Crown prepared for difficult year

Press, 5 December 1985, Page 61

Crown prepared for difficult year

PA Auckland Crown Corp., Ltd, is predicting difficult trading in the present financial year, but is in good shape to weather the storm.

Addressing shareholders at annual meeting in Auckland, the chairman, Sir Roderick Weir, said that, although a reasonable result had been budgeted for in the 1986 financial year, there were too many unknowns to forecast the result with any accuracy.

He said the result would depend on the value of the dollar, the trend in interest rates, the extent to which farm incomes declined, and the effect of that decline on small urban communities in rural areas. “Given these circumstances, we are prepared for a d fficult trading year.”

Sir Roderick said record interest rates and the high value of the dollar had had no affect on the result for the first quarter. He gave no figures. The company, he said, had made substantial bad debt provisions. Notwithstanding the parlous sstate of the pastoral farming industry, the reserves built up in previous years should be sufficient to meet any potential loss. Sir Roderick estimated the fringe benefit tax would cost Crown about $1 million because of its reliance on economy vehicles to service rural clients. He predicted a difficult year for the agricultural machinery subsidiary, C.B. Norwood, because if a slow demand for farm machinery. That would be balanced by a strong demand for

servicing and spare parts. He said the extent of the decline in farm spending was not expected to be felt in the Dalgety merchandising operation.

“The present situation is not unfamiliar to us. It is not the first time that fanners have had to rein in, and we should remember that they have always bounded back and carried the country along with them in doing so. However, it may take a little longer this time.” Sir Roderick recalled the recent flurry of interest in the company’s shares on the Stock Exchange recently when an unidentified party bought 7 per cent of the company’s capital. He said it was a matter of concern to Crown and other listed companies that it was possible to manipulate the price on the sharemarket with large transactions conducted by unseen, unknown persons. He likened those people to the “Man in the Iron Mask.”

Shareholders approved several changes to the articles of association, including the authority for directors to introduce a bonus share in lieu of dividend scheme. Sir Roderick said it was disappointing that such a change had to be made, because the company’s planning had assumed the continuation of tax-free dividend payments. The company had the ability to pay tax-free dividends for up to seven years when the Government changed the rules. The option would be introduced in time for the interim dividend payment in April. Several shareholders questioned Sir Roderick about the scheme. One asked why it had not been introduced on the final dividend approved at the meeting. Sir Roderick said there had not been time to call the necessary extraordinary meeting. Much administrative work was necessary, he said, before that equid be done. It was also too late to defer the final dividend until the scheme could be organised.