McKechnie Brothers orders reduced

Press, 1 November 1977, Page 22

McKechnie Brothers orders reduced

McKechnie Brothers, Ltd, has commenced its latest financial year with substantially reduced order books and no sign of a recovery, says the chairman (Mr G. D. McKechnie) in the annual

report. It seems most unlikely that the company will be able to repeat its record performance of last year, he says. "However, the group is confident that it will be able to recoup in the export markets some of what it may lose in the local area,” he says. "We plan to keep equipment working at a reasonable capacity to survive overseas markets, and place particular emphasis on the need for a continued improvement in efficiency if margins are not to be eroded by the effects of inflation and lower volumes.

Last year, in common with many other manufacturers, Mr McKechnie says' he warned that a progressive downturn in demand was expected in domestic markets.

"In the event, we enjoyed an upturn in demand for much of the year and the decline did not eventuate until the end of the financial year to July 31.” Total sales rose 40 per cent, and a key factor contributing to the satisfactory result was export sales, which remained at about 10 per cent of total sales.

The level of activity during the year was high compared with previous years, and capital expenditure related to new developments and general improvements totalled $856,000. A SI.SM expansion of copper-tube manufacturing facilities was begun and is due for completion in 1978. The project will increase capacity and provide substantial new potential for export. At the end of July, $327,000 had been spent on this expansion, Mr McKechnie says. A major development during the year was the installation of specialised furnace equipment from the United States.

This plant is being used for treating low-grade scrap metals which have not been usable by the company in the past, and for drying and cleaning brass scrap to improve subsequent melting activities. At A. W. Fraser and Sons, Ltd, the commissioning of new continuous-casting and machining facilities enlarged the manufacturing capacity for bronze bars and finished bushes.

Much of this extra capacity is also being used for

export markets. «ays M? McKechnie. As announced, group nei profit rose 39.3 per cent tc $1,540,969, and pre-tax profii increased 19.3 per cent tc $2261,583. The profit was after providing $44,144 more fot depreciation at $405,728, bu< $7667 less for tax al $598,717. Export allowances accounted for the lower tai provision and higher nei profit. Interest payments or term loans and one; classified as "others" ros« $65,220 to $441,301. Shareholders’ funds rcs« $1,058,112 to $7,841,550. including steady paid-up ordinary capital of S4M. Tin earning rate on shareholders funds rose from 173 pei cent to 19.6 per cent. an< that on capital from 27.7 pei cent to 38.5 per cent.

The recommended fir.a dividend of 8c a share, including a special Ic-a-share dividend to mark the company’s export performance, increases the annual rats from. 10c a share to 12c « share (12 per cent). The dividend absorbs $480,00< and is covered 32 times b> the profit. Shareholders’ equity fell from 44.3 per cent to 41.7 cent. Working capital rose $403,634 to $5,305,609 bul the current ratio fell from 2:1 to 1.7:1. The 100 c shares last sold for 137 c for a dividend yield of 8.8 per cent and an earnings yield of 28.2 per cent The price-earnings ratio was 3.6 and the net asset back ing a share was 196 c.