COMPANY BALANCE SHEETS.

Otago Witness, Issue 3865, 10 April 1928, Page 77

COMPANY BALANCE SHEETS.

THE DOMINION RUBBER COMPANY LTD.

Paid-up capital, £50,000.

. exal ?P le of the fluctuations in the fortunes of a rubber company is afforded by the above columns. Unfortunately for those concerned, the trend is at present downwards The net profit of £5OlO for J?® year , l926-27 »? les s than one-third of that of the preceding year, and is practically one-fourth of that of two years ago. Apparently, the profit for the latest season was made mainly during the first half, as the, mtenm dividend of 10 per cent, absorbed almost the whole surplus for the year In a commodity of widely varying “ arket , va oe like rubber, fat and lean years closely follow one another, and the shareholder receiving dividends of 50 per cent for each of two consecutive periods must regard them as covering the return k- u ?f eater s P“ ce «>an the time during which they were earned. b With the market price of plantation rubber steadily falling, it is necessary that expenses should be carefully watched! The statutory restriction scheme for the output was gradually tightened during the year, and, with the reduced crop resulting, the cost 'of production was-naturally inclined to rise. The combination of increased cost per lb with diminished output and lower prices materially affected the rubber industry generally, and those concerns that have been able- to keep their expenditure at a low level have fared best, lhe low expenditure, however, must be compatible with the maintenance of efficiency; otherwise, the expenditure ha s to be fajeed later on. The return per acre and the ocst per lb, excluding depreciation since 1917, comes out as follows, viz. : —

The crop of 358,1631 b, which included a quantity brought forward from 1925-26 exceeded the export license by 58,2311 b. ’The surplus output considerably increased during the 12 mouths, which meant that the cost per lb was further reduced by the gathering of rubber for which there was no immediate sale. Even if the selling price goes no lower than it s present quotation of Is -Id per lb, the margin is by P7nnn ea « S are .% T he . reduction of over £/000, or one-thud, in the genera] expenditure has been almost counterbalanced by the smaller crop. Sundry creditors stand at the fairly high total of £11,165, for which income tax may possibly be largely responsible. Even when allowance, is made for taxation, the total looks too large in proportion to the genera) items in the balance sheet to be ascribed entirely to indebtedness. Sundry debtors amount to £317, and the buildings and plant combined are under £6OOO. Are there further reserves under sundry creditors; or is it capital expenditure undertaken during the year on buildings and plant that is responsible for its dimensions?

Cash assets continue to be plentiful, and their contribution to the income is £668 Government securities, at £10.665. look im-‘ pressive, although in addition to covering reserves they mav lie called upon liquidate certain of the sundry creditors. Deposits and cash make up a further sum of £3507, and with no dividend in prospect to meet, seem ample for all contingencies. Among the other liquid assets, rubber on hand at £3482 easily occupies first place. It. is down some £4OO from a year ago, but, with the lower values now ruling, it may be assumed to represent a considerably larger quantity, a great part of which has been harvested in excess of the statutory limit. oBuildings have risen to £3339. and machinery and plant to £2516, entailing considerable capital expenditure. They have been subjected to depreciation .which altogether amounts to £l6l. As the bulk of the property i s new, a wastage allowance may not be regarded as necessary over the whole on this occasion, but in a tropical, climate, where deterioration is rapid, it will claim attention later on. Maintenance and repairs, which presumably affect these two groups chiefly, if not entirely, amount to £l3OO, and possibly make up to som'e extent for the comparatively small depreciation provision. Leasehold property remains at its figure, of £44 155, and represents nearly two-thirds, of the total assets Gradually the planted area is being increased, and now amounts to 1086 acres, of which 1000 are in bearing. If the industry had free play, the value of the land producing the rubber must necessarily increase with the larger crop, but, with artificial checks imposed by statute, it is a matter of uncertainty how far the increased planting area is going to ' benefit > the company. To attempt to control-, the ordinary forces of Nature by legislation seems attempting an impossible task, and the question arises whether the operation of the ordinary laws of supply and demand would not meet the case more satisfactorily and more effectively.

General Gross Net Her. 30. Deserves. £ Profit. £ Profit. £ Div. 1918 ... ... 5525 16,228 *169 1919 ... ... 5671 28,012 6,396 12J 5 1920 ... ... 4102 21,630 931 1921 ... ... 486 9,674 •3,616 1922 ... ... 518 12,287 32 1923 ... „. 3170 15,014 2,651 1924 ... ... 1122 14,710 2,953 10 1925 ... ... 6189 ■ 39,749 20,066 so 1926 ... ... 7659 41,338 16,470 30 1927 „ ... 7669 22,356 •Loss. 5,010 10

Beturn General per General Expenses Crop. acre. Expenses. per lb. lb. Ib. 45 d. 1917-18 ... 237,050 447 15,740 15.933 1918-19 — 299,782 428 20,770 16.629 1919-20 ... 313,208 447 19,565 14.990 1920 21 ... 194,004 277 12,624 15-617 1921-22 ... 345,027 493 12,003 8.347 19221923- ... 263,775 298 12,287 11 435 11.179 1924-25 ... '298-931 333 19,231 15,440 1925-26 ... 488,187 488 24.325 11.958 1926-27 — *3u7,000 347 17,185 11.089 ♦Approximately.