WOOLLEN INDUSTRY.

New Zealand Herald, Volume LVII, Issue 17597, 9 October 1920, Page 8

WOOLLEN INDUSTRY.

PROFITS OF THE MILLS. ALLEGATIONS INVESTIGATED. BOARD x OF TRADE REPORT, MARGINS «NOT EXCESSIVE." , TBT . 'OTWOBIPft^ ASSOCUWON I .} ' ~, _~i' . Friday.' \An interesting' report dealing -with the woollen milling industry was. presented to the House of Representatives to-day ~by the - Minister . for , Industries and Com? merce, Hon. E. P. Lee. The report cottr tains the result of the. Board of Trade's investigation of allegations made that, the woollen mills in New Zealand have been making unreasonable profits since ■. 1914, the year of the commencement of toe war with Germany. The Board's investigation into all the operations of : the woollen industry, from raw wool to the point of sate to the .consumer, was started some time ago and has not yet been completed- The report tabled was the /section of the investigation of the process of manufacture of woollen goods and the disposal of these goods by the milling companies. The Minister states in his summary of the report that . every care, was taken by the board's officers to obtain accurate information of the costs of manufacture and other charges which figure in the total cost of production. The board expresses its opinion that upon the evidence disclosed it cannot be said that the woollen milling companies of New Zealand have taken excessive profits during recent years. The profits have certainly been increased during the war period and on tho gross capital outlay the average net profit for 1919 amounted to approximately 12 per cent. A reduction of prices of less than 8 per cent, would place the companies in such a position that no profit whatever would be earned by the average company, while at least. two of the largest companies would be conducting business at a loss. "It must be allowed," runs another passage of the report, " that in sympathy with the general inflation of values, the decline in the exchange value of money, and the general increase in interest rates that the investors in woollen manufactur- j ing: companies! are entitled to come increase in the net profits earned by the capital so invested. * There are 10 woollen mills at work in New Zealand to-day, comprising four operated by private companies and six by public companies. Tables given in . the report refer to nine of the companies. The recent change of ownership of the tenth mill has delayed the submission of its detailed accounts to . the accountants of the board. '.

In the preliminary part of the report it is explained that the inquiry has been complicated by the fact that several of the companies are also importers and makers of clothing, " The allocation of capital expenses and profits as between the various departments of these companies," the report states, "is a matter which can be carried out only on the basis of intelligent estimates. The records of the various companies do not provide for the ascertaining of profits otherwise than for the businesses as a whole, but there is no evidence to show that the gross profit arising oat of imported .goods is less than the gross profit taken, on locally manufactured goods. {For this reason the particulars given in the major portion of this report cover the operations which are allied to, but which are not necessarily part of, the business of woollen manufacturing.

Large Output Maintained. "It is well recognised," the report states, "that prior to the war period the pressure of overseas competition was such that woollen milling in New Zealand was by no means a lucrative business. Several of the companies carrying on this business were-rapidly reaching a position of financial instability, and only one or two of the companies were earning profits which could be regarded as reasonably sufficient in a manufacturing industry. The higher profits earned in recent years have, to some extent at least, been secured as a .result of the installation of new and up-to-date machinery and the adoption of improved methods of organisation." The manufacturers state that the absence of competition from overseas permitted them to undertake measures of specialisation and a concentration on materials that could 3uickly be produced. Thus with up-to-ate machinery a large* output was maintained despite the shortage of labour, and the cost of manufacture was kept below the point to which it would have otherwise risen with a corresponding increase of prices to the public.

A Shortage of Labour. The following points v are made:— "Though the number of employees has risen from 1416 in the year 1896 to 1878 in 1919, the mills have equipment for a much larger number, and many machines are idle to-day as a result of the shortage of suitable labour." "In consideration of the fact that the costs of production for different samples of goods have increased since 1914 by different amounts it is not possible to give a concise statement as to the general increase in the cost of manufacture. The increase, however, may be set down as approximately 70 per cent." It is claimed by the woollen companies that the price of greasy wool has increased since 1914 approximately as follows:—Merino 10£ to 20|d per lb. (95 per cent.), half-bred 10|d to 20£ d (88 per cent.), crossbred 7 l-3d to 134-5 d (88 per cent). After an analysis of the wool position the report ..✓mentions that there is conclusive evidence to show that wool prices have advanced in recent years, notwithstanding the nominal fixation of "prices under the Imperial Government requisition and the extent of this advance so far as 1919-20 prices are concerned cannot be accurately determined, but may be accepted quality for quality at approximately 75 per cent. The wages figures show increased rates of about 65 per cent, for men and 52.84 per cent, for women. Largely as the result of the scarcity of labour the wages of junior female workers have been increased to a much greater extent.

"Although it is impossible to determine accurately over the mills as a whole the increase in labour costs in relation to the output, the evidence available showa that this increase has been not less than 60 per cent."

The Cost of Materials. With regard to the rise in the cost of various materials used by the mills, the board states: "It is qujte impossible to give any concise or accurate statement of these increases, but the evidence produced in respect of one mill shows increases ranging from over 100 per cent, for coal to several hundreds per cent, for relatively unimportant commodities." The total share capital paid in up to the year 1919 for nine of the companies was £1,373,460, and the gross capital was stated as £2,234,522. This gross capitalrepresented the aggregate of assets after the deduction of investments in outside business and the amount of sundry creditors' accounts (sundry debtors being allowed to rank as an asset). The gross capital had been based on the book values which in many cases are below the actual present-day values. The total sales of locally-made and imported goods by nine of the ten companies were £1,569,490 in 1914. and £?'!M!£» in 1919 < an '"crease of £1.459,256). The gross profit was £305,630 (19.47 per cent.) in 1913, and £729,061 (24.07 per cent.) in 1919. The net profit in relation to sales was £85,854 (5 5 per cent.) in 1914, and £242,721 (7 9 cent,) in 1919. ' V ' Further investigations will be made regarding the operations of one or two of the more successful companies, and the board's recommendations in this connection will then be submitted to the Government.