Strong expansion by Steel and Tube

Press, Volume CX, Issue 32462, 24 November 1970, Page 18

Strong expansion by Steel and Tube

(Niu> Zealand Freie Association! WELLINGTON, November 23. The Steel and. Tube Company of New Zealand, Ltd, has entered into agreements for the purchase of all the shares in Pearson, Knowles and Ryland Bros (N.Z.), Ltd, Steel Knowles and Ryland Bros (N.Z.), Ltd, and Steel Benders and Suppliers, Ltd.

The assets of Kawerau Industries, Ltd, will be purchased by Robt Stone and Company, Ltd, an associate company of Steel and Tube, the directors say In ’ the annual report for the year to October 1. Pearson Knowles and Rylands. manufacturers of nails and other wire products at Auckland, Steel Benders and Suppliers is based in Palmerston North and Kawerau Industries services the pulp and paper industry. “The total cost to the group will be about $1,400,000, and will be financed by borrowings. Arrangements have been completed to borrow sufficient funds overseas to enable the company to borrow long-term in New Zealand," says the chairman (Mr F. H. Kember) in the report. Sales increased

Mr Kember says that Steel and Tube Company sales at $19,800,000 increased- by over $3.6m over those for the previous year. As already announced group net profit rose from $1,004,182 to $1,302,168, this result being resched after providing $183,943 ($160,780) for depreciation ' and $1,268,762 ($1,000,241) for taxation.

Mr Kember says that the very satisfactory net earnI Ings for the year were the 1 direct result of this substantial increase in th* volume ■ of trading. I "More stable pricing in the < cutting and bending of rein--1 forcing steel prevailed. Those factors enabled the company to absorb steep Increases in costs which still appear to be escalating, and which are beyond the control of management," he says. Working capital "The large increases in the unit cost* of the company’s products have required the use of substantially more working capital to finance stocks and debtors, and the company has been fortunate that its financial strength has enabled It to take advantage of the buoyant conditions prevailing during the year.” Working capital increased by $735,000, and more will be required next year to cover rising prices, "Although a small measure of relief was obtained last February on an interim basis, the controlled unit margins under which the company operates for most of its pro-

ducts will prove inadequate to service the additional funds employed without increased volume of trading, and an abatement in the escalation of costs. "It is considered doubtful whether either of these latter factors will prevail in the ensuing year,” says Mr Kember.

Mr Kember says the costs to the group of payroll tax for the two months to balance date amounted to $10,120. Next year this is estimated to cost $70,000 which will reduce profits .available to shareholders by the same amount, or 2 per cent on share capital. The group balance-sheet shows shareholders’ funds up from $8,176,795 to $8,958,638. Working capital stand* at 56,330,933 compared with 5,399,222 last year. At balance data the ordinary 100 c shares had a net asset backing of 255 c. The final dividend of 9 par cent makes a steady 16 per cent for the year-