THE DAIRY COMPANY.

Timaru Herald, Volume XIIC, Issue 13597, 18 May 1908, Page 2

THE DAIRY COMPANY.

WOHK TO COiSTINUK. A special general meeting of vli.urli.ilil'is in tho Smitli Cantcrbuiy Dairy Company with Mi- \V. U. Howell in the chair, was held in the Sophia Street Hall on Saturday to consider the following proposals for the earning on of the industry instead of allowing the company to go into liquidation ; 1. '"That (he suppliers <>liall sign a guarantee to tho bank for £oooo, or that the

suppliers at each creamery or factory shall sign a guarantee for £3OO, except in the case of Temuka, which shall bo for £SOO. (2) That, tho capital of the company be increased by the issue of 2000 ordinary shares of £1 each. (3) Thalt the capital be increased by the issue of 2000 preference .slums ot" £l, bearing 10 per cent, cumulative dividend, with preference as to capital and interest ; preference to exist - for live years, at the end of which these share** rank as ordinary shares ; during the five years all profits (over all that.' required to pay the preferential share dividend) to be "placed to reserve account; when reserve reaches £SOOO a. dividend many be declared on ordinary shares; during the existence of preference the preferential shareholders to have the sole right to vote at. a general meeting; the voting power of preference shareholders not to be restricted to five votes, either during or after preference; all existing directors to retire at the end of the current financial year; no dividend to be paid for current year and balance of profit and loss to Iks carried forward; if at the end of five years the reserve account has ndfc reached to £SOOO then preference to continue until that- sum is reached."

In a circular distributed to shareholders and embodying these proposals the directors of the company stated that tho first proposal, is perhaps, the most feasible, and as tho suppliers derive mos't benefit from the company, it is suggested that thsy should come forward, and help themselves by signing the. guarantee, which, when distributed between tliem all, only amounts to a small sum each. Tho second proposal is the simplest way of getting over the difficulty; but, if carried, shareholders will have to see that' all these shares arc taken up to avoid liquidation. The third proposal is for issue of preference shares. As the money received for 2COO preference shares will be devoted to paying off debt (there being no present requirements for building or plant) the cost of the scheme to the company will simply be the difference of paying 10 per cent, instead of the present- 7 per cent-, viz., £6O per annum on the £2OOO. In years free from drought, the company may confidently expect to make a profit of over £IOOO, and it is proposed (instead of paying the profits out in dividends) to build w a reserve fund, to the extent of £SOOO, which it is expected can be done within five years. And as the money thus saved will be devoted to paying off the bank overdraft, the company will, in a rexj few years, be clear of debt. The interest paid last year amounted to £4OO, and with the proposed reserve account, this will be entirely saved, and the company in five vears 1 time should be in a position to ;?ay the maximum dividend on the 10,000 shares then existing, and thus bring the present shares, which are now comparatively worthless in the market up to »heir remain I value of £l. If the company gees into liquidation, there will be little left for the shareholders, whereas if it is enabled to continue through the carrying out of one of the above scheme, shareholders will stand a good chance of getting the amount back for their shares that they have paid in. The following statement as rt 3?th April, 1908, was also included in the circular. Liabilities—Capital Paid Up, £7876 17s, Gray, M. £5484- 6s, Bank of Jew Zealand £1577 8s sd, Unclaimed Dividenls. £221 10s sd, Unclaimed Bonus £2B 19s 7d, Sundiy Creditors £271 16s 2rJ, .Suppliers £BB6 5s 7d, Interest Accrued JSlob 10s; Total £16,483 15-> 2d. Assets — Buildings, Land and Plant £13,324 0s c>d, Live Stock £l5O 18s Id, Cheese and Butter, on Hand and in Store £685, Stores on Hand, say £IOO, Sundry Debtors £1938 17s lOd, Estimated Surplus on Shipments £3OO, Deficiency £4 17s; Total £16,483 13s 2d. Mr Beck, chairman of directors, gave his impressions gained by visits to some of the creameries. At Geraldine the shareholders had favoured liquidation without expressing any opinion as to the course to adopt: Temuka favoured the grouping system; Pleasant Point, liquidation and the formation of a co-operative concern; St. Andrews, grouping system. It was a difficult thing to get a straightforward expression of opinion, but he would say on his own account that he Imped the meeting would adopt the principle. It would either be that or liquidation. He explained the grouping system as at the previous meeting and stated that i a joint and collective guarantee vould | amount to £3300, but a personal guarantee to about £23 lCs apiece—it would vary in the case of different creameries from £l7 to £3O. He thought it :i pity that- liquidation was ever resorted to, ;;nd if they had had one really good season liquidation would never have been heard of. He believed that even in districts

where liquidation bad been carried, the shareholder* favoured the grouping system because there w a feeling that they had a duty to perform to the dry shareholders for their assistance.

In reply to questions Mr Beck stated hat at present there were 165 suppliers—

there were 187 in the height of the season, but ;i few dnipped off during the dry weather and probably they would (supply at any time jf the conditions were favourable. He had the opinion of a banker that the grouping system could b'j made acceptable to the banks. The bonds would have to be joint and several to all the creameries or factories, and would

amount to £3GO to each one except IVniuka, where it. would be £SOO. So far nobody had offered to sign any «.f tho guarantee bonds though lie took sonic with

him on his visits to the creameries,

Mr Cain asked if the company would want the fidl amount before carrying on and stated that Mine ]>eople were alraid to sign when othens would not.. Another asked if the bank would accept ;i guarantee in proportion to the amount of milk supplied. 31 r ]*eck replied that the bank Mould

not- accept e>uch a guarantee. Mr Melville Gray, the holder of the mortgage, then addressed the meeting. He *aid it was fully understood at the lastmeeting that if people signed the guarantee the company would go on, but as none had signed there wat> 110 need to ditvcuyjj the matter further, and it was time to paw on to tin; next, resolution, that dealing with the issue of common rshar<t> at £1 each. He thought little of this proposal l>ec;ttis--e it could not be expected that j>coplt: would pay £1 for ordinary shares when tln-ir present- market value was Ittti than £l. Coming to the propittal for the i>t>i;e of preferential shares.

he baid !k- had visited the factory and creaimrku and found that everything that, was required for carrying on was there mow, and the company was in a good po-

sition to carry on the business, which wh« a thoroughly sound one. .Although the

| last, two eoasotis had been dry ihere was every prospect, of the supply increasing. Liquidation was not it tiling to be considered at all. for. ai> the guarantee was not forthcoming, the preferenee Sfhcme was the only one to go on with. Some people said 10 jK.r ''eiT. *>n the pre 'ence shares was rather high, but sc>n;e inducement would have to le {. : iven to people to take up the shares. 'ihe pit sent shareholders would not lf .se anything; their profits would be merely deferred and added to iesei-ve instead of distributed. To make the thing quite definite he offered to cuavanu-: the. whole issue at a comicisiion of 5 per cent.

Mr Isitt wished to give the suppliers another chance, to sign the bonds, in order lo save the expense of Mr Gray's procedure. He asked how they were going to hold the suppliers on the south border when there was nothing to prevent tliem going over to the Taieri and Peninsular Company. Thousands of men in other parts <it the country had signed guaranties.

Mr llurdley said there w< ir> 165 suppliers holding an average of five shares each and some of them drew up to £29 per month for milk supplied. It was t:> their interest to take up more shares and lo keep tlio fousiiHSs in their own hands.

Mr Gray informed the meeting that the present shareholders would have priority in the allotment of the preference shares. He considered it was much more likely that they would get more suppliers if suppliers were not asked to sign a guarantee.

Mr A. C. Thompson thought the suppliers would not take up shares to the extent of £3OOO, and therefore the only system to accept was Mr Gray's. Mr Gray had been a good friend to the company, and had ottered to underwrite the whole issue of preference shares, thus making himself liable for £2OOO. It showed that Mr Gray had confidence in the future of South Canterbury. The acceptance of Mr Gray's proposal was the only chance the shareholders would have of getting their money back again. Liquidation would cost £SOO, and by the time the mortgage was paid off there w r ould be nothing for the shareholders. By adopting Mr Gray's proposal they would keep the factory going in a better manner than before, and it tfould be letter for the industry. The prospects were all in their favour, and the profits would go towards the strengthening of the company. At present the shares were not worth Is each, but in live years they would be up to their full value again. He advocated this system, so that they could all get their money back, which they could not do under- 'liquidation. He moved that 2000 preference shares at £1 each be issued and that Mr Gray's offer to underwrite those at 5 per cent- commission be accepted. A shareholder asked how it was that the grouping system of guaranteeing the bank would require £3SUO when Air Gray's scheme was only for £2OOO. To this Mr Isitt replied that the bank would still continue as a mortgagee to the extent of £ISOO.

Mr W- R. McLaren seconded Mr Thompson's motion. He thought it was the only business method to adopt and he advised the shareholders to retain control of the business for if it got into private hands it would become a money-making loneern at the expense of the suppliers, which would not happen if the shareholders' own directors fixed remunerative prices for milk. Mr Morris considered that if the dry shareholder's wanted to save their nloney they should back up the wet ones and sign the guarantee. He could not .see how, if the company had not paid in the past it could jiossibly do so in tho future; nor could he see how Mr Gray's proposal would bring more suppliers to the company. Mr Stewart (Clandeboye) favoured Mr Grnv's scheme; it- was sound commonsense and would work admirably. Mr R. H. Bowie also supported the proposal, but thought the amount should be increased by £SOO. These proceedings to a certain extent had spoilt the credit of the company and lost some of theiu connection, which was a valuable one, and if the company wore liquidated the connection would Ik> lost altogether. The company had done well for the district; they had circulated £150,000, and had saved £IOO,OOO from going to other quartern for butter. He thought that, as the wet shareholders held only 1300 shares out of 8000 they should take up the new issue. It would be a good thing for the suppliers, but even then they would only hold about half of the shares. Mr Jackson said he knew the business was a profitable one if well managed. He suggested that all the directors should not be suppliers; say three dry, three wet and a non-supplier for chairman.

After a little further discussion in which Messrs Gray, Beck, Wreford, Bqwie and Jackson took part, the chairman put the motion for the issue of preference shares, and this was carried, there not being a dissenting- vote.

A vote of thanks to the chairman brought the meeting to a close. Mr A. G'. Thompson, the promoter and first chairman of directors of the Dairy Company and the mover of the resolution authorising the issue of preference shares, in speaking to a " Herald" reporter on Saturday evening, expressed himself *as being thoroughly satisfied with the prospects of the company now that a reconstruction scheme has been decided upon, and he gave it as his belief that the company would now go ahead by leaps and bounds. A person who was present, and was taking part in the conversation, himself a butter and cheese maker of long experience, made an. offer to take over the whole concern, to put it on a sound footing and to reduce the cost of the manufacture of butter to one penny per pound. Mr Thompson was not-, however, in a position to close with the offer.