EGMONT BOX COMPANY.

Taranaki Daily News, 31 August 1921, Page 8

EGMONT BOX COMPANY.

FIFTEENTH ANNUAL MEETING, CHAIRMAN REVIEWS POSITION. The fifteenth annual meeting of the figment Box Company was held at Eltham yesterday, when Mr. J. B. Murdoch (chairman of directors) presided over an attendance, of about 50 delegates of share-holding companies. In moving the adoption of the report and balance-sheet (already published), the chairman said that they had found the past year a very difficult one. They had worked out the Ohutu bush, which had been their main source of supply of white pine. Clearing up the bush naturally proved a very expensive task, as they had to pick up little patches of timber in valleys. It would not have paid an ordinarj’ sawmiller to do this, but the Box Company did it with the idea of conserving the supplies of white pine for its shareholders as long as possible. White pine, as they knew, was a diminishing quantity, and, in fact, he thought that after the next twenty years there was very little chance of any being available, .if there was enoygh to last that time. Under the circumstances he thought some authority should be placed over the cut--ting of white pine in the various bushes. He said they had started to cut the Ohutu hush in 1908,' and during the period of thirteen years had cut out of it 42,000,000 feet of timber. As far as he could remember, it was estimated when they entered the bush that they would cut 35,000,000 to 40,000,000 feet, apart from a certain quantitj’ of hard-wood, so that the Ohutu position had turned out very good Indeed. They had, he said, all heard of the accident tn the bridge at Ohutu, and owing , to its height (120 feet above the water) it was difficult to get it repaired. As it was dangerous to take the locomotive over it they had to pull the trucks over with a winch, and that had proved expensive. He was pleased to say, however, that it had lasted the bush out.

In the middle of the year they had had a strike. This was not the outcome of the company’s own employees, hut was engineered by a. man outside with the object of having p. preference-to-unionlsts clause inserted. The Box Company had been picked out in preference to dther sawmilling concerns, because it was considered that it was a concern that could not afford, in the interests of the dairying industry, to close down. The directors recognised that if they agreed to the clause they would be in the hands of the unions for all time, so they stood out. The strike lasted five weeks, when the men came back to work, and he was pleased to say that since . then the emen had done well and there had itecn no discontent. The strike had cost the company a lot, owing to the additional railage entailed in railing timber and plant to Eltham, and also the cost of buying timber at high prices outside for boxes. The strike was extensive, but he was sure it was cheaper than to have agreed to the mon*S demands. STATE OF TRANSITION. The change over by a number of companies i suddenly from cheese to butter had also com- ! pelied them to buy a large quantity of timber i for butter box requirements, but he was i pleased to say that though the change took

place in the middle of the season they had Been able to meet the demand. He recognised that it was difficult for companies to tell at the Commencement whether they were going to- manufacture butter or cheese. He pointed out that it was difficult for the Box Company

to change over suddenly. This-year, however, they had taken into account the fact that a number of companies would continue to manufacture butter, whilst others would change back to cheese. They had got a large stock

of timber for both to last to January, and with butter tn the end of February, and so were in a much better position this year. The fact that /they were cleaning up Ohutu bush necessitated their procuring greater quantities from

outside sources, and as a result they had to purchase nearly 2,000,000 feet at a cost of about 26s and 275, as compared with 20s which it cost them to cot at Ohutu. thin year when they were- cleaning up, and 17s last year when they were cutting fully. It would, therefore, be recognised that when they went into the open market the cost would be necessarily greater than when they were in a position to cu£ f° r themselves.

Tl;e position during the corning season, he said, would also be a difficult one, as they would have to Buy the greater portion of their supplies. At present they were in a state of transition, as they were shifting the mill from (Tijutu to Kalcahi. They had erected a mill at Toliua, six or seven miles from the Main Trunk, and this was now working. They were told that the railway from Okahukura to the Main Trim!: would have bedh past there a .year ago. However, the viaduct over the Ongaruhc was now completed,- and he hoped that by Christmas or January they would ho able to have their timber carted over the Public Works railway, which would be much cheaper than carting over the road. That was the new position of the company at the present moment. They had built and equipped a new mill capable of milling from 18,000 to 20,000 "eet per day, and had got practically nine years from now to cut the bush, which was easy to get at and work, being mixed bush, practically half of which was white pine. They could also get an extension if they required it. He pointed out that the cost of erecting and equipping the mill, etc., was, roughly, £18,500, of which £12,500 had been paid during the year, leaving a mortgage x»f £6OOO. At the end of the year they expected to shift the mill from Ohutu to Kakahi, so as to get. into the bush acquired from the Tongariro Company. When this was completed they would be aNe to cut another 15,000 to 18,000 fed per day, and so would by- In a position to meet their own requirements without buying outside. He was, however, of the opinion that it would still be good policy to buy a certain quantity outside. As far as he could see, they had enough bush to supply their butter and cheese crate requirements for fifteen or sixteen ynuesJ If by buying a certain quan-. tity of timber they could conserve their supplies. so as to make them last 20 years, he thought that in the interests of the industry they would be justified fn doing so. even though it cost more to purchase in the outside market than they could cut .it for themselves. THE TONGARIRO COMPANY. The position regarding the purchase from , the Tongarlro Company had been before them for years, and he outlined some of the difficulties that had to be surmounted. A certain , amount of work had been done on the Tonga rlro railway, hut owing to the stringency of finance that hail to be cut down this year. As soon as they wore able to got their timber carried on the railway they would save 2s Gd per hundred feet in cartage, which at present, cost 3s per 100 feet. The managing director of the Tongarlro Company was at present in London trying to finance the whole concern, and as soon as he could do so the Box Company would receive back the £BOOO or £l)i)iio which they had advanced for expenditure on that railway. All this money advanced was Interest-bearing. During the year the company had manufactured 239,000 boxes and 251,000 crates, and since its inception it had manufactured a total of 3,315,000 crates and 3,357,000 boxes. From these figures they would realise what a large quantity of timber it toolr to manufacture this, and Hint the province- had also produced a Jot of dairy produce. As u guide to v.hat wan being charged by other concerns, he Stated that Waikato and Auckland factories were being charged 2s for boxCB And 4s O'.id for crates, and us J<J per crate on the Box Company’s output meant £2090 they would have received an additional ! £lO,OOO if tbelr pjjees were raised on a pat i with those mentioned. i He then traversed the. balance-sheet at some I length. Touching on tho overdraft, which itiood at £56,000, he said that though thlr, I iippqarcd a large sum, it was more than covered by the timber stocks (£42,000) and I the amounts ppepj on the Tongarlro block, j Two years ago ho stated that an over- ! draft of £(15,000 would foe ftepeswry in order ; to carry out the proposals they hud ip hapd, I and though plant und rails had become much more expensive, he felt they would be able {a do so. He hoped that by the end uf , the year ihpy would have arrived at that stage when ttie w&ffcing would be much easier than at present. it<j pp.i/iite.d out that they had written off practically uil at only taking into account the and of the steel rails. A new item *V foe fiance-.-••heel was that for bush rights Taurwv* T <». 2, which they had

now been able to secure from the native owners. Stock in hand (£42,355) had been valued at what it cost to land. The sum of £3OOO had been written off in depreciation, as owing to having written off the Olmtu, wasting assets the directors felt the company was not in a position to allow further depreciation. Referring to the expenditure side, ho touched on various increases, the principal one being freight, which had Increased by £6OOO, due to the 20 per cent, increase during (he year and the extra amount carted. All tended to make the cost of production higher than ip the past. Some of these charges would be reduced during the coming year, but he did not see any prospect of freight being reduced. The .wiping out of the wasting assets of ohutu after the bush had been cleared left the position in other places very sound. The past year, as far as production was concerned, had been a difficult one, on account of having to purchase so much timber, but he hoped that during the present year the position would be better, as they had a stock of nearly 3,000,000 feet of white pine on hand. He then gave figures showing that the present position of the company was good, pointing out that Its assets were much higher than shown in the books, that £45,000 .hart been capitalised, and that during tho last three years £35,000 had been written off, so that the policy was to make its position as sound as possible. He then formally moved the adoption of the report and balance-sheet. Mr. J. S. Connett, in seconding, said that the chairman had not mentioned the reason for calling up the additional capital.

The chairman said that he had mentioned that It was due to the banks warning them owing to the financial stringency.

THE DISCUSSION.

In reply to Mr. Snowdon, the chairman said that the rate of interest received from the Tongarlro Company was by agreement 6 per cent. The question of taxation had been placed before the Commissioner of Taxes by the secretary eighteen months ago, and the Commissioner allowed them to write down under a schedule. In reply to Mr. Williams, tho chairman said that the £lO,OOO in the balance-sheet for tramways was not ail for steel rails. Probably about £7OOO was represented by steel rails at the cut prices, some of which cost only £6 per ton.

Mr. O'Rorke asked whether the directors bad disposed of the bridge at Ohutu. The chairman said that the. bridge had seen them out. It had lasted thirteen years, and they had proposed selling it to the local bodies. However, it could be pulled up and the materials sold to realise £5OO or £6OO above the cost of putting it down. Mr. Corrigan asked whether it was possible to show the profits made on hardwood, as distinct from that ou the timber made into crates, etc. The chairman said that it was Impossible to get at that accurately, and as far as he could ascertain it was about 20 to 25 per cent. Mr. Corrigan considered that it would bo better in the interests of the shareholders to keep two separate accounts. There was no purely white pine bush available. At Tahua he understood there would be about two-thirds hard-wood and one-third pine, so this information would be valuable for future working. The chairman said that it was a very difficult thing tu get at. They wore making a good profit in hard-wood, and if they could make a profit sufficient to pay the expenses of working the company the shareholders would be able to procure the crates at a lower price.

In reply to Mr. Gibson, the chairman said that roughly 1,700,000 feet of pine and hardwood had come from Ohutu during the past year, as against his estimate of 1.500,000 feet. In reply to Mr. Gibbs, the chairman said that the company did not supply boxes and crates to other than shareholders. In the ease of shortage, the company adopted the policy of a pro rata supply to share-holding companies. The whole of tyc share-holding companies had taken up the capital rendered necessary by the alteration of the share basis. Mr. Gibson pointed out that various items In the assets showed an increase in value, which did not coincide with tho chairman’s statement that tho company had adopted a writing-down policy. The chairman pointed out that these were duo to new machinery, hush, etc.

Mr. Gibson suggested that the balancesheet should be drawn out. on a uniform, system each year. He complained that each year they were somewhat different, leading to confusion. Mr. Morton sa.ld that Item for Item there was little difference in the figures of the assets, though the order might be different. Mr. Gibson said that when the new share capital was called up they were assured that only 10 per cent, would be required, and now they were faced with a new call. If the whole of the capital was called up it would be a serious matter for some companies. Had they any assurance that another call would not be necessary ? They were assured in one breath that the financial position was good, and in another that the banks were pressing them. The chairman: "A very different matter.” Mr. Gibson: "They are closely allied.” Mr. Marx emphatically pointed out the impossibility of giving such an assurance, in view of the unsettled times. Things were different to-day to what they were twelve months ago, and no one could say what they would be in another year or two. Share-holding factories would be well advised to be prepared to pay up the lot. Mr. Morton said that he was chairman at the time, and had a clear recollection of what he said: that was that as far as he could see he believed and hoped it would be necessary to call up 10 per cent, and not 25 per cent., and arrangements were made with the bank accordingly. At the time there was no thought of financial stringency. They might have to call another is per share, but he believed Ute directors would refuse to call up more. Tho chairman said that two years ago he estimated that it would require an overdraft of £65,000 to carry into effect various mutters in connection with the acquiring of the timber rights, etc., at Tongarlro. This necessitated considerable delay, mid before, this was completed the bank reduced their overdraft by £10,001). He had gone, to Wellington and made tho necessary arrangements with the bank. When they shifted the mill from Ohutu tn Kakahi that would complete the whole scheme. Mr. J. R. Corrigan considered that the company should pay interest on tho share capital. They, paid interest to thelbank, and it was only a commercial proposition that they should pay it to their shareholders. The chairman pointed out that ir interest were paid on share capital it. would have to bo put on the crates aad boxes.

Mr. Cnrrlgan considered that It was not fair to share-holding companies that their money should be used to develop bush of which twoihirds was hard wood timber, which was used by other people. ■

9he chairman pointed nut that this brought in 20 per cent, profit. Mr. Corrigan: ••Then surely you can afford to pay 6 per cent.” Mr. Forsyth said that the question of interest had been discussed previously, and they iiad decided against it. It was stated in the course of further discussion that shareholders received 2% per cent discount over the outsider in regard to the purchase of hardwood timber. Mr. Fearon said that a member of his com- ' puny had received no discount. The chairman pointed out that the dairy company was tho i ■shareholder, and no benefit would be received unless the supplier put his order through the dairy company. Mr. Gibbs asked what assets the share- ' holders would have at the end of sixteen years, when the limber would be cut out. If they were to have no assets at the end of that i time the best thing would b e to berin writing their shares off right away. ' ! The chairman said there Wcrc tWo prn . I ccdvres—whether the company should go fIJ t !, e , Supreme Court ami get power to write down ' their shares, or whether any rebates allowed : to , share-holding companies should be devoted | by (he Individual companies |,o writing down their .-hares in t|m pompnny. He was quite aware that some dairy companies wc-ro iilroady writing down their shares. Mr. Corrigan did not think It fair to oom- ' P3 re flic price charged By another company for hoses and eratos when that eornpanv paid I Interest fo i(s shareholders apd (hla company did not. i The chairman considered that, taking the I last three years as a criterion, they were I writing off sufficient to meet all their engage-. MP. Cnrrigap said that they were wMIlm; off enough to meet wasting assets, but. thev were not writing off to enable share-holding C om-

panics to get value for their shares when the timber was worked out at the end of sixteen years. He considered tho prices charged should , be sufficient to provide for this. ■ Mr. Forsyth said that at the end of sixteen ' years, if the timber was worked out, the comi j'an.v would have io consider the question of ' supplying something else In which their produce would have to be packed. The chairman considered that if the coraI pany had been ceasing operations now, and had not obtained timber at Tongarlro and Tahua, it would have been able to pay its shareholders 20s in the £. Mr. Corrigan: "And yet you cannot pay them : inferest.” i The report and balance-sheet were then adopted. ELECTION OF DIRECTORS. ' The three retiring directors, Messrs. J. B. .Murdoch, .A. .Morten and J. Brown, were reelected unopposed, whilst the directors’ werrt recommended io appoint Mr. T. A. Budge to the \ae;iiicy caused bj’ the death of Mr. W. D. Powdrell. air. Perrott was re-apjmlnted auditor.* The usual honorarluui was voted the chairman and directors, who were accorded a hearty vote of thanks.