LINEN FLAX CORPORATION OF NEW ZEALAND

Appendix to the Journals of the House of Representatives, 1950 Session I, H-44b

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1950 NEW ZEALAND

LINEN FLAX CORPORATION OF NEW ZEALAND

Presented to Both Houses of the General Assembly

Your Excellency,— Wellington, 25th July, 1950. I have the honour to submit for Your Excellency's information the fourth report of the Linen Flax Corporation of New Zealand, for the period ended 31st December, 1949. I have, &c., Charles M. Bowden, Minister of Industries and Commerce. His Excellency the Governor-General of the Dominion of New Zealand.

Str, — Wellington, '2sth July, 1950. I have the honour to submit the fourth annual report of the Linen Flax Corporation. This report deals with the principal operations of the Corporation for the period ended 31st December, 1949. I have, &c., F. Johnson, Chairman of Directors, Linen Flax Corporation of New Zealand. The Hon. C. M. Bowden, Minister of Industries and Commerce.

REPORT INTRODUCTION The 1949 processing year opened with little in tlie way of straw stocks other than the remains of the badly rusted crop of 1947-48. An excellent crop was, however, then growing and about to be harvested, and it was hoped that during 1949 it might be possible to recoup some of the loss sustained in 1948. This, unfortunately, did not eventuate, owing mainly to over production and the collapse of the fibre market in Great Britain.

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The factories at Methven and Makikihi had been partially destroyed by fire in 1948 and it was decided to close these. Methven did continue for a short while with improvised machinery, but the costs proved too high. There then remained four factories —namely, Geraldine, Fairlie, Washdyke, and Winton. In June, 1949, the collapse of the market for flax in Great Britain and the Continent militated against sales, and consumption in New Zealand dropped on account of labour shortage in the spinning-factory. Faced with financial difficulties, the Corporation recommended the closing of two further factories, in order to reduce output to New Zealand requirements, and that in 1949-50 only enough crop should be grown to maintain the two remaining factories in full operation. Government direction was sought along these lines, but the Corporation was instructed to maintain the four factories in full production and to grow a full acreage in each district in 1949-50. Financial arrangements were made to permit this to be done. The 1949 year ended with large stocks of straw and fibre which had to be written down to new values. The most embarrassing feature has been the 1949-50 crop. An area of 2,875 acres was sown which produced the heaviest crop ever recorded in respect to both yield per acre and fibre content. In addition, therefore, to the somewhat heavy stocks carried over at the end of 1949, the Corporation will have a further 7,078 tons of straw for processing in 1950 and subsequent years. This year's yield of straw represents an average of 2-57 tons per acre, which easily exceeds the next best average of 2-13 tons harvested in 1944-45, and nearly doubles the rusted 1-36 tons of 1947-48. The rust-resistant Russian varieties referred to in the 1949 report have also done well, and a further 220 acres will be sown down to them this year. Spinning trials carried out on fibre from these varieties have proved satisfactory. PRODUCTION During 1949 4,742 tons of straw was completely processed, yielding 8-5 per cent, of fibre, an increase of o*6 per cent, on the previous year. This steady increase in fibre recovery year by year is a true measure of increased efficiency in the industry. Production totals are listed below: — Tons. Fibre .. .. .. .. .. 430 Tow (machine scutched) .. .. .. .. 155 Tow (hand scutched) .. .. .. 44 Seed .. .. .. .. .. .. 628 Linmeal .. .. .. .. .. 489 MARKETS As mentioned earlier, the overseas markets collapsed in June, 1949, but following devaluation of sterling there was a little activity lasting only a week or so, of which the Corporation took advantage. Sales through our London agents amounted to 213 tons of fibre and 155 tons of tow, while the New Zealand spinners, Donaghy's Rope and Twine Co., purchased 163 tons of fibre and 83 tons of tow, a total of 246 tons. The latter figure shows a drop of 119 tons on 1948 and is a result of that company's inability to secure sufficient labour to man their machines. This firm has now practically ceased production of yarns for carpet backing and the output of lines such as marline has also suffered. In 1948 a trial shipment of 30 tons of sowing seed was sold in Belgium and apparently gave satisfactory yields, enabling the Corporation to dispose of 216 tons on the same market towards the end of 1949. Prices were very attractive, and it is hoped to extend this market. A further 226 tons of seed was sold to Dominion Industries, Ltd., for oil-production. The contracts entered into towards the end of 1948 for the sale of meal have proved satisfactory, resulting in the disposal of 499 tons.

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EMPLOYMENT The maximum number employed by the Corporation during 1949 was 280, to whom £86,204 was paid in salaries and wages. FINANCIAL RESULTS The audited accounts for 1949 show a net loss on operations of £46,817 and a loss of £1,983 on realization of assets. This disappointing result was mainly attributable to the low prices received in the United Kingdom following the collapse of the market for fibre exported and in particular for fibre from the 1947-48 rusted crop. The average return for the 376 tons of fibre sold in New Zealand and overseas was £235 per ton, which, at £55 below the cost of production, accounted for £20,680 of the loss. Closing stocks of 178 tons of finished fibre were valued at the latest price received for sales in the United Kingdom, which is £llO per ton below the cost of production, thereby contributing a further amount of £19,580 to the 1949 loss. Operating loss at Methven was heavy owing to small throughput after the fire, and following the closing of this factory it was decided to thresh for seed the straw of low fibre content which could not profitably be carted to other mills for processing. When Makikihi was closed, high cartage costs were incurred, as the crop harvested in this area had to be delivered to Washdyke. Depreciation amounting to £7,044 was written off in the accounts. By the end of the year plant and floating assets had been disposed of fairly satisfactorily at Methven and Makikihi, but the sale of land and buildings was not completed. The year closed with large straw stocks, and the increased volume of work in progress has again been valued on a consistent and conservative basis. F. Johnson, Chairman of Directors. H. D. McCrostie, General Manager.

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THE LINEN FLAX CORPORATION OF NEW ZEALAND Straw Purchase Account, Year Ended 31st December. 1949 (Figures to the nearest pound) Dr. £ Cr. £ Crop purchases .. .. .. .. .. 71,482 Cartage in (recoveries) .. .. .. .. .. 504 Pulling .. .. .. .. .. .. 4,416 Cost of Production Account (prime cost transferred) .. .. 84,019 Labour supplied to growers .. .. .. ~ 359 Expenses of fibre determination .. .. .. .. 1,354 Interest to growers .. .. .. .. .. 62 Stacking and stooking .. .. .. .. .. 5,381 Minimum payments on reject crops .. .. .. 1,469 £84,523 £84,523 Cost of Production Account, Year Ended 31st December, 1949 Dr. £ Gr. £ Purchases of straw (prime cost transferred) .. .. .. 84,019 Work in progress (31st December, 1949) .. .. .. 41,824 Work in progress (Ist January, 1949) .. .. .. 29,547 Stocks of tow, seed, and meal .. .. .. .. 8,181 Stocks of tow, seed, and meal (Ist January, 1949) .. .. 10,274 Sales of— Factory salaries .. .. .. .. .. .. 9,387 Seed .. .. .. .. .. .. .. 31,980 Power and light .. .. .. .. .. .. 2,515 Tow .. .. .. .. .. .. .. 17,313 Cartage and by-products export charges .. .. .. 8,751 Meal .. .. .. .. .. .. .. 3,377 Rent, rates, and taxes .. .. .. .. .. 653 Rents received and sundry revenue .. .. .. 1,506 Compensation and workers'accident insurance .. .. 837 Trading Account (cost of production transferred) .. .. 122,063 Processing .. .. .. .. .. .. 59,436 Maintenance .. .. .. .. .. .. 9,226 Fire Insurance Reserve .. .. .. .. .. 2,233 Depreciation .. .. .. .. .. .. 6,377 Factory, office, and travelling expenses .. .. .. 2,989 £226,244 £226,244

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Trading Account, Year Ended 31st December, 1949 Dr. £ Or. £ Cost of Production Account .. .. .. .. 122,063 Sales of fibre .. .. .. .. .. .. 88,179 Stocks of fibre (Ist January, 1949) .. .. .. 25,352 Stocks of fibre .. .. .. .. .. .. 32,222 Stocks of salvaged fibre (Ist January, 1949) .. .. .. 1,019 Profit and Loss Account (gross loss transferred) .. .. 35,649 Export charges and fibre store insurance .. .. .. 7,616 £156,050 £156,050 Profit and Loss Account, Year Ended 31st December, 1949 Dr. £ Cr. £ Trading Account .. .. .. .. .. 35,649 Interest received .. .. .. .. .. 63 Salaries .. .. .. .. .. .. 5,606 Balance carried down (loss on operations) .. .. .. 46,817 Travelling-expenses .. .. .. .. .. 993 Directors' fees and expenses .. .. .. .. 451 Audit fees .. .. .. .. .. .. 70 General expenses, telephones and postages, stationery, Head Office rent, heat and light, exchange, discount, law-costs .. 1,323 Marketing expenses .. .. .. .. .. 2,177 Depreciation .. .. .. .. .. .. 141 Interest on overdraft .. .. .. .. .. 470 £46,880 £46,880 £ £ Balance brought down (loss on operations) .. .. .. 46,817 Profit on sale of motor-vehicles .. .. .. .. 398 Loss on realization of plant, stores, and motor-vehicles at Methven 2,943 Profit on realization of plant, stores, and motor-vehicles at Makikihi .. ~ .. .. .. .. 562 Profit and Loss Appropriation Account (net loss transferred) ~ 48,800 £49,760 £49,760

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THE LINEN FLAX CORPORATION OF NEW ZEALAND— continued Balance-sheet as at 31st December, 1949 (Figures to the nearest pound) Liabilities £ Fixed Assets* £ £ Loan capital .. .. .. .. .. .. 300,000 Land and buildings .. .. .. .. 64,373 Plant and motor-vehicles .. .. .. 42,605 Insurance Reserves £ 106,978 Workers' accident insurance .. .. .. 2,995 • . ' Fire insurance .. .. .. .. .. 1,244 Current Assets 4,239 Factory imprest balances .. .. .. 469 Sundry debtors .. .. .. .. 28,049 Current Liabilities Stocks of fibre, tow, meal and seed, stores, and work in Sundry creditors (including liability to Treasury for progressf .. .. .. .. .. 119,700 United Kingdom and New Zealand Governments' 148 218 share of profit on 1945-46 and previously sown crops finally processed in 1947, £8,042 9s. Bd.) .. .. 15,252 Intangibles Bank of New Zealand overdraft .. .. .. 3,941 Research expenditure .. .. .. .. .. 6,852 19,193 Profit and Loss Appropriation Account— £ Balance as at 31st December, 1948 .. .. 4,542 United Kingdom and New Zealand Governments' share of profit on 1945-46 and previously sown crops finally processed in 1947, payable to Treasury .. 8,042 Net loss year ended 31st December, 1949 .. .. 48,800 61,384 £323,432 £323,432 * are at valuation in accordance with the Linen Flax Corporation Act, 1945, plus additions less depreciation (3 per cent, on buildings, 10 per cent, on plant, 20 per cent, on motor-vehicles). 1 ' t "Work in progress valued at cost of straw stocks plus direct wages. F. Johnson, Chairman of Directors. 29th March, 1950. H. D. McCrostie, General Manager. 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 (784 copies), £l5 .

By Authority: R. E. Owen, Government Printer, Wellington.— 1950.

Price 6d .]

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