FELT & TEXTILES OF AUSTRALIA LTD.

Otago Daily Times, Issue 24773, 25 November 1941, Page 2

FELT & TEXTILES OF AUSTRALIA LTD.

ADDRESS OF CHAIRMAN (Sir Walter Massy-Greene, K.C.M.G.) given at the 21st ANNUAL GENERAL MEETING of the Company at Feltex House, 261 George Street, Sydney, on the 14th NOVEMBER, 1941.

Ladies and Gentlemen,— The Annual Report and Accounts of the Company have been in your possession for some days, and I I will be complying with your wishes if I take them as read. FINANCIAL: As the Consolidated Statement of Assets and Liabilities and the Statement of Aggregate Profits of Felt and Textiles of Australia, Ltd., and all Subsidiary and Sub-subsidiary Companies reveal the position of the Company in greater detail, I propose to refer to- the nrincipal movements in the Balance Sheet as shown therein, rather than that of the Parent Company.

civilian customers have not been able to secure their full requirements, but we have apportioned whatever has been available in the most equitable manner possible, and this is fully appreciated by our clients.

In the Balance Sheet of the Parent Company and the Consolidated Balance Sheet you will have noted on the Assets side wool purchased, but undelivered,' reflected by a corresponding liability/bn the other side of the Balance Sheet of similar amount. The asset is & giltedged one, the value of this wool having been guaranteed by the British Government.

In the footwear industry the tendency during the year has been to produce more economical samples, and for this purpose the Company's footwear subsidiaries have extensively used new patents and ideas which accomplish this purpose and at the same time are more attractive and have greater utility. The policy has been very successful, but our efforts in this direction have been necessarily curtailed by Military requirements, and I am pleased to be able to record that we are producing the largest quantity of Military boots made in Australia by any one Company. Until about a year ago the Company had never before attempted the manufacture of boots, but we starte* experimenting and later, in response to an urgent request for more production from the Department of Supply and Development, arranged for the changeover in some of our footwear plants to the production of Military boots We have received the Department's, written appreciation of our ready response to its appeal. Now we are investigating ihe practicability of introducing the American type of Military boot to Australia, which will enormously increase Australian productive capacity for defence purposes, and, at. the same time, make available to the Australian Services the most up-to-date type of Military footwear. The matter is being 'discussed with the Government Departments concerned, arid we hope our efforts will meet with success. One of our footwear specialists has just left for the. United States of America, where he .wfi\ make a thoroueh investigation into the imast" up-to-date American methods for production of Defence footwear. The Comoanv and its subsidiaries are also manufacturing a variety of miscellaneous lines for defence purposes, in addition to the maior items before mentioned. Some of the defence goods we make are disolayed in our Head Office show-windows, and I invite shareholders to have & look at the variety: or .defence the Company is able to meet. OVERSEAS SUBSIDIARIES NEW ZEALAND: Overseas our subsidiaries have aeain grown substantially. In my last address to you I outlined the general policy we intended following in New Zealand. There have been unavoidable delays owing to war conditions, but very good progress has been made, and in New Zealand factories, as elsewhere, we have been able to help considerably in supplies for defence requirements, as well as giving due attention to essential civilian requirements. Our factories in New Zealand now cover a wide range of activities, including as they do, the manufacture of all kinds of felt, footwear, and accessories to the footwear trade,.'the?; manufacture of plain arid stippled body carpets, and absorßent medicated ' cotton wool. MuchTlfef this development was planned" before the war, and the partial fulfilment of that programme has fitted well into the New Zealand national economy. Apart from the assistance we have been able directly to give to the war effort there, it has been officially recognised that certain of our products are for the maintenance of civilian require-' ments during the war. You will remember last year I had to tell you of a very damaging fire which occurred at Wellington and destroyed completely the premises of New Zealand Slippers, Ltd. This factory has since been re-built, and is now the best of its kind in the Southern Hemisphere. There is * greatly increased demand for all our products made' in New Zealand, and I think I am safe in saying that the Board's decision to expand in New Zealand on the lines indicated has been fully justified. The opportunity was taken when publishing the Balance Sheet for this year to include some typical photographs of the New Zealand plants showing an interesting sidelight on our New Zealand activities.: SOUTH AFRICA: In Africa, as elsewhere, the unusual difficulties common to the times have been experienced, the shortage of labour being particularly acute. There has also been difficulty in shipping, and our African subsidiaries have been very short of raw materials. In spite of these troubles, the expansion of the plants provided for in past years has been beneficial and turnovers have considerably increased. From the modest beginning about 10 years ago, when a slipper factory was established in Durban by our Managing Director in South Africa, Mr E. R. D. Faulks, an important chain of industries has been gradually built up. Our subsidiaries are w,ell established at Durban, Johannesburg, and Capetown, and most of the shoes and slippers worn in South Africa are made by them. These companies manufacture also a considerable quantity of hair felts and absorbent cotton wool. Restrictive conditions, dictated by the needs of our own national economy, have prevented us from keeping South Africa adequately supplied with plant and raw materials; so that the completion of their programme has been retarded to some extent. Bearing in mind the difficult industrial conditions now prevailing there, I can assure you the results reflect very favourably on our South African staff. You will have noticed the descriptive illustrated matter relating to these subsidiaries, published with the Annual Balance Sheet.

As the Consolidated Statement shows, the net nroflt of the Company and its subsidiaries for the year ending June 30. 1941. was £156,674 after providing: 1. £54.246 for Depreciation, and 2. £113,405 for Taxation, £167,651 The corresponding figures for the year ending June 30, 1940: Profit, £160,152. after providing—1. £38,798 for Depreciation, and 2. £79,825 for Taxation, £118,623

It will be seen that the greater provision for Depreciation and the very much heavier rates of Taxation are responsible for a slightly lower profit, notwithstanding the increases in the Company's capital and in the volume of business about which I will say more directly. In moving the adontion of the Accounts to .Tune 30, 1940, the Deputy Chairman. Sir George Pearce. drew attention to the establishment of a Snecial Reserve of £30,000 to meet unforeseen contingencies. It has been found neeessarv to utilise this provision to the extent of £20.000 to meet additional taxation imposed since those accounts were prepared. On this occasion an amount of £30.000 has been added to General Reserve and £20.000 to the Snecial Reserve to reinstate this at £30,000. After makine the necessarv provision for Preference and Ordinary Dividends and the transfer *r> Reserves, the balance of Profit and Loss carried forward is £56.463, against £47.575 brought forward from the previous year.

Since ,th« accounts were made up the new Chiflev has been presented. Notwithstandin? the large increase the Directors had made in the nrovision for Taxation, which in the Balance Sheet under stands at £146.650. we r>«w estimate that it will reouire an additional amount of F 20.000 to £25.00" to meet the demands of the Taxation Commissioner. It was to meet a continffencv of this nature ♦hat the SneMni Reserve, to which I have just referred, was created, and it should, therefore, b» nossible to meet th's further levy without interfering with the profits of next year's operations if such a course appears to be advisable. It will be noted that Reserves have increased only bv £9,052 in spite of the addit.'on of £30.000 to General Reserve. The difference of £20,948 is made up of capitalisation in certain subsidiaries of reserves since June 30,. 1940. the reduction on the other side of the Balance Sheet being In the item Goodwill, etc.

An alteration has been made in the Balance. Sheet bv bringing in as a liability the dividends on Second Preference arid Ordinary ■'■ shares for the half-*"ear ended June 30. 1941. paid resoectively on Julv 1, 1941. and October 1. 1941, amounting to £47,294. This item previouslv was not brought to account in the Balance Sheet. These two items have the effect of apparently, but not really, decreasing the aggregate of Reserves and Accumulated profits by £10,048. TURNOVER: The aggregate turnover of the Group has been surprisingly large. The growth of trade in our overseas subsidiaries will be referred to later.

It is impossible to estimate how far war conditions have effected our business. At the outbreak of war the Company's business was growing fast. Plants have since been altered and modernised, and there has been a diversion of a large proportion of pur normal civilian production to Defence requirements, about which I will say more later on. This diversion has, however, affected our profits, as Defence work has been accepted at rates of profit materially below those which we would regard as normal. Your Directors entertain no doubt when peace is once more restored that the developments which the Company has undertaken during the war. mainly to enable it to contribute to the war effort, can be adapted to the peace reauirements of industry. Meanwhile, this expansion of business, which was not confined to Australia, threw upon the Company very heavy financial obligations. THE NEW ISSUE OF SHARES: Herein you will find the reason which actuated the Board in deciding to seek the permission of the Federal Treasurer for the issue 0f..235,968 new ordinary shares at a premium of 10s per share, and about which you will be anxious to be informed. As I have already indicated, our group has been engaged in an increasing production of goods for Defence purposes. An inevitable consequence of this development has been the acquisition of plant and trading assets, alterations to existing plant and premises, and the holding of increased stocks and book debts, for the financing of which it was found necessary to seek fresh capital rather than to depend on external credit. I feel sure that, bearing in mind the unusual times, shareholders will approve this policy, particularly as the effect will be to reduce the ratio of external liabilities to assets, and enable our organisation to cope successfully with the urgent demands on it for Defence requirements. We have undertaken to maintain a substantial reduction in the amount of accommodation we get from our Bankers.

Foreign investment is of great economic advantage to Australia, and this is particularly true at the present time. The Board has always attached considerable importance to our ex-Aus-tralian enterprises, and their contribution to our aggregate prosperity has been substantial and consistent. As they are now very well established, there is good reason to hope that their importance "will' "StfeftdOy,- gr<aw,..,,,„... ~

THE COMPANY'S CONTRIBUTION TO THE WAR EFFORT: During the year an entirely new Mill was built and equipped in New South Wales, at the request of the Department of Munitions, for the production of hard Felts; this plant is now in full operation and supplying the Department of Munitions with large quantities of these special Felts, which are used in connection with the production of shell cases for the Army and Navy.

EXPORT BUSINESS: During the year our export trade has grown considerably, much of it being for defence work in other Empire countries.

As you are aware, our Wool Companies for some years have formed an important section of our activities, and under the British Wool Acquisition Scheme these Companies have assumed even greater significance. Special attention has been directed to the achievement of the highest standards of auality possible. The national value of these plants both in war and peace times should be manifest, and I cannot refrain from emphasising this feature, convinced as I am of the importance of an extensive local market for wool as a vital factor in maintaining the permanent prosperity of the Australian Pastoral Industry. Our Company has maintained its position as the largest consumer of Australian wool in the Commonwealth. Our Wool Scouring and Carbonising industries are extensively engaged upon *he handling of wools for Defence requirements and on behalf of the British Government.

New markets abroad have been opened up to us as a result of war conditions, and, such tracj.e,. must k be„ regarded-as a benefit to the-Common-*" wealth as welj'as"to the Company r"T*" do not, of course, put this phase to you" as something which has been established permanently, as it is impossible to foretell what world trade generally will be even in the near future, but'it is hardly necessary to point out the present value of this trade to the country, compensating as it does for other export business lost to Australia as a result of the exigencies of war. Under the heading of New Markets I am referring mainly to felted products and to the large export trade in wool-tops. The latter business is, of course, at present conducted under Governmental control, but there is no reason to suppose that we will not be able, after the war, to maintain our wool-top business with overseas countries about which I have previously informed you and which was opening up satisfactorily just before war broke out.

In addition to the heavy demands within Australia, large quantities of our combed products are also being shipped to India for manufacture there into khaki and other military textile materials.

In order to meet these military requirements, we have extended our plant very considerably during the past twelve months, and our production is now three times greater than our prewar output; these sustained Defence requirements have meant that our

CONCLUSION: All the plants have been maintained during the year In good order, and, as we and our subsidiaries are engaged either on defence requirements or, in the main, on necessities for civil consumption, shareholders can regard the future generally with reasonable confidence.