FARMERS’ CO-OP.

Taranaki Daily News, 27 June 1921, Page 7

FARMERS’ CO-OP.

SEVENTH ANNUAL MEETING. PAST YEAR’S OPERATIONS. The annual meeting* of the Farmers’ Co-operative Organisation Society of H.Z.. Ltd., was held at the Foresters’ Hall, Hawera, on Saturday, when Mr. A. Hunter, chairman of directors, presided over an attendance of about 300 shareholders. CHAIRMAN’S ADDRESS. In moving the adoption of the annual report and balance sheet, already pubashed, the chairman said:— We have now met to consider our Seventh annual report and balancesheet. The report is brief, one might almost say curt. In view of this the Iboard deemed it advisable to send with jt to shareholders a circular letter, a perusal of which shows that there is no occasion to be downhearted. That (circular has made it possible for me to Bomewhat shorten my address, for Fwhich mercy, I hope, you will all be duly thankful. During the past year there have been wide differences in the opinions of those who might be considered most capable of forecasting what /turn events would take, and yet not /one, so far as I have heard, anticipated the sudden slump which actually did (take place. The board fortunately had that it would be wise to play for safety, and build up our finanCial portion as quickly as possible, and a a result of the policy adopted our /subscribed and paid-up capital have /each approximately been doubled during the year, while the percentage of Biabilities to assets has decreased from 74.08 to 66.09. The actual increase in the subscribed capital is £126,360, bringing it well over the quarter million. and the increase in paid-up capital is £46,544. I During the past few months powerful concerns have at times had difficulty in finding ready cash, and you will readily understand what a great help the increase in paid-up capital has been to the management. It has been the meats of placing the finances of the Society in a very healthy condition, and which, so far as we can gudge, will enable us to successfully carry through the trade depression we ere now facing. The deposits increased by £20,444. The liability is fixed for periods varying* up to three years, with fehe maturing dates well spread. For good reasons known to the Government /legislation was passed in March last 'extending the due dates of deposits. It has been rumored that further legislation in regard to deposits will be enacted at the next sitting of Parliament, by which time financial condiitioni may be easier. Although our position at the date of the enactment was very easy, we, like other {•firms, were compelled to listen to the ■warning note sounded by the banks and femake endeavors to retain our deposits. Our deposits have shown conpdence in the Society by not unduly pressing for withdrawals, and for this iconcession we tender our thanks. | The amount owing to sundry creditors decreased by £9711, leaving £35,jl3l, mainly represented by trade balances arising since March 20 and not friue until April 20. A small amount 5s represented by proceeds from sales bf stock credited to accounts, and for which payment did not become due until after the close of the financial year. The amounts due under the heading of mortgages on freehold properties are Very well spread, £lOOO only being due 5n the current year, and no other amount until November, 1924, the greater portion being payable in the latter end of 1925. We have thus four years in which to make provision for these debts. The position of our bank account is very satisfactory, the amount of our advance being £2078 less Jthan last year, while our recent application for the renewal of our limit was granted in full. THE COMPANY’S ASSETS. And now to come to our assets. Our properties show an increase of £11,903. During the year we paid £4400, being the balance due on the Eltham premises. We purchased properties as follows: At New Plymouth, £2750; at iWaitara, £510; at Stratford, £1200; at JWaverley, £2600. These properties t were considered by the board to be good value for the money. The present /Value of our properties is much in exjeess of the values shown in the bal-ance-sheet, and all buildings and "yards fire in good order and repair. The increase of £3326 in the plant Account is mainly due to the purchase /early in the year of new Hupmobile cars for the auction staff to replace pld cars. The plant is ull in good orider, and the value shown is considered >afe.

Stock on hand shows an increase of {£37.741. A considerable increase in jour business during the first half of the financial year meant heavy buying, and the slump caught us with fairly heavy stocks. For the last three months we have been ordering only actual requirements, and the amount held should be Reduced, rapidly. The stocks are all glean and were heavily written down at the balance date. * I The amount owing by sundry debtors has decreased by £44,086. The total, [£135,000. is spread over 2186 names, tend over £40,000 of it is secured. The kccounfa have been carefully scrutinised iy fh? idvance committee, and in its jopintnu they are in the main safe, Jfioffrh no doubt the drop in the prices of hve stock and the decreased earning pdWspFof some of the debtors will evenUuaTtv mean loss on some accounts. In •the course of the year parts of some of ’our properties were sold, and the mortgages taken for the unpaid portion of the purchase money are included under jrar loan and other investments.

Our general trade profits increased by slightly over £lOOO, but our expenditure unfortunately increased by £14,841. The principal increases are: Bad debts, £349; casual labor, £523; legal expenses, £921; stamps, telephones, etc.. £259; brokerage, £699; interest paid £1671; salaries, £2824; discounts allowed, £3563. The large increase in the discounts allowed is accounted for by discounts having been treated as an overhead charge, instead of, as in the past, debited to th? different departments. After the slump came overhead and working expenses Were reduced as rapidly as could reasonably be done. Th? condition of afnairs received the earnest consideration UDf the board, and it was decided, as just mentioned, to reduce expenditure pnd to make ample provision against future losses, in order that we might jet Uuxaiab the period of stxingenoT

with our capital intact, as we hope and believe we shall. Our thanks are due to the staff for their loyal support during the year. The responsible officers have had a very worrying time during the latter portion of the year, and with equities and margins of security disappearing with falling values accounts have required constant and wide-awake attention. Our general manager’s advice during this trying time has been of great assistance to the board, and has so far as can be judged proved sound. The regrettable death of Mr. W. D. Powdreli caused a vacancy on this board and on those of several other cooperative concerns. The loss to the farming interests is a severe one to the Dominion as well as to this district. His advice and help were ever ungrudgingly given, and he obeyed the spirit of the command to “bear one another’s burdens.” The board have already placed on record a suitable resolution and sent a letter of condolence. I have nothing new to offer in the way of prophesies, nor of sage advice. You probably would not believe me anyhow. We have been urged again and again to produce more and economise. That will be right. To do so we must work hard and long, with brains as well as muscle. We owe it to ourselves, no matter who “goes slow,” and if we do our best with each day as it comes, “we’ll get there in the morning.’’ Mr. (Jane seconded. THE DISCUSSION. Mr. Blake asked in what direction the retrenchment had taken place. The manager said that there had been a considerable reduction in the staff, which had been reduced by 25 out of a total of 127, effecting a saving of between £5OOO and £6OOO per annum. Agents also had been instructed to economise in the use of cars, and only to utilise them where profitable business was probable. Another shareholder asked how it was that legal expenses were so high. The chairman stated that they had removed their banking account, and stamp duty on this had cost £5OO. In addition they had to pay the bank’s lawyer as well as their own. There was also the purchase o. properties at New Plymouth, Waitara and Waverley, as well as the completion of the Eltham premises. In addition there was a certain amount of suing debtors. Moreover, they } had also paid off the liability of £lB,OOO to Gillies and Nalder. He did not think it was likely the legal expenses would ever be as high again. A shareholder asked if it were not possible to reduce the bad and doubtful debts. Another shareholder remarked that it appeared as though the society was run on the lines of being affiliated to a charitable institution. The chairman pointed out that bad and doubtful debts had increased by only £3OO. The directors had adopted a policy of writing down as doubtful any amounts about which they were uncertain, but he thought the bulk would be recoverable. It was impossible to run the business without incurring bad and doubtful debts, though the management exercised every care in watching the sundry debtors. He felt that they would get practically all the money owing to them if the position did not get so bad that the farmer would not be in a position to pay his debts. Mr. Long thought that the management were to be congratulated, considering the nature of the business and the small amount of bad debts. USE OF MOTOR CARS. Mr. Smith Dawson asked what it cost the company to provide for the pleasure of their employees. The manager: “You mean joy riding, I suppose.” Continuing, the manager said that he had received complaints regarding two flash Hup. care being at the races and also in front of Mr. Massey’s meeting, etc. He said that the motor department waa a disgrace to the concern. There was no room for storing cars or for displaying them. Fortunately they had been able to show a profit. He said that he had no objection to his men taking their wives with them when they went anywhere in the cars. As for going to the races, the car salesmen paid their own expenses, and he always instructed them to go early and put the cars in -a prominent position where they would be seen. The stock agents also took their cars, as they were able to meet men at the races and do business. He could assure them that very little joy riding was done.

A shareholder said that nine cars had been seen going to the races. The manager said that the Hup. cars were all alike, and they may not have been all their cars.

Another shareholder said that one big firm in New Plymouth had stopped their cars going out on Sundays. Mr. Taylor: I am certain they never stopped them. They may have tried to. Mr. Burdekin pointed out that though the balance sheet showed a profit of £3OO. there was really a loss of £l3OO, as £l6OO had been carried over from last year. He pointed out that the Farmers’ Lnion Trading Company in Auckland, with stocks valued at £700,000, had shown a profit of £33,000, and the directors recommended the payment of a dividend to the shareholders. This he did not consider a sound policy in views of the probable fall in stocks, and he considered a wiser policy had been adopted by the Co-op. directors in writing down heavily and showing no profit. They could easily have shown a profit by varying the valuation of the stock slightly. He would, however, like an assurance that the stocks had been taken at a low conservative valuation, because if not, with the probable drop in value, they could very easily have a loss to face next year.

REASON FOR NO PROFIT. Mr. Taylor said that the loss of £l3OO was plainly shown. The chairman and Mr. Belton had gone through the stock sheets, and were quite satisfied the stock was in good order. The stock had been written down very heavily. They could have shown a profit, but under existing conditions would have been mad to have done so. A banker had told him unofficially that if they had shown a profit of £lO.OOO it was questionable if they could have got it to pay to their share-1 holders, and, moreover, they would have been liable to pay the Government £4OOO in taxation. It was better, therefore, to show a loss and write down heavily. He could see difficulties ahead, as the prospects were not too bright. During the last two months the stock department had shown a loss, but during the next two months it was expected to show a profit. After that he did not know what was likely to come. Mr. Belton said that stock had considerably depreciated since March 31. All, he said, would know how wire had slumped, but it had been taken into stock at such a price that it would be possible to sell without loss if the price became lower. All bread and butter lines had been taken into stock at prices

that would enable them to get out without loss. A shareholder asked how it was they were losing trade through not being able to sell as cheaply as local storekeepers, and he instanced benzine and oats. The manager said that they had been told the same theory before. When their business was increasing very fast, as at present, he did not think it advisable to chase business. Another shareholder gave instances where he held the ’Co-op. was selling cheaper. A shareholder said that he had obtained slag from the Co-op., and a month later was quoted slag at over £1 cheaper. Mr. Taylor explained that this was mainly due to the decrease in freight charges. THE CAR BUSINESS. Mr. Tosland said that the balance sheet did not show the profit made by the branches. He thought they should cut out the motor cars and hardware. The farmers of the district had leaned a I good deal on the Co-operative Organisation. During the year they had made a loss of £l3OO, but had paid out £4700, mainly due to the decreased freight charges. ~ A member suggested that they suoma reduce the commission charged on stock sales so as to encourage business. (Laughter). Mr. Tosland said that the balance sheet did not show the profit of the different branches. He had been told by several merchants that they expected to lose several thousands before they got their stocks back to normal. He thought it would be better to get out of their motor oars and hardware until things found their level. Regarding the loss of £l3OO, he pointed out that rebates amounting to £4700 or £4BOO had been paid out, and he considered that rebates should not be paid out till the end of the year, so that, as far as possible, interest could be paid on capital invested. This was an important point, as people had put money into the concern for investment, and felt the loss of the interest. The position in front of them, he knew, was vary difficult, but with hard work he felt the farmers would, if given time, pay all they owed. The chairman said that it was not possible to get out of the cars at present. He wished they could. The cars had been ordered on the basis of previous sales, and had to be paid for sooner than texpected, as some of those in the federation by whom the cars had been ordered were not in as good a financial position as they were. Rebates had been cut out when the slump came, and none were being paid now. Rebates had been paid in the past to avoid the taxation which would have to be paid if they were held to the end of the year. This taxation would amount to 50 per cent. Mr.. Boyer considered that more detail should be given in the balance sheet, and he thought the balance sheet should be referred back to the directors for further information as to the amount paid in salaries, profits from the various departments, etc. He also criticised the management for allowing the unsecured debts to be twice as large as the secured— viz., £92,129, as against £42,874. He also wished to know the extent of the society’s liabilities in connection with other concerns, instancing the West Coast Mortgage and Deposit Company.

ACCOUNTS VERY SOUND. The chairman said that one of the best things the society did was to invest in the Deposit Company, as it carried the burden of finance, and but for it they would have had to shut up. He did not think it advisable to give too much detail in their balance sheets, as this might be used to their detriment by their competitors. Regarding the unsecured accounts, he said that these included the ordinary business. It was customary to give I'4< days’ credit, and as the manager said the monthly turnover had been about £BO,OOO, this would account for a lot. The manager considered their accounts were very bound. With the exception of five, every account over £3OO was secured, and a good many accounts under that amount also. A shareholder asked whether it would be possible to reduce the commission at stock sales with a view to encouraging business. (Laughter). Mr. J. O’Neill thought they were leaning too heavily on their bankers, and the directors should take steps to strengthen their finances. They must either issue new shares or call up further unpaid capital. They should seriously hesitate before increasing their retail stocks before a further drop took place. Shareholders should put their shoulders to the wheel and assist, instead of wasting their time in idle criticism.

Mr. Laurent asked for particulars regarding the Rubber Magic deal.

The manager stated that ariy information could be obtained afterwords.

A question was asked regarding the purchase of Harris’ business, the manager stating that this had proved a profitable transaction.

Some further discussion took place over shareholders being able to purchase grass seed outside cheaper. The manager stated that with the necessity for procuring money, some firms had been forced to quit at any price, but they were not in that position. Mr. D. J. Hughes asked if the directors had considered the question of importing their' slag, etc., direct to New Plymouth. In order to help the pockets of the farmers they would have to consider this. He pointed out that direct steamers were now coming to New Plymouth faster than they could be berthed. The manager said they had been getting goods direct. To-day, however, finance was difficult, but he had no doubt in future of getting all their requirements direct. The chairman said they wanted everyone to put their shoulders to the wheel. If anyone wished to put £lOOO into shares they would take them. DETAILS ASKED FGR. Mr. Standish again asked for detailed items of earnings and expenditure. The chairman said they had always refused to give these publicly, but any shareholder could obtain particulars at the office. Mr. Boyer moved as an amendment that, the directors be requested to give particulars showing the profits, etc., of the various departments. Mr. Standish seconded. Mr. Buckeridge, in opposing, said that one year they had been indiscreet enough to do so. He had canvassed the district at the time to get more capital, and the publication of these particulars had done more damage than anythnig eke. He had since consistently opposed it. It made no difference which departments made a profit as long as a profit was made. A voice: It makes a difference when there’s a loss. Mr. Buckeridge said that it was not always advisable to show their opponents where they were making losses. A voice: No one would ask for items if the society was paying 10 per cent.

Mr. Buckeridge said that the Commissioner of Taxes would ask for 50 per cent, of it. Continuing, he said the directors might have shown a profit on paper, but they wrote the stock down to a conservative value.

Mr. Fryday considered that there was something wrong with the buying when the society could not sell as cheaply as its opponents, and he cited instances where he bought cheaper outside. He also considered they should carry more stock. The chairman questioned if there was anything wrong with the. buying. He pointed out that firms pushed for money had to sell low to quit. Some shareholders said they were carrying too much stock, and here was another saying they should carry more. Mr. Bremer said that he had invested about £5OOO in the society during the year, on the understanding that he was to get 8 per cent, interest, and the very first year he had got nothing. He did not complain because, as a farmer, he realised that during the past year he had made a bigger loss on his farm ' than ever before. Most of the shareholders who were criticising were either dairy farmers who had made a lot of money, or did not know what they were talking about. Mr. Quin considered it would be fatal to give the information asked for. They had to rely on the integrity and honesty of purpose of the directors, and, moreover, they had the auditor for their protection, and should not appoint an auditor in whom they did not have confidence. He considered the amendment a vote of no-confidence in the directorate. Mr. Cocker said that he favored these particulars being given at the meeting of a co-operative dairy factory because that practically had a monopoly of the district in which it operated, but the Society was in a different position, having to meet opposition. It was, therefore, not wise to give the information publicly, and shareholders should be satisfied to get it privately at the office. He also pointed out that during the past, year the directors had had six months’ good times, three months’ fair, and three months’ bad times, and he .felt that they possibly ’ had not retrenched eoon enough, being optimistic that things would improve. The amendment was loet, and after a little further discussion the report was adopted. TAXATION. The chairman briefly touched on the unjustness of taxation as at present levied. He pointed out that shares in cooperative concerns like this were not held for investment purposes, but were held in small amounts. Their own compared averaged about five shares per man. It pressed very hard on the company to have to pay income .tax at the rate of 8s 9d in the £. The same applied to manufacturing companies, and helped to keep up the coe-t of living. He pointed out that in the case of a company whose financial year ended in November, when values were high taxation would have been paid on that basis, and when stocks dropped, as they had done, that concern, if not strong, would have been impelled to liquidate. He pointed out that this taxation of profits affected all concerns, whether co-opera-tive or proprietary, and ultimately came out of the land. Mr. Connett then moved that this meeting of farmers, whilst recognising the difficulties the Government are faced with at uie present time to provide additional revenue to meet their obligations, view with grave disfavor the clauses of the Income Tax as it affects companies similar to our own, and desires that the Act be amended so as to make the tax payable by the individual instead of the company. Mr. Fryday seconded. In reply to. Mr. Laurent, Mr. Connett said, that a similar resolution had been carried at the meeting of the National Dairy Association at Palmerston North. Mr. Cocker also pointed out that reserves set aside for rebuilding, etc., were liable to taxation at the rate of 5 per pent.

The chairman said they did not want it to be thought that they wished taxation taken off altogether, but the individual should pay and not the company. A graduated tax was not fair to a company, which should be taxed on a flat rate. It was not fair that a man not liable to taxation should be taxed through the company on a higher scale, while a wealthier man might be saved taxation through being left out of a higher grade. Mr. Bremer thought the taxation would have the effect of preventing a man from investing in a company. Mr. Hughes said that if it was taken off the company, some one had to pay it, and in some cases shareholders would be in India or elsewhere, and it could not be collected.

The chairman said that the company were treated by law as agents, and would collect it.

Mr. Quin asked if it were not a fact that the Government recognised the unfairness of the incidence of taxation, and were asking companies for the. names of all shareholders, with the amount of the dividend paid them, with a view to changing the incidence of taxation.

The chairman said that was so. Mr. Connett said that there was no objeotion to being taxed in what the individual should pay, but what they di.l object to was paying taxation on a collective sum. finder the individual system some would not have to pay taxation at all.

A shareholder pointed out that th* Government could not afford to reduce taxation. Mr. Connett said that all recognised the necessity for taxation, but objected that it was not equitable. The resolution was carrierd PURE SEEDS. Mr. Tosland touched on the spread of noxious weeds through the use of im pure seeds, and urged on the directors rhe necessity for installing a seed cleaning machine or obtaining seeds from a firm that used one. There was, he said, a possibility of their losing their seed business otherwise. The chairman said there was not so much in this as they were led to believe. The society were procuring machine dressed seed, and were going to instal a machine. Another shareholder considered they should make themselves acquainted with ■the locality from which the seed, hay, chaff, etc., was procured, with a view to preventing the introduction of Californian thistle. A voice: Can you tell us where there is none? Another voice: Stewart Island or Mt. Egmont. RESPONSIBILITY OF DIRECTORS. Mr. Cocker asked if it were necessary for a director to sign a joint and several, and what attitude the remaining members would adopt if a man got in who was leaning on the company, or was not acceptable to the bank. The chairman said that a man could he a director who was at present being financed by the Society. He would have to make his position clear to the other

■ directors, and if the bank would not • accept him, it might be necessary to ask him to resign. They had to carry i an overdraft of £ 100,000 with the bank, and the bank had to be satisfied. The directors had always made it a point of letting a man off the quarter immediately he retired from the directorate, and if they wished to have strong directors they must see to it that they did not alter that. On the suggestion of Mr. Owen, there was a brief discussion as to the best way of helping the company to improve its position. The chairman pointed out what had been done by Canterbury. Mr. Belton: “Constructive instead of destructive criticism.” Mr. Laurent considered shareholders could assist by paying cash for small purchases. Another shareholder suggested giving a cheque in advance. Savings might also be effected if shareholders were more careful over paddock sales. Mr. Boyer (Waverley) suggested that business would improve by the establishment of a retail store there as well as a wholesale one. It was pointed out that this was governed by finance. Tremendous stocks would have to be carried to stock all branches. 'The manager urged people to invest money in their own concern. He pointed out that the company had £96,000 on fixed deposit. Of this amount, unless the moratorium was extended, the society would have to pay £31,000, He was doing his best to get in sufficient money to meet that obligation, and. to do so had to press unduly hard on those who owed the company money. He would be able to meet the amount, but it meant restricting business. Their overdraft at present was within £25,000 of the limit, but it would not be safe to lend that. , Instead of sending their money to Christchurch, Auckland, Hawke’s Bay, or elsewhere, he urged shareholders to give the society their money on fixed deposit at 8 per cent for five years with the right of withdrawal in three years. It was a perfectly safe investment, and even in the event of a loss the interest would be paid, and when the time expired the money would be obtained, even if the shareholders lost their share capital. If they could obtain £40,000 or £50,000 in this way they could give 8 per cent.,, and it would enable them to meet their liabilities and help them to finance the farmers. Regarding farmers paying cash, he pointed out that at present farmers were very hard up. Even those reputed to be wealthy could not pay oasl}. When shareholders wished to lift their deposits, he referred them to the banks, but if the money was wanted for investment elsewhere at 8 per cent, he had refused to give it. Mr. Spratt (the company’s solicitor) pointed out that the security offered was equally as good as that offered by other concerns, and that the deposit receipt could be financed on equally as well as the bonds. The chairman said that any money invested now was not affected by the Act of last session. Mr. Tosland thought as the money became due they should give their own investors 8 per cent. The manager said that this was the first opportunity he had had of putting the position of the investment of money before them. ELECTION OF DIRECTORS. The following were nominated for the vacancies in the directorate: W. G. Belton (Ngutuwera), A. G. Larcom (Ararata), T. W. Owen (Eltham), Frederick Sarten (Tikorangi), retiring directors and J. E. Palmer (Waverley), J. O’Neill (Ngaere), J. W’ooldridge (Okato), B. E. Cleland (Kaponga), and Levison Sutton (Kohuratahi). Mr. Taylor stated that 'GOO proxies had been received, representing a. total of 1335 votes had been received. The election resulted: P. Sarten 1604, B. E. Cleland 1147, J. Wooldridge 1039, L. Sntton 1021, J. O’Neill 931 (elected), W. E. Belton $2B, A. G. Larcom 799, T. W. Owen 764, and J. E. Palmer 627. Messrs. Burdekin (Hawera), and Rowley and Gill of Wellington were nominated as auditors, and in a show of hands the former was elected. The chairman’s honorarium was fixed at the same as last year, £l5O. A motion to the effect that it be £250 was proposed, but Mr. Hunter did not favor increasing the honorarium in view’ of the financial stringency. Had the Society been in a position to pay 10 per cent, dividend the position would have been different. The directors were voted the same amount as last year, viz. 30s per meeting, plus travelling expenses. Votes of thanks were accorded the retiring directors.