COMMERCIAL Gear record profit on much higher sales

Press, Volume CXIV, Issue 33455, 9 February 1974, Page 11

COMMERCIAL Gear record profit on much higher sales

The group net profit of the Gear Meat Company. Ltd. rose 983.165, or 30 per cent, to a record 5360.499 in the year to October 1 after an increase in turnover of 31.5 per cent to 825 million, the annual report j shows.

I However, full profitability was not achieved by the [Company in the year the chairman (Mr R. G. Linklater) says. ! Meat-plant operations and profitability were markedly [affected by a close-down of processing operations to carry out the continuing rebuilding programme at Petone. A slower factory production rate caused by the hygiene regulations and a year of drought in the company’s livestock areas also reduced [profitability. “International by-product prices, although in some cases rising as much as 150 [per cent, barely offset the [even faster rate of factory i costs, thus factory profits did not increase relative to [the increased investments in assets. “Therefore it is only by increasing processing rates to farmers will the factory income be maintained. “Indeed, the industry is facing a critical period which requires it to generate a high cash flow for at leasl i the next three years,” Mi iLinklater says. I “Failing to allow the industry to increase processing rates, and thereby gener ate adequate processing profits, as distinct fron trading profits from the sell-

' ing of meat, wool, and hides! ; and which has been the ; basis of the past year’s prof- ■ itability, must place the meat processing industry 7 in I financial difficulties,” Mr , Linklater says. f The record . profit was ( after another substantial in-- . crease in the provision for . depreciation. In the past two years the provision for depreciation ' has increased by $189,035 to , $525,649 in 1972 and a fur- . ther $149,986 to $675,653 in j the past year. The provision for tax is not stated. t “The continuing large re- ■ building and maintenace pro- ' gramme being undertaken 5 may well have justified ’ some of this expenditure 5 being transferred to asset 3 accounts, but it has been 1 considered prudent to take advantage of the full tax- ■ ation exemption so as to 5 generate the maximum cash J flow which is needed to meet the continuing pro- ® gramme of capital exI penditure” says Mr LinkB later. { The earning rate on ordir nary shareholders funds eased from 7.8 per cent in ’ 1972 to 7.0 per cent in the ' latest year. '■ At balance date the ordiS nary 100 c shares had a net II asset-backing of 226 c a The steady 9 per cent ordinary dividend requires $160,771 ($126,900 in 1972)

>|and is covered 2.5 times by : the net profit. Shareholders funds rose : $1,594,644 to $5,145,744. The i increase came from undistri- ■ buted profit of $256,128, an increase in capital of i $536,418 -share premium re- ■ -serves of $160,926, and capi- ' tai profits from the sale of the Lambton Quay property : and a revaluation of the i Towers and Company (Lon- > don) Investment. Fixed assets have ini creased $257,179 and investments have increased i $634,080, reflecting the rebuilding programme at Pe- - tone and the revaluation of - investments. i Working capital rose to i $412,721 and the current • ratio from 0.98 to 1.1 tol. t 1