Alliance Textiles full of optimism

Press, 6 December 1985, Page 20

Alliance Textiles full of optimism

PA Dunedin A warning that Alliance Textiles, Ltd, would not hesitate to rationalise further if the New Zealand dollar, or other factors, hit sales, caused a lively exchange at the annual meeting. The chairman, Mr W. R. Jackson, made the warning in giving an optimistic view of the company’s future. Results for the first quarter of the new financial year showed that domestic sales were up 9 per cent, export sales 12 per cent, and total sales 10 per cent. But he said profits and margins have been eroded, particularly by exchange rate fluctuations.

The forward order position was healthy and margins were improving, though not as well as at the same time last year.

Carpet yarn spinning capacity at Oamaru had been increased, and a number of plants were working extended hours. “If currency or other inhibitions result in levels of sales which are uneconomic for any plants then 'this company will not hesitate to further rationalise,” Mr Jackson said. “Your board takes the view that by operating as a major international competitor out of Australasia, further processing indigenous raw materials, that the medium to long term outlook is good. “Along with other export orientated companies, we will have to endure difficulty because of currency changes during the period of readjustment, and there may well be further

rationalisation, both here and in Australia. As a major company in our sector we will surely be part of it.” He was challenged by Mr Michael Mellon, a Christchurch shareholder, who said: "When we hear things like that it sounds very characteristic of the Brierleys and Judges of this world, who see things in asset terms rather than people terms.” He referred to R and W Hellaby, Ltd, controlled by Mr Bruce Judge, which recently acquired a 32 per cent interest in Alliance. “That (possible rationalisation) is unsatisfactory because the company has spent very large sums in establishing markets,” Mr Mellon said. “I would like to hear of a much bolder strategy from the board. “I would be quite satisfied if you have to report diminished profit if it means keeping key staff and markets.” Mr Jackson said he was not opposed to Mr Mellon’s position. “It is a matter of degree,” he said. “But there is no point in keeping on until it kills you.” Recalling the strategy of four years ago, he said Alliance saw itself in carpet and knitting yarns. There was a limited future for weaving. Knitting was “for the fairies.” As things turned out, the group’s knitting business had done well and would continue to do so. It was the yarn business that was hurting. He reminded shareholders that the New Zealand dollar had risen from being worth 62c

Australian to as high as 89c. “So you know what sort of a bath we have had. We will stay there but if we are looking death in the face we will avoid it.” In his speech earlier Mr Jackson said that despite the difficulty of maintaining margins and obtaining growth, Alliance was extremely wellplaced to endure unfavourable conditions and to take advantage of new opportunities. “Our restructured operations are sufficiently efficient, and our production runs sufficiently long, to compete with .unsubsidised western ’ international competition in chosen areas,” he said. “We intend to ensure that we remain in such a position by keeping absolutely up to date with the

latest technology, equipment, and methods. “We have already taken the opportunity to acquire the Lanes, Ltd, operations and work is proceeding apace for rationalisation of all our interests in the Manawatu. We believe our North Island further processing operations have an exciting future. “At the same time we shall be able to make better use of our Auckland facilities.” The possibility of manufacturing in Australia to beat both exchange rate and bounty problems was. raised. “We could well be involved in allied production activities in the future,” he said. “The relativity of the New Zealand dollar versus Australia is a matter of continuing

concern, and we may need to look further into Australianbased operations, particularly while bounties apply in Australia and not here. Bounty assistance is likely to continue for a further 10 years, to New Zealand’s disadvantage.” Referring to the annual report, Mr Jackson said the group generated more than $ll million internally. Total book value of the company’s fixed assets is just over $29 million after substantial writing down. “We are well aware that our productive capacity could not be replaced for less than $lOO million," he said. “In this fact lies a strength which will be to your benefit in the competitive time ahead.”