PATEA FREEZING WORKS.

Taranaki Daily News, 27 October 1921, Page 6

PATEA FREEZING WORKS.

THE FINANCIAL POSITION. ADJOURNED ANNUAL MEETING. PROSPECTS OF CARRYING ON. The adjourned annual meeting of the Patea Farmers’ Freezing Company was held at Patea yesterday. Mr. C. J. Hawken (chairman of directors) presided, and there were present more than 100 shareholders. The meeting had been called in accordance with a resolution passed at the annual meeting three weeks ago requesting and empowering the directors either to obtain further capital or financial assistance for the carrying on of the company’s operations, or enter into and complete negotiations for the sale or disposal of the company’s works or other assets or parts thereof to the best possible advantage, such sale to be subject to the confirmation of an adjourned meeting of shareholders. At the adjourned meeting the financial position was explained, after which considerable discussion took place. The meeting went into committee to consider a proposal put forward by Mr. T. Taylor, and on resuming it was reported that a resolution had been carried approving of a scheme put forward by Mr. T. Taylor for carrying on and leaving the matter in the hands of the directors, with full power to act in what they deemed to be the best interests of the company. A committee was appointed to confer with the directors, with power to canvass the district and report to an adjourned meeting, to be held in a week-’s time. AUDITOR’S REPORT.

The auditor, in his report, stated: “The valuations set opposite the fixed assets have been taken at book value, and it is very difficult to say whether book values even approximately represent market values. Stocks have been valued on a conservative basis, and there is every reason to believe that they will realise the amounts shown. I have, therefore, accepted the certificate of the secretary. I am afraid the steamers are hardly worth their book value, especially the Waitangi, although the amounts spent for repairs and maintenance during the last year or so have been almost sufficient to purchase another vessel. Of the liabilities, the bill payable, which w T as to the Income Tax Department, has since fallen due, and has not been met, and for practical purposes can be added to the sundry creditors. By not having met the asset the income tax suspense, £265, becomes worthless, as it was a rebate contingent on the P.N. being met. It was desirable, from all points of view, however, under the circumstances, not to pay the P.N. at maturity.

“The sundry creditors includes amounts owing to consignees for meat, etc., in the shape of reclamations, owing to them not realising the advances made thereon. The major portion of the sundry debtors, however, represents surpluses on consignments, and can be set off against sundry creditors. Of course, now that such a large loss has been made, the reserves are more than wiped out, and it will be necessary to transfer the amounts to the appropriation account, and I recommend accordingly. A summary of the position revealed in the balance-sheet, after removing capital and book entries and taking values as stated therein, shows a surplus of assets over liabilities of £8434 17s 6d. Therefore if the assets realised book values, and all unpaid share capital were paid up, there would be a little over Ils in the £ available for shareholders, after paying liabilities in full. However, I must say that I consider it unlikely that anything approaching book values will be realised on a forced sale being effected, seeing that liquidation is foreshadowed in the resolutions to be submitted to you.

THE CAUSES. i “Now, as to the causes of this unfortunate position. The main losses were, no doubt, caused by bad judgment in not selling stocks when the markets were good and prices high. However, I must also comment on several items in the profit and loss account. Buyers’ charges seem to be very heavy, and repairs to steamers, as referred to above, are also very large. The most noticeable item of all, however, is your interest bill, and I must confess that I cannot see how any concern, especially one that is up against competition, can possibly carry on successfully with such an amount to find annually for interest.

“Coming now to matters more especially affecting office routine, I am not at all satisfied with the position regarding the amounts that have been credited to the

calls accounts of the several guarantors and makers of promissory notes in connection with the bonus on bank guarantee for last year, and although it is outside the scope of this report. I would also re-

commend the distribution and allocation of previous years being looked into. This raises the question of certain promissory notes which are held, and I would certainly strongly recommend that the whole matter

be refe* cd to the company’s solicitors for an opinion. It would seem to me that only the signatories to the bank guarantee were entitled to participate in the bonus, but it would be more satisfactory to have the legal position defined. There are also a large number of signatures attached to an old deed which may or may not affect the position on a liquidation. This also should be referred to the company’s solicitors. It is especially necessary to have the share ledger correct, in every detail, as it may be necessary for all unpaid share capital to be called up, and it is essential that the adjustments referred to above be made as soon as possible.” THE CHAIRMAN’S ADDRESS. After the reading of the auditor’s report the chairman remarked that it was open for discussion. After waiting a few moments he said that as no one wished to discuss it he would move that the twelfth annual report (as already published) be adopted. In doing so, he said it would be noticed that they had killed 5000 cattle and 30,000 sheep and lambs less than was the case last year. This was a bad thing in one way, but was a good thing in another, because the more cattle they killed the greater would have been the loss, and the same applied to sheep and lambs, owing to the bad market they met at Home. During the past season they had killed 3245 cattle and 58,875 sheep and iambs. This, he said, was a ridiculous quantity for such large works, which must kill a big lot of stock in order to keep going. Owing to the delay in starting the works, due to the strike, they had lost the best market at Home for their stock, as the later in the season they sent the stock home the worse the market became, and at present beef was not saleable. They had started the season by advancing 54d on mutton, £2 on ox beef and 35s on cow beef, and that cow beef was not saleable to-day. In fact, if they gave £5 for a cow they would not get anything out of it. Any concern which sent beef Home tnusi come out of it very badly, even

though they practically gave nothing for As the season advanced the prospects became worse, and the company advanced lower prices, especially on heavy sheep, and even then he did not see how they could come out. right. He did not know whether they had watched the market, but during, the last three months sheep had dropped Us per head. A very considerable loss had also been caused by tinned meat and tallow. This could not be sent away during the war, and after the war meat and tallow from all the works were sent Home at once. Up to a certain time it made a fair price, but there was a sudden drop in the price of both at the one time. As a result, he pointed out that they had sold 500 casks of tallow at 26s per cwt, and if they had got it for nothing it could not be landed at that. They had cabled Home to stop the sale, and the next returns showed 48s. When the balance-sheet was made up the company had in London or on the water 8510 eases of canned meats, 258 casks tallow, 2700 eareases wethers, 700 ewes, 1800 lamb, 338 S quarters of beef, 2134 carcases of veal, 334 sacks mutton pieces, and 75 tons of boneless beef. All the sheep were probably sold the first week in Jqne, but the 8510 cases of tinned meat, 3388 quarters of beef, 21134 carcases of veal, and 334 sacks of boneless mutton had only just left New Zealand. VALUES ON STOCK. Mr. G. V. Pearce asked what values had put on the stock in the bal-ance-sheet. The secretary (Mr. Brewer) stated that prime ox fores had been valued at 2d in the works, hinds 4d; second heifers, fores, Ijd, hinds 3Jd; prime cow, fores, Hd, hinds 2 ! / t d; seconds cow, fores l%d, hinds 2d; pieces of mutton, legs sd, shoulders 4%d, and loins 4£d. These latter had since been sold at slightly over what had been estimated.

The chairman pointed out that there would also be l%d freezing charges and freight charges to consider. . The secretary said that veal had been estimated at 2d. Tinned meats had been taken into stock at 30s, including all freight paid in England. A quantity had since been sold at 31s. Mutton had realised up to 455, but there was not much mutton among their tinned meats.

The chairman said that if they were going to place their produce on the London market and compete successfully with the other meat exporting centres of the world, they would need to alter their methods somewhat. He touched on the question of sheep driven or railed to the works, pointing out the loss by being roughly handled and bitten by dogs, and also the bad handling they sometimes got when killed. A farmer sent in the primest mutton worth 5d per pound, and the butcher or someone round the yarns, by bad handling, reduces the value to 2d. All that would have to ’be altered. They would have to go in seriously for turning out the better quality meat. All reports from London showed that the people want the. primest meat. Indeed, any butcher here would tell them that the people want to live on lamb or prime hogget mutton and did not want to eat wether mutton or old ewes, and the same conditions applied elsewhere. They must, therefore, go in for exporting the best quality meat. Until they handled their meat at Home as well as here, they would lose what they should have for their own good quality. Moreover. expenses would have to be cut down from start to finish. Unless the charges were cut down considerably they could not export their beef, at any late in a frozen condition, but they might, perhaps, export it boiled down. There was no doubt New Zealand mutton was the best in the world. In fact, the English farmers admitted that they could not produce mutton at Home as

good, and they sold their own at big prices and bought New Zealand for tfieir own use. He then formally moved the adoption of the report and balancesheet. THE DISCUSSION Mr. Fryday, in seconding, said that mutton was being sold in London today at lid per poun<r. He was satisfied the New Zealand producer was being robbed right and left. He, however, considered the company must first put its house in order if it wished to continue. He instanced cases of what he considered loose management, remarking that he had sent 14 head of cattle to the works, all trace of which had been lost, but after three years he had been paid for eleven of them. Moreover, when he sent lambs the tallies were often one or two short when they reached the works. He had, however, since sent them to other works, and they were not much better than Patea. The chairman said that he was hopeful that the company would do better in the future. He admitted it was hard to keep the tallies right, as Mr. Fryday had found with other companies besides their own. Mr. McKenna said that the balancesheet showed a loss of £60,000, but he had gone carefully into the balancesheet and he considered the loss was actually £1)3,000 or £94.000, so that the whole of the shareholders, depositors and creditors would lose their money. However, it was no use crying over spilt milk, and the question I was how were they going to remedy the matter. The steamers were valued at £9OOO, and he did not consider them worth £4OOO. These steamers had been built 35 or 36 years ago, and as they knew, the value of steamers had depreciated, not only in New Zealand, but the world over.

PURCHASE OF LAND. He said the balance-sheet did not show the losses over the land transactions, and he deprecated the action of the directors in speculating in land and adopting such a very large building policy when they were always short of money. It was a good job the shareholders had not supplied more money, which would probably have got like the other. The directors, he said, should give up the idea of speculating in land and buildings, especially when they were short of money, instead of putting the money into the business. It was a sad state of affairs-that after 35 years, during which the company had been re-constructed several times, it should be in such a position. They had an up-to-date works, plant and machinery, and it was a question of how best to reconstruct. He was afraid th£ directors had something up their sleeve, so that it was hopeless to further discuss the position. They were not able to pay their creditors and depositors, many of whom, he was sorry to say,

were local men, who had put their money in at call, expecting to receive a dividend. The only solution appear!ed to be to take up more shares, and j if they were taken up by the depositors there "was a better chance of success. He considered that the whole trouble was that they never had a manager of a meat company in Patea. He was not disparaging the work of the secretary or the staff, but they should have had a man in charge who knew the whole meat business. In this connection he instanced the success of the Smart Hoad works, whiyh Ua

tablished a few years, and which paid (i per cent, last year. The dire, ors had had six or seven fat years, yet in the first lean year it only took two or three months to bring ’matters to a climax. lie would, he said, like the directors to give some idea of what they proposed before the meeting proceeded to pass the balance-sheet. The chairman said that the previous 1 speaker was talking as a town man regarding land speculation. The com- i pany must have land in which to hold I ’ their stock at times, otherwise it ' ’ would deteriorate. With possibly the ! ‘ exception of the last piece they had : purchased, all the land was a good ■ speculation to-day. They had put very little money in land. .Regarding the | buildings, he said that a lot of people j considered the buildings too big alto- | gether. Probably they were at present, but people were very forgetful; not longer than fifteen months ago they were wondering what they would do v Jth their meat. Every concern in New Zealand was 'full, and the company only spent money in buildings and machinery at the call of the fari mer, who was crying out all the time that there was no place to . put his J stock, which would be left on his hands, , I One of the biggest concerns in New ! Zealand had never built one foot of • space and had made a profit. If Pa- 1 tea had built half the buildings and in- ; stalled half the machinery it had it would be in a better position to-day. The directors should have said to the farmers, “Give us |d or Id per pound and we will erect buildings and take your meat.” FIGURES CRITICISED. Mr. Pearce said some explanation , should be given as to what the posi- ! tion actually was. The present bal- ! ance-sheet showed buildings, plant, etc.. , £177,508, but this was shown as did 43- j 000 twelve months previously, despite 1 the fact that the cost of building was now less, and moreover the buildings ' would be worth less than if they were a going concern. He wanted to know if the figures in the present -balance-sheet were the actual cost or a revaluation. Moreover, the deposits in 1920 amounted to £<95,000, whereas this year they I were only £OO,OOO. Sundry creditors last year were £129,000, whereas this year they were down to £34,0(H), so that close on £lOO,OOO had been paid oil, and he would like some explanation. The freehold referred to was valued at £21,000 and carried a mortgage of i £13,000. With the-fall in value, it was ! probably not worth more than the mortgage. He thought a committee i should have been set up at the lasi i meeting to look into the position. | Mr. Dickie explained that the difference in the amount of creditors was due to the Government advances against ■ meat, as the stock held the previous j [year was £240.000 as against £s<>,ooo j ! this year. The land referred to showed I a good margin of equity. ' The secretary explained that the appreciation in the value of the build- ’ ings was due to the fact that they had altered their system, and now showed the buildings, etc., in the books at their actual cost, showing a depreciation reserve of £14,935, and also to the fact that an additional amount of over £42,000 had. as was forecasted

by the chairman at the previous meeting, been expended on additions to buildings and plant. In reply to further questions, the chairman said that nothing had been placed to depreciation this year. The works to-day could not be built and equipped at the price paid at the time.

Mr. Pearce considered that a good deal of the loss was due to rhe stocks having been over-valued last year, and lie considered that it was bad policy to have over-valued stocks, and so paid £3285 in income tax'. SELL OR CONSIGN.

The secretary considered that the valuation had been on a conservative basis. He pointed out that they had estimated 20,590 cases of meat at 355, and in the face of letters from Home at the time that corned beer was selling at 80s to 85s, corned mutton at 65s to 755, and later that beef was selling at 45s to 55j|, this estimate looked conservative. They had also taken 1195 casks of tallow at 42s per cwt., and on September Hi were notified that beef tallow was selling at 86s 6d and mutton at 77s Od.

Mr. McKenna: “Then why did you not sell ?”

The secretary pointed out that it was the policy of the company to consign. A shareholder asked whether any de- ' posits had been withdrawn since the i moratorium.

The secretary said that three depositors had received amounts totalling £I3OO.

Mr. Boyle said that there was a suspicion in the minds of many shareholders that a big amount of money had been withdrawn by depositors just before the moratorium. Information must have been divulged to enable those depositors to take advantage of this.

The chairman said that no one here knew about the moratorium. The money had been drawn out all along. One man had taken out £4OOO the day before the moratorium, intending to buy land, and had put it into another concern, and it was still there.

Mr. Belton said that the primary cause of the trouble was that the slump had 'come so quickly no one had foreseen it, not even the banks, and the great mistake was consigning as against se]-

ling. Practically every dairy factory in Taranaki had made the mistake of turning down good offers in favor of consigning, and had dairy produce slumped to the same extent as meat and wool many dairy factories in Taranaki would have been in the same posi-

tion as Patea was to-day. He thought the directors should be given credit ror having shown great enterprise; but lor this unfortunate circumstance the works would have been a great asset to the I district. If the works were to be sav- ; ed to the district, it would require the ! co-operation of the whole district, and he hoped that any criticism would be constructive. The report and balance-sheet were then adopted. ELECTION OF DIRECTORS. The three retiring directors (Messrs. B. C. Lysaght, A. E. Symes and A. T. Wells) were re-elected unopposed. I Mr. H. B. Burdekin was re-elected auditor. SCHEME FOR CONTINUANCE. The meeting then went into committee to discuss the .proposals that were i promised to be placed before them when ' the meeting adjourned three weeks ago. 1 After being in committee for some 1 hours, the meeting resumed, and it was . reported the following resolution had been carried: “That the scheme put forward by Mr. T. Taylor for carrying on be approved, and that the matter be left in the hands of the directors with full power to act in what they deem to be the best interests of the company.”

A committee consisting of Messrs. G. ■V. Pearce, C. J. Belton and M. Murphy was appointed to confer with the directors ith power to canvass the district and report to. an adjourned meeting to be held in a week’s time. Considerable support was forthcoming ■in Ihe room for Mr. T. Taylor's scheme.