Commercial Dunlop N.Z. expects lower first-half

Press, 29 April 1978, Page 18

Commercial Dunlop N.Z. expects lower first-half

PA Wellington; The first-half to June 301 imay produce some dis-| ! appointing figures for Dun- i i lop New Zealand, Ltd, and! I the company was currently I having to curtail its produc-,1 tion because it was dyer-! stocked, said the chairman (Mr John Hammond) at the annual meeting. “Inevitably the slump in the motor assembly business, and more importantly the drop in the demand for replacing car tyres, reflecting the lower consumption of petrol in this country in the last few months, is affecting the level of sales in the early months of 1978. "I hope that I am not wrong in predicting that, whilst the first-half may produce some disappointing figures, the second-half of this year will show more promise,” he said. The company was overstocked on some of its product lines. It would have to continue to curtail production as it had been doing since the beginning of the year for a little longer to reduce working capital locked up in inventories. “This is a step that has been taken reluctantly, because it cuts employees’ earnings, and it was only taken after attempts to find new outlets. “In this connection exports in 1977 were a con-

siderable benefit, and we are; continuing in this field,” he; said. I The plight of the prefer-I ence shareholders and their! 4.5 per cent dividend return i was again raised, by preference shareholder Mr John Stern. Preference shareholders had never received a dividend increase or a bonus issue and were the “victims of inflation.” he said. The ordinary shares of Dunlop were currently selling at around 260 c, while preference shareholders were lucky if they could sell their shares on the market for 42c. “Most New Zealand companies have recognised the injustice being done to preference ssareholders,” Mr Stern said. He named a large number of public companies who had moved to convert the low interest preference shares into ordinary shares less susceptible to inflation. Yesterday was not the first time the preference shareholders’ position had been raised. At the annual meeting in 1975 a shareholder asked the directors to instruct the company’s auditors and solicitors to consider a solution to the prefer-1 ence shareholders’ problem. But in the 1975 annual re-1 port released in early 1976 IMr Hammond discussed the ■problem and concluded that

[equity shareholders could not be expected to surrender, part of their equity for the benefit of preference shareholders.

Until the company’s profitability improved the directors could not support a proposal to interfere with the contractual arrangements made more than 30 years ago, he said. Mr Stem suggested that this argument was not a valid reason to devalue the preference shares to market value of 42c while the ordinary shares sold at 260 c.

He suggested that the shares be either converted to ordinaries or be repaid.

For the first few years of Dunlop’s activities the preference shareholders had received dividends when the ordinary stockholders had not, Mr Hammond said. While there were some grounds to do something about the plight of preference shareholders, the company did not have enough cash surplus to repay theshares, and he did not like the idea of having to adjudicate between the two classes of shares. He said he still endorsed the view of the board as expressed in 1976.