CHEESE MANUFACTURE

Waikato Times, Volume 110, Issue 18406, 13 August 1931, Page 10

CHEESE MANUFACTURE

TATUA DAIRY COMPANY. EXPERIMENT WITH MILK GRADING NO DIVIDEND ON PAID-UP SHARES. A fairly satisfactory year involving Increased output and quality of the cheese manufactured was reviewed at th" seventeenth annual meeting of the Tatua Co-operative Dairy Company Ltd., held at Tatuanul yesterday. Mr W. Darrall, chairman of directors, presided over an attendance of about 40 suppliers. In commenting on the annual report and balance sheet (published), Mr Darrall remarked that the company could be congratulated on its sound position after passing through a difficult period. The year had been a record one for production but prices had fallen greatly. While the company had done better than most companies it had not emerged so well as it might have. He doubted whether the company would, ever be satisfied regarding the quality of cheese, it was a problem which was affecting cheese companies throughout the Dominion. With the aid of a highlytrained staff the quality of the company's produce had Improved during the year. Ho did not consider the change from standardisation would be as satisfactory as many people anticipated. Costs of manfacture had been kept low and additions had been made to plant. Deductions had been made from share capital, a policy which was considered a wise one. The company would revert to full cream cheese during the coming season in accordance with law. A new departure this year was a recommendation that no dividend be paid on paid-up capital. Question of Paid-up Capital. While the directors recognised the unsatisfactory financial position of many suppliers it was considered the latter would be rendered a better service by this policy, Mr Darrall continued. The reduction of capital by depreciation had to be taken into account. It was impossible for any company to maintain shares at full face value without very careful management. In the past the company had paid 5 per cent, on paid-up capital and shareholders were getting 10 per cent, on their investment. Personally he considered if interest was paid on paid-up capital in the future it should be on a lower rate.

In reply to a question the chairman stated that a small percentage of second grade cheese was manufactured during the season. This was a little higher than some other factories but there were disadvantages in connection with a small factory and tile actual cause of such a proportion of second grade was hard to ascertain. If nothing but second grade were manufactured the monetary gain would not be much less but the company believed that it was better from the national point of view to manufacture as much first grade as possible even at a slight loss. Mr P. Rushton asked if the manager considered more labour at the factory would Improve the output and quality of the cheese.

Mr T. A. Colson, the manager, replied that work had to be restricted to 60 hours a week through the Aribtration Court award. Mr Darrall said there were certain " off days ” at any (factory when second grade affected every vat in the factory. Even at Massey College this result had been noticed. Experiments at Factory. To another questioner Mr Darrall said it would be of benefit if the cheese were graded on arrival overseas. From information received, first grade cheese packed In the Dominion was usually of a higher grade than second when opened in England. The problem of " openness ” was still existent but he did not think present Investigators were optimistic enough to believe a remedy would come quickly. Generally it had been found that a second grade cheese was just as undesirable in quality when opened overseas as when exported. Certain experiments had been conducted at the factory during the year. The unpasteurised cheese had been an unsatisfactory article. The pasteurised standardised cheese had graded 91 and the pasteurised full cream cheese had graded 92 They had been informed by the Massey College authorities that If a good unpasteurised cheese was going to be manufactured for export a better milk supply would be neces« sary.

Speaking o' the directors' intention not to pay out interest on paid-up capital Mr Rushton remarked that the policy seemed to militate against the solidarity of the company. The dividend on paid-up capital, he thought, had had the effect of keeping several suppliers within the company. In the past when the dividend was paid any supplier going out of dairying or leaving the company had had an opportunity to. dispose of his shares on a satisfactory basis. If Interest were not paid the shares would cease to have any value. Until the company offered to resume shares to “ dry ” shareholders he considered it would be ethically and morally wrong to stop paying Interest on share capital. He knew a number o£ suppliers who would no longer be in the company if this action had been taken some years ago. Any move to drive away suppliers should be avoided. He moved that it be a recommendation to the directors that a dividend of 5 per cent be paid on paid-up share capital. Mr Darrall replied that the shares were not necessarily valueless because the company’s assets had to be considered. Taxation on Dividend. Mr J. M. Allen said personally he was a strong supporter of a dividend on share capital in a good average year but in a difficult year like the present such was hardly advisable. The question of taxation had to be considered. Even if a dividend of 2J per cent, were paid taxation amounting to about £25 would have to be paid. On the other hand if the £750 involved were not distributed it would be untaxed. He disagreed on several grounds with the contention that the shares would be valueless. Support to Mr Alien was given by Mr P. 11. Saxon, who considered it inadvisable to pay £4O or £5O to the Commissioner of Taxes, when the times dictated that all payments should be made on a butterfat basis. Mr J. Hart pointed out that the directors' recommendation in connection with the non-payment of dividend only applied to the current year. To Mr Lynch, the chairman said therc-ixas tn resume.tha

shares of “ dry ” shareholders. Some shares had been resumed at 50 per cent, and some at a lower figure. It had to be remembered that the cheese industry was in a much better position than last year. If every shareholder brought milk to the factory of an equal proportion to his shares the factory would have to be enlarged. Replying, Mr Rushton contended that under Mr Alien's argument suppliers who had been supplying the company for years and had paid-up share capital would receive no more beneflts than new suppliers. The chairman informed the meeting jlhat there were 987 “ dry ” shares paid up to the extent of £2900 and distributed among 31 shareholders. If a dividend of 5 per cent, were paid each shareholder would receive about £5. A resolution moved by Mr A. J. Luxton that the directors be recommended to pay a dividend on paid-up capital in the future was carried. Building Reserve Fund. Mr Saxton suggested the provision of a building reserve fund for future building requirements. He anticipated that the factory would have to be rebuilt within 20 years. The chairman approved of the proposal but pointed out that unless the fund was especially earmarked the articles of assocation provided for the directors using it for any purpose at any time. On the motion of Mr Lynch the directors were recommended to consider the establishment of a building reserve fund. The report and balance sheet were adopted. Three directors, Messrs J. Baker, J. Hart and A. J. Luxton, who retired by rotation, were re-elected unopposed. Mr T. J. Ryan was re-elected auditor at the usual salary (£35) less 10 per cent. The chairman expressed the hope that marketing conditions would be improved next year although the outlook did not give them cause to be over-optimistic. Regarding quality, he urged suppliers to exert their best, efforts to provide the highest quality milk. He knew of no business which took such little notice of the raw material as the dairying industry and it was essential that milk should be graded and tested as it came to the factory. .No stone should be left unturned to Improve quality and he was convinced milk grading was a most necessary provision. It had been found that much of the poorer class milk arrived at the factory later in the day so he appealed for delivery early in the morning. Asked whether milk grading should be attempted for one month, the chairman replied that if the Department had introduced regulations regarding milk grading, regulations for payment for special grades would also have to be included. He felt sure that the future of the dairying industry in the Dominion demanded milk grading on a comprehensive scale. Milk Grading Favoured. Mr Colson said if grading were Introduced the methylene blue test, the curd test or the senses test would be applied. The test by smell was the most common and fairly satisfactory while the other methods would take some hours in applying. He believed milk grading at the factory would necessitate the employment of another hand. A motion proposed by Mr Lynch that milk grading be tried for one month was carried. Mr C. Sing asked whether the directors would consider calling for tenders for fertilisers. Mr Darrall said the company had a fairly good arrangement with the fertiliser companies but any further reduction in the price would be welcomed. Mr Saxton said the merchants were making a profit of 8s a ton on manure, a profit which was undoubtedly excessive and double the amount paid as commission to auctioneers for selling stock. Anyone would agree that it was much easier to sell manure than to sell stock. In reply to a question, Mr Darrall said efforts had been made to exploit the local market but little had been gained by it. The company was always willing to accept local trade when offered But it was a difficult market to cater for partly owing to price-cutting. Cheese was worth more to ship to England than to sell locally. Auditor's Report. In his report the auditor said the company's position was sound as the following figures showed Fixed assets, buildings, plant, drainage, shares, £9900; floating or current assets, £14,743; total, £24,643; capital and reserves, £15,489; cow finance account, sundry creditors and suppliers, £9154. There was an uncalled liability on shares of £903. After allowing for the liability on these shares current assets exceeded current liabilities by £4685, which was very satisfactory. The auditor pointed out it must not be overlooked that it the cheese market were below butter for any length of time the supply would fall seriously; costs would rise and producers might be forced to give up. If this position arose, which was not anticipated, the assets would be of very little value. He preferred to take the view that the company would continue to flourish for many years and the question of how long the present buildings and plant would last before rebuilding had to be considered. Would the company have an increasing charge for repairs and renewals during the interval? When these facts were considered it would be realised that the desirability of building up a fund to meet the expenditure when it occurred was far better than working on a big overdraft or going to the shareholders for more capital.

The meeting closed with votes of thanks to the directors, secretary, manager and staff.

A payment of £lB7O, equal to Jd per lb., was distributed.