Markets and Money

Sun (Auckland), Volume 1, Issue 35, 4 May 1927, Page 3

Markets and Money

A Review for Business Men

(CONTINUED FROM PAGE 2.)

OTHER PEOPLE’S MONEY TIMBER COMPANIES LOWER PROFITS BUT BIG RESERVES By Pertinax. Lately there has been a very slack period in the timber trade, and this has been reflected by substantial * decreases in the profits of the firm engaged in the industry. However the very considerable assets and low’ liabilities of some of the leading compan*S4.,^rov*<'*e. an illuminating instance of the way in which good management enables the lean years to be passed with safety. It also affords an example to some other branches of commerce, in which lack of foresight had resulted in two or three bad years causing losses sufficient to undermine what had often been considered solid concerns. The decline of house building and the increase in the importation of timber have been much to the fore in New Zealand, but the latter element has been even more marked in Tasmania and on the mainland of Australia. In this connection, it may be noted that the imports of timber into Australia increased from 233 million feet in 1921 to 499 million feet in 1926. The sawmillers’ representative, giving evidence before a recent inquiry, stated that in South Australia millions of feet of pinus insignis were stacked because it was economically impossible to convert it into box timber. This is a situation which should interest investors in forestry schemes. He also said that the total number of mills in Tasmania was 178, of which 102 were closed. In view of that state of affairs, the continued stability of such a firm as the Kauri Timber Company calls for favourable comment, since it has only £BI,OOO of external liabilities as against total assets of nearly £1,150.000. On a smaller scale, the Leyland, O’Brien Company appears to be equally sound, having liabilities of only £6,220 against total assets of £226,000, while in the case of the Parker, Lamb Company, the two sides of the ledger stand in the lower though safe proportion of about 1 to 3J. The leading factors in the position of these, the three most important timber companies listed locally, may be summarised as follow; KAURI TIMBER CO.—

Paid-up Capital 750,000 Total Assets 1,149,363 Reserves 288,732 Liabilities 80,630 Surplus of Liquid Assets over Liabilities 143,118 Decrease in Net Profits for 1925-26 23,949 Net Assets per 25s Share . . 34s 6d LEYLAND O’BRIEN Paicl-up Capital 120,000 ' Total Assets 226,077 Reserves 94,257 Liabilities -6,220 Surplus of Liquid Assets over Liabilities 181,000 Decrease in Net Profits for 1925-26 2,671 Net Assets per £1 Share .. 35s 6d PARKER LAMB— Paid-up Capital 52,500 Total Assets 88,469 Reserves 5,500 Liabilities .. 25,755 Surplus of Liabilities over Liquid Assets 13,336 Decrease in Net Profits for 1925-26 (approx.) 800 Net Assets per £1 Share .. 23s Od The principal assets of these companies are also worth noticing: KAURI TIMBER — £ Freehold Property (including standing timber) . . 146,048 Stock-in-trade 335,553 Plant and Machinery .. .. 180,706 Shares in Other Companies 143,471 Mortgages, Loans, Debentures, etc 85,842 Sundry Debtors 124,178 LEYLAND O'BRIEN—- £ Freehold Property 3,207 Stock-in-trade 6,552 Plant and Machinery . . . . * 9,524 Shares in Other Companies 2,275 Mortgages, Loans, Debentures, etc 147,650 Sundry Debtors 26,333 PARKER LAMB—- £ Bush, Logs, etc 13,389 Stock-in-trade 24,498 Plant and Machinery .. .. 21,284 Mortgages, Loans, etc. .. 1,715 Sundry Debtors 10,704 In 1924, the Parker Lamb Company increased its issued capital from £35,000 to £52,000 by capitalising £17,500 of reserves and giving holders one new share for every two held. It has maintained its 10 per cent, dividend, and since 1924 the reserves, which were then left at £1,250, have moved up to £5,500. In 1925, the Leyland O’Brien Company increased its issued capital from £BO,OOO to £120,000 by capitalising £40,000 of reserves. This action left the latter at the figure of £86,726, which went up by £7,521 the following year. The company had paid 125 per cent, on its old capital and decreased the rate to 8 1-3 per cent, on the new total, thus making the same annual disbursement as before. In view of the ; fact that last year’s reduced profit would have borne a higher payment, the market appears to have the impression that the dividend will go back to the old rate. Last year’s net profit of the Kauri Timber Company was lower by £1,322 than the amount of £60,000 required to pay the usual 8 per cent, dividend and the difference was extracted from reserves. These appear to be equal to meeting more than one other such occasion, since they include a dividend equalisation account of £50,000, in addition to ‘’contingency reserve” of £129,069, and “contingency fund” of £28,612. Various considerable balancesheet changes were due to the scrapping of a mill in Western Australia, the erection of a “larger and better mill in another district,” and the investment of £50,000 in the Vanikoro Kauri Timber Company. The chairman stated that a further amount of about £27,000 would be taken from the contingency reserve in the current year. This whole situation inclines one to think that while the timber companies are showing great energy and resource in successfully meeting unfortunate conditions, the industry which they pursue might well be given a little more assistance by various benevolent governments. A policy of so-called protection, which has resulted in making these countries a dumping-ground for cheap foreign timber, is hardly more than a sham. If the Reform Party is still looking for something to reform, here is one of the things which might claim its attention. DATES “FOR TENDERS May 18, at 12 noon.—Laying of about 624 ft. of 6in. pipe sewer, together with all the requisite branches, manholes and other appurtenances for the One Tree Hill Road Board. May 9, at 5 p.m.—Erection of two pile beacons, Thames foreshore, and other minor works. Thames Harbour Board. May 10, at 12 noon.—Asphalt surfacing approximately 46 chains roadway with asphalt and other work incidental thereto. Mount .Albert Borough Council.