COMMERCIAL Farm sector affects Cyclone sales

Press, Volume CXV, Issue 33869, 14 June 1975, Page 18

COMMERCIAL Farm sector affects Cyclone sales

The fall of 23.7 per cent in the profit of Cyclone Industries (N.Z.). Ltd. during the year to March 31 was attributable to a major drop in saies of farming products, spiralling costs, and delays in getting Government approval for price increases.

During the latter half of the year the sales of farming products fell dramatically for reasons beyond the company’s control, the chairman (Mr C. W. Mace) says in his view with the annual accounts. The directors took steps to maintain productivity at the most economic level, to keep costs to a minimum. . but the liquidity crisis { further reduced trading to i levels which were the lowest for many years, Mr Mace Isays. Sales of industrial products were considered reasonable, but were affected to a ) certain extent by the same I factors, and therefore could I not compensate for the overall fall in sales. The company’s investment in Furnware Products proved that diversification ■ away from farming was ' beneficial, Mr Mace says. Sales of Furnware increased, and combined with increased productivity from new plant and work methods assisted profitability. The diversification policy is realistic, and the directors are pleased with its progress, Mr Mace says. Cyclone -C.M.1., Ltd, of Auckland — being basically industrially oriented — had comparatively buoyant trading and increased profit. : This associated company's I export sales also increased, { But Cyclone-C.M.I. (H. 8. I Ltd. Hastings, experienced! very difficult trading condi-| tioris, and its profit fell. With the extension to the? Christchurch premises at i i Bromley the company is ' now ready for the next i stage of its development. However, the sale of the Montreal Street property has not yet been completed, because of lack of mortgage money. Commenting on the outlook, Mr Mace says that the directors are still concerned] about the current trading, conditions — especially in I the agricultural field.

f But sales have shown an -{upward trend during the -first two months of this! 1 financial year, Mr Mace ? says. and may be returning! ) to more norma! levels. ; Management are operating strict budgetary controls to 5 produce a satisfactory profit '■ for the current year, hel ’■says. As announced in the pre- i’liiminary report, group net! ({profit fell to $158,738. from ; | $207,913 It was after providing I .{512,625 more for depreciation at 571,009. $15,456 less J for interest cf fixed loans at 1 .{510,429. and $44,266 less for ' i! taxation at $98,348. :! Gross profit from manu- , ! factoring, trading, and rents , . rose 47.8 per cent to , ,{51,230,813, but factory, selling, and administrative i (expenses more than doubled — an increase of 123.0 per ! cent — to $906,984 during lithe year. I The earning rate on aver- ■ age shareholders’ funds falls {from 14.6 to 9.6 per cent. I The steady dividend of 5c ia share (10 per cent) takes 1577,667, and is covered — .{allowing for the preference [dividend — twice by the pro|fit attributable to ordinary 'shareholders. j Net current assets in-1 j creased from $1,039,831 to I j 51,071,932 during ‘the year.

The current ratio improved from 2.6 to 2.8. Inventories increased from $11040.498 last vear to I $1.125,861 Shareholders' equity increased from 58.3 to 61.5 per cent. The funds of $1,715,522 are comprised of $861,667 I capital (including $85,000 preference capital). $207,756 .capital reserves, and $646,099! {revenue reserves; ; Among the revenue re-! {serves is a preference dividend equalisation reserve of $15,000. The shares last sold at 55c ex dividend, for a dividend yield of 9.1 per cent and an earnings yield of 18.0 per cent. _ The price-earnings ratio is 5.6 and the net assets backing 83c an ordinarv 50c share.