Good year for Cyclone but future less rosy

Press, 13 June 1978, Page 19

Good year for Cyclone but future less rosy

LCommercial |

Cyclone Industries (N.Z.), Ltd, had an excellent year to March 31, but the chairman (Mr T. J. N. Beyer) says in his review with the annual accounts that sales for the current year are not buoyant, and that no significant change in sales is expected during the next few months There is plenty of production capacity for increases in orders for the company's products, he says. "In my half yearly report to shareholders I indicated that we anticipated that trading conditions in the remaining 6 months of the financial year would be difficult. This prediction was borne out as business activity in all sectors declined. To add to our problems, widespread drought severely curtailed sales of our farming products, especially our fencing lines where traditionally towards the end of our year sales should have commenced to rise. Sales of products to the building industry fell but certain products in our industrial sector held." Mr Beyer says. “The cost of manufacturing rose during the year, but with very strict budgetarv control and the benefit of our new factory with improved plant layout we managed to keep costs to a minimum. Our Dunedin and Invercargill factories j were kept in full production and traded profitably. Staff in our Maces Road factory. Christchurch, fell over the past six months in line with the drop in the order intake. “Your directors and management are very concerned with the ever increasing cost of raw material, especially New Zealand-made wire. With no ability to absorb, such increases we have been forced to pass these costs on to the end users. Represen-j tation has been made to the Government and Industry' expressing our concern, especially in light of the prob-

iems faced with the farming community, who have been placed in a position of falling prices for their products while essential requirements like fencing materials have risen at alarming rates over the past twelve months. The measures announced in the Budget relating to farmers should give them confidence to spend on necessary maintenance and development

programmes. “Fumware Products, Ltd, our Hastings-based furniture, plating and caravan manufacturing unit has had its problems over the past year. Management, faced with a reduction in unit sales, especially in school furniture and caravans, kept tight control of expenses, and was able to earn a profit despite the market conditions that prevailed. This compares favourably with the loss incurred the previous year,” he says. “Our North Island associate companies earned an excellent profit in spite of itheir trading difficulties, and our recently opened Hamilton brane h has proved a benefit to the group. Cyclone C.M.I. based in Auckland and Wellington had good sales and were not affected to the same extent as Cy-i clone C.M.I. (H. 8. Ltd in Hastings and Gisborne who are mainly concerned with production to the farming community. They did obtain( some good contracts from the industrial sector which allowed them to keep production of their welding section at a reasonable level. “We have by rigorous promotion enjoyed our best ever year for exports. Our associate company in Auckland more than doubled its export sales when compared with the previous year and i exports now account for 8 1 per cent of total sales. In Christchurch we do not have; the advantages which are available to Auckland manu-I

facturers, nevertheless( export sales progress has been steady. Tightlock Deer Fence has a ready market in Australia. Barbed wire and fencing has been exported to Haw’aii and the sale of a prefabricated sheepyard to Rumania, through a New Zealand livestock export company, was recently concluded. Our subsidiary company, Fumware Products, Hastings, secured substantial contracts for the supply of commercial furniture to,

(clients in the Pacific Islands,” Mr Beyer says. As announced, group net I equity profit rise 24.2 per cent to $329,657 in the year to March 31, after providing $19,258 more for depreciation at $112,767, and $20,475 less for taxation at $94,922. The charge for fixed-loans interest rose $35,695 to $102,786. Expenses were well held, 1 and increased only 10.5 peri cent. The earning rate on average shareholders’ funds — again on an equity basis — was 12.7 per cent. The ordinary dividend, raised to 12 per cent be-i cause of the 75th anniversa-: ry bonus, takes $108,000; after allowing for the prefer-i

ence dividend it is coveredj 3.0 times by the profit. Net current assets fell 1 $61,399 to $1,282,797; the: current ratio is 1.9 to 1. Shareholders’ funds increased $378,047 to $2,776,718; they are comprised of $900,000 ordinary capital. $85,000 preference, capital, $221,431 capital reserves, $1,181,122 revenue reserves, and $389,165 equity

(reserves. The ordinary shares last sold at 75c, for a dividend I yield of 8.0 per cent and an I earnings yield of 24.0 per cent. The price-earnings i ratio is 4.2, and the net asset backing 150 c a 50c i share.