Ajax suffering a margins squeeze

Press, 21 October 1987, Page 45

Ajax suffering a margins squeeze

PA Wellington Light engineering firm Ajax McPhersons is suffering a squeeze In margins and flnt-quarter profits are running behind those for the same period last year, chairman Keith Pescod says. But while short-term results would be affected by the state of the Australian and New Zealand economies, major restructuring of the trans-Tas-man group would ensure a profitable long-term future, Mr Pescod told shareholders at the annual meeting in Well-

ington. In January last year Ajax bought the Australian nuts, bolts and metal pressings operations from McPhersons and was integrating them with its similar New Zealand ventures.

While much of the restructuring had already taken place, many of the projects were scheduled for completion over the next two years, Mr Pescod said.

For instance, the New Zealand screw manufacturing operation was being moved from Auckland to join the bolt manufacturing site in Lower Hutt — a move which Mr Pescod said would free up 13 million to help repay borrowing, In victoria, Australia, a $1 million nut manufacturing expansion project would rise capacity 40 per cent, and at another site screw and bolt manufacturing was also being meraed. "The changes taking place in the organisation are of a long structural nature,” Mr Pescod said. "The costs of such changes are substantial In time, in money and in personal effort, and the results rarely emerge overnight”

In the year to June, Ajax McPherson's lifted tax-paid profit to $5,032,000, after sales from the expanded group jumped 78 per cent to sl3<7 million.

Mr Pescod said that In the first three months of the 1987-88 year New Zealand sales were flat, but were 10 per cent higher In Australia. However, margins were eroded in some areas through Increased competition, high interest costs and currency fluctuations.

Managing director, Rod Trenberth, said the group was being selective by Investing In specialised businesses or markets, to maintain an edge over competitors.

Apart from the group's core fastener (nuts, bolts, and screws) operations, there was also considerable potential from its metal pressings, timberfixing components, and drill production businesses, he said.