K. Prosser rebate scheme compared

Press, 29 April 1978, Page 18

K. Prosser rebate scheme compared

PA Invercargill The Southland Co-oper-ative Phosphate Company, Ltd, is to pay a steady rebate of $5 a tonne on fertiliser purchased in the year to March 31, said the chairman (Mr W. G. Walker). This rebate was equivalent to a 33.3 per cent return on fully paid shares, and that 85 "per cent of the rebate would be paid in cash, he said.

Output, at 283,352 tonnes, was 5 per cent down on last year’s record figure, although when sales into Canterbury in the previous year were taken into "account, fertiliser usage in the company’s area remained on a par with last year. Mr Walker compared the company rebate and share requirement scheme with that recently announced by Kempthorne Prosser and Company, Ltd. For 100 tonne fertiliser usage a Southland company shareholder would need 1500 shares which would require application money of $187.50, and assuming $5 per tonne rebate, no cash rebate would be payable in the first two years but in the third year a cash rebate of $187.50 would be payable giving a cash return on investment of 33.3 per cent a year over the three years. The shareholder would re-

ceive capital appreciation of $1312.50 in the same period, he said.

The Kempthorne Prosser scheme as announced by their fertiliser division would require a shareholder purchasing 100 tonnes to hold 800 shares which the K.P. chairman (Mr P. Fels), said were worth more than $3, each to give a cash outlay of $2400, compared with the Southland deposit of $187.50, Mr Walker said. “Based on last year’s dividend of 13 per cent” a cash rebate of $189.10 would be payable giving a cash return on investment a year of 7.88 per cent. Mr Walker commented that the Kempthorne Prosser share price prior to the Dominion Fertilizer take-over last year was about $1.40 and the suggested value of $3 was far too high, based on earning capacity, and a shareholder taking up shares to benefit from the rebate system could only expect capital loss from share depreciation. Present Kempthorne Prosser profits and proposed rebates were only being achieved because of exorbitant fertilizer prices, Mr Walker said, the Kempthorne Prosser Hornby price being $45.80 compared with the Southland price of $39.05 a tonne.