Watties sees slower earnings growth

Press, 17 November 1982, Page 43

Watties sees slower earnings growth

PA Auckland The earnings growth achieved by Wattie Industries, Ltd, in the last two years might not be maintained while the price/freeze regulations are in place, the chairman, Mr W. T. Morriss, says, in the annual report. In certain areas of Wattie’s operation there are cost increases which the company is not permitted -to pass on, he says. ; ’ < Mr Morriss . reports that for the second year in succession the momentum produced ,by the first half carried on into the second, resulting in an improvement in earnings, and to a lesser extent, in sales. Operating expenses were held to a 15 per cent increase over 1981. The equity after tax earnings from the Wattie holding in the Goodman Group amounted to $1,179,090. The holding was increased from 24.9 to 34.6 per cent during the year. Total group sales increased 15 per cent to $526,127,000 including exports of $43,201,000. '

Mr Mdrriss says -that a considerable tightening in monetary conditions has been evident- for some time and there is no doubt that the credit squeeze will persist until the worsening overseas deficit is arrested. The group earlier this year introduced a one name paper (promissory note) facility for $25 million and at tjalance date had two lots of notes in the market. Mr Morriss says it is expected that one name paper will become - part of the group’s regular funding mechanism for working capital. Net capital expenditure on property and plant amounted to $33,331,000. Equity profits arising from the Wattie 24.9. per cent share in Waitaki N.Z. Refrigerating, Ltd, acquired in April for $2B million, have not been included in the 1982 result. Mr Morriss says it is intended to equity-account the Wattie share of this profit in subsequent years. Mr Morriss says that at the time of the Wattie entry into Waitaki NZR, the meat processing and marketing industry was facing problems. But the investment was made in the context of the group’s over-all strategy of future expansion and development which lies mainly in the food processing industry with emphasis on export marketing. The investment was made long term, he says, and the directors are confident that Waitaki and the whole of the New Zealand meat industry

will overcome the present difficulties. The managing director, Mr J. O. Haworth, says increases in volume in the domestic market were not significant but increased volume and value of exports throughout the group were an important element in the higher profitability reported. After-tax earnings, including share of associate companies' earnings, and before extraordinary items, increased 24.5 per cent to $29,482,000 in the year to July 31. Mr Haworth says that a 25 per cent increase in export sales of canned foods contributed very significantly to the after tax profits of this sector. The fishing operations of J. Wattie Canneries, Ltd, continued satisfactorily and export sales of frozen vegetables to Japan were buoyant. The General Foods wholesale division made a loss. The consolidated balance sheet shows paid-up capital of $57,631,000 compared with $52,863,000 a year ago. Reserves were $217,317,000 ($195,150,000). Deferred tax is shown at $4,970,000 ($3,585,000). Term liabilities are $70,478,000 ($48,533,000). Current liabilities were $111,462,000 ($74,469,000) and total funds employed $293,277,000 ($247,416,000). Fixed assets increased from $118,666,000 to $143,307,000, investments from $37,264,000 to $80,472,000 and current assets from $165,955,000 to $180,735,000.