SHARES & MINING

Observer, Volume XL, Issue 12, 22 November 1919, Page 23

SHARES & MINING

IN spite of the numerous trials and difficulties to which all coal companies in New Zealand are heirs, the Westport Coal Company has, during the twelve months ended September 30 last done exceedingly well. The profit for the year totalled £40,863, and there was brought forward £12,236, making a total of £53,099. The dividend for the year of Is 9d per share or 9, pei cent., absorbs £39,375, and the sum of £2000 is added to the employees Provident Fund, leaving £11,/ 24 to be carried forward: Judging by the prices at which coal is selling, our coal companies should be showing better results. Compared with the results obtained by joint stock concerns on other branches of trade such for (instanoe, as meat companies and woollen companies, dairy companies and farmers' co-opera-tive associations, the coal companies are showing poor results. In the share market also, coal ventures are neglected, and most of the shares are at a discount. The Westport Coal Company' is about the only concern that appears to be doing a profitable business, and that is very small.

With the extraordinary, demand that exists for all classes of building material, one would have imagined that a Brick and Tile Company would be enjoying prosperous times but this apparently is not the case, judging by the results obtained by the Wairarapa Brick and Tile Company. The twentieth report and balance sheet discloses a loss of £233 13s sd. Of course the directors are able to offer a variety of apparently cogent reasons for the unfavourable showing, but experience shows that in industrial undertakings of this character the very keenest management is imperative. This question of management is of very great importance, and it is doubtful whether New Zealand has reached the stage of being able to produce capable captains of industry.

The National Insurance Company s balance sheet for the year ended September 30 last is not so satisfactory a document as that issued last year, for although the premium income shows a distinct improvement, the underwriting profit is less than it was last year. The explanation of this unfavourable showing is that the losses sustained by the company were considerably greater than in 1918. The premium income for the past year was £172,249, as compared with £166,317 in 1918. The losses totalled £84,302 as against £64,690, and the expenses amounted to £66,239 against £64,265. Deducting these two items from the premium income, the underwriting profit is shown at £21,708, as compared with £37,357, a difference of £15,649.

To the underwriting profit of £21,708 must be added the income from interest, rents, etc., £21,447, and there was brought forward £35,274, making available a total of £78,429, as compared with £100,274 which was the amount available last year. This year the directors have £21,845 less' than was available to them last year for distribution. The shareholders have not suffered because of this shrinkage for the dividend and bonus are again equal to 3s per share which was the amount paid last year, but only £15,000 is added to the reserve fund this year, while last year that fund was augumented by £25,000. This year there is no appropriation for taxation while

last year £10,000 was set aside lor this purpose, and in these two items the directors have saved £20,000. The amount carried forward is £33,429, or £1845 less than last year and this added to the £20,000 saved on the other two items shows how the difference of £21,845 In the available balance was met. • * * Insurance companies have done remarkably well in recent years but it does not follow that they will continue that indefinitely. Experience shows that there are cycles in which underwriters do well, and then follow cycles of heavy losses. The National Insurance Company's losses this year were £19,607 greater than in 1918, this increase being equal to 30 per cent. There may be an increase on this heavy expansion in the current year, and no amount of care can avoid that. It is of the very nature of this business that there should be fluctuations because the moral hazard plays so great a part in the game. The best that the insurance companies can do is to fortify themselves against the cycle of heavy losses and they do -this by building up the reserve fund and keeping that fund invested in giltedged securities. It is always a matter for commendation when banks and insurance companies add to their respective reserve funds. The National Insurance Company has grown to be a very powerful concern and while the paiH-up capital of the company is £200,000, the reserve fund stands at £290,000. • » » The paid-up capital and the reserve fund of the National Insurance Company, together amount to £490,000 and the fluid assets of the company are War Loans, £212,562 ; debentures, £52,999; money on deposit and at short call, £65,000 ; balance at bankers, £34,239, and outstanding at branches, £20,053, or a total of £384,853. In addition to those very liquid assets the company lias lent on mortgage £238,309. It is a question whether insurance companies and other concerns will not be obliged to create investment fluctuation reserves to meet the depreciation in value of gilt-edged securities, for it seems certain that such securities will very much in the next few years. The markets are flooded with Government securities of all kinds which cannot possibly be digested by the various communities. Furthermore many European Governments will be obliged to repudiate their debts or at least defer for many years meeting the obligations. • * • Of course there is no fear of any part of the British Empire failing to meet the interest obligations, but that will not prevent the market values of the securities declining. Such a movement appears to have begun in New York, where according to a recent cable message, there has been a crash on the Wall Street Exchange. A crash was no doubt due in the States because inflation and over capitalization was systematically practised during the war period in connection with munition plants and ship-building slips. But a similar boom is going on in London, inflation is the order of the day with extreme gambling and a stock ex-, change crash is inevitable in London sooner or later. • • • New York recently announced that the money markets were tight and last week the Bank of England discount rate, which was steadily maintained at 5 per cent, was raised to 6 per cent. The Bank is apparently released from the close Treasury control, and is now free to regulate the market, and that being so it is more than likely that we shall see another sharp rise in the discount fate. The effect of all this will be to make money dear, which must have a beneficial effect. What is urgently needed is to get the people sobered" down arid force them to realise the rugency that exists for substantially increasing the output of field and factory.

Now that we have candidates for Parliamentary honours wooing the electors it is as well to be careful of the promises and proposals of these candidates. Many of them are ready to spend millions freely, and are willing that the State should nationalise this, that, and the other concern. The net -indebtedness of New Zealand on March 31, 1914, was £91,689,835, and the debt per head of the European population was £84 2s Bd. On March 31, 1919, the net indebtedness had increased to £170,125,204, and the debt per head to £151 5s od. The net debt increased from £145,868,450 last year to £170,125,204 this year, the per capita indebtedness having increased in the twelve months by £19 4s 9d. * * * New Zealand is already very heavily in debt, and unfortunately our war obligations have not ended. When the current financial year closes the debt will have increased by another £24,000,000, and.will be quite £195,000,000, and we cannot add millions to this total by gambling in coal mines, flour mills, house property, and such things. It is time to sober up and to view things in their right perspective. In the five years, 1914-19, we have added £78,435,369 to our indebtedness, or an average of £15,687,074 per annum. In the five years, 1910-15, our debt increased from £73,387,420 to £96,644,455, or £23,257,035, equal to an average of £4,651,407. These figures, are impressive, and should afford food for thought to those who care to think on such matters.