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Taranaki Daily News, 24 September 1924, Page 6

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TARANAKI MEAT COMPANY. WORKS TO BE SOLD. STOCK INSUFFICIENT. HOPELESS TO CARRY ON. Authority to dispose of the Smart Road meat works on such terms as they think fit was given to the directors of the Taranaki Farmers’ Meat Company yesterday by a large attendance of shareholders. The meeting was called at the request of the Bank of New Zealand to consider an offer for the works which the bank, however, found it was not then in a position to submit. A statement setting out the position of the company and showing that it was hopeless to try to carry on was read by the chairman of directors (Mr. J. S. Connett) and after a brief discussion, the decision mentioned was arrived at unanimously. The chairman also stated that the negotiations for amalgamation with the Patea Company had proved fruitless.

The meeting was held in the Workers’ Social Hall, New Plymouth. Mr. Connett presided, the othef d'irekjtofrs with him on the platform being Messrs. M. Fleming, Newton King, C. E. Bellringer, -I. Brown. J. McLeod, E. Martell, H. P. Best and W. A. Hewitt.

The notice calling the meeting was the result of a notice from the Bank of New Zealand which was received at the last meeting of the directors, Mr. Connett said in his opening remarks. The communication was as follows: “Inform Taranaki Farmers’ Meat Company that wc desire a meeting of shareholders called for the purpose of authorising directors to accept an offer for the company’s works which we expect to submit prior to the meeting.” As a matter of fact, the bank had been a little ahead of themselves, Mr. Connett said, for that morning a further communication had been received from the .local manager of the bank stating that the bank was not in a .position to submit an offer for a week or two. They wished the directors, however, to obtain the sanction of the shareholders to accept such an offer for the works as they thought fit. COMPANY’S POSITION REVIEWED To explain the position of the company to date, Mr. Connett then read the following statement which he had had prepared: —

“In order to enable you fully to appreciate the position of affairs in regard to this company, I will endeavour to lay before you first of all the circumstances which prompted the reconstruction. Stock owners, directors and shareholders generally realised the advis* ' ability of retaining a co-operative ’ farmers’ works. The reasons from an economic point of view were apparent, I and I need not detail them here. From [the town's point of view it was beneficial to reconstruct, to create employment, and to enable the town to receive [the benefits of a great part of the earnings of the men employed. From the old shareholders’ point of view also it I was essential that something be done [to endeavour to save if possible some !of the £150,000 put in to establish the ; works in the first instance. These were i good reasons for reconstruction, especially as an expert 1.-ad favourably re- ; ported on the prospects providing an assured output of 110,000 freight car- ■ cases was obtained.

“It was realised from the start that the element of speculating in stock must if possible be eliminated. If operations were confined to freezing on clients’ account the risk of loss was nil; it only required a large turnover to ensure success. The policy proposed was to avoid speculation as far as possible and to rely on freezing for anyone who would put his stock through the works. "Your directors immediately got in touch with the heads of most of New Zealand’s biggest exporters, but for various reasons—(principally that they had made other arrangements —all these efforts w’ere unsuccessful. Preferring to take the best price offering, consigning did not appeal to shareholders, and consequently directors were forced into purchasing stock & policy which they had previously determined not to adopt.

“In direct contrast is the resuscitated Masterton company. During the past season they put through 213,000 sheep, and lambs and 8000 cattle and did not buy a hoof. They killed solely on account of consigners, and I am informed that with such continued support their future success is assured. FINANCIAL DIFFICULTIES. “Mention was made at the last annual meeting of the proposals under consideration for the amalgamation of the Taranaki and Patea compander;, which, among other things, provided that we would freeze down there this season, and Patea would dismantle and do all their freezing here in future. We were not ready in December to operate at Smart Road, and in order to save working costs here readily agreed to freeze at Patea. in order to reduce overhead charges which, with the short season and scarcity of stock which was expected. would have been unquestionably high. In a works such as ours a turnover of 60,000 sheep and lambs is almost ;us cheap to handle as half that quantity, while the overhead charges per head are cut in half, and of course decrease with increased output. Our willingness to freeze at Patea was practical evidence of our approval of the amalgamation scheme, a subject I will deal with later.

“The first difficulty which presented itself at the commencement of operations was finance. ‘Stock had to be paid for as soon after purchase as possible. The bank naturally could only advance 75 per cent, of the uncalled capital, but even that represented only a month’s purchases. Arrangements were made to obtain advances on store warrants against stocks on hand. As the values obtainable were based on prices on an erratic and falling London market, it [meant that extreme care had to be exercised to keep within the overdraft limits, and to be able to pay freight on shipments out of drafts discounted, particularly about April when values were so low at Home that store warrant ad-

vances on the goods shipped was almost equal to the c.i.f.e. advances against the documents. However, on only one occasion was there any undue delay in paying clients, and this Would have 'been avoided had we been able to obtain all the allotment of space to ship our meat when we desired.

“As you are aware the company in the past has received a great quantity of stock from the Ohura. Prior to the opening of the season a party of your directors visited that district, and it was quite evident that there was a great shortage of stock in that quarter. As the drafters got about the province it was plain that the stock was generally short, and consequently prices were likely to 'be high. Arrangements were made with stock agents to send stuff in. bat only one firm responded. A general feature of the stock purchased at 'the beginning of the season was the lightness of sheep and lam'bs sent to Patea. It is realised of course that trucking the stock to Patea after perhaps six days or so on the road would result in loss in weight owing to lack of water. Then again the grading was high, quite a large percentage of seconds and rejects going to make further loss on the stock, bought, of course, as all firsts.” “So far as we ourselves were concerned we cou'ld not sell to clear, and our consignments landing on a low market we could only hang on in hope of a rising market, which price, after paying storage, would leave a small margin of profit,” Mr. Connett’s statement continued. “The uncertainty of the English market, the shortage and high cost of sheep and Jambs, together with restricted finances, caused us to conclude in April that it weje better to cease buying, and not risk greater loss. We could not afford to pay the prices asked for sheep, nor could we see any good reason for continuing.

AMALGAMATION ABANDONED. “Our experience this past season confirms the opinion of directors formed earlier in the year when amalgamation with Patea was suggested, that the stock available in Taranaki does not warrant the t>ree works. With this fact in view it was endeavoured to bring off an amalgamation with the southern company. < As I 'have already mentioned, our company arranged to freeze at Patea last season, at the end of which they were to commence and dismantle their works and transfer any necessary plant to Smart Road. The Patea directors had first of all to obtain the consent of their shareholders to the proposals suggested, and with this end in view held the first extraordinary general meeting of their members in March when the matter was discussed. The feeling in South Taranaki was that endeavours should bj made to re-capitaiise the local company a,nd retain the works there, and with this object in view they made a canvass more or less unsuccessfully. Your board felt that unless an amalgamation was brought about with the goodwill of the South Taranaki people, no good purpose could be served The southern stock was most necessary to warrant the price to be paid for closing up at Patea, and as it appeared that neither the stock nor the practical support would be forthcoming, it was im perative that this company should in continue negotiations. Accord''ig’y on June 20 your directors decided as under:—

That the Patea Company be infonmed that in the opinion of this company the delay that has taken plaoe in coming to a decision on the amalgamation proposals submitted for their consideration has largely prejudiced the position and rendered impossible the carrying out of the scheme in time for next season’s operations. This board is therefore reluctantly compelled to notify Patea of an abandonment of the proposals. OFFER TO BORTHURIK'S. “As a la-st resource it was decided to get in touch with Messrs. Thus. Borthwick and Sons, Ltd., with the object of freezing for them at Smart Road, giv- ' ing them, of course, preferential freezing rates. Mr. Newton King interviewed Borthwick’s in London, and they in turn discussed the matter with their New Zealand manager who was also in London after Mr. King left. The proposition did Dot appeal to them, thinking probably that if the works were of any use to them they might as well buy them straight out and have full control. Your directors, after reviewing the experiences of last season and visualising the prospects for the future, decide<J to represent the position to the bank with a desire to finalise matters at an early date to save further interest charges and payments of principal and give prospective purchasers an opportunity to get in before the new season started. The result of this was the wire received from the bank suggesting this meeting.

“It is a matter for sincere regret that an up-to-date works in 'the centre of an agricultural and pastoral district with a deep water port at ns doors, owned by the farmers who have benefited so much by them in the past, should have to go out. It is quite apparent that its continuation is not warranted, its resuscitation proved the farmers’ loss of faith in it—and therefore for the sake of those townspeople who did so much towards its re-estab-Idshment, your directors are anxious to get the worka opened by some other concern os early as possible. “The objeci of this meeting is to bring off such disposal of the works in order to enable operations to commence soon, and further to endeavour to conserve if possible the uncalled capital, viz., £3 per share on 9710 shares in the company. How far this can be successful depends on the bank who, no doubt, are anxious to do their best for contributing shareholders. WINDING-UP COMPANY.

“According to our Memorandum of Association, your directors have power to dispose of the works, but are anxious to get the feelings of shareholders on the object stated in the convening notice. Given the consent of this meeting your directors will complete negotiations for the sale as early as can be arranged and the company will go into voluntary liquidation in the ordinary course. Should such consent bp withheld by this meeting, it will be left to the bank to complete the winding-up, and this in your directors’ opinion is the less desirable of the two courses/’

Giving a resume of the financial position of the company, Mr. Connett said that the directors had hoped to have an audited statement for the benefit of shareholders, but they had decided that it was not a fair thing to aak the auditor to prepare what could be only a partial statement at such short notice. Thev had, therefore, prepared a state-

ment which, coming from the directors, •it was thought would be readily accepted by the meeting. The statement showed that there had been a loss on the trading account of £8204. Overhead expenses had amounted to £13,162, including interest, discount and exchange £10,0(70. In addition payments amounting t<o £6750 had been made in reduction of principal in connection with the purchase of the works. To show that the company was not alone in its position, Mr. Connett read an extract from the last issue of Meat and Wool: DIFFICULTIES OF FREEZING COMPANIES. “The past season on the whole has been a very satisfactory one from the point of view of the producer -who sold his fat stock outright on the farm or at a schedule on hooks at the freezing works, and the prices for both mutton and lamb have been on a high level throughout,” the extract said. Lambs opened at 9d, and despite the fall in values in Great Britain which was quite 2d per lib., when the main bulk of the shipments arrived in March and April the price at this end not only remained steady at the opening prices, but continued to advance each month till they reached lOd and 10|d for the 'best North Island lamb, and a little higher in the South. Weth-.r« opened at and ewes at 4id, and continued to advance to 7d and sjd respectively. In the case of mutton also prices fell considerably as the season advanced owing to the very large supplies reaching the Home market from South America. Exporters and buying freezing companies have been faced with a very difficult position throughout the season, and prices at the conclusion were at a high level while values at the London end dropped 25 per cent, after the first few early shipments arrived. Had it not been for the greatly increased value of the byproducts in the nature of pelts, wool, etc., the prices for both fat sheep and lambs must have dropped by 5s to 10s per head in the Dominion. Pelts, however. rose by 5s to 10s per dozen, and wool increased to the extent of about 50 per cent., and these increases helped to set off the drop in the value of meat though the losses of some shippers must have been heavy.” INSUFFICIENT CATTLE.

“The position simply boils itself down to this.” Mr. Connett continued. “We must realise that the exporters are not prepared to operate here to relieve us of the trading difficulties.” The stock in Taranaki was not sufficient to keep three meat works going, and that was why the proposal to amalgamate with Patea had been made. This would have consolidated the co-operative works and so enabled them to carry on more successfully. The total stock handled in Taranaki last year was about 200,000 sheep and lambs and about 20.000 to 30,000 head of cattle. Messrs. Borthwick and Sons, who did a big business in beef, traded as far afield as Coromandel, the Waikato, and the Bay of Plenty, so it was hardly correct to include all their killings as Taranaki stock. When, therefore, they realised that that quantity of mutton and beef had to be divided between three works, they would see how difficult it was for any one company to carry on at a profit. Competition during the past season had been very keen, Mr. Connett continued, and the company had been forced in an endeavour to maintain its connections, to pay prices that the directors considered were not warranted tr We have insufficient finance to carry on,” he added. “We have only a smao proportion of the preference share issue left, and as the bank would only advance us 7'5 per cent on the total issue last season, we cannot hope to finance the company’s operations on the smau amount of the capital which now remains.” COULD NOT HOLD FOR PRICES. Mr. Connett also referred to conditions at the marketing end, stating the company had had to sell its meat as fast as possible in order to keep the finances right. They had not been in a position to store the meat until prices advanced, but when they had been compelled to do so, the storage charges had been fat in excess of what they would have had to pay had they stored in New Zealand. The proprietary companies had the advantage of larger capital and they could hold for better prices, while they also had the benefit of better marketing connections. Many of them had direct connections with retail shops and, therefore, they obtained the full price for their meat, an advantage which was not enjoyed by .companies such as the Taranaki Meat Company, which had to sell through the meridian ts. “In conclusion,” said Mr. Connett, “we can only repeat that, from the point of view of the directors, it is advisable to sell the work-s as soon as possible in order to save some portion of the uncalled capital." Particularly were the directors desiroua of doing this for the sake of the town shareholders who had helped the company along. It was not a fair thing, in the directors’ opinion, to ask the town shareholders to carry on and take the risk of losing the remainder of their uncalled capital. For that reason t he shareholders had been called together to consider the position. Although the directors had power to negotiate a sale or wind up the whole thing, they desired the shareholders to be fully aware of all the facts. Mir. Connett then moved: —■. “That this meeting of shareholders of the Taranaki Farmers’ Meat Company approves of the disposal of the company’s works on such terms as the directors think fit/' Buch a resolution, he thought, would meet the position. Mr. A. W. Budge seconded. DIRECTORS UNANIMOUS. Mr. Newton King said that he had very little to add, as the chairman had explained the matter very fully. It was the unanimous opinion of the directors that it was impossible to carry on for a longer period. In the first place the money was not available, and, apart from that there wis not sufficient stock ar. present in the district to warrant the works going on. There was a tremendous shortage last year as compared with 1921-22. The quantity of sheep I liad gone down rtonsideralbly, and he ■agreed with the chairman chat it would j be fut'ile to open the works. Regarding the marKeting conditions ■ at Home, he stated that, when he arrived in England at the end of April the mutton market was as bad as it could pos'siibly bo. He saw there Mr. Dickie (■chairman of directors of the Patea works), as well as a couple of tl eir own agents and half a dozen other agents Que of their agents advised

him to sell gradually at the .prices ruling each week, but after talking the matter over with Mr. Dickie, more .particularly regarding lamb, it was decided to hold for higher prices. They did actually realise 8s per pound more, and had they held on longer would have realised a higher price still, but the storage charges, etc., in England were so high that the additional Ad or Id per pound would soon have been eaten up. He stressed the .point that the company must hq.ve a lot more capital if it were to go on, as it would be absolutely necessary to buy. stock, there not being enough available on open consignment. There was, moreover, the gambling spirit to contend with. This, as they knew, came in pretty bad as regarded the fluctuations in butter and cheese. When he arrived in England butter was down to 120 s, and it was abated that ib wold go lower, whereas in ten days it had soared up to 178 s. It was an extraordinary market, and all traders seemed to be misled. In concluding, Mr. King regretted the position they 'had arrived at for the sake of all who had invested in the company, but he could see no possible way of carrying on.

The chairman said that the directors had met every week in an endeavour to carry on. CONSIGNMENT IMPOSSIBLE.

Mr. C. E. Bellringer said that when he joined the directorate he knew very little about the meat export business. From the reports submitted by experts it seemed thfa-t it would -be possible to carry on, as it was stated that there was a considerable increase in stock. They had not started long before they discovered that there was a great shortage of stock and that competition was very keen for what there was, buyers operating for proprietary firms being out to get the stock at any price. He went on the directorate with the definite policy that there was to be no more trading, but that they would freeze on open consignment. They, however, found it impossible to carry on the consignment policy, as it was impossible to do so in this district, while the other companies operating did not confine themselves to that. In the South Island tend the Wairarapa it was different.

Their Overhead expenses, he remarked, amounted to £13,000, and this was a crushing item. On an output of 50,000 carcases the overhead expenses would be 5s per carcase, and of course it would be impossible to carry on at that price. If that were increased to 100,000, which he considered the extreme limit, the overhead charges would be 2s fid. To this must be added 2s fid freezing charges, which would make the total 5s per carcase, on which basis it was absolutely impossible to carry on and make a success of the concern. THE QUESTION OF FINANCE.

Apart from that there was the question of finance, added Mr. Bellringer. Roughly, they had £49,000 on which to finance. Of that amount £21,000 had been already lost. This year they had to pay the bank £5OOO in reduction of account and interest £lO,OOO, only leaving £14,000 with which to finance and carry on. The directors had given the matter careful consideration, and were unanimously of opinion that it was not possible to carry on. Therefore, as it was not possible to carry on themselves they recognised that it was best if possible to allow some one else to do so. He detailed the steps the directors had taken, including the proposed amalgamation with Patea. There was not room for three works in Taranaki, and it was thought that if the output from the works could be brought up to 1'50,000 or 200,000 carcases it would be possible to carry on, but to be successful it was necessary that they should have the goodwill of the people of the southern end of the province and be assured of getting stock therefrom. The directors had agreed on a basis, but naturally the people of Patea had got together to prevent the closing of their works, and as the result of their efforts the Taranaki directors had notified them that they could not go on with the amalgamation, as the new season was coming on, and to further postpone the question would have put the company in an untenable position. The directors had also interviewed 1 Borthwick’s. NO ALTERNATIVE BUT TO SELL. He stated that the directors had no idea from whom the bank had received an offer. Though they regretted the position, the directors were unanimous that they could not carry on. It was impossible to raise more capital and he was sure that the directors were not going to sign a joint and several. In fact, he was sure that shareliolders

would not ask them to. There WAD consequently no alternative but t® endeavour to sell on the best toriu« possible. They were absolutely in th® hands of the bank, and if not prepared to go into voluntary liquidation, no doubt the bank in due time would com- . pel them. In conclusion, he said that the money lost in trading had not boon altogether lost to the district. Farm* eYs had received an enhanced price fop the stock owing to the extra compete tiion. He considered there was only ona thing they could do, and that was to make the .best of what was -undoubtedly! a bad job. Mr. Gordon Fraser asked whether the directors did not think it was rather q remarkable position the bank had plac-’ ed the company in by not having given them a hint as to the amount of money that would be available. He wanted td know whether there would be anythinn left of the wreck for the or would the bank secure the uncalled capital ?

Mr. Connett replied that the banM had full power over the uncalled capital which the directors had had to sign) away as security for the advances thq company bad received. It might b 4 that the bank would be satisfied with the £2 per share which had been called up, but that, of course, would depend on the sale price of the works as well as on other factors. There was n<q doubt that, if they bad to sell, the bank) would stand to lose another £4O/MX>| but, doubtless, provision had (been madf long ago for that. NEGOTIATIONS WITH PATEA. - Mr. W. B. Honeyfield suggested that the directors had given the Patea company too much rope and had- thereby prejudiced the position of the Taranaki company. Replying, Mr. Connett said that tihd directors could not have foreseen what was going to take place. The directory of both companies, he continued, had unanimously agreed on a basis of amalgamation which had needed only the ratification of the shareholders. The graziers of the Waitotara-Waver ley district and the people of the town of •Patea, however, had set themselves out to save the Patea works. Patea had realised, as those present at the meeting must realise, that the closing of the works there would be the beginning of the end of Patea. “We know,” Mr. Oonnett said, “that the time must come when the whole of their stuff must come through New Plycoming remains to be seen, but it must come. With the interest on the big debt of £lOO,OOO to be paid on their port, the only thing to do 'if their trade falls off is to strike a rate, and nobody wants to have to pay that.” Mr. Connett added that the directors were quite satisfied that they would have lost much more money if they had tried to run the Smart Road works. They had also shown their bona f.des towards Patea by sending their stock there last seaeon. Patea had treated them well in the matter of preferential rates. There were no further questions, and the motion was then put and carried unanimously.