Mosgiel blames delays for profit slump

Press, Volume CXIV, Issue 33672, 23 October 1974, Page 21

Mosgiel blames delays for profit slump

(New Zealand Press Association) DUNEDIN. Increased costs of about Sl.2m and the “inordinate” time taken by the Government to deal with price-increase applications caused a large reduction in profit ability of Mosgiel Woollens, Ltd, in the year ended June 30, the chairman (Mr P. W. Fels) said at the annual meeting.

The profit for the latest 12 months was $942,721, ■ compared with $1,195,057 for nine months in the previous year. “The focal point of any year’s trading is net profit, and no doubt many of you were disappointed that we were only able to achieve in 1974 a figure smaller than the exceptional result reported for the nine months to June 1973.

“However, the 1974 result showed earnings on shareholders’ funds to be 11.2 per cent, and the rate on capital was 28.1 per cent. In my view, these returns were satisfactory,” Mr Fels said. “Under the general head-, ing of price control, there was also a requirement toj absorb part of any increased costs. “So far, there appears to be no constant formula by which absorption is to be calculated. For example, the principle, if it can be called that, was recently applied to blanket prices which bear an unusually low mark-up content in any case. “Woollen goods, being the subject of subsidy, were also quite properly price controlled. Whether intentionally or otherwise, the price of some goods to consumers was unjustly reduced by the inordinate time taken by the Government to deal with applications for price increases,” Mr Fels said. The Mosgiel company alone paid out $3.6m in wages and salaries in the nine months to June, 1973. In the year under review, the amount was s6m. Another factor in the reduced profit was the disappearance in the current year of the beneficial effect of the realisation of stocks build up by Kaiapoi Textiles, Ltd, which was taken over by Mosgiel Woollens in 1972.

Forward orders were highly satisfactory, and the turnover for three months of the current year ended September 30 was ahead of the corresponding period last year. Sales last year contained a [large export order of wool tops and other export products. “These events are unlikely to be repeated this year, as the world market is verypoor and likely to continue in this condition. “The production capacity could be used for other profitable products readily sold in New Zealand or to selected export areas. “The board has in mind a number of projects which! will improve profitability, I but it is doubtful that all of I these can be brought to fruition in the current year. “Undoubtedly, the containment of costs will once again prove to be one of the problems which will occupy much of our time,” Mr Fels said.