THE NEW ZEALAND FARMERS’ CO OPERATIVE ASSOCIATION OF CANTERBURY, LTD.

Press, Volume CVII, Issue 31504, 19 October 1967, Page 20

THE NEW ZEALAND FARMERS’ CO OPERATIVE ASSOCIATION OF CANTERBURY, LTD.

Eighty-sixth Annual General Meeting October 17, 1967 The eighty-sixth Annual General Meeting of Shareholders of The New Zealand Farmers’ Co-operative Association of Canterbury Limited was held today in the Chamber of Commerce Hall, Christchurch, Mr G. Gibson, Chairman of Directors, presided. The Chairman, on moving the adoption of the eighty-sixth Annual Report and Balance Sheet, gave the following Address—

CHAIRMAN’S SPEECH Ladies and Gentlemen, I referred in my opening comments last year to our Director, Mr C. G. Jarman, who has served your Board of Directors faithfully and well for over 50 years. 1 regret to advise you that Mr Jarman, who retires by rotatioti from the Board this year, has decided for health reasons not to offer himself for reelection. I am sure that you would wish to place on record your appreciation and thanks for Mr Jarman’s outstanding record of service to your Board over the last 51 years. Ladies and gentlemen, 1 now submit to you the eightysixth Annual Report and Balance Sheet of the Association, copies of which are in your hands. The Association’s Net Profit for the year ended July 31, 1967, was $229,284 after provision for taxation and all known contingencies. The Consolidated Net Profit of the Association and its Subsidiaries was $229,385 as compared with $306,290 in the previous year—a decrease of $76,905. Dividends paid to the Association by Subsidiary Companies were $2200, the same as in the previous year. In addition one trading subsidiary, the assets of which have been finally realised and which no longer operates, paid a capital dividend of $12,997 to the Association. It seems appropriate to recall to you the statement which I made to this meeting in the course of this annual address 12 months ago.

THE FUTURE I cannot but sound a cautionary note in respect to the ensuing year's trading in view of the weakness of the United Kingdom's financial position at the present time, the stress on international liquidity generally and the likely effects of current financial and other restrictions obtaining within New Zealand. Indeed these effects are already reflected in a downturn of volume of land sales arising from limitations In the availability of mortgage finance, and some degree of uncertainty as to what the future may hold. Concurrently in view of the upward revision of most Awards under which the association works, with a cost of living bonus likely to be superimposed on present salary and wage levels, cost increases under this heading are likely to be substantial In the ensuing year. Given normal seasonal conditions both wool and live stock production may be expected to reflect a substantial increase, but with market uncertainties the net realisation earned from disposals may well not reflect this increase. In view of the cut in import licensing some shortages in supply will develop during the course of the year with, In particular, an accentuation of the difficult position in respect to motor vehicles.”

In the event, in spite of a satisfactory period of trading in the first half of the past financial year the forecast to which I have just referred certainly eventuated in the second half year’s trading, and the likely adverse circumstances then referred to are likely to be accentuated in the months ahead.

Actually the Association's operating expenses increased by. only some 4 per cent which is somewhat more favourable than the position revealed by many recently published Profit and Loss Accounts. Revenue however was severely affected in the second half year's trading by a major fall in commission earnings, a substantial reduction in the number of new vehicle uriits received for sale and a considerable reduction in television sales. I must be realistic and add that prospects, at least for the Immediate future, are not encouraging and all possible positive steps have been taken to restrict our operating costs within the limits of and commensurate with anticipated revenue.

May I refer briefly to the main phases of our activities. Our Retail trade was generally satisfactory with the exception of the major

decline in television sales, although the pattern of the year’s trading was characterised by quite material turn-over increases in the first half year which were almost lost in the second half year.

Commission earnings in the Stock and Station Division, as you would anticipate, declined materially in spite of the fact that the Association handled some 4000 more bales of wool. Land sales declined substantially particularly in the farming sector. Because of further import restrictions the Motor Division received from our principals, considerably fewer new vehicles for disposal and this is a factor over which we have no control. Trading circumstances were such that our used car stock was inevitably at a high level, and steps of a precautionary nature were accordingly taken in view of the general weakness in the economy to ensure that this stock was taken into account at realistic values.

A brighter note may be struck in respect to our export business where further development of our overseas coverage was successfully achieved, and export sales reflected a satisfactory increase resulting in taxation savings in terms of the Export Incentive Schemes.

In the light of the current uncertainty as to the extent of New Zealand’s economic weakness over the next year or so, your board feels that it is prudent to take a cautious view in respect to the development of new projects which have been planned for implementation in more buoyant circumstances. The cost of development, together with the resulting heavy initial depreciation charges, are such that it has accordingly been decided to defer some of the plans which in other circumstances your Board would have been anxious to proceed with. The preservation of liquidity also dictates that we should take a cautious approach to projects involving major capital expenditure until times become more propitious. It is also Important to preserve our financial resources to ensure that we can continue to provide the reasonable requirements of our fanner clients. Pursuit meantime of this policy inevitably dictates that certain valuable properties held by the Association for development projects in the future, will contribute only minimal returns to the Association’s profitability in the meantime.

May I refer briefly to another matter. The question has been raised from time to time over recent years that a half-yearly dividend should be paid and a half-yearly report issued to Shareholders. Our Board has given this proposal very serious consideration but has reached a clear conclusion that the character of this Association’s trading is such that a half-yearly report would be more likely to be misleading rather than of value. A major proportion of the Association's revenue from certain fields of its activities falls in the second half-year, with the result that profitability in the second half-year may vary materially from that of the first halfyear. In fact in the year under review profits earned in the first half-year were ahead of the previous year, and yet by balance date our year’s profitability reflected a substantial reduction.

THE BALANCE SHEET The Balance Sheet totals $10,733,683 —an increase of $343,589. The principal items representing this increase lie in Single Premium Endowment Assurance Policies, the total investment in which increased by $87,769 and in Current Assets which increased by $229,233. On the Liabilities side, mortgages which in the main are subject to repayment over a 20 year term increased by $425,000 and Current Liabilities decreased by $172,004. A new item, Term Deposits $35,376 appears, this representing deposits for periods in excess of 12 months, and the balance lies in the increase of $55,618 in Shareholders Funds which now total $4,692,267. Your Board regards the liquidity ratio of 1.99 to 1 as satisfac-

tory under current circumstances. RECOMMENDATONS After giving careful consideration to all relevant factors, in particular the reduced profit earned in the past year together with the uncertainty as to the immediate future, as against the substantial carry forward of retained profits in our Appropriation Account, in the judgment of your Directors the reduction from 9 per cent to 8 per cent in their dividend recommendation is both prudent and necessary and your Board recommends accordingly. The dividend at the rate of 8 per cent totals $176,000 against last year's payment of $198,000. APPROPRIATION ACCOUNT The position of the Consolidated Profit and Loss Appropriation Account, subject to your approval of the dividend recommendation, will then be as follows: $ Net profit for the year .. 229.385 Less dividend recommended .. 176,000 Surplus for the year .. 53,375 Add: Amount brought forward from last year .. .. 418,963 Unclaimed F’vidends for period .. 1.190 473,538 Less: Transfer of the Capital Dividend to Capital Profits Reserve .. 12.997 Leaving a balance to be carried forward of .. $460,541 BOARD OF DIRECTORS The Directors retiring by rotation this year are Messrs C. G. Jarman, T. A. McKellar and C. S. Peate. As earlier advised Mr Jarman does not seek re-election. Mr McKellar and Mr Peate are eligible and offer themselves for election. CONCLUSION Your Directors do not view the immediate economic climate with any degree of confidence. Of our major overseas exchange earners 92 per cent of our lamb exports are still marketed In the United Kingdom, 86 per cent of our butter and 78 per cent in cheese. The United Kingdom is by no means as yet achieving an economic recovery in strength. We all know how black the present picture remains in respect to our other main export item—wool—the only one which in fact has a world market weak though that may be. I am sorry to be unable to forecast more buoyant conditions of trading but at the moment any other statement would be unrealistic. I would assure shareholders that your Board and the Association’s senior officers are taking all possible steps to' meet the present trading outlook. I extend to my colleagues on the Board of Directors my sincere thanks for their loyalty and constructive assistance throughout the last year. I would also record my thanks and appreciation to our General Manager and staff for their conscientious work throughout the last year, a year which has presented its problems and some abnormal additional loads, particularly the training of the whole staff for conversion to decimal currency—an exercise which I am pleased to say was handled very efficiently.

I now formally move the adoption of the Report and Balance Sheet and invite our Vice-Chairman, Mr T. A. McKellar, to second the Motion following which it will be open for discussion and questions. Mr T. A. McKellar, ViceChairman of Directors, seconded the motion for the adoption of the Report and Balance Sheet which, on being put to the Meeting, was carried. Three Directors retired by rotation —Mr C. G. Jarman, Mr T. A. McKellar and Mr C. S. Peate. Mr T. A. McKellar and Mr C. S. Peate were reelected. Mr C. G. Jarman did not seek re-election. —P.B.A.