COMMERCIAL Newton King surveys economic scene

Press, Volume CXIV, Issue 33673, 24 October 1974, Page 14

COMMERCIAL Newton King surveys economic scene

International and national economic conditions pointed to a period of difficulty for New Zealand as a whole, the chairman of Newton King, Ltd (Mr S. P. Gird wood), said in the annual report.

International liquidity, and balance-of-payments problems for some of New Zealand’s customers, and rampant inflation were all adverse factors, he said. The increasingly socialistic, and restrictive legislation, such as the Commerce Bill and the superannuation scheme, also gave him concern. “The tight liquidity situation in the latter half of the financial year affected the whole industry, which was already suffering from a sharp fall in beef cattle values, in particular, and rapidly rising costs for farm requirements,” Mr Girdwood said. The managing director of Newton King (Mr R. B. Weir) said that there wa.s a need for a close study of the marketing of New Zealand beef. “As a nation and as individuals we are far too small and vulnerable to stand the wild fluctuations in prices such as took place in the beef industry this year. “A price equalisation scheme, under the control of the meat board should be investigated urgently,” he said. “It is extremely difficult, if not impossible, for farmers to budget for the additional development of land and for the group’s finance subsidiary, the Insurance companies, and banks to make lon g-term arrangements, when prices for a commodity can fluctuate $BO per bee.st in six months. “The drop in beef, wool, and lamb prices has resulted in many farmers facing real hardship. There are 9,000,000 cattle in New Zealand and around sBoom was wiped off their value in a matter of a few months,” Mr Weir said. There are some real prob-

lems to be faced and although Newton King has substantial diversification its profitability will wax and wane with that of farming, Mr Weir eaid. The present situation is not new, and many can recall times when primary product prices were much lower than they are today, Mr Weir said. The result for the year included, for the first time, a full year’s profit from the now wholly-owned subsidiary companies De Pelichet, McLeod and Co., Ltd, and G. H. Perry and Co., Ltd. The accounts confirm the company’s announcement that the group net profit increased 30.8 per cent to a record $1,058,299 in the year to June 30. The ordinary dividend for the year wa»s 15 per cent against 12J per cent for the previous year, before a one-for-five bonus issue. The directors have recommended a final dividend of 6| per cent and a bonus dividend of 2J per cent making a final dividend of 9 per cent, which will be paid from capital reserves, making it tax-free in shareholders hands. The 15 per cent dividend (15c a share) was covered 2.4 times by the net profit. The profit was after provision for taxation of $860,520 ($617,449 last year) and minority interest share of consolidated net profit of $36,416 ($31,663). Total shareholders’ funds stood at $7,231,996 ($6,442,455) including issued capital of $3,257,719 ($2,670,340).The earning rate on ordinary shareholders’ funds rose from 14.6 per cent to 14.9 per cent.

Interest charges on term liabilities, which rose $519,835 to $3.2m. were $30,523 higher at $188,284. Working capital rose $440,516 to $4.4m, but the current ratio fell from 1.5 to 1.3 to 1. Proprietorship eased from 36 per cent to 31 per cent. At the price of 140 c, last Friday, the ordinary shares yield 10.7 per cent from the 15 per cent dividend and they have an earnings yield of 25.7 per cent.