COMPANY NEWS AFFORDS EVIDENCE OF BUOYANCY IN TRADING CONDITIONS

Otago Daily Times, Issue 27080, 14 May 1949, Page 3

COMPANY NEWS AFFORDS EVIDENCE OF BUOYANCY IN TRADING CONDITIONS

INVESTMENT MARKET

By Gregory The application of the Berlin blockade 11 months ago, the first out-and-out act of aggression in the “ cold war ” was the greatest single factor in undermining the confidence of investors in the prices ruling last winter, ard in the succeeding months put the market about face and caused a severe shake-down of values. During the past month confidence has been returning apace. Company news has been especially good;- two out of every three dividend announcements have promised increases on those paid a year ago, balance sheet totals have assumed new dimensions, and now the Soviet has suffered ignominious defeat in its siege and Berlin has again become the line of demarcation in the “ cold war.” The new development marks the .third Western Victory in 1949. concedes nothing in importance to the earlier triumphs—EßP (or Marshall Aid) and the Atlantic Treaty—and will do much to focus the attention of idle investment money on the opportunities which would seem to exist to-day. Only six dividend announcements were received by the Stock Exchange during the week, but of these no fewer than four represented increases, the most important of which was the increase in the annual distribution of Dominion Fertiliser, which restores the pre-war rate of 6 per cent. Burns Philp and Company raised its distribution to lli per cent, to replace the regular 10 per cent, paid during the past 29 years. Wilson’s Cement brought out an interim 3id per share as against 2|d a year ago, and dividend-conservative McLeod Bros., just managed inclusion amongst the rate-increasers with an interim of 4 1-6—an increase of 1-6 of 1 per cent.

Donaghy’s Rope and Twine balance sheet was received by shareholders yesterday and disclosed a buoyant year with a profit result fully commensurate with the 50 per cent, increase in capital which was made last year. In the past two years new plant and machinery to the value of £20,000 has been installed and has had an immediate bearing on gross sales (up £17,000 on the year) and despite slightly higher management expenses and an increased tax provision (up £6500) produced a net profit which neatly (perhaps too neatly) reconciles with the capital increase Another £21,000 worth of plant is on order and if it can be presumed that it will be as productive as that recently installed the record profit achieved in the year which ended on March 31 last will not be long standing. The directors are at pains to point out that the 10 per cent. “ does not, in fact, represent a return of 10 per cent ” for those who paid a premium on shares. The motive, which is certain to be well-in-tentioned is not clear and they might have added. “ nor those who buy the shares on the market at nearly £3 each" but the warning—it is sufficiently emphasised to be termed a wairning—should not deter investors from investing in this virile industrial, the immediate yield from which at £3 7s 6d cer cent, is only a pot boiler compared with the long term advantages of being a shareholder in

Donaghy's Rope and Twine Company, Ltd. The keenly awaited New Zealand Paper Mills balance sheet was also in the mail yesterday morning and the figures supplied their own answer to the current market neglect of the shares which in the last year slip from 42s 6d to 375. In the same period the affairs of the company have been going in the other direction, and although a net profit (£16,550) very similar to that obtained last year is revealed the. actual result is more flattering. A new account styled “ Provision for maintenencc and Repairs ” has been opened and utilised to absorb £5500 of the profit before the net result is claimed and if the allocation from gross profits for tax at £31,210 (up £6767) can be taken at face value, the year was even better and must take its place with the 1920 result and the succession of profits, £20,000 and over between 1932 and 1939.

The company is nicely cushioned against external shortages, rationing and like influences with the possession of its own coal, water and afforestation area, and the ma ntenence of the steady 7 per cent, dividend to yield £3 16s 3d per cent, which has been in force for 18 years, seems assured. Indeed, the possibility of the company restoring the 7J per cent, rate common in the decade prior to 1932 should not be overlooked.

Wright, Stephenson and Co. put an end to speculators profiting from any information they possessed regarding the sale by the company of certain of its interests and circularised shareholders cautioning them against offering their shares for sale. The company has over £500,000, invested in subsidiary concerns, and it is likely that one of'them has changed hands. At the last annual meeting it was pointed out that—exceptions to the rule—two of the subsidiaries had made small losses, but whether or not it is one of these that is sold, the chairman of directors advises that V a very substantial addition will be made to reserves" as a consequence. Buyers moved their offers up to 455. but by the same token they would pay more, and it is doubtful' if the shares could bo bought for the price of a couple of opera seats in contrast to the last sale figure of 435. In the " black ” from trading for the first time since the war started, Dominion Rubber presented a bold front and a net profit of £2684 with its latest balance sheet. The appropriation account still carries a red ink balance of £375, but that is the only remaining evidence of the. loss of £5448 made in the 1946 year, which bore the weight and cost of rehabilitating the plantation and plant after the Japanese occupation. The estate is now reported in good condition, and a jungle-clearint’ and replanting programme has been instituted to offset the comnany’s stand of old rubber. The " rest ” that the trees enjoyed during the years of ene'mv occupation is illustrated by the fact that a record crop averaging 5781 b to the acre was drawn last year. A new intruder stalks the plantation, however, with the institution of Malayan income {ax as from January, 1948.