LINEN FLAX CORPORATION OF NEW ZEALAND (FIRST ANNUAL REPORT OF THE)

Appendix to the Journals of the House of Representatives, 1947 Session I, H-44b

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1947 NEW ZEALAND

LINEN FLAX CORPORATION OF NEW ZEALAND (FIRST ANNUAL REPORT OF THE)

Presented to both Houses of the General Assembly by Command of His Excellency

Your Excellency,— Wellington, 11th July, 1947. I have the honour to submit for your Excellency's information the first report of the Linen Flax Corporation of New Zealand for the period ended 31st December, 1946. I have, &c, A. H. Nordmeyer, Minister of Industries and Commerce. His Excellency the Governor-General of the Dominion of New Zealand.

Sir,— Wellington, 11th July, 1947. I have the honour to submit the first annual report of the Linen Flax Corporation. This report deals with the principal operations of the Corporation for the period ended 31st December, 1946. I have, &c, F. Johnson, Chairman of Directors, Linen Flax Corporation. The Hon. A. H. Nordmeyer, Minister of Industries and Commerce.

REPORT Introduction The occupation of the Netherlands by the German Forces in 1940 cut off the source from which Great Britain had previously obtained 90 per cent, of her requirements of linen-flax fibre. Since flax was deemed essential for the successful prosecution of the war, alternative sources had immediately to be arranged, and New Zealand, in common with several other Empire countries, was requested to grow and process as much flax as she could possibly undertake. New Zealand's response was the establishment of seventeen factories, and during the war years, apart from supplying her own needs, exported to Great Britain 7,460 tons of fibre. This effort compares favourably with that of other countries as, for example, Australia, which exported during the same period 6,520 tons. An agreement was negotiated whereby the United Kingdom would meet the costs of production of all fibre and tow sent to Great Britain. Further arrangements have since been made whereby approximately 85 per cent, of the capital loss will be borne

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by tlie British Government. That is to say, the loss on the liquidation of the wartime industry in New Zealand is to be shared between the United Kingdom and New Zealand Governments in proportion to the sales of fibre to the respective countries from 1940 until the crop sown in 1945-46 is fully processed and marketed. Establishment of an Industrial Corporation During the war years the industry was attached to the Department of Industries and Commerce under a management committee comprising representatives of the Departments of Industries and Commerce, Scientific and Industrial Eesearch, Treasury, and one linen-flax worker. On the cessation of hostilities it was deemed advisable to change the form of control and, by virtue of the Linen Flax Corporation Act of 1945, the industry was vested in a Corporation comprising eight Directors and giving equal representation to the Government, the growers, the manufacturers using the raw product in New Zealand, and the employees. Of the seventeen original factories only six now remain in operation under the direction of the Corporation. The others have been closed, and the surplus assets in the form of land, machinery, and buildings are being liquidated on behalf of Great Britain by the New Zealand War Assets Bealization Board. In terms of the Linen Flax Corporation Act, the functions of the Corporation are to organize and develop the linen-flax industry and to carry on the business of producing linen-flax fibre and other linen-flax products and marketing any such products in New Zealand and overseas. The Corporation has also the like functions in relation to such other soft fibres as the Minister of Industries and Commerce may direct or approve. The Corporation was empowered by the Act to carry out the functions of the Department of Industries and Commerce envolving the completion of the contract with the British Government, the liquidation of the assets, and the full responsibility involved in the post-war industry of the growing and processing up to the fibre stage of linen flax. Markets The initial agreement with Great Britain was for the growing of flax during the war and for a period of twelve months after the cessation of hostilities. This was extended to include the fibre processed from the crop grown during the 1945-46 season. The 1946-47 crop is therefore the first grown wholly on behalf of the Corporation and for which the Corporation is responsible. Nevertheless, the British Government has undertaken to purchase certain grades of fibre from the 1946-47 crop, and, although the prices offered are substantially below those ruling during the war years, this assured outlet for fibre that may prove surplus to New Zealand's immediate requirements is helpful. The present consumption of linen-flax fibre in New Zealand amounts to about 250 tons per annum, and additional textile machinery now being installed will increase this to 300 tons per annum. This estimate is based on a single shift, but, were labour available, a double shift, operating on the present plans, would increase consumption of fibre to 600 tons per annum. There is a demand in New Zealand for yarn, thread, twine, and cordage sufficient to utilize from 400 to 500 tons of raw fibre per annum. At the present time there is only one company spinning linen-flax fibre into spun products, but negotiations for the installation of spinning-plant by a British company are still proceeding. With the entry of this company into the spinning side of the industry it will be possible to produce yarn suitable for the weaving of canvases, fire-hose, &c. It is estimated on a conservativebasis that an additional tonnage of 200 to 300 tons would be required. Under these circumstances the Corporation has not hesitated to maintain production at a level of 700 tons of fibre per annum pending a more definite indication of the possible utilization of flax fibre in New Zealand,

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Linen-flax tow is at present in strong demand, and the Corporation is exporting its surplus production to Belgium and the United States. Offers have already been received for the purchase of the full production for 1948. All seed produced is used either for resowing or is supplied to Dominion Industries, Ltd., for the production of linseed-oil. Australia also requires annually from 300 to 400 tons of high-grade seed for resowing. The 1946-47 Crop Year The Corporation's full responsibility for the growing and processing of linen flax commenced with the sowing of the crop in the spring of 1946. Continuous rain in certain districts during the spring delayed sowing, reduced;the acreage sown, and affected detrimentally many of those crops which had been sown prior to the wet period. Apart from this, the season has been reasonably satisfactory, resulting in heavy yields being obtained of straw which, owing to the climatic conditions, has varied in fibre content from the very worst to the very best. Whereas the objective was the sowing of 5,400 acres, wet conditions resulted in the sowing of only 4,095 acres. Financial Period ended 31st December, 1946 The Corporation assumed control of the industry on Ist April, 1946, taking over the fixed assets at six factories for the purchase consideration of £162,675, and undertook to liquidate the remaining fixed assets and all the current assets formerly held by the Linen Flax Section of the Department of Industries and Commerce. The first financial period ended on 31st December, 1946, the balance date having been altered from 31st March to 31st December to facilitate the valuation of works in progress. The accounts for the nine months ended 31st December, 1946, now presented, disclose a net loss of £1,536, which has been transferred to the liquidation account. Since the first crop sown by the Corporation was not harvested during the period covered by this report the loss experienced in the nine months ended 31st December, 1946 (namely, £1,536), was confined to the completion of the processing of works in progress on hand at 31st March, 1946 (that is, the processing of earlier sown crops many of which had been held for some years and were of very poor quality). This is amply demonstrated by the costing records, which show that, while the 1945-46 crops processed during the nine months yielded profits aggregating £8,500, the remnants of the 1944-45 and earlier crops were processed at a loss of £10,036. The balance-sheet as at 31st December, 1946, can be conveniently divided into the assets and liabilities of the Corporation, and the assets and liabilities merely taken into the accounts of the Corporation for purposes of liquidation. The former include the fixed assets taken over and expenditure by the Corporation to 31st December, 1946, on the 1946 crop ; the liability to Treasury for the assets purchased and the initial cash advance of £30,000 provided from National Development Loans Account. Assets in the course of liquidation are shown in the lower portion of the statement, also the liability to Treasury which is being discharged as the liquidation proceeds. The realization of the fixed assets of the wartime industry, comprising land, buildings, plant, &c, is being accounted for in a separate set of Liquidation Accounts, and these are not included in the accounts of the Corporation. F. Johnson, Chairman of Directors. J. W. Hadpield, General Manager.

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THE LINEN FLAX CORPORATION OF NEW ZEALAND Final Accounts, Nine Months ended 31st December, 1946 Purchases of Straw Account Dr. £ s. d. Or. £ s. d. Crop purchases .. .. .. .. .. 25,714 16 11 Labour to growers .. .. .. .. .. 31 0 8 Cartage in .. .. .. .. .. .. 1,974 4 6 Pulling .. .. .. .. .. •• 1,849 11 3 Pulling .. .. .. .. .. .. 81 19 5 Cost of Production Account .. .. .. .. 28,353 19 5 Labour to growers .. .. .. .. .. 24 10 1 Interest .. .. .. .. .. .. 1,238 1 4 Stacking .. .. .. .. .. .. 917 11 2 Minimum guarantee ... .. .. . . 283 711 £30,234 11 4 £30,234 11 4

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Manufacturing Account Dr. £ s. d. Or. £ s - d - Cost of straw 28,353 19 5 Work in progress 44,574 13 11 Work in progress .. .. .. .. .. 90,63115 5 Sales tow .. .. .. .. .. •• 1,495 13 3 Stocks Rescutohed tow .. .. . . • • • • 832 3 4 Tow .. .. .. .. .. .. 1,311 0 0 SalesMeal 249 1 6 Seed \. 14,116 16 9 Seed 1,972 8 0 Seconds 1,634 9 3 Transfers seed .. 505 14 9 Meal 3,480 12 1 Deseeding .. .. .. .. .. .. 10,205 6 3 Sundry revenue .. .. .. .. •■ 7 19 3 Threshing .. .. .. .. •• •• 62 6 3 Seed-distribution .. .. .. .. •• 5,069 16 0 Seed-dressing .. .. .. .. .. 3,235 0 7 Transfers— Retting 7,411 3 1 Rug tow 125 J? S Drying 14,179 16 5 Seed 505 14 9 Scutching .. .. .. .. .. .'. 19,418 7 9 Rents received .. .. .. •• •• 777 14 9 Rescutching tow .. .. .. .. .. 972 1 5 Stocks— Stores, overhead 1,024 3 7 Tow •• 301 16 11 Removal expenses 42 17 9 Meal 564 0 11 Factory salaries .. .. .. .. .. 4,877 4 0 Seed .. .. .. •■ •• 8,149 7 4 Power and light .. .. .. .. .. 2,463 9 8 Trading Account (cost of production linen fibre transferred) 133,821 13 10 Cartage, general .. .. .. .. .. 4,517 12 1 Rents, rates, taxes .. .. .. .. .. 467 7 4 Insurance— Buildings 1,829 2 6 Accident .. .. .. .. .. 643 8 2 Transport of workers .. .. .. .. 65 16 8 Cartage out, by-products .. .. .. .. 519161 Repairs and renewals— Plant .. .. .. .. .. •• 3,857 7 4 Motor-vehicles .. .. .. .. .. 1,068 19 4 Buildings .. .. .. .. .. 606 6 5 Houses .. .. .. .. .. .. 81 16 4 Unallotted factory wages .. .. .. .. 8,932 12 7 Depreciation— Buildings 1,299 11 7 Plant 3,605 22 Motor-vehicles .. .. .. .. .. 730 0 0 . General expenses .. .. .. .. .. 79 3 4 Telephones, &c. .. .. .. .. •. 238 2 9 Stationery .. .. .. .. .. .. 40 11 4 £215,498 11 10 £21 !' 498 11 _ 1 °

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THE LINEN FLAX CORPORATION OF NEW ZEALAND— continued Final Accounts, Nine Months ended 31st December, 1946— continued Trading Account Dr. £ s. d. Cr. £ s . d. Cost of production .. .. .. .. .. 133,82113 10 Sales of fibre .. .. .. .. .. 138,890 6 10 Stocks fibre, Ist April, 1946 .. .. .. .. 2,750 5 0 Stocks fibre, 31st December, 1946 .. .. .. 2,698 6 7 Export charges .. .. .. .. . . 1,404 6 10 Insurance, fibre-store .. .. .. .. 375 0 0 Gross profit, transferred to Profit and Loss Account .. 3,237 7 9 £141,588 13 5 £141,588 13 5 Profit and Loss Account Dr. £ s. d. Cr. £ B . d. Travelling-expenses .. .. .. .. .. 973 7 11 Cost of Production Account: Gross profit, transferred .. 3,237 7 9 Head Office salaries . . .. .. .. .. 2,696 3 8 Commission .. .. .. .. .. 737 General expenses .. .. .. .. .. 125 6 10 By-products Factory Account .. .. .. 165 2 7 Telephones .. .. .. .. .. 183 14 1 Linen Flax Section No. 2 (net loss transferred) .. 1,535 14 7 Stationery .. .. .. .. .. .. 179 2 11 Directors' fees .. .. .. .. .. 229 7 5 Removal expenses .. .. .. .. .. 90 0 0 Cartage, general .......... 3 13 6 Unallotted .. .. .. .. .. .. 731 Audit fees .. .. .. .. .. .. 75 0 0 Exchange .. .. .. .. .. .. 147 11 5 Discount .. .. .. .. .. .. 5110 Advisory Committee expenses .. .. .. 13 7 6 Fidelity insurance .. .. .. .. .. 33 14 3 Rent, heat, light .. .. .. .. .. 182 4 11 £4,945 8 6 £4,945 8 6

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Balance-sheet of the Linen Flax Corporation of New Zealand as at 31st December, 1946 Liabilities of the Linen Flax Corporation— £ s. d. £ s. d. Assets of the Linen Flax Corporation— £ s. d. £ s. d. National development loan .. .. 30,000 0 0 Buildings (at valuation in accordance Treasury Account (purchase considera- section 12, Linen Flax Corporation tion, assets taken over in accordance Act, 1945, less 3 per cent, per annum Treasury Memorandum T. 47/352) .. 162,675 4 7 depreciation) .. .. .. 62,277 3 2 £ s. d. Plant (at valuation in accordance Accident Reserve .. 671 16 7 section 11, Linen Flax Corporation Less compensation 560 6 7 Act, 1945, less 10 per cent, per payments 111 10 0 annum depreciation) .. .. 48,796 11 2 Fire insurance reserve .. 2,349 16 3 Stores (at valuation in accordance Less Methven fire 100 4 7 section 11, Linen Flax Corporation damage 2,249 11 8 Act, 1945, and as certified by factory-Fibre-store insurance .. .. 375 0 0 manager) .. .. .. 34,511 13 5 195,411 6 3 Motor-vehicles (at valuation in accordOther liabilities— ance section 11, Linen Flax Treasury Account (current Corporation Act, 1945, less 20 per assets of the Linen Flax cent, depreciation) .. .. 3,424 0 0 Section taken into Land, including roads, fences, &c. (at Corporation Accounts valuation in accordance Linen Flax for purpose of Corporation Act, section 12) .. 9,533 13 3 liquidation) .. 165,661 6 10 £ s. d. Loss to 31st December, Research .. .. 1,228 19 0 1946, on liquidation .. 1,535 14 7 Plant development .. 1,422 111 164,125 12 3 2,651 0 11 Sundry creditors .. .. .. 3,199 11 4 Preliminary expenses .. .. 55 15 10 167,325 3 7 Expenditure to 31st December on 1946 crop— £ s. d. Advances to growers .. 13,021 19 1 Proportion factory. expenses .. .. 3,207 7 7 ■ 16,229 6 8 177,479 4 5 Carried forward .. .. .. 362,736 9 10 Carried forward .. .. .. 177,479 4 5

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THE LINEN FLAX CORPORATION OF NEW ZEALAND— continued Final Accounts, Nine Months ended 31st December, 1946— continued Balance-sheet of the Linen Flax Corporation of New Zealand as at 31st December, 1946 — continued £ s. d. | £ s. d. £ s. d. Brought forward .. .. .. 362,736 9 10 Brought forward .. .. .. 177,479 4 5 Assets in course of liquidation— Work in progress (at prime cost of straw plus direct wages to 31st December) .. .. .. 44,574 13 11 Wages in advance, 31st December, 1946 1,529 15 5 Stocks— £ s. d. Meal .. .. 564 0 11 Seed .. .. 8,149 7 4 Tow .. .. 301 16 11 *■ Fibre .. .. 2,698 6 7 * By-products, factory stocks .. .. 1,792 1 11 *- 13,505 13 8 Sundry debtors (mainly sales to U.K.) 110,327 5 1 169,937 8 1 Bank of New Zealand Current Account 14,797 7 8 Balances on Imprest Accounts at factories .. .. .. 522 9 8 15,319 17 4 £362,736 9 10 £362,736 9 10

F. Johnson, Chairman of Directors. J. W. Hadfield, General Manager. 24th January, 1947. I hereby certify that the statement of Accounts and Balance-sheet have been duly examined and compared with the relative books and documents submitted for audit, and correctly state the position as disclosed thereby.— J. P. Rutherford, Controller and Auditor-General. Approximate Cost of Paper. — Preparation, not given ; printing (840 copies), £l4.

By Authority: E. V. Paul, Government Printer, Wellington.— 1947. Price 6d.]

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