Dunlop cautious about profit

Press, Volume CXI, Issue 32564, 25 March 1971, Page 14

Dunlop cautious about profit

Dunlop New Zealand, Ltd, expects to , maintain a satisfactory level of profitability if the Government’s measures restrict inflation without bringing about a downturn in economic activity, the chairman (Mr J. E. S. Hammond) says in his review.

The company's turnover, which in 1969 benefited sub-, stahtially from- the introduction of tyre tread depth regulations and from the acquisition of Slazengers (New Zealand), Ltd, showed a smaller but not unsatisfactory increase of 8 pier cent to $19,053,000 in 1970, Mr Hammond says. In spite of the impact of the payroll, tax, which amounted to $45,000 and which cannot be charged against profits for tax purposes, the percentage of profit absorbed by tax decreased marginally because of a reduction in depreciation and other charges not allowable against tax. The consolidated net profit after tax accordingly increased $80,711 or 11 per cent to $794,358, and the return on shareholders’ funds improved from 12.3 per cent to 13.1 per cent. Inis was after providing $15,694 for depreciation at $754,690, and $28,533 more for tax at $1,069,452. The improvement in return was not assisted by the tyre division results, whose margins and returns on investment declined from the previous year.

Though material costs on balance showed no change, the total impact of other cost increases during the year was substantial. Some of the increases were offset by productivity improvements. None of the cost increase for new car and truck tyres which are price controlled and represent the bulk of this division’s business, was passed on to the consumer who in fact benefited by a re-

duction in S.P, radial tyre prices. The steady 10 per cent ord: inary dividend plus the preJ ference payment takes $393,000 and carry-forward is $4Ol 358. Term liabilities are up from $1,573,600 to $1,748,402. Working capital has deteriorated with current liabilities up from $4,596,000 to $7,912,000 and current assets up from $7,027,000 th $8,689,000. The liquidity ratio fell accordingly, from 1.54 to 1.1 to 1. As already reported, the company will make an issue of 580,000 100 c ordinary shares at 225 c on the basis of 1 for 6.