Progress By A. B. Cons.

Press, Volume CIV, Issue 30794, 5 July 1965, Page 17

Progress By A. B. Cons.

In spite of hard cotnpetion and rising sugar and other costs, A, B. Consolidated, Christchurch-based biscuit, chocolate, and confectionery manufac- . turer and flourmiller, has achieved sound financial growth since it was formed through the amalgamation of Aulsebrook and Company and Bycrofts in 1961.

Profit has shown a steady increase in each of the four years and now covers ordinary and preference dividend payments 1.6 times against 1.2 times in 1962. Revenue reserve has been built up from nothing to £148,942 and earning rate on average shareholders’ funds has risen from 6.1 per cent in 1962 to 7.35 per cent in the latest year.

Investors may feel that A. B. Consolidated has not been a rewarding investment. Prices of ordinary 5s shares reached a peak of 6s 5d in the first year but it was not

until May of this year that this value was exceeded and since then the price has slipped to 6s. Dividend on ordinary shares has been held at 5 per cent and redemption of the 54 per cent cumulative preference shares is, according to the latest report, not likely within the next few years. Sugar Costs

But in three of the four years, A. B. Consolidated has been plagued by high sugar costs. In 1964 and 1965 the wholesale price of £l2O a ton was nearly double that early in 1963 and the chairman of directors (Mr T. W. Perry) notes in his latest report that the high cost was “a sales and profit restraining influence during the greater portion of the year.” In retrospect, it appears that higher sugar costs were not recovered with higher retail prices, especially with confectionery lines.

When prices were reduced after the sugar price drop, isome lines, notably confectionery, still had a large content of the high-cost sugar. A. B. Consolidated too, operates in a highly competitive market. Although it is the only New Zealand owned public biscuit manufacturer,

A. B. Consolidated faces strong competition from New Zealand manufactured goods operated by overseas interests. The company has a large portion of the chocolate and confectionery market and is one of the three largest flourmillers in New Zealand. It manufacturers Kelloggs' products and Huntly and Palmer lines under a royalty agreement. There are four factories, three in Auckland and one in Christchurch.

Over-all, it appears that A.B. Consolidated’s advancement has been sound and the retention of profits after payment of dividends has in the past been to the longterm benefit of the company. Important Year

This current year will be an important milestone in the short history of A.B. Consolidated. Not only has the bug-bear of high sugar costs been partly removed but a probable merger with an ailing M.C.P. of Dunedin should give a boost to both companies and place a stronger and more efficient unit in a

still strongly competitive market.

It seems highly improbable, in view of the latest accounts of both companies, that a majority of M.C.P. shareholders will ignore A.B. Consolidated’s offer. A merger would give an enlarged A.B. Consolidated lines of a high marketing potential and an association with the powerful English company, Messrs John Mackintosh and Sons.

Amalgamation would streamline distribution of both com-

panies, pool technical and managerial resources and make for buying economies. Future prospects seem good and A.B. Consolidated is still expanding in a well-exploited field. A new venture is exporting biscuits to Australia. Although the company has been exporting for 12 to 18 months, it has just begun air freight ing biscuits to Australia three days a week. First reports are favourable.

Tenders have been let for a 30,000 sq. ft. extension for storage facilities at the Christchurch factory and the company is investigating the possibility of re-siting the central Auckland flourmill at Mount Roskill. Balance Sheets A comparison of results with previous years shows clearly A. B. Consolidated’s financial progress. Although the company has the second largest paid up capital of any New Zealand, food manufacturer, its reserves by no means compare with those of say, J. Wattle and General Foods.

Capital paid up has remained steady at £200,000 in preference shares and £l.sm in ordinary shares but shareholders will be asked to lift authorised ordinary capital to £3m in anticipation of a successful merger with M.C.P. Huntley and Palmer, with 462,666 ordinary shares or 7.7 per cent of ordinary paid up capital, is the only company with a significant holding in A. B. Consolidated. The company’s major outside liability is bank overdraft which rose £75,981 in the latest year to £370,191. Bank overdrafts rose sharply in 1963 when a mortgage advance of £200,000 was paid but directors then used £98,554 from the realisation of outside investment in 1964 to reduce this abnormally high figure and give more liquid funds for trading. Traditionally, stocks have made up a major portion of current assets. In the latest year they are valued at £771,043 out of total current assets of £1,140,706 but this is not considered unusual. Besides revenue reserve, there is a capital reserve of £50,357 from the revaluation of properties in 1963 and an investment reserve of £8973.

Metals (N.Z. Press Assn. —Copyright) LONDON, July 2. Latest London Meta! Exchange prices for spot supplies ire as oliows: —

1965 1964 1963 1962 £ £ £ £ Net Profit . . 138,688 130,737 112,430 104,713 Depreciation .. 81,558 83,266 78.395 73,351 Taxation . . 120,375 122,354 110,563 99,855 Working Capital . . 436,883 441,170 275;788 438,212 Reserves .. 20S.272 156,777 107,053 19,151 Ordinary Dividend 5% 5% 5% 5% Total Ord., Pref., Div. payments 86,000 86,000 86,000 86,000 Retained profits 52,688 44,737 26,430 18.713 Times Divs. covered 1.6 1.5 1.3 1.2 Earning rates: Paid-up capital 8.1 7.7 6.6 6.1 Average shareholders’ funds 7.35 7.1 6.35 6.1 Working capital ratio 1.63:1 1.71:1 1.35:1 1.75:1 Share Prices: High 6/8 5/9 5/6 6/5 Low 5/9 5/0 4/6 4/7 Latest price of 6/0 represents a dividend yield of 4.2%

Buyers se: ers a ton a on £ s d £ s d Copper . . 412 10 0 415 0 0 Tin . 1420 0 0 1422 0 0 Lead 96 10 0 97 0 n Zinc . 106 0 • 106 5 0