Decline in industrial sector concerns LWR

Press, 8 October 1987, Page 26

Decline in industrial sector concerns LWR

The rapid decline in the New Zealand industrial sector is concerning the directors of Christchurchbased Lane Walker Rudkin Industries (LWR). "Our concern is that while we are seeing substantial reductions in both employment and investment in manufacturing, little if any constructive activity is taking place to capitalise on the resources thus released,” the managing director, Mr David Lee, says in the company's annual report He says this is reflected in increased unemployment and the stream of New Zealanders leaving the country. Mr Lee says that while much of the Government’s deregulation of the industrial sector is justified, and in some cases welcomed, the pace of change is of concern.

“We believe the time has come to call a halt and review the future industrial development of this country.” . He says there have been dramatic changes to regulations in the footwear industry. Despite LWR being one of the; first companies to adjust* to these changes, he says, the company has still suffered.

“In spite of a comparable sales level, the staff of M. O'Brien and Company (a subsidiary) is now 24 down from 156 12 months earlier,” Mr Lee says.

Mr Lee says that in the case of yarn and fabric manufacture, quantitive controls are rapidly disappearing and the Government is evaluating the level of tariff protection it will implement "While improving operating efficiencies will enable us to compete with most countries — given a reasonable tariff regime — we are concerned at the lack of effective antidumping measures.”

Mr Lee says the local apparel market is at present 85 per cent reserved for local manufacturers, but this is being opened up to importers at the rate of 2 per cent a year. The Government will be reviewing this plan about the middle of next year and Mr Lee says LWR has some strong views on What changes should be made.

“These will be made known at the appropriate time,” he says.

Mr Lee says that, on top of deregulation in the industrial sector, high interest rates, high inflation and an overvalued exchange rate are creating an extraordinary environment in which to operate. He expects LWR to emerge from the current financial year with an increased market share, but only a modest sales lift “The real potential for profit improvement lies in the area of cost reduction,” he says. As previously reported, LWR boosted its tax-paid profit for the year ended June 30 to $9,536,000 (previous period $3,201,000). The result was on turnover of $181,451,000. The annual report shows that the biggest contributors to group sales were the textile and underwear divisions, with sales of $5 IM each. The international division contributed S46M, a significant turnaround after posting a loss the previous year.

The division's chief executive, Mr Bill Broadhead, says foreign exchange has continued to be a difficulty for his

sector. He says LWR has needed to take forward cover at a time when the New Zealand dollar is strong against the United States dollar. The company has forward cover until October, 1988, at an average rate of U553.77C per NZIOOc. The sports wear group brought in S2BM, Adidas apparel having a strong year but Adidas footwear performed less well. The outerwear division exceeded budget with turnover of S4SM. LWR took a loss on associated companies of $582,000 ($169,000) profit The 10c a share dividend is covered 2.1 times with current liabilities and provisions at $51,565,000 ($45,441,000) and current assets at $78,997,000 ($80,495,000).