DAIRYING PROGRESS.

Waikato Times, Volume 105, Issue 17783, 7 August 1929, Page 9

DAIRYING PROGRESS.

TE AWAMUTU COMPANY. INCREASE OF CAFITAL. SUCCESSFUL YEAR. An exceptionally good year so far as pay-out, general progress and economy were concerned culminated in a largely attended and harmonious annual meeting of suppliers to the Te Awamutu Co-operative Dairy Company at the To Awamutu Town Hall yesterday. The chairman of directors, Mr C. M. Alexander, presided.

In his annual address the chairman said he thought he. could speak for practically the whole of the suppliers when he "stated that the rapid growth of the company was viewed with the greatest satisfaction. It was doubtful if another instance could be found amongst the co-operative dairy companies of New Zealand where a company with such a small beginning, and faced with the keenest opposition, had made such rapid progress in three and a half years. The directors realised, however, that growth had its dangers as well as its advantages. There were two kinds of growth in a company—first, a steady, orderly progress where every branch of the company’s operations continued to be subjected to rigid supervision by the directors; and secondly, a weedy, disorderly growth, where “bigness” became so great an obsession that economy and efficiency were sacrificed. lie assured them that the directors were fully alive to this danger, and that the constant objective was to attain that position where the company would secure the maximum of efficiency at the minimum of expense. The report attached to the balancesheet showed that it cost £2O 18s 9d in the 1925-26 season to place one ton of butter free on board the boat at Auckland, whereas they had accomplished the same task this past season for £l3 18s 6d per ton. So long as the directors could come before them each year and show a steady decrease in this item, it was proof positive that the company’s growth was justified. The shareholders had to wait until the annual accounts were published before they knew the position; but the directors got a detailed report each month which was really a monthly balance-sheet. The manufacturing side of the business was dealt with exhaustively, and the directors knew all that transpired in that department, from the quantity of cream received right down to the average moisture content of every churning of butter sent forward for export. On the financial side, also, the details were just as complete. The whole of the revenue and expenditure for the month, the company’s’financial posilion, and even a summary of all important correspondence was supplied to each director prior to the board meeting, so that they knew just where they were from month to month. Men who were in a position to know stated that the directors were furnished with one of the most complete reports of any dairy company in New Zealand. They could rest assured, therefore, that"the moment there was the slightest falling away from the high standard set by the directors, it would be detected immediately. Share Capital Proposal. Dealing with share resumption, Mr Alexander said a motion was on the agenda which he would move later in connection with a proposed increase in the company’s nominal capital. Meantime he wished to bring before them a suggestion which the directors recommended for favourable consideration in connection with the share capital. During the past year the directors had given frequent and careful consideration to the question of adjusting the present basis of shareholding, which was: a £i share for each 1001 b butterfat, with a deduction of id per lb by way of share calls. Some six months ago the directors considered it might be desirable to reduce the amount of the share call to id per lb butterfat, but in discussing this Idea with a number of the leading shareholders they had been pleasantly surprised to find that many of them did not consider this either necessary or desirable. Such a proposal, of course, would merely lengthen the period taken to pay up the shares. The present deduction of id resulted in shares being fully paid in five seasons; the proposed alteration would prolong the period to ten years, although it would have this advantage, namely, that one-half of the amount at present retained for share capital would be paid out annually in casti. The attitude taken up by shareholders who opposed any alteration was that the reduction to jd delayed that happy consummation to which every shareholder looked forward, namely, the time when his shares would be fully paid, and be would receive not only a dividend of 6 per cent on his capital, but also a special cash payment of another id per lb which was previously taken to pay up his shares. (Applause.) These objections had

had considerable weight with the directors, who found that the opinion was generally held amongst suppliers that a deduction of id per lb was a reasonable rate. In addition, the directors contemplated adding to the efficiency of the factory by installing some additional plant (chiefly a mechanical can-washer, a. regeneratee pasteuriser, and another direct expansion vat) ; and also to increase the efficiency of the working conditions be giving the staff some additional room on the cream-stage, and adding to the capacity of the cool-room. All these factors had influenced the directors in their decision to defer any recommendation to reduce the amount of share call tin’s year; but an expression of opinion from shareholders on tins point would be greatly appreciated. An Ambitious Objective.

The directors were unanimous on one point in connection with shares, however. Generally speaking, shares in co-operative companies had not been held in high esteem, and it must be admitted that, in some cases, there had been too much justification for the slogan adopted by proprietary dairy companies: “No shares, no worry.” The directors had the somewhat ambitious objective before them of making the shares in the Te Awamutu Dairy Company practically as good as Government bonds. To that end they were unanimously recommending to the shareholders, not only that the payment of 6 per cent dividend on paid-up capital be continued, but also that the directors should have power, at their sole discretion, to resume share capital at face value (20s in the £) where a supplier gave up dairying, either by selling his farm or going in for sheep. (Applause..) He stressed the point that there should be nothing mandatory or compulsorv about this scheme. In all cases the directors must he the sole judge, and the amount of shares to be resumed annually, and the time at which they would be resumed must be left to their discretion. The directors were adamant on one point, namelv that this scheme should not apply to the case of a shareholder leaving the company to supply another company, although that supplier .would continue to draw a dividend on his paid-up capital. Although it was not anticipated there would be many cases of this nature, it was well that the position should be clearly understood. The directors would appreciate comment or criticism on the proposal, and trusted the fact that they were the first dairy company, so far as they knew, which loth paid a dividend and resumed share capital at face value, would not be a deterrent in the minds of the suppliers. Herd Testing. Speaking of herd testing, Mr Alexander said the company’s groups had been very successful, and had been run most economically. Very good service had been given during the past season; and the directors were sorry that the herd testing officer (Mr Lange) decided to give up the herd testing, as he desired some experience of cheese manufacture in New Zealand. He was an expert in the Gerber system, and had specialised in herd testing in Denmark; but lie had come to this country to gain a general experience of our methods, and he was no longer in the company’s employment. This fact influenced the directors in their decision to close the herd testing branch; although possibly a more powerful factor still was the decision of the Dairy Produce Board to place the herd testing system upon a national basis, free from the direct control of any individual dairy company. This system had many decided advantages, but it was somewhat unfortunate that it proved rather expensive for the man with a small herd. In these circumstances the directors wished to intimate that they would still carry on what was known as the “Association” system of herd testing at the factory for small herds up to, say, 20 or 25 cows, and full ’’nformalion on this point could be obtained at the office. Dealing with the pay-out, the speaker stated that for the season the pay-out came under the financial side of the operations and would be dealt with by the secretary, whose g”eat problem In the preparation of the bal-ance-sheet was whether they should show in a straightforward manner what had been actually paid suppliers for butterfat for the season, or whethey should adopt the somewhat doubtful processes adopted by some companies of swelling their total payout by including such items as cartage subsidy, amounts placed to reserve, depreciation, etc. He merely wished to remark that the directors felt well satisfied that the result of the past year’s stewardship had returned to suppliers a total payment for finest quality of Is 7d for the three winter months and is 6kl for the balance of the season. The directors wished to express their appreciation of the efforts made by the whole of the company’s staff, because it was their excellent service which was largely responsible for the fact that they had been able to put their butter on board the boat at under lid per lb “all-in,” even though they were 100 miles from the port of Auckland. Balance-sheet Explained. A thorough and complete explanation of the balance-sheet was given by Mr A. J. Sinclair, secretary, who was complimented on the manner in which this document had been drawn up. Mr Sinclair mentioned that part of the supply from September to December had been sold for Is 5d and portion for is sid. There had not been the same demand from agents this year as formerly, but it was to be hoped the disposal at the figures mentioned would prove advantageous. In answer to questions, Mr Sinclair said there were a number of contributory factors to the lowered manufacturing costs—greater efficiency in manufacture, the larger quantity manufactured, and the operations of the Control Board, which had enabled produce to be placed on board ship at a much reduced figure. Mr Glennie (Otorohanga) suggested that when the lorry was put on to collect the Otorohanga cream, the company should see that the cans were properly covered. Otorohanga suppliers would then endeavour to send a superfine cream along. It paid no farmer to produce other than superfine cream. (Applause.) Mr Alexander said the company would see that the cans were properly covered. He asked suppliers to notify the secretary if any delinquence was observed in this respect. He urged every supplier to observe the utmost cleanliness in every phase of the industry. If this were done they would get superfine cream, and their factory manager would then be able to manufacture the highest grade butter all the time. Mr .Bruce asked that the carters he circularised to take greater care in the treatment of cans. At present, owing to rough handling, many cans were damaged and left on the roads in a dirty condition. The matter will he attended to. Replying lo a question regarding testing, Mr Sinclair said the charge

for testing under the Association, in , the case of small herds of under 20 | cows, would be 2s 6d per cow, the owner to And all equipment and take his own samples. Congratulations. Mr A. E. Leonard, Auckland, in congratulating the company upon its wonderful progress, said he was with the company in the early days, and shared with Mr Sinclair and the directors the optimism which had been so well justified. Speaking of the share capital, Mr Leonard said he did not see why the shares of dairy companies should not be as valuable as those of any other concern and why they should not be regarded as gilt edged security. He knew of one small co-opera-tive company whose shares were so regarded and whose banker was prepared to advance suppliers 10s per share where fully paid up. Referring to the marketing of “Lotus” butter, the Te Awamutu Company’s particular brand, the speaker said that while it had been difficult in the early stages to place it on the critical London market, it had now a ready sale in the Midlands, where there was a chain of retail shops always ready to take “Lotus. ’ Last year was one of f.o.b. selling and good prices were obtained. There had not been the same “long shot” buying this year, however, and his firm was feeling rather glum about the position. Still there would always be a market for all the butter they could produce. The great competitor of New Zealand butter was not Australian nor Argentine, but margarine. The more the New Zealand producer could reduce his costs and the lower he could sell his produce at, so much better would be his chance of getting his share of the market. The wisdom of selling of portion of the supply from September to December at Is 5d could not be gauged until later on. motion to Increase Capital. In moving that the capital be increased from £II,OOO to £25,000. Mr Alexander said the company had progressed so rapidly that it would soon be in the position of having no shares to issue. It was not necessary that they issue the whole or any part of the new capital at once, but they must be in a position to offer shares when new applications came forward. There was no chance of over-capitalisation, as they could stop calling up at any time. The tendency everywhere was to treat dairy companies as small agricultural banks, to which the suppliers could apply at any time for a little assistance. For this purpose it was necessary to have a sum of money in hand over and above working capital.

The motion was seconded by Mr Gane.

Mr Rhodes considered that at the present rate of the company’s progress the present proposed increase in capital would be insufficient in a couple of years’ time. He wanted to know what the directors considered the saturation point. Mr Alexander said it was very difficult for the directors to predict the future. The district was growing rapidly, but the board considered the present proposed increase sufficient for the company's needs for some time to come. Mr Howcroft said there may come a time when it would be as safe to hold shares in a dairy company as in a bank. That time had not yet arrived. The balance-sheet revealed that the company was in a sound financial position. It also showed that the company had paid £II,OOO to get into the butter business. It was now proposed to increase the capital to £25,000 to meet that bill of £11,000.. For the life of him he could not see why they should create a reserve fund of £14,000. It was neither necessary nor a sound financial proposition. There should be other ways of issuing further shares without raising this additional capital. There was also the danger that with a big reserve fund future directors might see fit to branch out into side-lines. Would it not be better to raise the quantity of butterfat per share than to raise the capital? Saturation Point Not Reached. Mr Sinclair said that if the company had decided to call a halt and to accept no further butterfat, there certainly would be no necessity to raise fresh capital. With the increasing facilities for manufactur it was possible, however, to deal with larger quantities of cream now at the same cost than it was a few years ago. New inventions were constantly coming forward, and while undoubtedly there was a stage to be reached when it w r ould be impossible to increase the economy in working, this had not yet been reached. When it was, the company would then be wise to refuse to handle further supplies. It was, however, impossible at the present time to gauge when the saturation point would be reached. The speaker said he was quite convinced it was not the intention of any present director that the whole of this money should be called up. In answer to Mr Howcroft. Mr Alexander said the directors would call up the capital only as it could be used profitably. Answering Mr O’Connor, Mr Alexander said that on the basis of id per lb, the share capital would be paid up in five years. Mr Sinclair said the company would carry on on the same basis of the deduction of id per lb, and at the end of five years" shareholders would be paid G per cent on their fully paid up shares and would receive the extra id per lb thereafter. Mr Alexander pointed out that at the end of the first year the directors might be able to go to the shareholders and say: “We can do with id deduction only.” It would then rest with the shareholders to say whether they could do better with the other id themselves or whether the same deduction should be continued. Mr Howcroft moved: “That it be a recommendation to the directors to exercise their powers under the articles of association to resume shares from shareholders who have ceased dairying, at face value, such shares to be resumed at the sole discretion of the directors in such numbers and at such times as they in their sole discretion may think fit.” The motion was carried unanimous-

iy. The chairman said the directors would endeavour to live up to the spirit of the motion. The motion to increase the capital was carried unanimously. Tributes to Staff. A tribute to the staff, both factory and clerical,' was paid by the chairman, and the meeting passed a unanimous vote of thanks to them. Mr A. J. Arnold, factory manager, in returning thanks, said there had been a saving of 8s 7d per ton in wages alone during the past year; while the saving on boxes and parchment had been As ltd per ton. lie considered no other factory of the same capacity could show such economy as To Awamutu, the ‘all-in" cost being

The speaker stressed the importance of cleanliness in the dairy and in the care of utensils. He urged suppliers to scald out their cans and turn them to the sun; then, before putting in the cream, to swill them out with cold water. He appealed to suppliers not to put cream in rusty cans, for rust was absolutely detrimental to cream. Rusty cans, if not too far gone, could be retinned in Hamilton.

Mr O'Connor moved: “That a sum of 50 guineas be voted to the chairman as honorarium.

Mr Alexander thanked Mr O’Connor but declined any such offer. lie thought, however, the time had arrived when some sum should be voted to meet the expenses of the directors, who hitherto had given their services gratuitously. The bulk of the organising had also been done in the directors’ cars. Many of the directors were busy men and had sacrificed a good deal of time to the company’s interests.

A motion that each director receive £1 Is and the chairman £2 2s per meeting was carried unanimously.

Encomiums of the work done by Mr Sinclair were paid by Mr Alexander, who said his services had been invaluable —far more so than he was being paid for. Mr Alexander intimated that he might see fit to resign from the chairmanship during the next twelve months, in order to give younger men a chance.

A resolution asking him to continue at least for another year was carried with applause.