Rapid increase in N.Z. Cement assets

Press, 11 December 1976, Page 17

Rapid increase in N.Z. Cement assets

During the last three years, New Zealand Cement Holdings, Ltd, completed the ;greatest expansion in its 88year history, with capital i expenditure on fixed assets , amounting to more than $22.0M, said the chairman (Mr J. P. Cook) at the annual meeting in Christchurch yesterday. All the new plant and equipment for the extension is installed and working, making the Westport cement works the largest and most modern in the country, he said. The new bridge over the Buller River, which is essential to the company as the only link between the works on the one hand and shipping, rail and coal supplier on the other, is now completed. It was feared that the works might be isolated by flood damage to the old wooden bridge. The Minister of Works ■ and Development (Mr ; Young) is to open the bridge 1 today. |i “Last year has been one ; of changing fortunes, [ marked by a sharp drop in > the rate of cement conI sumption and devaluation of ! the New Zealand dollar.” ! Mr Cook said the fall in ’ cement sales was about ; 22,000 tonnes to 387,000 > tonnes. ! “At first glance this may ; not appear a large amount ; but, from a profit earning > point of view, it is a very

[Significant figure. It includes a drop in the use of cement in State electricity generation projects, the impact of which is considerable for this company. "But, despite this, the group’s share of the New Zealand market has improved by a small margin.” The results of the first four months to November 30 of the current financial year have been materially better than expected, and it is hoped that this will continue, Mr Cook said. “It is natural for Governments to endeavour to restrain price increases and inflation, but had there been no control of cement prices, so far as this company is i concerned, prices would have been no higher than .they are today; indeed they (might well have been power.” ■ It is true that had cement I prices not been controlled I they would have increased at an earlier date, but the company would have built up reserves at a time when it was running at high capacity, he said. • “There would not have been sudden fluctations in prices, and there would have been a reduction in the amount of borrowed money required and high interest charges which have to be met.” Regarding financial arrangements, New Zealand Cement is working at a high

(gearing of borrowed funds to shareholders’ funds, but at present the directors do not see the need for further equity capital. However, this may change. “The writing up of book values of assets was made after the preparation of detailed valuations, and with the concurrence of the company’s auditors. “These new valuations give a much more realistic indication of the true worth of the company, and clearly demonstrate the capital- • intensive nature of an enteriprise such as this.” However, the figures ' shown in the balance sheet ' are still substantially below th«* full value of all fixed assets at. the present time, iMr Cook says. i “At the present time it is 1 estimated that the replacement cost of all fixed assets is in excess of twice their original cost — more than $90.0M. For example, the cost of the m.v. Westport, which was delivered last January, was S7.OM. If the same ship (was ordered today it W'ould cost, more than S9.OM. Devaluation since balance 'date (including the 7 per cent devaluation on Novemiber 30) has produced foreign ' exchange losses of about |$l.l2M, after allowing for (future tax benefits.