LWR puts past behind

Press, 26 October 1984, Page 10

LWR puts past behind

Lane Walker Rudkin Industries, Ltd, expects to resume profit growth this year after overcoming the failed projects which marked down its latest result.

LWR’s chairman, Dr G. B. Battersby, told yesterday’s annual meeting the group’s first quarter profit was in line with budget and a “satisfactory” increase should be achieved in the year to next June 30.

Dr Battersby referred to the losses incurred on L’eggs (Australia) Pty, Ltd, the Bing Harris Group and Canterbury of New Zealand (Canada), Ltd, as “past and buried,” and predicted a return to profit growth similar to the annual average 34 per cent achieved by LWR in 1979-83.

The group’s profit of $6.37 million in the year to last June 30 was slightly down on the previous year and there were extraordinary losses of $2.66 million resulting from closedowns. The directors had “dwelt at length” on the failure of L’eggs (Australia), Dr Battersby said. The initial study had been thorough and comprehensive but the

venture had failed “because we did not appreciate subtle differences between the market conditions in New Zealand and Australia.” The directors had learned from the. experience and while they recognised that C.E.R. may ultimately make the two countries one market, they intended to keep LWR’s Australian manufacturing investments now to a minimum.

Dr Battersby pointed to the result from the Bing Harris Group, more than offset by extraordinary losses of $1.6 million arising mainly from the closedown of the Bing Harris Sargood and Company, as disappointing. Onehunga Woollen Mills, part of Bing Harris, was now being restructured to double its production capacity. The company would not be profitable this year, but was expected to make a “useful” profit in the year from July, 1985. “We anticipate a modest over-all profit from the Bing Harris Group by the end of this financial year,” Dr Battersby told shareholders. LWR had sold its investment in salmon farming for $200,000 which was considered a satisfactory price and was above book value. In response to a shareholder’s question, the group’s managing director, Mr P. H. Rudkin, said the withdrawal from the Canadian joint venture, after a significant trading loss, had been a “sensible

commercial decision before we got too far down the road.” Of the L’eggs failure, Mr Rudkin suggested nothing more could have been done to assess the project initially and quota arrangements had required LWR to put a plant in Australia as the only way to enter that market.

To another shareholder, Dr Battersby said the directors were not considering any further acquisitions outside the group’s mainstream activities. Reviewing LWR’s prospects, Dr Battersby pointed to Canterbury International as the group’s largest growth opportunity with its rugby and sportswear ranges. He said the company had changed its overseas marketing strategies towards franchised outlets where it had control of wholesale purchasing. “The objective of this franchise approach is longterm security. The change of direction has caused some temporary problems while we phase down our business with historical outlets.”

However, a substantial rise in manufacturing requirements to meet deliveries in the second half of the current year was forecast. LWR Leisurewear, which had been established as a marketing vehicle for Arena swimwear in Australia, would be used to launch a number of other products there, Dr Battersby' said.

LWR Hosiery had raised its profit, substantially in the last year, in which there had been major technological developments, and this profit trend was expected to continue. M. O’Brien and Company, in which LWR had a 54 per cent

holding, had now.developed the market position and the technology to achieve satisfactory profitability in future. Dr Battersby pointed to Tekau Knitwear as “the only real problem child among our domestic-based activities.” Its bid to develop large exports to the United States had given the company an unsatisfactory “stop-start” business, he said. Complex handknitting on some of the products had been done in China and Tekau had consequently had problems with U.S. customs rulings. “We now have a number of options in mind, which are aimed at the positive development of knitwear for export.” Dr Battersby said the phase down of export tax incentives starting next year would place pressure on the group. It would attempt to “increase efficiency through increased volume to at least offset the loss of per-formance-based export tax incentives.” As this would not be possible for all products, the group would probably begin more offshore manufacturing through sub-contractors.

“We are cautiously optimistic and believe that our strategy for controlling retail distribution will help to secure long-term increases in our level of exports while at the same time controlling our profit margins.” Noting the likelihood of more import competition from 1987 with the start of the garment and textile development plan, Dr Battersby said LWR was comparatively well placed having invested heavily in technology and reduced cost differentials between itself and third world producers.