Good result by Winstones

Press, 5 December 1981, Page 19

Good result by Winstones

PA Auckland Winstone. Ltd. has bounced back with a 129 per cent leap in net operating profit to $4,71'2,000 for the six months to September despite a reduced but still high loss on the Karioi mill of $2,670,000.

The unaudited result, which compares with a $2,054,000 profit for the 1980 half year, was earned on sales 25 per cent* higher at $123,726,000. t

The operating profit for the six months was $1,079,000 more than Winstone earned in the 1980 full year. Extraordinary loss items totalling $1,217,000 reduce the over-all profit to $3,495,000 — a 2".7 per cent increase on the 1980 equivalent. These arose mainly from an accounting change to amortise unrealised exchange losses on overseas loans. The figure includes $318,000 in unrealised and $715,000 in realised exchange losses but total unrealised

exchange losses of $2,576,000 are being amortised over the period of the loans. In 1980 extraordinary items represented a gain of $682,000, including a $651,000 unrealised exchange gain. Higher tax credits from export sales growth again boosted the earnings result. Credits totalled $1,533,000 (previous $1,043,000) from export forestry expenditure and market development incentives.

Similarly, tax losses have again eliminated a tax provision on- New Zealand operations except for a minor amount on mining and overseas company profits. The result includes $98,000 ($100,000) in equity earnings associated companies and was reached after depreciation (less recoveries) of $2,374,000 ($2,412,000). The directors say domestic sales rose 22 per cent and exports, including pulp sales; 61 per cent.

A steady interim dividend of 3c a share (6 per cent) has been declared, which the directors say is equivalent to 3.3 c on the one-for-10 bonus increased capital. The dividend, requiring about $1,522,043, is payable February 5, ex January 18. Paid-up capital increased from $29,261,909 to $31,567,384. The directors report that application monev totalling $889,092 had been received by September 30 for Winstone’s 16 per cent redeemable cumulative preference share issue. Since balance date 12,800.000 of these had been issued, increasing the issued capital by a further $6,400,000.

The directors say that, in line with comments in the annual report, they expect significant increases in sales and profits will be achieved for the full year.

“Forward orders remain at a satisfactory level, confirming the buoyancy experienced in October and November," they say. “But the international pulp market is expected to remain depressed until the second or third quarter of 1982." In an interim report, the chairman (Mr A. H. Winstone) says that conditions in the New Zealand economy, and the building industry in particular, improved during the six months.

Commercial construction volume increased, some new industrial projects began and residential building permits rose, he says. Addition and alteration activity remained at a high level and volume continued to grow in the do-it-yourself market. In some geographic areas improvement occurred in the real estate market, with a consequent expansion in medium to high cost residential home building. Increased consumer credit helped to maintain retail sales growth, he savs.

Increased use of existing manufacturing and merchanting resources enabled the merchandising sector to capitalise on a firming in the marketplace. Mr Winstone says only a minimal additional capital investment was needed to achieve an improvement on funds employed. Although the international pulp market continued to be

weak, budgeted production and sales targets were met. “It appears that the year's targets are still achievable," Mr Winstone says. “Contracts with existing customers have been extended for a further two-year period and there is some demand for spot sales." The $2,670,000 half-year net loss on the Winstone Samsung Industries Karioi mill compares to $3,134,000 lost last year. The directors repeat that it may be some years before the mill returns a positive contribution. The mill has operated both lines since April 1 and the current sales target for the present year stands at 57.000 tonnes, tip 45 per cent on the 1980-81 sales levels. Mr Winstone says that studies of methods ’to improve the range of pulp through introduction of a chemical-thermo-mechanical process have continued with extensive market surveys to identify likely demand, and to form strategies. In addition to the 12-month secondment of Mr Lennart Lunden. a senior executive of the Swedish firm Suns-Defri-brator, as managing director, the marketing and technical support teams of Winstone Samsung are being further strengthened. The Government subscription for preference shares and loans totalling $l5 million has enabled the repayment of overseas borrowings of SUSI2M, he says, with tfie balance for plant additions and modifications. The groups traditional activities performed well. Winstone continues to im-

prove efficiency and productivity with sufficient capacity remaining at manufacturing and trading levels to utilise opportunities. Mr Winstone . says that offshore trading outlets were generally in line with forecast levels. In Papua New Guinea two civil construction contracts will be completed this month and the deficit for these has been confirmed at $1,290,000, provided for in the operating result. No further civil construction contracts will be entered into, he says. Winstone’s 20 per cent investment in Golden Bay enabled a share of the cement industry on a broader base than was the case with the previous stake in Wilsons (NZ) Portland Cement. Dividend income from Golden Bay of $316,000 was included in the operating profit plus a further $86,000 in retained profits of associated companies. The board has decided to write up certain land and buildings of subsidiaries to an independent valuation, and $5,090,000 more has been credited to the revaluation reserve. On the future. Mr Winstone says the economy appears to be entering “a further phase of contraction” and liquidity is expected to tighten early next year. Government policies affecting the building and construction industries will probably not become apparent until the new year, he says, but Winstone still expects to make significant progress and take full advantage of market opportunities.