FARMERS’ CO-OP.

Taranaki Daily News, 28 June 1922, Page 7

FARMERS’ CO-OP.

THE ANNUAL MEETING. A DIFFICULT YEAR. CHAIRMAN REVIEWS POSITION. The eighth annual meeting of the Farmers’ Co-operative Organisation Society of New Zealand, -Limited, was held at Hawera yesterday, when Mr. A. Hunter, chairman of directors, presided over an attendance of about 200. • The annual report regretted that the profit and loss account showed a substantial loss, which was mainly attributable to falling prices in both live stock and merchandise. The balance sheet showed ar-net loss of £23,185 19s 4d. - • ■ ■ ELECTION OF DIRECTORS. There were six vacancies on the directorate. Messrs. W. G. Belton, G. H. Buckeridge, H. A. Foreman, Alex. Hunter and 8.. C. Lysaght retired, by rotation, and Mr. A. Corkill resigned during the year. The chairman, in calling for nominations, intimated that it would benecessary for the directors to sign the guarantee at the bank. In reply to a question, the chairman stated that it would not be possible to ascertain if the nominees would be - acceptable to the bank prior to election. Messrs. W. G. Belton, H. A. Foreman, Alex. Hunter and B. C. Lysaght were reelected, and the two vacancies will be filled up by the directorate. Mr. G. H. Buckeridge did not seek re-election. The directors’ honorarium was fixed at the same as last year, viz., £l5O to the chairman and 30/- per meeting for the directors. Mr. H. B. Burdekin was re-elected auditor. THE CHAIRMAN’S REPORT. The chairman’s report, referring to the balance sheet, said: It is not cheerful reading, and your directors regret the result, especially on account of those who have large amounts in shares and depend to a large extent on a dividend as their income. However, I do not suppose anyone was so sanguine as to expect a profit. As regards our capital, the amount subscribed has increased by £10,300, the total now standing at £266,420, accounted for by the allotment of 1030 “C” shares, the names of 58 new shareholders having been added to the register. This must be considered satisfactory, considering the times througn which we have been passing. Calls in arrears amount to £10,806. This amount is high, and shareholders are urged to do their utmost to pay their overdue calls. The uncalled capital is £149,997, less £17,341 paid in advance, a decrease of £8643. As you know, it has been the policy of the board to call up only £5 per share, and if it can be avoided, this policy will not be altered. We may, however, be compelled to make a further call or calls, for the sum of £18,030 on fixed deposit is due at the end of this year, and £22,270 at the end of 1923. We are receiving such a poor response to our calls for share moneys and for repayment by sundry debtors that shareholders must take warning to provide the necessary capital to meet these liabilities. Our paid-up capital stands at £122,957, an increase, of £10,620, which in normal times might have been considered quite satisfactory, but in a time of stress sue’ 1 as we are experiencing is quite inadequate to meet the requirements of the business. The calls in arrears, mentioned before, must be paid if the society is to meet its obligations without seriously disturbing our sundry debtors, very many of whom, if pushed now, might have to sacrifice their stock at a serious loss to themselves and to the society. Our mortgages on freehold properties have decreased by £7OO to £16,150. This amount is well spread, the first sum of £2500 being due in November, 1924, and the balance in 1925 and 1927, so that we should have ample time to make provision to meet these amounts as they fall due. Our overdraft at the bank shows an increase of £1829, the extent of our indebtedness being £77,262, while on the other hand our fixed deposits have increased by £5llB, leaving the amount at £90,950. These deposits are mainly moneys of directors and shareholders. The liability is well spread. During the year deposits amounting to £23,408 were lodged, and £28,526 repaid. Every endeavor was made to meet the withdrawal demands of depositors, and In no instance where it could be proved that hardship would result from our non-pay-ment did we fail to meet the wishes of our depositors. Our sundry creditors now stand at £23,631, a decrease of £11,500, due mainly to the general decrease in turnover in both live stock and merchandise. Of the balance at March 31, £20,287 mainly represents proceeds of live stock, payment for which was not due until after balance date, and interest accrued on deposits and to the bank. The balance of trade accounts was £3343, payment for which was not due until April 20. COMPANY’S ASSETS. And now to come to our assets. The freehold and leasehold properties stand at £67,348, an increase of £3,038. The increase is accounted for by a payment of £l5OO on one of the Union Street sections, £B4O for the purchase of a house property n Wanganui, to cover a bad debt, and the erection of benzine sheds, rendered necessary by the regulations of the Dangerous Goods Act of 1920. The plant account has been reduced by £926 to £14,900. A valuation was made early in March. With the exception of motor-cars, the value o: which it is difficult to estimate, the plant is well written down, and should be readily saleable at book value. A decrease of £38,048 is shown in stocks, leaving a total of £74,309. The slump caught us with £112,000 worth of stocks, bought at the top of the market, and, of course, we had to face the drop. We also had the experience during the year of merchants from whom we had purchased coming into the territory and competing openly with us. The stocks are all taken in at replacement values. The amount set opposite sundry debtors is £149,298, spread over 1882 names and showing an increase of £14,294. Of the amount £82,587 is secured, as compared with £42,874 last year. These accounts have been carefully scrutinised, and appear to be very clean, though some will no doubt prove bad, and some “long-winded.” We have done our best to help clients through the trying time, and naturally the amount under this heading shows an increase. The decrease of £4OlB in war loan and other investments is accounted for by the transfer to sundry debtors of £4600, the unpaid balance for properties sold, and which is secured by mortgages. In the past the receipt side of the profit and loss account showed net profits of departments, and the expenditure side showed the overhead expenditure, i.e., expenses that could not be directly charged to departments. The gross figures are now i shown. Every reasonable endeavor was I made to reduce expenditure, with the re--1 suit already stated; but, unfortunately, we

«ou|d not reduce at the same rate as our turnover dropped. Reductions are still being made where possible, and the expenses percentage of turnover should next year show an improvement. For the year under review the expenses percentage of the turnover in the produce department show 10.2, as against 6.7 in the previous year, and in the stock department 3.4 as against 2.6. Taranaki and the Waikato are perhaps feeling the slump more at the present time than any other part of the Dominion. During the boom, five or six small farms changed hands in the vicinity of £2OO per acre, and quite a number at from £lOO to £l5O. At the present returns for butter* fat, some farmers are finding it imposible make their farms pay, and many have gone, or are going, out.

FEATURES OF DEPRESSION. Adjustments are daily being made on a basis of Is to Is 3d per lb of butter-fat, and in some instances £3O to £5O per acre has been written off mortgages. The prices of dairy stock and store cattle during; the twelve months have dropped considerably’, representing a great shrinkage in equities. This society has avoided advances against land, though in some cases we have taken such securities in support of existing cover. Although we are passing through the .worst depression this country has known, the policy adopted by the board is enabling the society to pass through the financial crisis in a creditable manner. . The credit for this is mainly due to the foresight of our general manager, and his watchful supervision over the accounts and finance of the society. I take this opportunity of thanking him, and our staff generally, for the loyal service they have given during the past year, and we must remember that the success of a co-operative concern depends to a great extent upon the efforts of the staff. The shrinkage in turnover has necessitated considerable reduction in staff, which is now pretty well down to a mihimum, that is, unless business is curtailed. The full effect of this reduction on the amount of salaries paid, will, of course, only be evident at the close of the Current year. While pointing out our dependence on our staff, I would also remind you of your responsibility as shareholders. The business of the society is mostly with shareholders, and only in so far as you loyally support this, your own society, can it attain to the success we all hope for. I do not intend to say much regarding future prospects. I am not a prophet. Most of you have heard or read quite a lot about the dairy produce markets of late, and the outlook is not by any means black. Things have also been said about increased production, and that will be right. The cow is the responsible machine, and it is therefore of the first importance that only good ones should be bred. This can only be done by using pure-bred sires of the particular breed the individual fancies or uses, having regard to the conditions under which he farms and sticking to that breed. The next thing is to give the necessary feed, shelter and attention, intelligently applied, which is necessary to enable the "machine” to do its work. A year ago wool was selling for less than its cost of production, but the prices have steadily improved, so that the lot of the hill country farmer looks brighter. The fact is generally overlooked that the area of Taranaki land suitable only for grazing of sheep and. store stock is greater than that suitable for dairying, so that wool and meat are of no little importance to the community. Another point that must not be overlooked in the re-establishment ’ of sound financial conditions is economy. The balance left to the producer, after cost of production and disposal are paid, is what counts, and even ■' the benefit to the individual and community is often greatly reduced by unwise use, to say nothing of abuse of the value produced. I now close these remarks by formally moving the adoption of the report and balance sheet. THE DISCUSSION. Mr. J. Gibbs (Inglewood) said that on the assets side freehold and leasehold properties were valued at £67,348, as against £64,310. Doubtless the society had purchased some property, and if so this should have been shown in the balance-sheet. There was no mention o-f depreciation on these properties, nor on buildings and yards. The depreciation on machinery and plant valued at £15,449 was set down as only £549, and he considered this was appealing to the credulity of the shareholders, as it should, have been at least 10 per cent. Regarding stock on hand ( £74,309), he did not know whether stocktaking was carried out by the society’s employees, but in fairness to the shareholders he considered it was as necessary to have this done by an independent expert as it was to have an independent auditor. He also considered that £2867 was too small an allowance for bad debts on secured and open accounts amounting to £149,295; £28,000 would have been nearer the mark. Regarding the profit and loss account, he said that salaries amounted to £25,367. These were not itemised in 1920 or 1921, but in 1919 they were shown as £8175, which was a big jump in three years. Last year’s overhead expenses were £32,941, and this year £62,902, an increase of practically £30,000. The position roughly was that the society had probably lost at least half of its capital. From what one could gather it semed that from the inception of the society the stock department was the only branch that had made a fair showing, and, he therefore moved as an amendment that, taking into consideration the big losses made by the various trading departments since the inception of the society, the whole of the departments, with the exception of the stock department, be wound up. Mr. Fryday (Ngaere). in seconding, considered that it was time "the whol«e thing was scrapped.” PLEA FOR MORE EFFICIENCY. Mr. J. R. Corrigan, in seconding the adoption of the report, was not in favor of the amendment. He admitted that desperate diseases needed desperate remedies, but he considered this proposal too drastic in the present state of the society. The society had been started in prosperous times, and during the war they were told that after the war they could expect something better. Experience of previous wars should have shown them that this could not be expected. Summed up, the bal-ance-sheet represented mismanagement. He then asked the chairman to give the total of the salaries of the general manager and six other heads of the stock and other departments, and on being told that it was £4150, he said that the directors had not carried out economy, to his way of thinking. They had kept on the highly salaried officers and had let the lower paid ones go. They had got less efficiency and had not received value for the money expended. He advocated the appointment of one of the best business men obtainable to act as chairman of directors, and see if they could not puli the concern together. The chairman said that the mover and seconder of the amendment had based their remarks on a wrong supposition, and he called on the manager to explain. The manager said that the reduction

in expenditure .for the year had been over £15,000, which had been coneid* ered by other business njen as remarkably good. The chairman pointed out that the directors did not manage the concern; they merely dictated the policy to be followed. If they were to attempt to interfere in the management, the shareholders would bo justified in getting rid of them. Mr. Corrigan said that the directors were the supreme council, and were responsible to the shareholders for the success of the concern, but how could they expect success if the directors had not the commercial ability to lay down a policy and see that it was followed. Mr. Dickie said that they had made a bad loss this year, and he agreed that they must economise as far as possible in the management. He was prepared to put the axe into any department that was losing money. They had, however, only made losses proportionate to other - concerns doing similar business, but unfortunately they had to publish their losses. If they looked through the Mercantile Gazette they would see the losses that had been made by other concerns in bad debts, whirfh their concern had not made; He had scrutinised the accounts and- was surprised to find that they-were as clean as they were. A shareholder said they wanted a management that would ■ make ends meet. The concern was supposed to be run in the interests of the farmers, yet they were charging 4 per cent, commission on cattle sales and other concerns in the south were only charging 2| per cent, commission and giving u rebate of 30 per cent. There had really been no slump since the last anuuai meeting, when it was professed that the whole of the slump loss had been put in the balance-sheet. Mr. J. Ure Murray said that shareholders would only be reasonable in their demands to ask that consideration be given by the directors to the recommendations by the auditors. There was a feeling that some radical change was necessary, as too heavy a loss had been made during the year. They certainly looked for better conditions in the next report. x . APPEAL FOR SUPPORT. . Mr. Fryday complained of the variation of prices in the various stores, and also that shareholders could buy cheaper outside than in the Co-op. stores. They should have a commercial man at the head of affairs. He considered the directors should be “fired out neck and crop.” Mr. Murphy said that one of tn® heads of the most conservative banking institutions had congratulated him on the way their manager had got through a very trying time. He confidently expected a further loss next year. He believed the expenditure was too high, and that not enough had been left for bad debts. He urged all shareholders ito support the concern, which was a good one. Mr.- Cocker said that but for the existence of their concern they would have been paying 6 per cent, commission on sales, so that the loss was as nothing to what they would have lost had the concern not been in existence. He also pointed out that branch stores had only been erected at the request of shareholders in any district. He thought their position, considering the times, was very good. Other concerns had lost more; in fact, on his own farms, he had lost £BOOO, and possibly Mr. Corrigan had also lost, unless his racehorses had kept him up. Mr. Corrigan: I don’t put all my eggs in one basket.

Mr. Cocker: Yet that is what we are asked to do. He advocated closing all departments except the stock department. The balance-sheet was not altogether satisfactory, but he urged all to support the concern. It was no use railing at the directorate, whose guarantee was keeping the concern afloat. If the directors resigned in a' body they would not have even their share capital. They should therefore be grateful to the directorate, particularly as no one else was anxious to join the directorate.

Mr. Geo. Hunter (Waverley) believed the directors had done their best, but he thought that branch managers should be given more power, and that each branch should forward its own balancesheet.

Mr. Corrigan said that all must realise that the directors were carrying a very heavy load in the interests of the shareholders, and he thought that they should formulate a scheme that would take this unfair burden off the directors’ shoulders. He recognised that the bank wanted the best security possible, but surely the assets and uncalled capital of the society should be good enough without requiring that it should be backed individually by the directors. Mr. Belton said that he was surprised at the amendment proposed by Mr. Gibbs. He thought the amendment was badly worded, as it was an instruction to the directors to at once close up those premises. They must consider the timer, and realise that a forced saie would mean greater losses. STANDING BY SHAREHOLDERS. The chairman stated that the stocktaking had been done by the staff, and had been taken at replacement values. Referring to the losses that had been made, some of the speakers overlooked the fact that values had been dropping for the last two years, and the directors realised then that they had a loss to face. It would have paid them to close the stores, hut they realised that it was their duty to stand by their shareholders and help in keeping prices down. There was a certainty that there would be a loss through their unsecured debts, and possibly through their secured debts also. There were men whose position yesterday was looked on with suspicion, but who to-day, on account of the recovery in dairy produce, might be well on the road to recovery. Where they felt a man had not a reasonable chance of pulling through, they put- him down as a doubtful debt. Mr. Astbury said that the majority of the shareholders were small dairy farmers who took up shares with the hope that the organisation wo lid do the best for them in the way of supplying their needs. He also considered that when the directors had the chance of obtaining the services of a particularly good man, who was doing good business against them, they should endeavor to obtain his services. He understood that the concern had big possibilities, but he did not think the management had sufficient imagination to realise its possibilities. He considered that the manager should not merely be an accountant. He should visit the sales associate with farmers, learn their wants, and what their competitors were doing. He considered that it should have been the duty of the organisation working in the interests of shareholders to produce seeds that could be guaranteed free from noxious , weeds. Regarding the policy of the organisation, he said that the, .directors

guided that, and if they did not make it pay there must be a fault somewhere’. If they had any foresight they would have prepared for the slump. Mr. Marfell (Toko) considered that they should have patriotism enough to etick to their own stores. He considered that the organisation undoubtedly kept prices regular. Mr. J. S. Connett (New Plymouth) said that the directors always prided themselves on the quality of their seeds and manures. The former could perhaps be equalled, but could not be surpassed, whilst the latter was the finest in the Dominion. While a certain amount of criticism was welcomed, it must be realised that they had come through the trying times very well, and it was due to the supervision of the manager that the position regarding bad debts was so good. The chairman, in reply to Mr. Astbury, said that there were two ways of doing business, either by country stores or by having distributing centres and canvassers, and the directorate had decided on the former.- It was not possible to have both, as the expense would be so much increased. All the directors did not favor branch stores. From experience they had found that canvassing did not pay. He considered that the directors had built the concern up strongly so as to stand the bad times, and that was proved, by the bank agreeing to let their overdraft limit stand at the same figure as previously. THE MANAGER’S POSITION. The general manager stated that some of the statements that day had been made through spleen. It was not the duty of the general manager to attend sales. He had his departmental heads, and his function was to look after the financial side. When appointed he said that he knew nothing about stock or motor-cars, and he had not time to gain this experience, in fact, as lo»j£ as he was controlling the organisation he would never be able to, as his time had all been taken up with the finances. When he took it over the concern was practically in a bankrupt state, and he had increased the capital from £29,000 to £120,000, and the deposit money that he had secured a few months ago had undoubtedly kept the concern going. He did not know one similar concern that kept its affairs in as sound a state as they had. ! Most of the suggestions made by the auditor had previously been placed before the directorate by the speaker. It was hard to be shot at by such men as had shot at him that day. He considered they had the best stock department in the whole of New Zealand, and he was not going to go out into the yards himself. He admitted there was a loss, but even the best man possible would have shown a loss under the conditions. He warned them that there would be another loss during the coming year, and if they wanted to show a profit they would have to appoint som« one else, as it could not be done. He was not responsible for the various branches being started at different centres; that was done by the directors at the urgent wish of shareholders in the respective districts. He recognised that these could not compete successfully against local concerns. Mr. J. R. Corrigan said that his criticism was only with the idea of getting better efficiency. He held that South Taranaki was one of the dearest places in New Zealand as far as efficiency was concerned. The amendment was then put and declared lost, only one voting in its favor, and the motion was carried. AMENDMENTS TO ARTICLES. ' The meeting then discussed a notice of motion dealing with proposed amendments to the articles of association so as to provide that the commission payable on share capital may be increased from 2A per cent, to 5 per cent.; also to provide that no member voting by proxy shall east more than twenty-five votes in addition to his own votes. A further amendment provided for an alternative in the nomination and election of directors, so as to provide that the nomination shall be in writing prior to the annual meeting, and that the election shall be by post. There was some discussion over the proposal that voting should be by post, Mr. Astbury considering that the tendency if this alteration were carried, Would be to concentrate the power in the towns. It was pointed out that other organisations had adopted this method with satisfactory results. This would also prevent the use of proxy voting in connection with the election of the directorate. The motion amending the articles was carried without dissent, and a special meeting will be held to confirm the amendment in four weeks’ time. CHAIRMAN OF DIRECTORS. At a subsequent meeting of the directors Mr. Alex Hunter was re-elected chairman of directors, a'nd Mr. C. D. Dickie vice-chairman. A hearty vote of appreciation was passed Mr, G. H. Buckeridge, the retiring director, for his splendid work during his term of office since the inception of the company, he having been one of the prime movers in the society’s formation and the first chairman of directors. A very hearty vote of thanks and appreciation was also accorded the general manager and staff for the loyal services rendered during the year.