N.Z.I.G. complains about margin-fall

Press, 26 May 1977, Page 18

N.Z.I.G. complains about margin-fall

PA Wellington A decrease in net profit of 8 per cent, in spite of an increase in sales revenue of 10 per cent, in the six months to March 31, is reported by New Zealand Industrial Gases, Ltd. The net profit on sales fell 16 per cent to 4.3 per cent. The company was forced to absorb all cost increases for nearly 12 months when annual inflation was running at 14 per cent, says the chairman (Mr T. C. Hull). The unaudited results for the half-year show sales revenue increased from 511.6 M to $13.0M. Estimated tax provision was down $69,000 at $683,000, and the estimated net profit fell $49,000 to $559,000. The profit represents an earning rate on average shareholders’ funds of’ 6.6 per cent. “This is an inadequate return for risk capital at a time when annual consumer price inflation is 14 per cent” says Mr Hull. The company will pay the maximum dividend permitted by the regulations, and the ordinary interim dividend (for the year to September 30) has been increased from 6.5 per cent to 8 per cent ;8c a share) payable on June 28. “While the interim dividend has been increased to the maximum permissible, the directors expect to recommend a total ordinary dividend for the 1977 year of 15 per cent, if regulations then permit” Mr Hull says. “Apart from the growth in export manufacturing, there

are no signs that the New Zealand economy will recover during 1977. “We expect it to continue declining steadily for the remainder of the year with tightening liquidity, high interest rates, and trading conditions remaining difficult,” he says. “It may. be politically expedient to superimpose price freezes upon other stringent price control measures, which already freeze the profitability of companies, but in the long term, companies must earn sufficient cash profits to replace assets, pay dividends and attract funds for expansion. “If this does not happen, the ultimate result will be a progressive rundown of industry, and an inability to provide jobs for an expanding work force,” says Mr Hull.