N.Z.F.P. sales up, but profit lower

Press, 26 August 1977, Page 10

N.Z.F.P. sales up, but profit lower

I Sales of N.Z. Forest Products Lid, for the first four months of the present financial year are ahead of those jin the previous corresponding period — profit, however, is a little lower. The newly re-appointed chairman (Mr A. G. Wilson) i told the well-attended annual general meeting that although there had been a recent decline in the local requirement for building products, the demand for most of the group lines remained buoyant locally and overseas. ! The company problem had [been to maintain output particularly from the pulp and [paper mills. Producation had I suffered as a result of regrettable plant closures because of either technical and mechanical failures and industrial disputes. On export markets deI mand was generally at a I most acceptable level. Pulp * output had not been sufficient to fully satisfy existing contracts while prices had to some extent been eroded by strong international competition because of the large stocks of products from Northern Europe, land Canadian mills. ■ Some minor price reduc-i itions had been accepted, but with an expected better bal-j ; ance between supply and de-1 i mand some improvement iwas expected early in 1978, said Mr Wilson. | Paper was supplied to markets which ranged from Ecuador to the Middle East, where prices were also still affected by strong competition — although there were indications of lessening pressure.

■I Sales of timber to Austra•llia and logs and timber to ■ Japan were maintained at ■’satisfactory levels and the flexibility of the group con- ■ 'tracts would be most helpful while the present reduced I level of local demand coni tinued. I Although small in volume, sales of other products in- ■ eluding chemical products, ■ hardboard, and plywood. ■ continued to make a useful f,contribution to the company I export earnings, Mr Wilson underlined previous statements in the an- [ nual report that after the considerable expansion of I the past decade the next few I’years would be seen as a period of consolidation. It was planned to secure I maximum production from existing plants, and to improve efficiency of operation and to diversify. I Relatively minor sums jwould be spent on essential 'new developments and it j was expected that most of Ithe finance for the implei, mentation of that policy ■i would be available from the 'group cash flow and already arranged finance. I The next major problem for the group was likely to ■ be the installation of a pulp , mill to start production in ■ the mid 1980’s for which ■ additional finance would be required. , Commenting on the dividend policy, Mr Wilson said i it was the objective of the i board to progressively in-( , crease dividends provided that the annua! profits: ■ justified this step. ■ ; The major reason for the group low share price was seen by Mr Wilson as thej

■ existence of high Interest ’ bearing fixed term itv : vestment. • I Mr Wilson pointed oilt that not all factors affecting I'the profitability of the busi-. I ness were undec the board’s control. As an example he ; quoted the recently itC , troduced higher tax on fuel and oil which would cost , the group about SI.SM a .year. I On overseas ’ Mr Wilson added that th* interest on overseas loans • was reasonable by present New Zealand standards, ana ■ in fact the saving in interest ’as compared with current local rates helped to offset i any exchange loss whiclr ’might be incurred. Mr Wilson said that th* medium term should see some recovery in the New' Zealand economy. To assist and expedite this he called on the Government to cotu tinue to keep the economy under responsible control. He also asked the ment to continue to give close attention to the prob* lems of the building in-, dustry. It was doubtful, he added, whether the measured just announced provided adequate stimulation for the industry as a whole.