FOREST PRODUCTS

New Zealand Herald, Volume 78, Issue 24135, 29 November 1941, Page 7

FOREST PRODUCTS

MARKED PROGRESS MADE MANUFACTURING BEGUN REFERENCE TO PAST PROBLEMS A review of the recent marked progress of company, and reference to its past problems, was made by the chairman of directors of New Zealand Forest Products, Limited, Mr. David Henry, at the fifth annual meeting of shareholders yesterday. In moving the adoption of the annual report and balance-sheet, the chairman stated:— "The development account has been increased by £20,200. This represents the excess of expenditure over income, « apart from capital expenditure, and, while the amount is quite a large one, it is the lowest debit balance for any year since our inception. The amount charged last year to development account was £27,391, so that the saving on the year's operation is over £7OOO. "The directors would, of course, like to present a credit instead of a debit balance, but that point can only be reached when profits from manufacturing and milling activities exceed the outgoings for forest maintenance costs, office administration, rates, taxes, etc. The large insulating board mill now established is the first of those activities, and we hope that sufficient profit will ensue therefrom to more than offset the heavy annual charges. Reconsidering Tax Assessment "The directors in previous years have referred to the heavy charges for land and income tax, which, it is felt, are not wholly equitable in the circumstances, but we have not made any real progress toward securing an alteration in assessment. We appreciate the difficulties of the taxation authorities, but, on the grounds of equity, we think that the unusual circumstances of the company warrant special consideration. We are, therefore, constantly pressing the proper authorities for reconsideration of the basis of the company's taxation assessments. "Investments on buildings, plant and equipment have increased substantially since last year. This indicates the degree of progress in the establishment of those works during the year, and the estalishment of all manufacturing and milling activities, excepting the_ machinery for making hardboard, is now practically complete. The hardboard machinery has been delayed on account of the war, and is not expected her© until May or June of next year. "Shareholders will realise that, in the midst of all these operations, war was declared, and it will be readily understood that hostilities have caused much delay in acquiring machinery and plant. On the other hand, the directors feel that the industry, and especially the product, will prove of much assistance in New Zealand's war effort and, with this in view, they have pressed on to production. Increasing Mill Production "Machinery has also been ordered to increase the capacity of the present insulating board mill at Penrose by 50 per. cent. The bulk of this plant has arrived, so that there will be no delay in meeting an increased call for our product when that point has been reached. "It is interesting to note how the set up of the company's problems lias been ever changing since its inception. First, there was the basic problem attached to forming the company from the bondholders; this was followed by the settlement of the compounding of . the maintenance contract; concurrently we took over the forests and gradually evolved a satisfactory scheme of maintaining them. This was followed by the consolidation of the various trusts and the issue of common classes of shares, and now the company has two sawmills constantly working, pit props are being regularly supplied to the mines, the insulating board mill is in steady production, and 'Pinex' board is being shipped and railed all over New Zealand, _ while the timber preservation plant is in course of erection at Pinedale. "The change in the problems has been ever constant and in some respects we feel progress has been slow, but we feel that a great deal has been accomplished in the five and a-half years of the company's life. In a month or two the comnany's employees will number about 400. Indebtedness to Government "The present developments _ and establishment of realisation activities have only been made possible by forming the bondholders into shareholders in this company, and I think we are indebted to the far-sighted policy of the New Zealand Government that made that change possible. "As bondholders you will remember you were entitled to "one undivided acre of trees in a particular trust for every bond purchased. The contract with the planting company provided that they would plant the acre and maintain it for 20 years and at the end of that period bondholders would stand possessed of their holding. "The responsibility for maintaining the area after 20 years and marketing the crop belonged entirely to bondholders and it is obvious that they would then have had to find more money to do those things if ti*ey desired to get the benefit of their first investment. There was no individual acre allotted to them., It will require very little consideration to indicate that the position of bondholders at the end of 20 years would not have been an enviable one. To-day their position is improved immeasurably, and without going into the many advantages gained by bondholders becoming shareholders I need only mention two. "Firstly, we are marketing portion of the trees before the 20-year period has expired. Secondly, shareholders have not been asked to find a single pennv for the mills which have been, established up to date. They are yours —free of all encumbrances, and there is still a lot of money in reserve for the purchase of any further plant which may be required. _ The money shareholders paid for their bonds was solelv to plant and maintain the trees. "The mere formation of the company would not of itself secure the results indicated, but it made it possible for a common unitv to be established among shareholders and a board of directors appointed from among them which could consider every problem and work for the common good of everyone. Experiments and Research "The directors, however, do not desire to rest on past achievements; their minds are constantly fixed on the future. Plant for certain added experimental activities is being secured, a research department has been established, the services of a highly _ experienced pulp and paper chemist and assistants have been secured, and wo expect to provide a great deal of information which is now lacking. The directors expect to be able to advise shareholders of further developments, which should be undertaken in line with the realisation plan which has been adopted. We are still awaiting advice from the Government regarding our application l'nr a licence to establish kraft pulp and paper mills, _ and hop© to learn before long that this proposal has met with tlieir approval. "Over .10,000 share certificates have now been issued, and we expect to have despatched by the end of January next all certificates which have been applied for up to date. This will still leave a number to be completed, but nothing can be done until we receive back tho old certificates. We urge shareholders concerned to do this without delay.' _ The chairman closed with appreciative references to the loyalty and keenness of the staff. The adoption of the report and balance-sheet, as published in the Herat,P on September W. seconded by Sir Charles Mnrr. retiring directors, Messrs. S. -f Me ■ > bon and 11. G. Buckleton. were reelected Messrs. Morris, Duncan and Gvllies and Mr. H. 31. Newton - were reappointed auditors. r.B.A.