I.W.-Dow margin declined

Press, 9 April 1977, Page 19

I.W.-Dow margin declined

The profit margin of Ivon Watkins-Dow, Ltd. since 1974. as well as being very much lower than the profit to-sales ratio approved by the Government, had actually declined, the managing director of the company (Mr R. F. Bollen) said in the report on the year to December .31. This emphasised the impact of the Government’s price freeze, and control programmes, he said. The improvement in the company’s performance last year was better than ex-

pected, in spite of the continuing high level of inflation which adversely affected the economy in general.

Record gross sales revenue of 523.6 M was received, representing an increase of 54.4 per cent, and group net profit of $1,689,709, was up 1-37.9 per cent, compared with 1975.

The results compared very favourably with those of 1975, but it should be noted that the severe recession in 1975 reduced the company’s sales and profit. A comparison with 1974 is more anpropriate.

The latest profit was 36.4 per cent higher than in 1974. The profit-to-sales ratio of 7.2 per cent for 1976 was much better than the 4.5 per cent in 1975, but still did not come up to the 7.4 per cent achieved in 1974. A final tax-free dividend of 4c a share is payable on May 4. ex dividend April 15. restoring the rate to 7c a share (14 per cent) for the year, after the reduction to 5.5 c a share for 1975.

The $461,778 required for dividends is covered 3.7 times by the net profit for the year.

In the six months to June 30, sales revenue increased 833 over the first half of 19/5. but this rate of increase

could not be sustained in the second half of the 1975, but this rate of the year and was lower at 39.1 per cent.

Of greater importance is the substantial improvement in the amount earned on shareholders funds, which rose from 9.2 per cent to 18.9 per cent. This, though still below the record achievement of 1973. and based on historical accounting methods, marks a retui . towards a more acaccentable level.

A further productivity improvement was achie achieved

during 1976; significant contributions were made through better use of raw materials and energy. Increases in freight rates, utilities and other costs made it more necessary than ever to maintain tight control in every aspect of business.

The degree of success could be measured by the fact that expenses were kept to an increase of only 4 per cent over 1975, despite a national inflation rate of nearly 16 per cent for the year.'

“It is evident that if we must continue to live with high rates of inflation, and continuing escalating expenses and cost of materials, some relief from the severe price restrictions of the past two years is essential. “Ultimately there must be a limit to the extent to which we can rely on gains from increased productivity' and expense management to offset the effects of inflation,” Mr Bollen said. A no-growth economy, if not a bankrupt nation would result if all environmental protection laws are enforced as enacted, and without prudent interpretation, the

chairman of Ivon WatkinsDow- (Mr D. W. Watkins) said in the report. "The effectiveness of the legislation already apparent, and the very substantial capital-outlays ’ already committed will result in further improvements in the near future. “The company’s concern for the environment and safety continues to be of; special importance and we can justifiably claim to be a 1 leader in these two areas," Mr Watkins said. Export receipts at $1,780,000 were a little disappointing, with one major delivery schedule for November/December having tobe carried over to the mid--1977 period because of a balance-of-payments problem in the country concerned. “It is increasingly obvious; that of farmers and manufac-) turers are to substantially increase their export earnings,; the constraints to improvements in productivity must be removed. “Surely one of the most important areas of relief is. to allow more realistic taxrates, and price-control mechanisms that take into account the serious impact of inflation on inventories, and the true costs of replacing capital assets. “Without some relief, there must be some doubt about industry’s response to the ad-i monishments from the Gov-' eminent to work harder,” Mr Watkins said. The latest profit was after $58,674 more for depreciation at $390,870. and $923,719 more at $965,935 for tax. In-' terest. expenses were reduced $92,590 to $175,373. A bank overdraft of $l.l M) no longer appears amongst' current liabilities, but term (loans were $961,444 higher at $J.9?4 at balance-date.

Net current assets increased $348,191 to $6.4M. but the current ratio fell from 2.2 to 1.8 to 1. Shareholders’ funds rose SI.3M to $8,946,071. Paid capital rose $22,419 to $3,312,415 after issues to staff, a capital replacement fund was opened with $250,903. distributable reserves increased $1,218,383 to $4,177,768, share premium reserves were reduced $232,089 to SI.2M. At 97c the shares had a dividend yield of 7.2 per cent, and an earnings yield of 26.3 per cent. The price-earnings ratio was 3.8.