FLOUR MILLING

New Zealand Herald, Volume LXXIV, Issue 22722, 7 May 1937, Page 13

FLOUR MILLING

CONTROL BY STATE INDUSTRY'S DIFFICULTIES "A DISASTROUS RESULT". NORTHERN COMPANY'S FUTURE The position of the Hour-milling industry under the scheme of control inaugurated by the Labour Government was reviewed by Mr. J. A. Peacock, the chairman of the Northern Poller Milling Company, Limited, at the annual meeting of shareholders yesterday. The accounts of the com- . panv, which showed a fall in profit for the year of £20.774 to £11,793, were published in the Herald on April 22. "This company for 36 years has served Auckland Province efficiently," said Mr. Peacock. "No exaggerated profits have been made for shareholders, ■ whose return on their capital for ma|iy years remained at 7 per cent, which in a commercial concern of this character could only be regarded as moderate. Government Takes Ovex "The position as I have to explain it to you to-day has entirely altered. In February, 1936, the Government, coincident with the new harvest, took over the milling interests from the growing of the grain to the disposal of the fipur. This involved the fixing of a price for the service of converting wheat into the dour of commerce. The resylt of this interference has been disastrous to this company and milling interests generally. "The Northern Poller Mills' management, recognising the expansion of business that the growth of the community necessitated, decided in-1929 on a five-year plan of development. This had just been completed when' the Government stepped in. At this time 34,000 tons of flour were being "handled by the company, and there were facilities to increase this amount to 38,000 tons. The Government scheme arbitrarily reduced the output to 27,000 tons, and fixed the price allegedly to show a reasonable profit. The figures that I have to put before you to-day show what that means. From £11,793 of, profit made in the 12 months, £5527 goes in income tax. In £1233 Was paid in land tax, which makes the total amount paid to the Government by way of taxation £6760. leaving the shareholders £6266, so that, without responsibility or financial obligation, the Government to-day owns slightly more than half your business. Dividend Prospects "From profits there is a negligible return on shareholders' capital. Your directors feel that this cannot be the intention of the Government. It is for this reason that a dividend of 4 per cent for the past 12 months has been recommended from the accumulated profits. That this cannot be cohtinued is indicated in the report that you have received. Unless profits are made in the ordinary course of trading, no further dividends can be expected. "We have had the assurance of the Prime Minister in and out of season that no interest in the community would he injured, yet this company has been arbitrarily divorced from its customers, whom it has served and helped for more than a third of a century, and it has been left with no possibility of meeting its obligations to shareholders to give them some return on the capital that they have invested. "The directors examined carefully the question of efficiency. Experts were | engaged. Their reports Mere briefly to ' the effect that there was no mill quite as efficient in New Zealand, and it was the equal of any in Australia. So the position resolves itself into this, that for the past 12 months the company has been the victim of the Government's scheme to regulate the industry from the growth of wheat to the sale of flour ; to the public, either as bread or for , household purposes. Effects upon Quality "There is another and very important phase of the subject which requires a clear and impartial statement of facts. Under Government control. it cannot be said that it has been possible, in spite of every effort, to maintain quality. A large amount of last year's harvest sprouted in the stook. This was a disaster beyond anyone's control, but the insistence that this wheat should be gristed resulted in the mixture consisting largely oi unsound wheat. "Extraction of flour, instead of being about 73 per cent, fell below 70. per cent, and for the whole year just equalled that figure. No doubt some mills got a higher extraction, and the inferior article they produced was paid for by the Government at the sania price. There was one price, irrespective of the quality of the flour. No allowance was made for the inferior grain supplied. Moisture Content of Wheat "This year the position'is no better. The Wheat Committee was warned as far hack as December that the crop would be inadequate, and that Australian wheat would require to be imported, but no attention was paid. New Zealand, because of the vagaries of the climate, is unsuited for heading wheat, which is the process of cutting and threshing at the same time. Canterbury wheat should be stacked for six weeks before threshing. An unusually wet summer in Canterbury this season is resulting in an exceptionally high moisture content, the average being about 16.5 per cent, and rising as high as 19 per cent. If; was quite impossible to ship this wheat or even store it with safety. "The result has been that, instead of having four or five months' supply of grain in our granaries, which is usual at this time of the year, our mills were reduced last month to an amount eoual to a fortnight's gristing. Without being able to mix different classes of wheat, flour of a suitable standard cannot be produced, and here the mills have been gristing any grain that could be secured without regard to quality or any other factors. No allowance has been made for th< high percentage of moisture, but when a belated cargo of Australian wheat arrived at the end of April, the low water content was taken fully intc account in fixing the price. These ar< facts, and no contradiction or speciotu argument can alter or detract from them one iota. Courses Available "The statement as to the mills' efficiency is beyond question, but is open to Government investigation. If the position is not met, it means that the Government is knowingly pledged tc confiscation. There can be no other conclusion. There appear to be two courses open to the Government —either to fix a price that will allow the mill to function at a reasonable profit, or to take it over at what was the current price of shares at the time that the affairs of the company passed virtually from the control of the management to a State department, as was done with the Reserve Bank of New Zealand. Either course is open, and, I feel, will be acceptable to shareholders. "During the thirty-six years that the company has been in business it has had uniformly harmonious relations with its employees. During the ten vears preceding Government intervention approximately £300,000 has been paid away in wages." The report and balance-sheet wer€ <U ',s'r W. Cecil Leys and Mr. John Hcllaby. the retiring directors, were re-clected. < -