DOMINION FERTILISER COMPANY

Otago Daily Times, Issue 23828, 7 June 1939, Page 9

DOMINION FERTILISER COMPANY

NINTH ANNUAL MEETING ADVERSE SEASON EXPERIENCED SIX PER CENT. DIVIDEND DECLARED The ninth annual meeting of the Dominion Fertiliser Company, Ltd., was held in the Public Trust board room last night the chairman of directors, Mr R. G. Hudson, presiding over a large attendance of shareholders. CHAIRMAN'S ADDRESS The adoption of the annual report and balance sheet was moved by the chairman, who said he was pleased to report a successful year's operations. These results were secured in spite of seasonal conditions more unfavourable than any experienced during the history of the company. Last autumn and winter in the Canterbury province were the worst seasons experienced within the memory of the present generation of farmers. Very little autumn sowing of wheat took place, and top-dressing was at a standstill. The spring and summer, with better weather, brought such a growth of feed that top-dressing was out of the question. Likewise, the weather in Southland and South Otago from June to September was so bad that top-dress-ing and cultivation were impossible. The weather broke again in October, and heavy rains and floods were experienced off and on until January, restricting severely the sale of fertilisers.

"Notwithstanding these adverse factors, the company's sales were the largest experienced in any one vear with the exception of the sales made in 1937-1938." Mr Hudson said. "This fact I think shows how stable a market exists for the company's products and leads me to think that the sale of phosphatic fertiliser in the South Island will increase in the future just as they have increased during the company's short history. In this connection. I estimate that sales have increased between 1931-32 and 1938-39 by at least 100 per cent. Shareholders will recollect that the year 1931-32 was the first year the company marketed its products.

"During the year the company used raw materials costing £126,209. while manufacturing wages totalled £21,361. Both these figures show increase on similar figures in the previous year The increase is due to greater tonnages bandied rather than to increased costs The added value of this increased expenditure is reflected in higher stocks of. manufactured products cerried by the company. "As in previous years, I will give vou particulars of sums paid by the company in respect of services rendered to the company by local authorities in and about the city of Dunedin £ s. d Rates paid to Borough of West Harbour cost 391 5 10 Electric power charges paid to the Dunedin City Corporation cost .. .. 1,778 12 5 Rents to Otago Harbour Board and Railway Department cost .. .. 412 0 0 Insurances and fire protection cost 879 9 9 Dues to the Otago Harbour Board cost '.. .. 8,315 0 0 Freights to the Railway Department cost .. .. 22,128 0 0 While shipping freights paid on outward consignments cost ... .. 1,316 19 5

"Once again the company has provided by way of depreciation the full sum allowed by the Commissioner of Taxes. This sum amounts in the current year to £8317 5s lid, and brings the total provision made by way of depreciation since the incorporation of the comDany to the total of £65,730 3s 4d. The sums provided by way of depreciation are in addition to the usual costs of maintenance and repair. By substantial renovations and replacements the company's buildings and plant have been kept in excellent state of repair and to-day represent a thoroughly up-to-date and efficient unit. The Droflt for the year amounts to £15,783 9s Bd. After a small adjustment covering additional income tax the balance brought forward amounts to £1702 8s 7d. With the profit for the year the sum available to be dealt with by way of dividend is £17,485 18s 3d. Out of this sum the directors recommend the payment of a dividend of 6 per cent., requiring £14,433 10s lOd, and to carry forward to next year's accounts the balance of £3052 7s sd. This is the first year that no appropriation is required against intangible accounts such as preliminary expenses. All those accounts were finally liquidated last year. The dividend payment proposed is after full provision has been made in the accounts for payment of social security tax on the profits of the company. In effect, this means to shareholders an increase in dividend rate, as hitherto unemployment tax, the equivalent of the Social Security Tax. has been payable by the shareholder and not by the company. In future, shareholders will be exempt from the Social Security Tax in so far as the same relates to that part of their income represented by dividends of this company. "The only substantial alterations In balance sheet figures relate to the figure of plant and buildings, stocks and sundry debtors. In the case of plant and buildings the reduction in value is the result of writing off depreciation already referred to. Stocks at balancing date were approximately £20.000 higher than last year, while sundry debtors are approximately £11,650 less. The exceptionally favourable sales experienced in 193738 resulted in manufactured stocks being reduced below normal levels. Opportunity was taken during the year to Drovide in manufactured stocks a safer margin than existed at the end of the previous year. Actually, stocks at balancing date were only approximately £ISOO higher than stocks as at March 31, 1936, and March 31, 1937 The reduction in the sums due from sundry debtors followed reduced sales at the end of the financial year. "The stocks held by the company cover the complete range of the company's manufacturing activities. In particular the company is fortunate in having almost two vear's reserve tn stock of jute sacks. Since the company's stock in sacks was purchased nrices have risen substantially, due to the extensive use of jute for sand bags for war purposes. The whole of the company's stocks have been taken most carefully, and I can assure sharehold ers that thev are conservatively valued

Precautions in Event of War

"The mention of war purposes may raise in the minds of our customers the company's position in the event of war occurring," Mr Hudson continued l can assure our customers and our shareholders that very complete plans have been formulated to provide tor the continuance of supplies to our farmer friends in the event of any such contingency arising On orevious occasions I have acknowledged the signal service rendered to this and all other superphosphate manufacturers in Australia and New Zealand bv the British Phosphate Commission Once again it is my duty and my pleasure to acknowledge the service to the farming community and the superphosphate manufacturers which the British Phosphate Commission has rendered in carrying into effect Its plan to provide for reserve supplies of phosphate rock to cover contingencies likely to arise in the event of war This' plan provides for building up reserve stocks of phosphate rocK at superphosphate factories "In the case of this company the British Phosphate Commission has engaged, as it has done with all other companies, to deliver for storage in the open stocks to bring up the total quantity held at the works to the equivalent of six months' supply The only commitment on the part of the manufacturers is to make available the necessary space for storage, and to pro-

vide reserve supplies of sulphur and nitrate equivalent to the reserve of phosphate rock. It is calculated that within a period of six months alternative sources of supply could be secured in the event of hostilities interfering with or preventing the delivery of phosphate rock from Nauru and Ocean Islands, When I tell you that these islands are within less than 24 hours' steam from Japanese bases in the Marshall Islands vou will appreciate the advantage of adequate reserve supplies to cover requirements pending arrangements for shipments from other sources of supply. It is comforting to know that such supplies can be made available from places, such as Florida, which are far removed from possible theatres of war.

"Incidental to the provision of reserve stocks of rock, the company is preparing to carry the necessary reserve supplies of sulphur and nitrate. To do this, extensions are now in course of construction to enable the company to house up to 6000 tons of sulphur, and shipments have been arranged. At the same time, provision is being made for improving the handling of bulk supplies into the factory from the Ravensbourne wharf. These are now to be handled by belt conveyors from the foot of the ramp discharging on to transverse conveyors delivering into the sulphur store and into the rock store and by extension to outside storage. It is estimated that savings in handling charges and rapidity of delivery will more than pay for the cost of this new system of handling within a period of six or seven years. ''As from June 30 next the company will enjoy a further reduction in the price of phosphate rock. New prices advised bv the British Phosphate Commission show a saving to the company of Is 6d a ton. In terms of superphosphate this is equivalent to about lOd per ton, which amount will help to offset factors of rising costs. It is hoped tnat these costs may be so controlled that no increase in price to consumers may be necessary. "Once again the whole of the sales of the company have been handled through the agency of Fertilisers (South Island, N.Z.), Ltd. The thanks of the company are due to the selling company and to its manager. Mr Stuart P. Cameron, and his salesmen, for the efficient handling at low cost of the important duty of marketing the company's product. The purchasing, manufacturing and despatch activities of the company under the control of Mr H. Douglas Kerr have functioned in the usual efficient and satisfactory manner.

"To Mr Kerr and his technical staff, office staff and works staff and workmen I extend the thanks of the directors for the results achieved. The year has not been without its difficulties but it is pleasant to know that all difficulties have been satisfactorily overcome. Not the least of the difficulties concerned import restrictions. This is now all plain sailing, as the assurance of the Minister of Finance makes the requirements of the fertiliser industry —in other words, the requirements of the farming community—paramount. Whatever is required for the business of the company will receive the necessary import licence " In conclusion I am r lad to say that our farmer friends are tackling their problems in what I consider the right and constructive manner. Quantitative restrictions on export of mutton and lamb may be overcome if the quality of the produce is improved, and in particular if a greater number of lambs are sent to the freezing works milk fed direct from the mothers. To do this successfully it 's imperative that pastures should be top-dressed. Signs are not wanting that our farmer friends are doing so. " I am pleased to be able to tell you that the aggregate sales of fertiliser

during the months of April and May constitute an all time record for the company for these two months. The investment represented in the purchase by our farmer friends of this fertiliser augurs well for their success and incidentally for the success of the company. To our farmer friends, particularly our farmer shareholders. I again acknowledge the great measure of goodwill- they have always given to the company. It will always be the company's aim to maintain and extend this goodwill." The chairman then moved the adoption of the report and balance sheet, and with it the payment of a dividend at the rate of six per cent, on all shares of the company. LARGE SUM WRITTEN OFF The motion was seconded by Mr P. McSkimming, who said that the chairman had given the shareholders a very good grip of the company's position. The company had got rid of the preliminary expense item on the balance sheet, which was a blessing, and although it now had to pay social security tax, that was not an unmixed evil, for if the company paid it, the farmers escaped it. As the chairman had also pointed out the company had written off the sum of £65,000 in depreciation. That was a big item, and if they continued writing off £BOOO each year, they would soon get the capital value of the buildings and plant down to a reasonable figure. When the plant was erected the company received a reasonable deal, and anyone who viewed the plant and machinery would realise that everything was being kept up to the mark. The cost of upkeen was going into expenses, which was one of the items on which the company did not have to pay taxes. The sales had kept up remarkably well during the year, although, as the chairman had said, the weather was against them. That, however, was one thing over which neither the company, nor anyone else, had any control. COMPANY'S GOOD PROGRESS Mr James Hogg spoke to the motion, and congratulated the directors and management on the excellent results revealed in the balance sheet. The large attendance at the meeting, moreover, disclosed the shareholders' keen interest in the activities of the company. He had been greatly impressed by the chairman's revelation of the constructive measures adopted to provide supplies of raw materials in the event of an outbreak of war. In addition he doubted if there was another industrial company in the country which could, in the short time that the company had been in existence, show such a sound position. The drop in the profit and sales during the past year had been explained by the chairman, but nevertheless the balance sheet was a very favourable one when compared with previous years. This had been brought about by effective control and management, and efficient plant. In response to a question by a shareholder the chairman said that the working arrangement with the New Zealand Drug Company concerning sales, etc., would terminate at the end of three years from ' pril last. FARMING COSTS Mr W. Malcolm said that one of the most important assets of the company was not listed in the balance sheet. That was the goodwill of the farmers. He pointed out. however, that on some classes of land the spreading of topdressing at its present price was uneconomic, and said that if the company wished to help reduce the farmers' costs and retain their goodwill, it should keep in view the question of reducing the cost of fertiliser. The chairman said that the company

was not making an exorbitant profit and always had the interests of the farmers at heart. It was through the formation of the company that the cost of fertiliser had been reduced. The directors appreciated the farmers' support, and hoped that it would increase. In his opinion the company had done very well, considering what the Government had done to it during the past few years. The costs of handling had gone up tremendously, and the cotapaJiy had done very well to keep the price down to its present level. Moreover, the Government controlled the price of fertiliser, and was satisfied that the farmers were getting a fair deal.

Mr Stuart Sim said that the farmers were not in any way hostile towards the company, for they recognised that it was well managed and controlled. In Australia, however, a higher grade of superphosphate was being produced cheaper than in New Zealand, and as the New Zealand farmers had to meet strong competition from across the Tasman, anything that the company could do to reduce their costs would be appreciated. The chairman explained that on the costs of manufacturing fertiliser in New Zealand, the company could not bring the price any lower than it was at present. The Australian Government subsidised the production of fertiliser, and the working week was not restricted to 40 hours oyer there. However, he assured shareholders that the directors would give the matter their consideration. Mr Colin Mcintosh said that in his opinion the amount of £I3OO excess profits which had been carried forward was not an excessive amount for a concern of the size of the company. He considered that the company should " dig itself in " and prepare for eventualities, for if it was not in a position to meet a reverse out of reserves, it would only mean that an added burden would be thrown on the shareholders. In addition, he said, farmers were getting their fertiliser more cheaply now than at any other time during his experience of farming, which went back for 30 years. The report was adopted. ELECTION OF DIRECTORS The retiring directors, Messrs R. G. Hudson and R. Sinclair, were re-elected unopposed. The directors' remuneration was fixed at the same amount as last year, namely. £IOOO. Messrs J. W. Smeaton and Co. were re-elected auditors. A vote of thanks to 4he chair concluded the meeting.