COMMERCIAL Fires tones profit falls to $947,546

Press, Volume CXIV, Issue 33463, 19 February 1974, Page 10

COMMERCIAL Fires tones profit falls to $947,546

The group net profit of Firestone N.Z., Ltd, for the year to October 31 was $947,546 is a decline of 18.5 per cent on the $1,162,195 earned the year before ($1,260,195 after an adjustment for tax provision in the prior year).

Trading was buoyant throughout the year, the chairman (Mr Clyde W. Campbell) says in review with the annual accounts. Sales to the tyre replacement market and to vehicle assembly plants were 15 per cent higher, Mr Campbel) says. Sales of retreaded and repaired tyres increased by only 24 per cent; retreading production was hampered in the latter half of the year by a shortage of retread rubber. Total net sales were an all-time high; in June the highest monthly sales in the company’s history were recorded. While sales showed a satisfactory increase, escalating wages, large increases in raw material prices and in-j creased distribution costs, ■ plus the very costly effects j of disruptive industrial actionj eroded the company’s profits.; Since 1948 tyres and tubes have been subject to full price control. Mr Campbell says that it

ttis not yet clear whether exchanges currently being initi.ated in price control criteria in will result in a more satisfactory basis for negotiation .with the authorities than experienced in the past. r| Firestone N.Z., Ltd, records I only three months trading to balance date; the company . was formed in a restructuring / prior to the issue of 1,394,750 > convertible notes in SeptemJ ber last year. However, the t full year of the operating . company and its subsidiaries fare reviewed. » The result is after provid- > ing virtually steady depreci- > ation at $553,953, $159,459 more for interest at $293,266, j and $213,958 less for tax- . ation at $688,140. Pavroll tax i was $87,368—56258 more . than the year before. The dividend naid is 6.5 c ■ia share, and requires i'5568,750. compared with ,$2.114.412 in the previous ; i year. II After deducting $2,682,334 pre-acquisition earnings, reclamed earnings carried forward are $194,136. compared; with $2,497,674 last year. Of the profit of $947,546; one quarter, or $236,886, is) attributable to shareholders' of Firestone N.Z., Ltd, and, the dividend for the period at $42,750 is slightly less than 0.5 per cent. The earning rate on average shareholders’ funds is 12.9 per cent. Working capital imnroved $2,549,376 to $3,354,786, the current ratio is 2.1 to 1. The only significant move was the reduction in bank overdraft from $2,521,763 to $6ll 560. Other balance sheet movements that stand out are an increase in borrowings from the overseas parent, from $841,255 to $2,035,831, and an increase in machinery, equipment and motor vehicles from $2,139,848 to $3,857,926. Shareholders’ equitv is 48.7 ner cent; the capital of $8,750,000 compares with shareholders’ funds of $7,678,194. Goodwill on consolidation of $1,459,765 has been deducted from the funds.

Referring to the outlook, Mr Campbell says that the industry will be subject to review by the Tariff and Development Board early this year. It is vital, he says, that adequate tariff levels be established and import control continued. “Expansion of tyre and

■itube manufacture to cope 'with the expected growth of 'the economy will require :multi-million dollar capital ; expenditure; our confidence Jin making such appropriations can only stem from the \ belief that Government pricing policies will recognise ; the need for a level of profitability that will provide an ; adequate return on shareholders’ investment. ' “Including the prices gazetted last month, selling prices of most New Zealandmade car and truck tyres are in fact lower than they were in 1948. “Your directors consider that the company’s absorptive capacity has been reached, and while we endorse the Government’s objectives of control of inflation, the time has come when increased costs must be shared by users of our products as well as by the producer.” On the energy crisis, Mr i Campbell says that it is a i matter of concern, as many lof the industry’s raw materials are products of the i petro-chemical industry. But provided that the ' necessary supplies of essential raw materials can be obtained, the directors are confident that the market for all Firestone’s products will remain buoyant, and that the company will continue to increase its market share.