PAPER MILLS OPERATIONS

Bay of Plenty Beacon, Volume 2, Issue 248, 11 December 1940, Page 5

PAPER MILLS OPERATIONS

Managing Director's Outline

A NET LOSS OF £72,993 SHOWN

Opening his address Mr Horrocks, | 'Who presided over the meeting, said that the Government had decided that the mills should* supply New . x Zealand's cardboard at a price to be /assessed. From the first' price list made knoAvn it was apparent that 'the officials had failed substantially in arriving at operating costs during war time. Resulting conditions led to ail enquiry, which lasted 16 days and involved ,the company iin heavy expense. Any company of the magnitude of the_ Whakatane iMills could not expect to make a !s)Tofit over the first twelve months, said Mr Horrocks. The Government had assumed that there would be a loss arid had allowed it at £1000 per 'Week. Costs had been based on a hypothetical tonnage, the idea being that if this tonnage were reachj," ed, the company would recover production costs, plus £21,000 depreciation, plus 7 per cent, on- the capital iinvested in the mills only. . 'Carrying on at a Loss. "Our complaint is not so much, that profit should be controlled dur- ' ing war time, as against the severity of that control," continued Mr Horrocks. Pulp played an important part in the selling costs of the manufactured board and the company had 'been compelled by circumstances to -change from Swedish pulp to American. The American pulp was not ;as satisfactory as the Swedish and in .some cases had affected an .crease of "up to 50 per cent. Unless the costing division took that into it could quite easily cause losses. It was only in the last weekor two that the Price Tribunal had ** conceded the right to have the formula altered and brought into line •with the true situation. Until then the company was carrying on at a loss. Dealing with price control, Mr Horrocks said: "We are ■ controlled in type of .manufacture, controlled in imports of /' raw materials, controlled in the .quantity and' kind of board for * export, and controlled in the selling price." The Government had been very •slow to give full accord to the aspect of increased costs and the new price must allow for that, for other •obligations such as debenture interest, and for the shareholders' 7 per -cent.

Saving Hon. W. Nash from Headaches. The Australian Paper Mills had found it necessary to apply for a protective duty. It was only behind that tariff protection that it was .-able to establish itself. The same coukl truthfully be said abotit the Whakatane Mills. With a 40 hour week and unskilled labour at 2/6 per hour, it was impossible to. manufacture without tariff protection. Of course, that was impossible at the present time, under war conditions. "But I have no doubt that we have been saving Mr N'aSh many a headache on the sterling question with the £300,000 for the boxmakers of New Zealand," said Mr Horroeks. Mr Horroeks expressed appreciaMUHK"""

Factors Affecting Production

"This meeting is described as an 'informal' meeting," said Mr H. A. Horrocks, managing-director, when addressing a small gathering of New Zealand shareholders in the Whakatane Paper Mills at the Mills on Monday. "The Company is Australian and under the provisions of the New South Wales Companies' Act the annual meeting must be held at the registered office, which is Sydney. The purpose of this meeting is to give an opportunity to New Zealand -shareholders to express their views and make any recommendations to the annual meeting." Mr Horrocks expressed regret that so many notices had not been received, although according to information had been posted in Sydney on November 15. Although there complaints it was impossible for the board of dir•ectors tv. -rectify the position. Reviewing the year Mr Horrocks referred to the effect of price fixation, by the Government, the rising tide m production costs,, and general matters of operation. Concluding, Horrocks said, inter alia: "If the Government will not meet what we consider to be legitimate requests, there ?s only one thing to be done, close down. We cannot go on asking the creditors to continue their sup<port. The Government has not yet said 'No' and every indication was that, at last, it saw the necessity. There is only one outstanding issue and that is the method' of pricing. If that is arrived at we should be able to run along, pay creditors, debenture interest, andi gather something for reserve." It was vitally important that New Zealand shareholders should not lose confidence. He himself had confidence that the industry would pull through and that private industry would! come into its own.

from the various departmental heads and the splendid manner in which the men had adapted themselves to the manufacturing conditions. The Mills superintendent had said that'there was no better type of men than those at present working in the Mills. Difficulties. Discussing accounts Mr Horrocks said that after paying debenture interest, standing at £17,000, and other sums, the outlook, even for ordinary shares, was not one of dividends. There was approximately £33,0001 owing to unsecured creditors,/ "You will see that it was owing. to the forbearance of these creditors . and debenture holders that part of the loss was financed." Mr Horrocks added that the creditors could not be expected to allow the Mills to operate for ..ever on their charge, and there were the alternatives of closing the works or inviting the Government to take 1 over the control, with its attendant worries and problems of management, and 1 pay the shareholders their 7 per cent. /'Somesthing is going to happen very shortly," said! Mr Horrocks, "and just which way the cat is going to jump, we do not know. At the present time you are forced! to buy where you cart and forced to piw what the other fellow demands. If we are going to develop in New Zealand, surely we must get prices which will take care of all those costs . • -' 1

Mr Macnamara: "it boils down to the fact that we are in the hands of the Government." Concluding his address, Mr Horrocks said he did not think there was any chance of increasing , tlia tonnage output. Some Criticism. After criticising the date and time of the meeting, making for considerable inconvenience for shareholders, Mr G.. R. "Mackenzie, of Wanganui, said that some of the shareholders criticised the appointment to the board of directors of, Mr H. G. Mackley, late general manager of New Zealand Raihvays. Mr Mackley's experience and .ability were not questioned, said Mr Mackenzie, nor was his particularly line record. But there was a feeling that Mr D. J. Wesney, of Invercargill, who had been, defeated at the last election of directors, should have been offered the seat on the board. Mr Mackenzie said he understood) there were 6000 New Zealand shareholders in the come pany. Fifty per cent, of them 1 had lost heart and their support was needed. Of the remaining 3000, 50 per cent, had* to put , it plainly, considered! that they had* been 'taken •down.' They considered also that the management was not in the best interests of the industry. A Comparison. Replying, Mr Hoxrocks said that in his'opinion the only thing to inspire confidence was the acid test of results. A loss of £72,000, something like £10 per ton, was sub<

[ stantial. He did not believe in apologies and must stand or fall by results. A similar enterprise started in Tasmania saw a first year loss of £50.000 and that company's directors had said that that loss was not unreasonable- That company did not produce the tonnage ill writing paper that the Whakatane Mills produced in cardboard. "Our loss was due partly to the fact that the men were not trained, partly to the fact that the plant was new and had to be run in. and, in the main, that we received unfair treatment from the Government, which did not lend any encouragement," said Mr Horrocks, who continued: "There arc some bright spots in the picture, however. Trading conditions will riot always be so difficult and -if we are allowed to survive as a private enterprise, on terms of which the shareholders approve, this company could be Avell established."

Mr Mackley's Appointment. Answering a question, Mr Horrocks said lie w-ould liked to have given all shareholders fuller information, but was that wise ? If a loss had been made, why ventilate in public all things that brought about that loss? It was not the practise these days for companies to disclose more than was necessary. Discussing Mr Mackley's appointment to the directorate, Mr Horrocks said that the centre of gravity for the Mills, 'the point front which all blessings flow,' Was Wellington, and it was absolutely, imperative that a second director be available in that town. Mr Mackley had been largely instrumental in wearing down that intolerance towards the company which had been so evident in March. Confidence Expressed. Mr Horrocks also explained the discontinuance of the logging method on Matakana Island in favour of contracts, the work to be done by lorries instead of the railway which the company had constructed. He added that it was not anticipated that any loss would be made on the disposal of the railway lines. Mr Mackenzie said he had always had great confidence in the industry and When small shareholders threw cold water over the prospects he did his best to warm them up. The industry must come out on top because it, had a monopoly in New Zealand. Following Mr Horrocks' observations quoted in the introduction, he said that he was confident that the balance sheet to be presented next June would be more comforting although it .must inevitably show a loss.

Tribute to Managing-Director. Mr G. S. Crimp, of Wellington, paying a tribute to Mr Horrocks, said he was the one man who would not give up under difficulties—-of which there were .many, with an accompanying physical and mental strain. Replying, Mr Horrocks said he did not really deserve such tributes. The progress of the company had not been due to one man- —it was a team responsible, and a good team. It was those people who deserved the praise. In that direction he would like to mention Mr Brown, the secretary; who had been (responsible for very hard work, clear thinking and had been of the utmost assistance. A motion that the next annual informal meeting of the ( New Zealand. shareholders should be held in Wellington, Palmerston North, or Hamilton, was carried. The balance' sheet 1 for the year records a net loss of £72>,993 18s lid,