referring to the Balance Sheet. Authorised and Paidup Capital remains unchanged at £2.000.000 in £1 stock units. After making the transfers recommended above. Revenue and Capital Reserves total £2.570.195. making total stockholders’ funds £4.570.195. an increase on last year of £519531.

“The Balance Sheet of the Parent Company shows that the amount due to Subsidiary Companies in London stands at £190.785 and is an increase of £51.436 on last year’s figure due to the taking of additional advances on consignments This gives the Parent Company fuller use of Jhe Group’s carfi resources The Group Accounts show there is little change in the total of Sundry Creditors and Provisions in the two years "The nett book value of Land. Buildings and Plant over the vear has increased by £306462 to a total Of £3.537.557. It will be noted that the accounts have provided for Depreciation m

excess of the rates allowed by the Inland Revenue Department, but in the opinion of the Directors • the amount written off is considered adequate but not excessive. This follows the policy of the previous two years. Commitments for Capital Expenditure in progress at Balance Date total £212.709. “The total of Investments remains substantially unchanged. Last year stockholders were advised that some or all of the Government Stock would be liquidated as and when opportunity offered. Since the boc»;s were closed a further £30,000 of this stock has matured or has been sold. “Among the Current Assets Trade Debtors have increased £63,579 to £627,443. This increase is however not significant in the volume of our turnover. Movements in other current assets are marginal and no other items on the Balance Sheet appear to call for specific comment. “The excellent results for the year have greatly improved our liquidity. Stockholders will readily appreciate the need to maintain a sound liquid position and the considerable improvement here in the year under review should give satisfaction. An analysis of the Consolidated Accounts shows an excess of current assets over current liabilities of £706,658 as compared with the surplus in the 1961 accounts of £500,589. so that there has been an improvement here of just over £200,000.

KILLINGS: “At our five plants the 1962 season has seen increases in turnover in almost every category. Compared with 1961 the Lamb kill increased by 7.2 per cent. Ewes by 14.6 per cent., while Wethers and Hoggets decreased 18.0 per cent. In total, this is an increase in Lamb and Mutton kill of 7.6 per cent. On a total tonnage basis the increase is not so favourable due to the lighter averI age weights. These lighter weights have an adverse effect on our processing earnings in that by-product yields are inevitably lower. "The season will long be remembered by the industry for the problems presented by the prolonged drought in almost all areas. This brought about a heavy demand for early killings, and resulted in lambs being drafted at unusually light weights. By the end of December, 1961, the Dominion export lamb kill was 7.629 millions compared with 5.786 millions at the same date a year earlier. Furthermore, average carcase weights at the same time were 2.131 b per head lower than the previous year. Conditions improved as the season progressed making the average decrease in weight for the year 1.711 b per carcase.

“As with the lambs, average carcase weights of wethers were down 1.961 b, and of ewes 2.501 b per head. “During the year we processed a considerable number of stock for the Primary Producers Co-operative Society. Our relations with this important producer body have been most cordial and I believe they have been happy with the service given them by our. Company. “With increased killing facilities at some of our plants and with new outlets for Beef our Cattle kill showed an increase of 46.7 per cent, on 1961. with the major portion of this increase in the prime beef section.

"The Bobby Calf kill remains relatively small when compared with that of Works operating in major dairying districts, but even here an increase of 3.8 per cent, is recorded. “It is disappointing that none of our plants has yet reached an export . kill of one million sheep and lambs for a season. We are hoping that this position may be rectified in the 1962-63 season. THE UNITED KINGDOM LAMB MARKET: “The 1962 marketing of our Lamb was consistent in its inconsistency in that price levels and sales volume failed to follow the pattern of the previous two years, and also varied so considerably from the usual market forecasts With our main markets so far removed in both point of time and distance and with so many outside influences affecting those markets, stockholders will know that meat exporters encounter many hazards in their trading. The first sales of the 1962 new season's lambs were made at prices 2d or 3d per lb below realisations of a year earlier and no less than 5d per lb below those of 1960 From early January to the end of April prices eased Id per lb, then came a spectacular and unexpected increase during May and June of 6d per lb. accompanied by a very satisfactory volume of lamb moving into consumption. In July, August and September we saw a fall in realisations of 2d per lb, followed by the usual seasonal decline through O and November of 2d to id per lb At this time over-all stocks were not high and the lower volume of sales did not cause undue concern, nor very materially affect our earnings. “There is no doubt but that the main factor to influence the market was the absence of serious competi-

tion from Home-killed stock in the crucial months of May, June and July. The United Kingdom had suffered a severe winter in the main producing areas, followed by a cold wet spring.

“The main slaughterings in England and Scotland were thereby delayed many weeks and this enabled New Zealand lambs to fill the gap at satisfactory prices. Even more important was the fact that tihe heavier volume of early shipments was able to be cleared. This was a decided relief to New Zealand exporters as statistics had shown that an increase in the United Kingdom kill was to be expected. It would appear that the increase was not as great as at first forecast, and that a greater number of lambs would be carried through to early 1963. You will appreciate that these could have an effect on lamb prices in the first quarter of 1963. Nevertheless, there again an outside influence affects our marketing. We have all read of the atrocious climatic conditions prevailing in the United Kingdom during January and early February, 1963. This certainly must have some effect on supplies of domestic stock and consequently on the general price level of meat for this current year.

“Another outside influence Which showed its effect on the meat market generally in the United Kingdom was the closing down through labour troubles of many of the Argentine Beef plants. This cut off supplies of South American chilled beef to the United Kingdom and while frozen beef was to some extent substituted for chilled, our lamb market was strengthened. Some of the problems in Argentina have now been resolved, and it is expected that increased quantities of chilled beef will arrive in the United Kingdom particularly in the first quarter of 1963. It is also interesting to note the increasing volume of beef from Yugoslavia now being marketed in the United Kingdom. This beef is particularly lean in quality, and, with the growing aversion to fat, is proving popular. Yugoslavia is now the second largest exporter of beef to the United Kingdom with Argentina still holding first place. It appears that the time has arrived when the producing countries must reassess what the term “quality” means when related to current consumer preference for lean meat.

“On the latest statics available it does seem that the United Kingdom broiler chicken production is levelling off. Margins of profit have been cut to a minimum, and with the ever present threat of disease this business is not now as attractive as formerly. It may be that the growing tendency to pre-pack beef, lamb and mutton in consumer units, has eliminated the “convenience" factor which gave the ovenready chicken such a decided advantage. The fact still remains that in 1961 the average annual consumption of poultry in the United Kingdom was 14.6 lbs per head compared with 5.1 lbs per head pre-war. We cannot at our peril be complacent.

MEAT MARKETS OUTSIDE UNTED KINGDOM

"The rapid development of markets for New Zealand meat in countries other than the United Kingdom has continued throughout 1962. It had earlier been thought in some quarters that exporters were progressing satisfactorily when 27 per cent, to 30 per cent, of our total meat exports went to such other destinations. For 1962 meat year, a percentage of 34 per cent, has been achieved in .servicing over 30 different countries. The more important of these were in round figures United States 89,000 tons, Japan 19.000 tons, Russia 14,000 tons and Canada 9000 tons. This, we consider, gives a complete answer to those armchair critics who accuse the meat exporters of being luke-warm in their approach to finding and servicing new markets. Of a total of 162,000 tons sold to outside markets, however, only 11,800 tons comprised lamb. Every effort is being made by exporters, the N.Z. Meat Producers' Board and our Trade Commissioners to interest new markets in our lamb, but progress is slow, and this for several reasons. Firstly, many countries are. by tradition, not lamb eaters; secondly, there is severe competition from other foodstuffs: thirdly the conditions of entry mto some countries, e g.. Germany, cannot as yet be fully complied with by processors in New Zealand, and fourthly there is the problem of the under - developed countries having the necessary exchange to pay for imports. As standards of living rise, there should be great opportunity for trade development, in particular as the industry moves more into the packaged cut meat field. This is undoubtedly expensive in the provision of plant and equipment, labour and packaging materials and much research is necessary if costs are to be held at economic levels. “The best cuts of our meat are relatively easy to sell—the true test of salesmanship is to find markets for the less desirable portions. For these, one’s thoughts turn to the possibility of development in East Asian countries and in Africa. Here again one meets the problems of political and racial prejudices, balance of trade, availability

of shipping for small quantities, and the lack of refrigerated storage at destination. These difficulties are not insuperable but there is no easy solution. In the matter of balance of trade it does appear inevitable that we in New Zealand must be prepared to open our ports to • greater volume of imports from these new countries if we are to expect them to take a greater proportion of our own increasing primary production.

POLITICAL CONSIDERATIONS AFFECTING MEAT

“During the year there has ' been ‘ a considerable ‘ amount of discussion in Government, in Meat Producers' Board and in Farming and Frozen Meat Industry circles on the vital problem of the marketing of our export meat. This has culminated in the passing of legislation which gives the N.Z. Meat Producers’ Board, with the consent of the Minister of Finance, power to subscribe for shares in any Company selling, storing or transporting New Zealand meat, to advance money to such a company and to guarantee any such Company. Prior to the passing of this new legislation these trading powers of the Meat Producers’ Board were confined to under - developed markets. Those of us engaged for so many years in a private enterprise system of marketing meat are naturally a little apprehensive as to the manner in which these new powers will be used. It is gratifying to know that the Government has given certain assurances in this respect. ■ “We as a wholly owned New Zealand Company whose policy is determined in New Zealand must, and do, have the national interests at heart. We feel that the producer wants our help and experience in marketing ibis produce throughout the whole year. We cannot ourselves always sell just at what appears to be the most propitious moment—we must meet the market day by day and week by week throughout the year according to its requirements. We cannot be in the market one week and out the next.

“We do recognise moreover that oversees interests, particularly those domiciled in the United Kingdom, have played a very significant part in the development of the meat export industry of this country, and without their Capital and their outlets it is doubtful whether the spectacular expansion in New Zealand over the years could have been achieved. In terms of export lambs alone, the kill in 1953-54 was 12.6 millions, increasing to 18.3 millions in 1960-61, and to 19.4 millions in 1961-62. This increase in turnover together with changing methods has, in the seven years to 1961, involved a capital expenditure on land, buildings and plant in the industry of over £2om. Of this the Overseas interests have undoubtedly contributed their share. “For the last four years, leaders of the primary industries of New Zealand have been giving thought to the growing implications of the European Common Market and its possible effect on the economy of our country. We live in a period of radical change in tl)e patterns of world trade, a significant feature of which has been the growth rate of rapidly expanding industrial countries which has not been matched by a similar growth in primary producing countries. We must all be concerned that this situation should be adjusted. To be effective the adjustment would need to be broadly based with a better economic climate and be international in character. Thus it seems that our destiny cannot be determined by narrow or isolationist principles, but rather by seeking our place in the general pattern of international trade. We cannot alone shape our future, and to a great extent this will be resolved by the decisions taken in countries, to whom we export our produce. It is too early yet to assess the implications of the breakdown in negotiations for England’s entry into the Common Market. It would be correct to say that our major concern is the growth of homekilled meat in the United Kingdom. This, assisted by large subsidies, has grown tremendously since the end of the war in 1945. “In the meantime I am sure that stockholders will also be aware that primary producing areas are vulnerable, in that scientific and technological development have produced so many substitutes for Nature’s example, leather, wool and rubber substitutes are developed to a point where they are difficult to distinguish from the natural materials. Margarine so often replaces butter, artificial casings in place of natural, plastics provide an alternative for many metals. Whilst we welcome and strive for higher prices for our productions we cannot overlook the fact that too high a price for a natural material inevitably leads to an intensive search for an artificial alternative. When we consider these things we come to the conclusion that, in the short term, we must view our future with caution. In the long term perhaps, we may indulge in a little more optimism for the statisticians tell us that the day will come when the problem of feeding an exploding world population growth will be a major world problem. With the blessing of a kind climate and a fertile soil New Zealand should be capable of taking an even more important place as a leading food producer. LABOUR RELATIONS “Whilst we have had one or two minor stoppages at our Freezing Works, operations in the present season have proceeded relatively smoothly. The recently nego-

tiated Freezing Workers' Award contains some new provisions for the settlement of disputes, and it is hoped that the new formula will be used to obviate direct action tactics. Such direct action in the past usually resulted in loss to aM concerned, the worker, the employer, the producer and the Dominion. The supply of labour for our factories has been adequate to cope with the peak killings. WORKS’ IMPROVEMENT AND EXPANSION: “Last year we gave stockholders a detailed review of developments at each of our five plants, but this year I will confine my remarks to a general statement that the rate of expansion and improvement continues. The policy of your Directors is to maintain our factories at the peak of efficiency and to provide the facilities for new techniques in production and for an expanded production. The magnitude of the task will be appreciated when it is realised that at the five plants in the past year capital expenditure on buildings and plant exceeded £425.000. This total does not include expenditure on normal repairs and maintenance which also runs at a very high and costly level. In the same period capital expenditure on the new Head Office Building was £143,000. Our plans for future capital works involves expenditure running into very substantial figures, but these- must be faced (as indeed they are being faced by 'all large scale industry) in order to maintain our relative position in this vitally important industry.

N.Z. REFRIGERATING CO. (London) LTD.: "Our London Office, managed by Mr C. S. Couper, continues to carry out its function of conducting our business in the United Kingdom and on the Continent in all commodities except Meat Sales in Britain, which are of course channelled through Towers and Co., Ltd. Close liaison is maintained with H. W. M. Duerkop our agent in Hamburg, Van Dantzig in Rotterdam, and Dr. Restani in Milan. Through these agents Continental sales are negotiated and we are kept closely in touch with the requirements of those markets. Whether or not Britain ultimately joins in the European Common Market, these Continental agencies are likely to be of increasing importance to us in the future.

G. B. FIELD and CO., LTD.: "This organisation is our United Kingdom Casings subsidiary with extensive storage and selecting facilities at Bermondsey. With a strong demand for casings in the United Kingdom and on the Continent of Europe, G. B. Field and Co., Ltd, have had another successful year. The development of the premises to provide cool storage facilities for our consignments is proving its worth as we are no longer entirely dependent upon public cold stores. There is ample space to allow for development of packaged casings, which appears to be the future trend for presentation of this product to the consumer. “During the year Mr J. P. D. Rafferty, Manager of G. B. Field and Co., Ltd., has made visits to most European Markets and has established a number of additional outlets for our production. He also visited the United States and Canada where, in association with our New York Casings Agent. Mr S. K. Adams, a survey of those markets was made. Particular attention was paid to new forms of presentation which are calculated to keep natural casings fully competitive with the artificial product.. TOWERS and CO, LTD. “With our partners, The Southland Frozen Meat Co, Ltd, and the Gear Meat Co, Ltd, we continue to be well served on the distribution side in the United Kingdom by Towers and Co, Ltd. During the year the large cool store mentioned at our last Annual Meeting was completed at Canterbury. This is proving a valuable addition to our distribution system, particularly in SouthEast England. At Liverpool a start has been made on another large to service the main North-Western areas. With more than 60 depots and Distribution points in- the United Kingdom, Towers can fairly claim to provide the partners, and those others who entrust them with their meat shipments a fully representative service. We like to emphasise that the selling and distribution services of Towers are available to any New Zealand shippers of meat In particular does this apply to the Owners’ Account shipper, and we have welcomed the many farmers who have elected to follow our Nominated Vessel system of marketing. In the 1962 season many of those who elected to carry the market risk themselves, received very satisfactory returns which amply repaid them for the risk taken. This of course is not always the case. During the financial year just completed Mr W. Melville Pooley, Managing Director of Towers and Co, Ltd, London, made a visit to this country and met our partners in that Company. His discussions with the directors of Towers and Co. Ltd, and with leading figures in the New Zealand meat industry proved of very great value. APPRECIATIONS: “On your behalf I take pleasure in expressing appreciation of the services throughout the year of the members of the Wanganui Advisory Committee x under the Chairmanship of Mr W. F. Alexander, and to the members of the Marlborough Producers’ Freezing Committee now led by Mr J. R. Cresswell. We also express our sincere thanks to Mr J. B. Barnett, who for so many years was a member of the j

Producers' Freezing Committee and latterly its Chairman in that province. “To my co-directors I express my personal appreciation of the compliment they have paid me in electing me their chairman. I know that I will receive their support and co-operation in solving ■the many problems that lie ahead. “We must also express our appreciation to those thousands of producers who processed their stock through our organisation. We operate in a very highly competitive industry and our aim is always to provide a. service of the highest standard.

“In conclusion I record the board’s appreciation of the services of our executives, managements, agents and staff both in New Zealand and overseas. Especially I would mention the service of Sir Henry Turner in London where he is chairman of our two subsidiary companies and of Towers and Company, Ltd. He has been associated with our company both in the United Kingdom and in New Zealand for over 40 years. The benefit of his long experience, particularly in the development and expansion of the Towers organisation in post-war years, has been invaluable. Finally I would say that although we have shown financial results which must be regarded with satisfaction, this position has not been achieved without long hours of hard work and serious application to the multitude of problems which are associated with the industry. “I now formally move the adoption of the directors’ report and balance sheet for the year ended October 31. 1962, and after the motion has been seconded by the vice-chairman, Mr Peate, the accounts and report will be open for discussion.” Mr C. S. Peate, Vice Chairman, in seconding the motion stated:— “Mr Chairman. Before I second your motion for the adoption of the Directors’ Report and Balance Sheet I wish to congratulate you on a very comprehensive survey of the operations of the Company. “The Chairman has made reference to the liquid position as shown by the Accounts at October 31, 1962, and I would stress the fact that this aspect of the Company’s financial position is always to the fore in the minds of your Directors. We. and indeed most other expanding industries, are faced with the problem of further Capital expenditure to provide for increased production, altered ie :h--nicues of processing and the necessity to meet the re? quirements of our many new and chang ng markets. On the other hand we must conserve our liquid resources to provide finance for our normal trading activities without leaning too heavily upon the banking system. Somewhere between these two requirements we must retain a point of balance, but it is not a simple matter when one meets large fluctuations in market realisations. "Mention has been made of the United Kingdom domestic kill and its expansion in recent years. According to a review of statistics the average sheep population in the United Kingdom in the years 1951 to 1955 was 16.43 million, in 1960 19.39 million, and in 1961 it rose to 20.03 million. This gives a percentage increase 1961 over the 1951-55 average of 21.9 per cent. In cattle numbers for the same periods the returns show 1951-55 average 10.13 million, 1960 11.48 million, 1961 11.70 million, giving an increase of 15.5 per cent. This • substantial growth rate is, in a large measure, due to the very generous and costly subsidy system applied to United Kingdom agriculture. The British farmer is therefore one of our major and growing competitors in fulfilling the United Kingdom meat requirements. Any alteration by way of reduction in subsidies would undoubtedly benefit your Company and at the same time reduce the taxation burden carried by the British taxpayer. This is, however, a matter over which we have no control, but is one that would certainly have a marked effect on the economy of the Dominion. »

“Despite market fluctuations, financial problems, etc., our Company is, I am sure you will agree, in a very strong position, thanks to sound and prudent administration, and I now take pleasure in formally seconding the motion for the adoption of the Directors’ Report and Balance Sheet.”

A stockholder, iClr L. W. Spencer, expressed his pleasure and interest in the Report, and congratulated the Directors on the success of the season and their foresight in erecting such a splendid new building —an asset to the Company and to the City of Christchurch. He stressed the vulnerability of tiie industry in that it carried the market risk for three to six months. He considered the dividend very satisfactory. The chairman then put the motion for the adoption of the Directors’ Report and Balance Sheet. This was carried unanimously. There being no other nominations the retiring Directors, Messrs C. S. Peate and A. H. Fitts, were re-elected.

AUDITORS: Messrs J. W. K Lawrence and Co., continue in office, their fees remaining unchanged.

STOCKHOLDERS’ THANKS: On behalf of stockholders. Mr H. T. Francis thanked the Directors, Management and Staff for their services during the year and for the excellent results achieved. His motion was carried by acclamation. Mr W. H. Nicholls replied on behalf cf

the Directors, and the General Manager, Mr W. M. Cleland. on behalf of Management and Staff both in New Zealand and Overseas. At the close of the Meeting stockholders made an inspection of the building and had the lay-out explained. (Extended report published by arrangement.)