WHAKATANE MILLS

Bay of Plenty Beacon, Volume 2, Issue 132, 6 March 1940, Page 5

WHAKATANE MILLS

INTERIM DECISION BY TRIBUNAL COSTS AND INVESTMENTS ! —— In accordance with an arrangement made at the conclusion of evidence before the Price Investigation Tribunal interim decision Avas given on Monday on four points raised in the Whakatane Paper Mills hearing recently. Accountants for the parties are lo consider these decisions before the tribunal announces prices for the company's cardboard products. The first question was the tonnage output to be regarded as a standard. The tribunal decided that a fair and reasonable basis at this stage of tl*e company's existence would be 12,500 tons-. It considers this Avill provide the company Avith the necessary incentive to take full advantage of the opportunities noAV provided*by the domestic market and to lower its cost of production. The second question was the fair or true value of investment in the mill and adjuncts. This was decided at the conference betAveen the tribunal and counsel on the last day of the hearing, the figure agreed upon being £450,000 in the meantime. Prices for the March-April cycle is based on this figure, but the prices for subsequent cycles are to be adjusted to take into account the value of the mill and adjuncts ns agreed to by the accountants for the parties after investigation, and any gain or loss to the company during the March-April cycle is to be adjusted Avhen subsequent prices are fixed. Price of Wood. The third question Avas the price to be taken into account for a cord of Avood delivered to the mill. The company claimed £4 3s 6d per cord as its costs. Under this head the tribunal decided to alloAV £3 18s lOd. The fourth! question Avas what per centage of the return on capital, if any, should be provided and whether such should be inclusive of income tax, Avar tax or social security tax or one or more of them. The tribunal decided to a 1 low the company a gross return on the capital invested in the mill" and adjuncts calculated at the rate of 7 per cent. This, it Avas stated, would provide a net return of 5 per cent on the capital invested in the mill after providing for the payment of income tax by the company, xh;; tribunal did not consider that the special tax should be taken into account, on the ground that these taxes, by their nature, Avers taxes which should, in its opinion, be borne by the individual concern and should not be passed on. Value to Dominion. The tribunal's view was that it AA T ould be unjustified in putting the company in a position where it would be receiving such a return on capital inA'ested in the mill as it could only have hoped lo attain after the company had become avcll established, after it had reached an economic state of production, after it had attained to a high degree of efficiency and after it had, in consequence, been able to meet successfully competition from overseas. If the tribunal had strictly adopted this A r ieAV, the judgment continued, it would have been justified in not allowing any return on capital invested at the present juncture. HaA r ing regard, hoAvever,, of the com pany's value to the Dominion under war-time conditions and the fact that overseas prices had risen as a result of the Avar the tribunal decided to allow a gross return of 7 per cent. The judgment says the actual amount available as a return on capital invested in the mill would, of course, be increased if the value of assets, ,as finally determined, was greater than the basic figure, £450,000, taken for the March- April cycle. The judgment also points out that if production is less than the bask figure, 12,500 tons, the return or capital invested Avill also be and, conversely, if production 5 greater than basic tlien the returi on capital will be greater than th< tribunal's figure. This should pro vide the necessary incentive to th company to increase its output t the maximum, to increase its effi ciency and to examine every pos sible avenue for reduction in pre duction costs. (Continued foot next column).

"Excellent Opportunity."

The tribunal considers the pre-r sent conditions seem to afford an excellent opportunity to the company to increase production beyond 12,500 tons, following the shortage of tin and other container materials The tribunal also considered the fifth question of quantity of ground wood pulp derived from a cord of wood, although this matter was not specifically referred to it at this stage, because it was considered there was a question of principle involved that could be more approrpriately dealt with by the tribunal than by the accountants. The tribunal decided that it was reasonable to take a figure of .70 tons of pulp to a cord. In costs for the March-April cycle this figure is to be taken as a basis on the understanding that adequate tests shall be made during the period and that the company's and Government experts shall agree upon a figure for the succeeding cycle. The accountants are now to proceed with their investigations, and when they are ready the parties are to communicate the results to the tribunal. The judge, Mr Justice Hunter, in. reply to a question based on tlief assumption of an increase being allowed to the company in prices for its cardboard, said in that event it might be necessary for hoxmauers to make application to the tribunal if they wished to pass on the increase to their customers.