Good result by Feltex

Press, 16 March 1982, Page 34

Good result by Feltex

PA Auckland Feltex New Zealand, Ltd, yesterday reported an unaudited group net profit of $8.5 million in the six months to December 31, an increase of 35 per cent on the previous corresponding period. The result was achieved on group sales higher at $224.2 million. The interim dividend has been increased from 4c to 4.5 c a share (9 per cent) taxfree, payable on April 7, ex dividend on March 24. The directors said the buoyant market experienced at the end of the last financial year had continued into the. first six months of the new financial year, and company sales were again ahead of inflation.

Of greater importance was the improvement in profit, they said. The 35 per cent increase in the net profit reflected not only the improved market in comparison with the same six months last year but also the stronger position which the company had reached after the major effort in developing and redirecting the business begun during the last few years. Of the three operating companies, only Feltex Reidrubber. Ltd, had results that fell significantly short of corporate objectives. The reorganisation of activities in that company was already under way. The major determining factors in its future would be the Industries Development Commission’s plans as finally accepted by the Government and the impact of closer economic relations with Australia, the directors said. In contrast to the domestic

sector all groups found export markets tight and fiercely competitive - because- of the ..international recession. The drive to build longterm viable markets overseas had continued, and export sales were up 47 per cent on the same six months of last year. During the period, Eurodollar loans had been progressively repaid to reduce the company's exposure to foreign exchange fluctuations. At the same time firm control has been maintained on funds invested in working capital and the Feltex group remained in a strong financial position, they said. Feltex Furnishings of New Zealand, Ltd, reported that the increase in both new dwellings and alterations, coupled with the greater availability of credit, led to an upturn in the carpet market.

Smith and Brown Maple, Ltd, again sharply increased its market share, and sales were 39 per cent ahead of the six months to December 31, 1980. Feltex Industries, Ltd, reported that the integration of the head office and warehouse activities of the old established distribution company; J. Yock'and Company, Ltd, on a new site in Auckland, would complete the. restructuring of the plastics group into four separate divisions.

The reorganised units had continued to grow in both sales and profits, and results for 'the group are now in excess of corporate objectives. In the favourable economic conditions, the textiles group had strong growth in sales and profits. Of particular note has been the achievement of the three major units in building a new export base: Feltex Yarns with the first major export of machine knitting yarn to the United States and. handknitting yarn to Australia and Japan; Feltex Marine with the export of baler twine to Australia; and Spalding with golf clubs to

Australia. Exports for the group were up 140 per cent on the same period last. year. Feltex Reidrubber, , Ltd, said the local market for tyres halted its downward trend of recent years and held over-all volume levels in the latest six months. At the same time, the Reidrubber market share had risen so that sales were ahead of those in the same period last year in real terms.

In Australia, severe competition had limited sales, but the appointment of an Australian marketing manager based in Sydney, together with the forthcoming introduction of a new tyre developed specifically for the Australian market, was expected to restore Reidrubber’s export growth. In spite of the encouraging short-term picture, the outlook remained clouded by the Industries Developemt Commission (IDC) study which recommended the eventual free trade between Australia and New Zealand in new tyres.

In such a capital-intensive industry the advantage enjoyed by the Australian companies with their larger market base posed a real problem. Reidrubber, however; with its plant located in the centre of the largest New Zealand market, was as well equipped as any New Zealand tyre company to face such competition. The management was engaged in a complete restructuring of the rubber group. This was undoubtedly necessary in view of the coming IDC report and the likely development of CER. The emphasis on agricultural products, an area of great potential development, had been hindered in the latest period by production constraints, but steps were being taken to overcome this. Feltex Finance, Ltd, said that strong public support for the company's unconditionally . guaranteed deben-,

ture stock provided a 30 per cent increase in deposits during the last six months and allowed an increased level of hire-purchase discounting. Profit after tax for the current period was 89 per cent ahead of that for the same period last year. Intense competition for funds had caused debenture interest rates to rise substantially and though the company’s rates remained competitive, Government actions were likely to cause a reduction in activity for the rest of the year. Commenting on prospects for the future, the directors said that in conjunction with the re-organisation and redirection of existing operations, it has been the company’s objective to obtain stronger growth prospects and a more balanced business through investment in activities that add value to the country’s- natural resources, particularly wool and timber.

A number of companies which had been acquired in recent years had now been co-ordinated and fully integrated into operations, the directors said. Not only had they shown good growth, but the majority had substantially improved their profit.ability. With both'existing and new businesses developing in accordance with the basic five-year strategic plan, the company could look forward to good trading continuing. In shorter term, the extent to which current growth and profit rates were maintained would be affected materially by the general economy of New Zealand.

Although most economists suggested that the current level of buoyant trading was unlikely, to continue during the next six months, it was confidently expected that the full year’s results for Feltex would show real growth for the company and its shareholders, the directors said.