Confidence in industry

Press, Volume CXIII, Issue 33360, 19 October 1973, Page 10

Confidence in industry

Sir, — I don’t think Sir James Wattie should be worrying about confidence in industry. Last week Wattie Industries announced a 75 per cent increase in profit. What relation has that to the 8.5 per cent increase that workers are allowed under the amendment to the Economic Stabilisation Regulations? — Yours, etc., ROBYN BLACK. October 17, 1973. Sir, — Mr Kirk’s attack on company profit increases prompts me to point out the following basic finance. Company A: year 1, capital $lOO, profit $10; year 2, capital $2OO, profit $2O. Result: 100 per cent increase in profit. Company B: year 1, capital $lOO, profit $1; year 2, capital $lOO, profit $2. Result: 100 per cent increase in profit. Would Mr Kirk assault these companies with curbs, etc., or would he recognise the static position of company A, and the extremely poor return in the case of company B? One must remember that it is "the return on capital employed” which is critical and not the percentage which Mr Kirk seems to be hung up on. — Yours, etc., L. J. EBBORN-GILLESPIE. October 17, 1973. Sir, — The sharemarket recently has been looking anything but healthy, and just when confidence was starting to return our leader says that he is not happy about high company profits. Mr Kirk has quoted one case of a company showing a 219 per cent increase in profit, but he fails to mention that another company, a sawmiller which also had a very large increase was returning only 7.33 per cent on capital which wasn’t enough to cover the dividend before the latest increase. The Prime Minister fails to understand that many profit increases are caused by rationalisation and not just by raising the prices. Companies pay 40 to 45 per cent tax and are major earners for the Government; yet because many of them are recording good results they are to be rapped over the knuckles by a Government flushed with socialism. — Yours, etc., EX BONUS. October 17, 1973.