Commercial Tasman hopes shattered

Press, 4 July 1978, Page 20

Commercial Tasman hopes shattered

I The production, cash flow, iand profit plans of the Tasman Pulp and Paper Company, Ltd. in the current financial year to March 31 were shattered by the strike which ran from March 29 until May 11, says the chairman (Mr J. C. Fletcher) in the annual report. In a production sense the company lost 43,000 tonnes of newsprint. 25,000 tonnes of sale timber, and 22,000 cu m of sawn timber at a gross sale value of S24M, he says. •‘ln a profit-and-loss sense, the impact from the! strike means that a loss for) the year to March 31, 1979,| is now anticipated. “However, the agreement for resumption of work which was negotiated with the 14 unions involved is an equitable one to all parties and it establishes constructive procedures for dealing with future disputes.” Mill activities were interrupted no less than 13 times during the year under review as a result of industrial action taken by three unions, and production lost amounted to a gross sales value of SIOM. Newsprint production for the year fell 2390 tonnes to 277.430 tonnes. Gross sales were about 7.2 per cent higher at

$150,991,000, including ex-i port sales at $109,970,000. I “It was necessary during die year for the company to reduce its price for newsprint sold in Australia and certain Far Eastern markets and on non-contract pulp sales. "Sales of sawn timber were also some 20 per cent below the volume achieved in the previous year, but the price reduction and shortfall in sawn timber were offset by additional newsprint sales and an increase in the, ’price of newsprint sold to I New Zealand publishers,” he says. I Sales of newsprint to Australia were below budgeted levels because of a static economy and the failure of two major Australian publishers to purchase their newsprint from the company at a level envisaged in New Zealand-Australia Free Trade Agreement. “During the last 12 months supply agreements have been concluded with China and with India, in the face of strong competition from other world suppliers. “Further, strong marketing efforts have also been made in other Far East markets and increased newsprint sales have been achieved in Hong Kong, Malaysia, Singapore, and Indonesia.

: “The substantial surplus lof newsprint capacity in the world has resulted in increasing competition in export markets and price erosion has been prevalent. “The weakening of the United States dollar relative to the Australian dollar made it necessary to reduce the price of newsprint by SAustlO a tonne in October, 1977, to remain competitive with Canadian and Scandanavian suppliers. ' The relative exchange rate has continued to weaken since January, 1978. and as a result the company’s newsprint selling price has been automatically reduced by a further $lO a tonne. "In spite of the continued economic recession in New Zealand, sales of the company’s newsprint and pulp were maintained at a satisfactory level,” Mr Fletcher says. “However, the company’s present domestic newsprint price is still about $lOO a tonne below the current world price for newsprint imported into New Zealand, and some $32 a tonne below the price authorised by the New Zealand Government Pricing Authority in 1977.” Should the much publicised Albury project by Australian Newsprint Mills. Ltd, go ahead Tasman will be faced

with finding alternative markets for some 90,000 tonnes of newsprint, Mr Fletcher says.

As reported, the group net trading profit fell 14.3 per cent to $4,251,000, but -fter export tax incentives and credits the total profit is $13,484,000 compared with $4,959,000 previously. The profit was after providing $66,000 more for interest charges at SB.9M, $lO,lOO more for depreciation at $10.4M, and no taxation was payable. Because Tasman has still to resolve many issues bearing upon its cash position, including Government plans for some restructuring of the company, and the six-week strike no final dividend is recommended. The interim dividend of 2.5 c a share (5 per cent) requires $970,000 and is covered 13.7 times by the profit.

Shareholders’ funds rose $18,621,000 to $109,528,000, including steady capital of $21.4M. The earning rate on average funds rose from 6 per cent to 13.6 per cent. Shareholders’ equity was 46 per cent. The working capital deficit fell $624,000 to $23.2M, and the current ratio was steady at 0.6 to one. The shares last sold for 125 c for a dividend yield of 2 per cent and an earnings yield of 27.4 per cent. 'The price-earnings ratio was 3.6 and net asset backing a 50c share was 277 c.