Wattie sales rise less than expected

Press, 14 April 1978, Page 10

Wattie sales rise less than expected

. The unaudited equityaccounted group net profit of Wattie Industries Ltd, rose 10.7 per cent to; $6,084,000 in the six months) to January 31. ) Group sales increased 8.2 per cent to $139,576,000, but the chairman (Mr D. F.j McLeod) says this increase) was below expectations and) reflected a weakening of the] market since the sales and basic production plans were adopted a year ago. The value of exports included in the sales figures rose 21.7 per cent to $6,522,000 on a c.i.f. basis. A reasonably strong overseas demand for the group’s products was experienced during the six months, but again some markets were not as strong as had been expected, he says. Diversification of the export product range continued to make progress. The earnings attributable to our investments in associated companies were adversely affected by a downturn in domestic demand for plastics extrusions and more particularly by the difficulties experienced by Wattie Pict, Ltd, in Australia.

j This has been previously I reported on, but as the trad- • ing period for that company, : incorporated in our report, I covers the six months to ■ October 31 last, the remedial I steps which are now showing results cannot be reflectjed in the accounts during 'the current year. The tax incentives appli= I cable to export business have continued t< be valuable in helping to compete overseas, Mr McLeod said.

■ The incentives are a positive contribution to the development of new markets ;and in meeting competitive (pricing situations. The tax concession applicable to inventories this year is also proving of bene--1 fit in helping to offset the

costs of holding stocks which have escalated in value and are currently higher than normal because of the slowing in the economy.

A measure of the additional financial burden imposed on the group by these two factors is the increase of SIBM in aggregate value of stocks since January 31, 1977. The cost of this for the half-year in terms of interest alone, disregarding other storage costs, would be roughly equivalent to the inventory related tax allowance of $725,000 included in the figures, Mr McLeod says.

Management is closely engaged in reassessing market needs in order that stocks are kept in line with changing patterns in both domestic and overseas markets.

For the balance of the year the directors are hopeful of maintaining the trading pattern of the first six months, but are aware of the difficult current economic trends.

Adequate provisions have been made for cash needs in the next twelve months, and the group is sound in working capital requirements and funds needed for development, Mr McLeod says. The support given by shareholders and underwriters to the recent issue of specified preference shares producing $5.7M was excellent and, as previously announced, this had been backed up by the completion of an overseas loan facility for $U55,000,000.

Pre-tax profit rose 5.7 per cent to $9,631,000, and after providing $639,000 less for tax, the group net trading profit was 22.4 per cent higher at $6,631,000. The company incurred a loss of $285,000 from associate companies, compared

with a profit of $74,000 previously. Shareholders’ funds rose $10,328,000 to $105,732,000, and the earning rate of the funds fell from 5.76 per cent ito 5.75 per cent. The earning rate on sales I rose from 4.2 per cent to 4.8 per cent.

A steady tax-free interim dividend of 3.5 c a share (7.

per cent) is payable on June 15, ex dividend on May 30. To help reduce overheads it has been decided that those shareholders who hold a combination of either ordinary and preference shares or debenture stock will receive dividend payments in one cheque. Previously, each class of share was paid separately.