U.E.B. profit down, but directors optimistic

Press, Volume CXII, Issue 33064, 3 November 1972, Page 7

U.E.B. profit down, but directors optimistic

The group net profit of U.E.B. Industries, Ltd, declined by almost 10 per cent, but the directors have declared a steady interim dividend of 3c a share, they say in the company’s report for the six months to September 30.

The directors also deny emphatically rumours alleging a difficult liquidity position for the company. The profit of U.E.B. Industries, Ltd, in New Zealand in the six months was slightly up on that in the same period last year, but the over-all group profit was $170,000 or 9.9 per cent lower at $1,540,000, the directors say. They were confident that a net profit for the full year about that of 1971-72 was achievable.

Group sales rose 5.3 per cent over those in the first half of last year. Export sales were 33 per cent higher.

While the market was quiet during the early part of the six months, prospects for the second half of the year were encouraging and current order books reflected an upswing in the economy. The Australian subsiddiary, Tasman U.E.B. holdings, Ltd, had a 90 per cent profit decline in the six months to August 31. The directors were confident that, notwithstanding increased competition and higher costs of materials, the drop in group profit would be arrested in the current financial year. Indications were for continued improvement in the future, subject to no adverse trading conditions prevailing in New Zealand or Australia.

They state categorically that the company was observing a policy of rationalisation and consolidation. i

“In spite of widespread rumours to the contrary, the company is in a sound finan-

cial position with no liquidity problems whatsoever,” they say, “The debenture issue (which is open until January 9 and fully underwritten) is proceeding to plan and directors are pleased with the current position.” A close control has been maintained on stocks and debtors and the current ratio had improved from 1.5 to 1 on March 31 to 1.88 to 1 on September 30. In the same period, shareholders’ equity had risen from 43 per cent to 47.6 per cent and the net asset backing of each 50c ordinary share from 95c to 96c. Even allowing for the increased volume of business anticipated, it was not expected that any further funds would be needed in this or the next financial year. In New Zealand the packaging operations continued to grow profitably and were coping with the increased competition through effiicent marketing and management. The building materials division was also steadily increasing its share of the market and has been successful in the export field.

“Exciting venture”

The entry into the lucerne business in Marlborough and Hawke’s Bay promised to be an exciting and rewarding venture. The erection of silos at the Marlborough plant and at Picton had already enabled the company to secure substantial bulk orders for pellets, with shipments beginning this month. Market surveys had vindivated the expansion into this type of business. Unlike the first half of 1971, when business was very buoyant, the textile operations — with the exception of exports — had an unexpectedly slow start. However, sales started to lift substantially in August and forward orders were now much higher than a year ago, with the output of all spinning and carpet plants being built up to full capacity. This would result in high sales well into the new calendar year. The small tufted carpet operation in the United Kingdom would require a capital outlay of less than $lOO,OOO. Due to start next year, it was aimed at safeguarding the increasing United Kingdom market and developing one in the E.E.C.

The directors point out that, although the dramatic rise in wool prices was of

concern to all processors, the wools offered so far had in the main been the finer apparel wools. The bulk of carpet wool types was not yet in the market.

Provided the company was permitted to blend in more synthetic fibres to keep costs in check, directors were confident that, with its wide range of qualities and prices, U.E.B. would be able to supply profitably the strong demand that could now be fully anticipated for some months to come.

On the 90 per cent profit decline in Australia, they emphasise that Tasman U.E.B contributed only 14.5 per cent of group profit in 1971-72. The main cause of the adverse result in Australia was that the textile operaions had been subject to much greatei competition from acrylic yarns from low-labour-cost Asian areas.

Dividend deferred Industry negotiations with Japanese exporters of acrylics to Australia had been successful and the volume of imports from this source would be substantially reduced from November 1.

The Australian packaging operations were still facing severe competition and had had to absorb the continuing wage and cost rise with adverse effects on profit margins. In spite of this, a reasonable profit was earned. In the circumstances, directors of Tasnjan U.E.B. deemed it prudent to defer consideration of an interim dividend until the results of the full year to February 28 were known. Already, a market improvement in the Australian trading operations was evident in September and this trend was now expected to continue. The 6 per cent ordinary and 3| per cent preference interim dividends were payable on December 11, shares becoming Ex dividend on November 17. Ballins issue filled The chairman of Ballins Industries, Ltd, (Mr B. J. Wilks) reports that the one-for-five cash issue of ordinary shares has been fully subscribed. The issue of 1,827,889 shares was not underwritten. Letters of allotment will be posted on November 3 and scrip will be forwarded after April 1. when the final call is payable.