The Waikato Times With which is Incorporated The Waikato Argus. FRIDAY, MAY 14, 1920. F.U. TRADING CO., LTD.

Waikato Times, Volume 92, Issue 14363, 14 May 1920, Page 4

The Waikato Times With which is Incorporated The Waikato Argus. FRIDAY, MAY 14, 1920. F.U. TRADING CO., LTD.

The Farmers’ Union Trailing Co., Lid. are to be congratulated on a successful year's work, as disclosed by the balance sheet made up to March 31, 1020. The business done lias been very large, an 1 the profits shown are very satisfactory. There is no occasion for us to emphasise these points, for the report which accompanies the balance-sheet docs so in sufficiently glowing terms. The most satisfactory feature of the bal-ance-sheet is the large increase in the number of shareholders, which has grown from 5830 to 10,700. Tho amount of paid-up capital is not adequate to the size of the business, but if the company can continue to enrol fresh shareholders at this 'rate they will rectify the shortage before long. In this connection it is interesting to note that they are taking powers to increase the nominal capital from £600,000 to £1,000,000 by the addition of 300,000 ordinary shares' and 100,000 “B" preference shares. It is thought apparently that the ”B” preference shares will find a market, although but a small proportion of those previously issued have been taken up. The company is wise to lake the flowing tide at the full, and increase their capital at a time when money is plentiful and trading concerns arc all doing a more or less profitable business. The company rellects the conditions of the time; prices have been steadily rising during the past year, and as much profit was made on the Sunday when they rested as on a week-day when they worked. They have had a very successful year, and all concerned deserve credit, hut the oircumstances must not be overlooked, for fear that they will not otherwise receive due attention when the position alters. There are some figures in the Tialanoesheet to which it is necessary to draw attention. The fixed deposits and the amount at credit of current accounts amount together to £305,000, which is out of all proportion to the paid-up capital, £323,000. Moreover, these deposits have been, treated as capital, and invested in buildings, stocks afid factories. These may all be sound and profitable, but arc not assets whicu could be realised if any large proportion of the money on deposit were with* dravyn. The directors have also opened up a large number of branch warehouses, and propose to extend this policy further. Without entering upon any discussion of the wislom of such a policy, it is only right to point out that such branches involve the locking up of very considerable capital. Now, capital is just what the company requires, and is taking steps to provide, and there is no prudence shown in setting up the business before the funds required for it are provided. I’lie circumstances of the times are peculiar. The high prices of produce put an unusual amount of money into flamers’ pockets. The repatriation of our soldiers enabled many farmers to sell out, whcflglhc Government paid off existing mortgages. Then the soldiers' gratuity added to the amount of cash in the country and incidentally helped to raise prices. The result of this has been to make money plentiful, and much of it has been attracted by the high rale of interest offered by the company as compared with that given by the banks. This, however, is not the normal position for Auckland, or for any. part of the North Island. Wc are still in the position of having much land lo develop, and this offers a safe and profitable investment for capital, which will go in that direction as soon as conditions become normal, and labour is once more available. How long it will be before this takes place is uncertain, and the company may get their additional capital floated and subscribed before depositors require any substantial portion of their• money. There is,, however, the possibility that they may not, and, what is more likely, that the directors may consider that the investment of deposits in buildings, stocks and factories is sound business and warranted by results. The experience of all bankers is against them, and they will do well lo limit the amount of deposits to a sum which bears a smaller proportion lo capital, and reiy on shareholders for the cash required to hold the various stocks at so ma.iy branches. There arc indications in the report that the farmers are inclined lo draw away from the rest of the community and that they consider that they can successfully supply all their wants, and do away with other businesses. We trust that they will not allow the success of the past year to lead lo any such thoughts. As we have shown, it is largely the'results of circumstances such as we have never seen before, and are not likely lo sec again. The farmers who purchase 29 businesses in one year, and enter up an the manufacture of saddldry, bools end furniture are conducting a large and intricate business of a kind which has hitherto proved difficult to handle successfully. The farmers may succeed where others have failed. They have a great asset in the large number of small shareholders who arc interested in the business, but it is an asset which is apt to prove troublesome if things are unsatisfactory. Instead of taking their business elsewhere they may stay and grumble, which gives the business a bad name, and though the number of shareholders is large the bulk of tf.e trade must be done with the public. The opening of London and New York buying offices sounds attractive* but

experience does not always confirm th? wisdom of this course. To combine nil brandies of rade under one management lias been a favourite device of business magnates, and it holds out the attraction of obtaining Die prof!is of each portion. In actual practice :t is too often found that the profits are required to obtain the services ctf competent managers, or disappear under incompetent men. The Farmers’ Company, with a turnover of a million per annum, can buy to the lies! advantage without becoming a Trust, and incurring the unpopularity involved therein. Meanwhile they will be wise lo continue their policy of enrolling fresh shareholders, rest from then* labours in the purchase of businesses, and establish a more prudent proporthei between the amount of paid-up capital mid money on deposit. *