FCL profit hike forecast after excellent start

Press, 8 November 1984, Page 23

FCL profit hike forecast after excellent start

Auckland Fletcher Challenge will be disappointed if it does not achieve a 1984-85 net profit of more than $l6O million, according to the chairman, Mr Ron Trotter. Trading results in New Zealand for the first four months of the year were excellent, being well ahead of plan which itself called for a significant increase on last year, Mr Trotter told the FCL annual meeting yesterday. The company nearly tripled net profit to $131.3M in the year ended June 30 from $44.6M in 1982-83. Mr Trotter said this year’s earnings so far had benefited from the “rather artificial buoyancy” of the first quarter, short-term gains arising from 20 per cent New Zealand devaluation in July and the continuation of export incentives. However, even without these factors, Fletcher Challenge’s planning envisaged the group should achieve equal and better results in the future. Mr Trotter cautioned, however, that Government policy changes or a deterioration in international markets or in the economic situation could significantly affect his estimates. He said he agreed with

the need for change in economic policies but the process had to be handled with care and with commercial realism. “There are leads and lags in the impact of all such policy changes and the effect seldom reflects the precision expected by the economists who propose them. “ We need to be careful that the pressure to achieve neutrality does not knock the economic engine out of gear,” he said. “In fact if New Zealand is to achieve the growth we so desperately need then it is essential an environment is created for business that encourages enterprise, innovation, and investment. “It is also essential that Government policies are consistent and stable with less intervention and regulation.” Mr Trotter believed FCL was in good shape to compete in a more open environment. “We already meet the international market place in our major exporting subsidiaries and the strategy for all our business is to achieve international standards of performance.” He said for the first four months of this financial year the biggest improvement has been in Tasman

Pulp and Paper. Newsprint prices and volumes were up as were pulp prices. “Newsprint sales and prices are expected to continue at the current high level but some weakening in the pulp market is apparent. Nevertheless at full production Tasman Pulp and Paper will have a very good year,” he said. Mr Trotter said Wrightson NMA had made a “flying start” due to a mild winter and spring, heavier than usual merchandise and livestock trading and an increase in cattle prices caused by the season and devaluation. “The trend will not continue at its current level but results for the full year will be good.” He said Fletcher Fishing has also started the year well with catches and production efficiencies ahead of last year and prices firmed strongly.

“Tasman Lumber also continues its progress. We believe it can achieve international standards of performance although there is still some way to go. With strong market demand and prices their results will be very sound. “Wrightcars experienced an acceleration of sales from pre-devaluation

vehicle stocks and would normally expect a corresponding fall off later in the year. However with the current outstanding Toyota and Commodore range the company will increase its market share and expects to maintain sales at a reasonable level. In the financial services area, Mr Trotter said, the effect of controls in the first couple of months and increased competition and deregulation since had put pressure on margins. “Results are behind plan and it is unlikely that the sector will better last year’s results.” Mr Trotter said that in view of the profit results the Board had authorised a second share offer to all employees this year, to be made before Christmas. He said the company was favourably disposed towards having a bonus issue and also the possibility of a dividend reinvestment scheme. “However, it is constrained from taking action meantime as the redemption of our two preference share issues cannot take place before January, 1986. Any bonus issue before this reduction in capital could be taxable.” he said.