Motor Holdings loss on difficult trading

Press, 24 July 1987, Page 18

Motor Holdings loss on difficult trading

PA Wellington Motor Holdings, Ltd, has reported a loss before extraordinary items for the year ended March 31, 1987, of $3,983,550 compared with a profit of $1,349,123 in the previous year. An interim dividend of 5c a share (10 per cent) was paid in January, but the directors have recommended no final dividend be paid. Total dividend paid last year was 11c a share (22 per cent). Turnover was up 26 per cent to $131,409,359 from $102,918,618, but the pretax result was a loss of $3,796,378 against last year’s profit of $2,040,966. Tax of $106,847 reduced last year’s trading profit to $1,934,119.

The share of associated companies retained loss was reduced from $584,996 last year to $187,172. Extraordinary items increased the loss this year by $1,030,900 against last year’s extraordinary profit of $497,016.

This resulted In a bottom line loss of $5,014,450 compared with last year’s profit of $1,846,139.

The operating loss was the result of difficult trading conditions experienced by subsidiaries Subaru New Zealand, Ltd, Motor Holdings Machinery, Ltd, and Motor Holdings Aviation, Ltd, the directors said. The more liberal market access for built up vehicles and private imports caused a reduction in demand for the locally assembled product and, combined with high interest rates, created the most difficult trading conditions ever experienced in the vehicle assembly industry, they said. Subaru New Zealand is now the only wholly New Zealand owned motor vehicle assembler in New Zealand competing against Japanese and other multinational vehicle producers. The factory support given to the multinationals enables them to engage in massive price cutting to maintain assembly volume and gain market share at the expense of ' gross margin contribution. Discussions are currently taking place with the company’s Japanese principals, Fuji Heavy In-

dustries, to try to improve the position. The heavy machinery and aviation divisions maintained their market share, but suffered an erosion of gross margins. As a result of a reduction in demand from the mining sector, the wheel loader assembly operation became unprofitable and was shut down. Aviation parts and service volumes decreased dramatically due to the grounding of helicopters used for the capture of live deer. In addition, projected aircraft sales were deferred or cancelled. But subsidiary Blue Wing Honda, Ltd, produced a satisfactory result, the directors said. Since balance date the company has sold 90 per cent of its interest in its agricultural subsidiary, C. B. Norwood Distributors, Ltd, subject to Commerce Commission and Overseas Investment Commission approval. The directors also said they welcomed the closer association with Euronational Corp, Ltd, which was assisting with a plan to restore the company to profitability.