FINANCES STRONG

Otago Daily Times, Issue 23857, 11 July 1939, Page 15

FINANCES STRONG

STEADY PROGRESS GREAT EARNING CAPACITY FACTORS IN SUCCESS In seconding the motion, the managing director, Mr H. J. Kelliher, said he felt sure the report and balance sheet would be received with the utmost satisfaction by shareholders. "Indeed," he continued, "we have every reason to feel gratified with the strong financial and trading position the company is in to-day as well as with its remarkable scope for further expansion. During the cast year every sphere of the company's activities has been greatly strengthened and consolidated, and, what is even more importaht, the excellent results as disclosed in the present balance sheet have not only been maintained, but are being substantially exceeded since the close of the financial year. "The remarkable earning capacity of the company may be gauged by the fact that the net earnings for the financial year under review—after providing for all contingencies—are sufficient to cover the dividend of 12 per cent nearly twice over. As far as the prospects for gfuture development and expansion are concerned. I indicated at the last annual meeting of shareholders that for the first three months of the new financial year—that is, April. May and June. 1938—every department was showing a substantial increase over the previous year. This increase is still continuing, and our output for the first three months of the current financial year—that is. April. May. and June. 1939—is again 30 per cent, higher than it was for the corresponding period last year. To put it in another way, although our total sales for 193839 showed an increase of close on 1,000,000 gallons, this extraordinary increase is still being maintained. It is significant that this continued expansion of our output has partly taken place during a period when the total consumption of beer for New Zealand actually showed a decline. During the four months ended March 31. 1939. for instance, the national revenue from beer duty declined by approximately £IOOO. when compared with the corresponding period the previous year while, as already stated, our own sales showed a substantial increase. This may be taken as striking evidence of the popularity enjoyed by Waitemata products.

Share of Total Trade

"Another aspect with a direct bearing on further expansion is the volume of our total national production. The total production of beer in New Zealand for the year ended March 31, 1938. was in the vicinity of 18,000,000 gallons. Since its inception, our company has tremendously increased its ouota of this total trade from year to year, and it logically follows that we need only maintain our present rate of progress in order to secure in the predictable future a commanding share of the total beer trade of the Dominion. As a matter of fact, last year our brewery produced .in addition to draught beer, over 13,000,000 bottles of beer, which constitutes a record output for bottled beer for any brewery in this country. "Contrary to general belief. New Zealand is really not a heavy beerdrinking country when comparing our total national production with that of other countries. On a population basis, production in New Zealand for 1938 amounted to 11 gallons per head of population. According to the latest figures available, the production of beer per head of population is 13.9 gallons in Great Britain, 20.2 in the Irish Free States, 13.5 in Denmark, 36.5 in Belgium and 13.9 in Germany. In a comparative sense and regarded from a national viewpoint, there also appears to be scope for further expansion in this direction.

Outlook for Future

"Although I am optimistic regarding the future and certainly do not anticipate anything in the nature of a seriout setback, we cannot entirely disregard the war hysteria that exists throughout the world to-day. and no one can foresee as to what extent it may ultimately undermine productive industries. At the same time, I feel confident that the financial and trading position of our company is such that its stability would remain unimpaired even should we have to face' a major crisis. The main factors upon which I base this statement are:—

" The remarkable earning capacity of the company and the guaranteed outlet for the bulk of its production through the company's own hotels. "We now possess a brewery combining the most advanced features of modern -brewery equipment and design, a fact that is mainly responsible for the high quality and extraordinary popularity of our products. "The liquidity of the company's stock and trading assets. "The strength of our general reserve, which now represents one-third of the total capital. "The company's assets, which cover more than four times our liquid liabilities by way of bank overdraft, sundry creditors and contingent liabilities such as provision for income tax and the payment of a bonus to employees. Dividend and Wage Bonus •'After giving careful consideration to all circumstances, your directors felt justified in recommending a dividend of 12 per cent, for the financial year ended March 31. 1939, and a profitsharing bonus of 7$ per cent, for all members of the staff at the brewery, stores and head office. "In view of the fact that the continuance of the brewing industry in New Zealand is subject to the country's approval every three years, brewery shares cannot be regarded as gilt-edged security, and capital invested is, in my opinion, entitled to a somewhat higher return than when invested in ordinary industries. As a matter of fact. I am being constantly reminded that much higher dividends are being paid by Australian and British brewing concerns Dividends paid by leading Australian breweries have averaged over 12 per cent, during recent years, and these rates were undoubtedly a factor in attracting investment capital to the Commonwealth prior to the exchange control.

Up-to-date Equipment

"As an indication of the vital importance of modern methods and equipment, shareholders may be interested to learn that the original brewery and plant, as taken over only eight or nine years ago. are now completely obsolete and have been written off the company's books. It is only by adopting progressive and scientific methods of brewing, and installing up-to-date plant and equipment, that we are able to produce and maintain that uniformity if quality which is in a great measure responsible for the popularity of Waitemata products.

"The progress and development of our company during the past year furnishes ample proof of the excellent cooperation received from all members of our organisation, and I wish to take this opportunity of expressing my personal appreciation for the readiness and willingness with which they have worked in the interests of the company Without this co-operation and this active interest, it would have been most difficult to cope with the demand during the peak periods of the year We can congratulate ourselves on possessing a band of loyal workers, who look to our organisation for their future and therefore are anxious to further the progress of the company I feel sure shareholders will wholeheartedly endorse your directors' recommendation to pay a profit-sharing bonus of 7J per cent, to all employees of the Waitemata Brewery, stores and head office, and so enable them to participate in the results of a successful year.

State Takes £250,000

"In conclusion 1 might say that, as far as it is practicably possible, to-day we have a trading concern which embraces a complete cycle of successful production, distribution and consume • tion. The total gross orofit for the year amounted to over £252,000 Of this sum, on a rough calculation, the brewery and head office employees received, by wav of wages, salaries and

bonus, over £55,000, or 22$ per cent.; the shareholders about £32,000. or 12J per cent.; general expenses and depreciation, £74,000, or 29 per cent.; the Government by way of income tax will benefit by £60,000, or 23\ per cent.; the balance of approximately £32.000 or 12$ per cent., being placed to reserve

"It will thus be seen that the benefits of the company's operations were widely and fairly distributed. Shareholders and employees received a satisfactory remuneration for their capital and labour. Producers of raw material found a substantial market for their products, the amount spent on malt, hops and sugar alone being £52,000; while consumers benefited by the outstanding quality of Waitemata products, and the installation -of the most hygienic beer-serving system used anywhere in the world. As a result of our continued policy of renovating and reconstructing our hotels, the travelling public are being provided with a higher standard of hotel comfort and service. Finally, when allowing for excise duty and general taxation, etc., the national exchequer was the greatest beneficiary of all, the company paying by way of direct and indirect taxation over £250,000 during the past financial year.

" It is not mv intention to make anv prediction regarding the future, except to say that I am not one of those who look upon a general war as an event inevitable. On the contrary, I am sufficiently hopeful that common humanity and common sense will prevail, and that sooner or later a better international understanding will result in a greater measure of economic and financial stability and a return of general confidence. Confidence in productive industry is a prime essential to the harmonious working of capital anri labour, and it is only by this means that we can hope to maintain progress and bring about the peaceful development of our national resources." Directors Re-appointed The motion for the adoption of the report and balance sheet was carried unanimously. The retiring directors, Messrs H. J. Reimers and L. J. Stevens were reelected, and Messrs Hutchison, Elliffe and Cameron were re-appointed auditors, and the remuneration of the directors was fixed at the same rate as last year and the allowance to the auditors was increased Mr V. W Sim congratulated the directors on the excellent results disclosed, and assured them that they had the wholehearted appreciation of the shareholders. On his motion, seconded by Mr H. Tiarks, a vote of thanks was passed to the directors, management and staff.