COMMERCIAL Excellent trading year for N.Z. Refrigerating

Press, Volume CXIV, Issue 33453, 7 February 1974, Page 16

COMMERCIAL Excellent trading year for N.Z. Refrigerating

Meat prices may have reached a new plateau of values, and it is unlikely that a return to the values of even two years ago will be seen, savs the chairman of New Zealand Refrigerating Company, Ltd (Mr C. S. Peale) in his report with the annual accounts.

The company's trading in the year to October 1 was a record. The markets for all main products, particularly meat, strengthened as the year progressed. Group sales, at $90,297,505, were $26,197,907 higher than last year — an increase of 41.5 per cent.

I While there was an increase in volume in most products the main factor in the higher sales was higher product values on world markets. In value, export sales increased 44.1 per cent, and local sales 32.6 per cent. Lamb trading proved profitable in all markets, Mr Peate says. Sales had to be rationed to have sufficient stocks to last until the new I season. This is the answer ' to the United Kingdom criticism that importers were hoarding stocks in the hope of higher prices, he says. The change in the pattern of lamb distribution in the United Kingdom, as - more supermarkets with meat counters are developed, isi likely to lead to more fabric-

-lation and packaging in New (.[Zealand. ; New Zealand Refrigerating lis planning to extend cutting r and packaging facilities to i meet this growing demand. At Imlay (Wanganui) the • company has installed what 11 is considered as one of the, most sophisticated film vac--I'uum packaging machines yeti •[invented; it is the first unitj ?,of the kind to be used outLside the U.S.A. Lamb diversification ■i During the year the lambi • [•market diversification quota! ■of 22 per cent was sus-i ■pended when it became oblivious that the season’s kill), I would show a significant de-1 Moline on the totals forecast, j, • Another reason for the de-, ncision was the approach by • [the United Kingdom Govern-h iment to increase supplies to; Britain. j, In the event, the com-n pany—and the industry as ai< whole—diverted more than; 22 per cent away from the United Kingdom, mainly toprotect newly developed [, markets, where prices wereij also often better. IJ The diversification for this I , •season has been fixed at 23, • per cent. [ Ewe mutton realisations,[ ( • and results for wool, pelts, |, casings, tallow, feeding;, [meals, and fertilisers were I ( ‘very satisfactory. i Beef was supplied to the;, I usual markets in increased!, [quantities, and the prices for! • livers, kidneys, hearts, and], [brains were in some cases]; [almost double of those a;[ •year earlier.

Projects delayed With so many currencies floating, new hazards are encountered in trading in overseas markets, Mr Peate says. “A sale that is satisfactory on the day it is made can present a totally different picture when the cash finally arrives in New Zealand,” he savs.

As announced, group net profit jumped 78.6 per cent to $3,288,246. It was after almost steady depreciation of $1,219,878, and $60,185 more for interest on fixed term liabilities at $172,683. Tax, as [usual for meat exporters, is • not disclosed. Mr Peate says that it might have been expected that depreciation would have risen [more than shown, but delay •in completion of some major ; projects has postponed the charge for another year. The company used to write off depreciation in excess of Inland Revenue rates, but with many items now qualifying for special depreciation the directors consider the department’s rates adequate. • Should the position change they would revert to the former practice, Mr Peate says. : Referring to the profit, a ■ record and “deemed most satisfactory,” Mr Peate says that in the meat industry, especially with the worldwide inflationary trends, high profits must be achieved to [provide the necessary resources for future development

The costs imposed by the apparently never ending stream of hygiene regulations

[continuing without abatement is unfortunately not matched with increased earning capacity. Mr Peate says. An extensive programme of development is proceeding at the five plants, but unfortunately some projects have been delayed by lack of building materials. The report gives details of 39 separate projects at the five works, as well as the improvements — mostly in upgrading freezing rooms and cold stores — in all works. Capital work in progress amounting to $192,582 is dealt within the accounts, and commitments for capital expenditure not provided for is $1,480,000.

The recommended dividend for the year is 121 per cent:; it requires $1,089,868. [ •covered three times by the; ’•profit. •j The earning rate on aver■[age shareholders’ funds im-i ■ proves from 13.2 to 19.0 per! [cent. ■! Mr Peate says that thei Idirectors would like to main-! ■[tain the level of dividend ini • the future, but this would be l • dependent on profitability. 1 Liquidity again improved/ [with working capital in-1 [creased by $2,565,048; the! [current ratio is 1.2 to 1. j Hygiene programme I Current assets rose $5.7 ‘ [million, mainly because of the [increased values for consign-! intents, trading stocks, and [stocks of processing [materials. [ The $2.7 million increase in [current liabilities is almost [wholly because of higher [creditors. Mr Peate says that [this reflects the higher tax ! provision and the higher costs i [of works materials purchased! [in advance. • Shareholders’ funds increased from $15.3 million to ’[sl9.3 million. The capital of HsB.7 million compares with [capital reserves of $1.5 million and revenue reserves of $9 million.

[ The capital reserves rose • ah.iost $l3 million because of a revaluation of the 45 per cent shareholding in Towers and Company (N.Z.) Ltd; this is offset bv a corresponding increase in the figure for investments. , Among the revenue ■ reserves, the reserve for iinarket fluctuation rose to $2 million because of a transfer of $1.4 million, while uniappropriated profits are $1.3 ;million higher at $2.9 million.

Capital protits There was a capital profit of $118,583 on properties [sold, and a surplus of $205,622 on the maturity of life insurance policies [funded to repay the registered notes; the notes were repaid on October 31. Shareholder’s equity in the company is 57.1 per cent. The shares last sold at 143 c; on that basis they yield 8.7 per cent from dividend, and 26.3 per cent from earnings. The price-earnings ratio is 3.8, and net asset Shacking a 100 c share is 221 c.

I An analysis of the comjpany’s shareholding shows that 64 per cent of the shares [are held in parcels of less [than 5000 shares, by 6965 [shareholders (96.6 per cent): [5350 shareholders hold uarjcels of fewer than 1000 shares, with 23.7 per cent of the total share capital. The shareholding is widely spread; 48 per cent, of shareholders live in the North Island, and 31 per cent in the South Island north of the Waitaki River.

it; “The 1972-73 season will d I long be remembered for rhe g 1 problems posed by the serious and prolonged drought if in almost ail areas in which it • we operate,” Mr Peate says. i- 1 “These conditions taxed n our plants to their limits for g a considerable period, as [every endeavour was made if [to meet the requirements of e[our livestock suppliers. e “The response from our n [employees under these tryding circumstances was sins. icerely appreciated. s [ “The farming community It were in desperate straits bed | cause of shortage of feed, :-;and in many areas forage s[crops failed to mature.” The unusually heavy snow-

• fall in August aggravated ■ problems when much stock [was lost. N.Z.R. "‘trend setter’ 0 Because of the drought • average lamb carcase weights ‘were 21bs lower than the previous season. Quality was [seriously affected, with the [ percentage of carcases graded [F.A.Q. increasing by up to 15 per cent at some plants, i However, total killings increased by about 300.000 to • 4.6 million: the Islington,; Smithfield and Burnside! works each exceeded the; • million kill; Imlay turnover; • was a record for that plant. I Cattle killings increased at fall in August aggravated; • being at Imlay. Referring to processing charges, Mr Peate says that the company has been selected as a “trend setter” for the purpose of applications! for increases. This means that the accounts must be submitted to the Department; • of Agriculture and Fisheries/ This procedure, has proved’ [cumbersome, Mr Peate says with long delays in obtaining the approval. On shipping, Mr Peate says that there appeared some improvement in the service to the U.K., but even so there

was bunching of arrivals, [with a depressing effect, on the market. Containerisation may reduce the problem, but here North Island ports have an • advantage. Perhaps a container port for the South Is- • land may become a reality [sooner than expected, he says. [ Meat Packers (N.Z.), Ltd, had a most successful year, [the export of beef carcases • increased 55.8 per cent, more • than half going to the U.S.A. • The conversion of the plant [to “on the rail” boning and [cutting proved most success- • ful, giving greater efficiency • and containing costs. Meat Packers have _ acquired a majority shareholding in Beacon Bacon Company, Ltd. Their accounts • were consolidated in the • latest year. Unit trusts Buy Sell !First N.Z. Unit .. 99 JO7 I Investor .. 78 84 N.Z. Income. .. 83 90 | N.Z. Accum 130 138