C.S.R. Co’s ANNUAL REPORT

Press, Volume CIV, Issue 30811, 24 July 1965, Page 24

C.S.R. Co’s ANNUAL REPORT

Points from Chairman's Addresa to Shareholders In his address to shareholders at the annual meeting held on 21st July, the chairman of The Colonial Sugar Refining Co. Ltd., Mr. J. W. Dunlop reported on the Company’s activities In Australia, New Zealand and Fiji. Some of the points from hit speech are:

RAW

Raw Sugar Production by C.SJL Group: In the 1964 season, the total quantity of nvr tugar made by the group's mills In Australia and Fiji, although a record, was a disappointment; it was well short of estimates made at the start of the season, and even shorter of the desired tonnage. At this time last year, the estimate stood at 768,000 tons, but only 697.000 were made.

For the 1965 season, now under way, present estimates point to a crop that will produce 735,000 tons of raw sugar.

C.S.R.’s Australian Mills The 1964 harvesting and milling season at the company’s mil's in Queensland was prolonged and difficult, due to adverse weather conditions. By contrast, favourable conditions prevailed in New South Wales. Much additional plant has been installed at the company’s mills in both States during the past year to meet the expanded production objectives. Fiji South Pacific Sugar Mills Ltd: Prolonged dry weather during much of the 1964 crushing season held output down to 308,000 tons of raw sugar. Nevertheless, this was the most sugar so far made in one season in Fiji. Early this year, favourable wet season conditions and the consequent rapid growth in the young cane indicated that the 1965 crop would result in 350,000 tons of raw sugar. However, the cane suffered severely from hurricane and flood in February and the latest estimate is that 317,000 tons will be made. The capacities of transport and milling plants and sugar stores have been further increased. During the past two years, 1300 new cane growers have entered the industry and the contract areas of many established farms have been increased. Other Fiji Matters: South Pacific Sugar Mills Ltd. was converted to a public company last year and local people were invited to buy shares. Although shares now owned by local residents represent only about 2% of the issued capital of the company, the response came from all walks of life in Fiji and the outlying islands and more than 1700 Fiji residents are now shareholders in South Pacific Sugar Mills Ltd. and thus part-owners of this large local industry. It is expected that changes made last year in the system of government in Fiji will be further advanced by a constitutional conference to be held in London later in 1965. Political developments, leading to a greater degree of self-government, are becoming of increasing importance to the people of Fiji. We welcome these developments.

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Australia: Sales of sugar products from our five Australian refineries for the year ended 31st March 1965 were 576,000 tons, up 4% on the previous year. New Zealand: New Zealand is one of the few developed countries which buy all their raw sugar at prices based on the world market price. As a consequence, refined sugar is cheap for New Zealand consumers when the world price is low. When the world price surged upwards in 1963 the New Zealand retail price also rose to a peak of Is. 3d. N.Z. per lb. in January 1964 under the stabilization scheme referred to in the last two annual reports. It was reduced from Is. 3d. to 10<L per lb. in December last and to Sd. per lb. in May. New Zealand imports about 120,000 tons of raw sugar a year. Since 1957 the New Zealand Government, by agreement with British Commonwealth sugar producers, has bought from Commonwealth sources 75,000 tons of raw sugar yearly at a price based on the world free market price. This Commonwealth sugar comes mostly from Fiji and Queensland which are nearby r -d stable suppliers. Sales of sugar products bv the New Zealand Sugar Co. Ltd. for the year ended 31st March 1965 were 112,000 tons, a reduction of 5% on the previous year’s sales. High prices and speculation about possible price changes depressed sales. It is hoped that sales will now recover.

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Australian Raw Sugar ProduetiM Australia’s 34 raw sugar mills (seven of them owned by C.SR.) made 1,904,000 tons tn the 1964 season. Although this tonnage was a record, it would have been more but for unfavourable weather For 1965. earlv estimates indicated a raw sugar output of 2.400.000 tons. Unfavourable weather conditions have occurred again, mainlv severe drought in several major sugar producing areas, and have resulted

in a serious set-back to earlier expectations. Present estimates are that output from the 1965 season will not exceed 2,000,000 tons. These set-backs to production in both 1964 and 1965 have been most unfortunate in that they have restricted our ability to take full advantage of the export marketing opportunities which had opened up. Expansion of capacity at Australian raw sugar mills and enlargement of cane farming areas, in accordance with the recommendation of the 1963 Committee of Inquiry, are now well on the way to completion. World Sugar Situation In the past year the world free market price fell steadily from about £Stg.46 per ton c.i.f. U.K. to a low of £Stg.2l in February before staging a mild recovery to about £Stg,26 in March. Since then there has been a further steady decline to £Stg.2O as this report goes to the printer.

This drastic fall has been largely caused by a record 1964 beet sugar crop in Europe and Russia, equivalent to about 24 million tons of raw sugar. This was almost 5 million tons more than in the previous year, and 3 million tons more than the previous record. Extremely good seasonal conditions over most of Europe, and increased acreages in Russia, were the main factors contributing to the increased output. Reports of greatly increased production of cane sugar in Cuba and South America are at present further depressing the market. The latest estimate of the 1965 world sugar crop indicates a total sugar production (cane and beet) of some 63 million tons raw value, about 9 million tons above the previous year. Estimates of total demand vary, but production seems likely to exceed demand by perhaps 6 million tons. World stock should then be equal to about three months consumption, which is not exceptionally high. Extreme fluctuation in the world price of sugar is a well-known phenomenon and is a matter of great concern to both exporters and importers. It is of especial concern to Australia and Fiji. For the 1964 season, 49% of Australian sugar

and 45% of Fijian were sold at prices related to the world free market price. International Sugar Agreement There is a movement towards a new International Sugar Agreement, and this, if it eventuates, is likely to be based on control of exports through quotas. The International Sugar Council met in London on 28th and 29th April this year and resolved to ask the Secretary General of the United Nations to call a conference of member nations towards the end of 1965 to initiate the negotiation of a new agreement. British Commonwealth Sugar Agreement At the annual conference in London at the end of last year, the most far-reaching changes since its inception were introduced into the Commonwealth Sugar Agreement. Three new exporting countries (India, Rhodesia and Swaziland) came into the agreement Negotiated price quotas were increased. Australia’s quota was raised from 330,000 tons to 335,000 tons, and Fiji’s from 132,000 to 140,000 tons. These quotas have now been fixed and are no longer subject to

slight movements in response to changes in U.K. consumption. Fiji and the other “less developed” members of the agreement received an additional £5tg.3.5.0 per ton of negotiated price sugar in recognition of the difficulties caused by the present depressed prices received for their free market sales. United States Market The foreign quota provisions of the U.S. Sugar Act expired at the end of 1964, and new legislation to replace them was not introduced. As an interim measure, the U.S. Secretary of Agriculture has made quota allocations for foreign supplies for 1965 on the basis of export performance in 1963 and 1964. These arrangements have resulted in quotas corresponding to about 165,000 long tons for Australia and 40,000 long tons for Fiji. Japan Japanese buyers have recently contracted to take a record total of 550,000 tons from Australia from the 1965 season. From the 1964 season Japan purchased 477,000 tons.

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There has been more building activity in Australia during the last year than ever before and sales of C.S.R. building materials have risen accordingly. Fibreboard Group: Domestic sales of our Masonite and Timbrock hardboards were greater, and export sales substantially greater, than in the previous year.

C.S.R. Floor Tiles: The vinyl flooring market continues to grow, but competi’ion from within Australia and from imnor’- ’ severe:

Pyneboard: "*v. Ltd. a”d Pyneboard (Gippsland) Pty. Ltd., with factories at Oberon, New South Wales, and Rosedale. Victoria respe''*-'-.-»>v. are now both owned eoua”v by Australian Paner Manufacturers Ltd. and C.S R Sales improved substantially on the previous year and are continuing at a pood rate.

Gypsum Products: New Gyprock factories opened in Brisbane and Adelaide during the year and both are operating successfully. A third new factory is scheduled to operate in Melbourne in the latter part of 1965.

Bradford Insulation (85% C.S.R.): Sales of all 8.1. companies are being well maintained against keen competition. Australian Blue Asbestos Pty. Ltd: Sales of blue asbestos improved during the year as the market became more normal.

INDUSTRIAL

C.S.R. Chemicals Pty. Ltd. (60% C.S.R.): Sales of plastics and industrial chemicals by C.S.R. Chemicals and associated companies, C.S.R.C.-Dow Pty. Ltd. (50% C.S.R. Chemicals) and B. F. Goodrich-C.S.R. Chemicals Pty. Ltd. (40% C.S.R. Chemicals), increased, but are now showing signs of levelling off

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Sales of industrial alcohol, and solid and liquid carbon

dioxide, continued to be satisfactory and were generally higher than last year.

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The company’s ships, “Tambua” and “Rona” continue to operate well in their respective trades

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The R.M.C. group of companies, in which C.S.R. acquired a 50% interest, has continued to operate satisfactorily.

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As announced in the press during May, the Australian equity in this joint operation Number and domicile

with American Metal Climax Inc., has been increased from 45% to 50%. The Australian equity will be held by Pilbara Iron Pty. Ltd., a recently formed subsidiary. A contract for the sale of 100 million tons of iron ore was concluded with eight Japanese steel mills in May. Shipments are to begin in 1969 and will build up to at least 5 million tons a year by 1973. The contract is to be completed in not longer than 22 years. This is a long range project of considerable size. Much planning and engineering work has already been carried out and it is expected that construction will commence late in 1965 or early 1966.

It was announced in the press in March that Swiss Aluminium Ltd. and a group of Australian companies headed by C.S.R. had lodged a joint application with the Commonwealth Minister for Territories for Special Mineral Lease No. 1 at Gove in Arnhem Land in the Northern Territory. The application contained a proposal for the construction of an alumina plant at Gove to produce alumina on a large scale from bauxite mined from the lease. Our application, together with another, is under consideration by the Commonwealth Government.

The Australian group Would have 50% ownership of the operation, the other 50% being held by Swiss Aluminium Limited. C.S.R. is to hold a Majority interest in the Australian group.

As referred to in the Directors’ Report, the reduction in consolidated profit compared with last year was attributable to the operations of raw sugar milling in Australia and Fiji which were adversely affected by low world sugar prices and disannointing production.

Comments on possible trends for the current year are contained in the Directors’ Report which you already have. There are no indications at present of any large recovery in world sugar prices and we expect therefore that the average price to the mills will be lower than for the year under review. Under these ■'onditions profit for the 1966 year is not likely to be as much as in the year just concluded. Decimal currency is expected to come into operation in February next year. Later in the meeting shareholders will be asked to agree to some resolutions which will result in the company’s shares being split into dollar units (two $1 shares in place of each existing £1 share) as soon as the currency is officially converted to the decimal system. There are some consequential alterations to the company’s Articles.

DIRECTORS

The General Manager, Sir James Vernon, was created a Knight Bachelor in January of this year. This honour to Sir Jam»s gave great pleasure to the Directors and to all in the company.

Sir Edward Knox retired from the Board in November. I told you of his forthcoming retirement at the last annual meeting, when Sir Edward also spoke of his regret at the ending of his official connection with the company. Dr. R. W. Harman was appointed to fill the vacancy on the Board. Dr. Hannan, as you know, was formerly General Manager and a Director of the .mpany

The year has been a difficult and testing one for the staff of the company and the Board records its high appreciation of their efforts in furthering the company’s interests in its widespread fields of operation. of C.S.R. Shareholders

Raw Sugar Production by C.S.R. Group Tons Actual Sugar (nearest ’000 tons) Season i N.S.W. Queensland Fiji 147,000 Total 1960 _ 60,000 241.000 448.000 1961 _ 65,000 236,000 143,000 444,000 1962 _ 76.000 274,000 248,000 598,000 1963 _ 73.000 280.000 299,000 652,000 1964 91.000 298,000 308,000 697,000 1965 (estimated) 68,000 350,000 317.000 735,000