H.—44a

93

Reference No. 3. -Whether thb Profits made in thi Production and Distribution of Goal are Fair and Reasonable. (i.) Profits in Production. (See Chapter IV, Section 1, pp. 56-6 L.) The annual average differences between the average sell ng-priee per ton and the average cost per ton to the several mining companies over the whole period range from a loss of Is. I Id. to a gain of Is. 10d. (See Table 73, p. 57.) in four cases out of thirteen principal collieries there was a loss on the average ; in two cases the average profit was less than 6d. ; in two cases between 6d. and Is. ; in four cases between Is. and Is. 3d. ; and in the other case Is. 9-93 d. If the increase in the average selling-price for the industry as a whole be calculated from the available data in the same mariner as the increase in the cost of production it is found that the selling-price of those mines for which data is available over the whole period 1913-18 increased, when due allowance has been made for relative outputs, by 36 per cent.--i.e., from about 14s. 3d. to 19s. sd. per ton. This figure is to be compared with that showing the increase in total cost of production — viz., 37 per cent.* When we compare the selling-prices of all coals for which exact details were available in each year, whether from collieries working over the whole period or not, the increase in selling-price is 22 per cent. This figure, however, as in the case of cost of production, does not give a true measure of the change of the price of all coals, since the selling-prices and cost of the mines for which exact particulars were not available for 1913 were on the average lower than those of the mines providing data for that year. This figure was lower during 1914-15—16 than in 1913. In 1916-17 it rose 11 per cent, above the 1913 level, and in 1917-18 22 per cent. The selling-price of bituminous coal increased 35 per cent. (3s. 2d.) during the period, though the cost rose 40 per cent. ; that of semi-bituminous coal rose 34 per cent. (ss. 7d.) or slightly more than its cost; that of brown coal 22 per cent. (2s. 7d.), as against a rise of 25 per cent, in cost. The increase in the price of brown coal for 1917-18 when compared with 1913-14 (a better basis of comparison in view of the incomplete data for brown-coal mines for 1913) is 30 per cent. (3s. Id.), the corresponding increase, in oost of production being 31 per cent. If the properly weighted average selling-price be compared with the corresponding average cost of production for the mines giving returns for the years 1913-18 the margins between oost and price are 9d. and lOd. a lon for 1913 and 1918 respectively, or 56 and 4-5 per cent, of the cost of production. A comparison of the similar margins for all mines giving data, whether over the whole period or not, shows a reduction from 9d. to sd. « ton, the latter representing 2-2 per cent, of the average cost. Table 75a (p. 58) summarizes the chief facts regarding average cost of production, selling-prices, and profits per ton for the coal-mining industry as a whole, 1913-18. The mining companies have not increased their gains from the industry during the war period relatively to their costs. It is further to be noted that in many cases certain charges are not sufficiently provided for in their costs. Of the twelve principal coal-mining companies the highest average annual dividend for the last six years is 10 per cent, (earned by a company which for seventeen years, 1880 97, paid no dividend at all) ; the lowest average is nil. Of the twelve, two paid an average dividend of from 7J to 10 per cent. ; two from 5 to 7| per cent. ; four of from 2|- to 5 per cent. ; one paid below 2| per cent. ; and three paid no dividend during the period. The average rate of dividend paid during the period, weighted according to the relative sizes of the capitals of the different companies, was 4-8 per cent. The average rate of total gains made by the companies — that is, including undivided as well as divided profits — was 5-1 per cent. Out of this the industry has to provide interest to the shareholders, and a large part of the insurance, depreciation, and sinking-fund charges. The general conclusion is that the rate of profit made in the production of coal, taking the industry as a whole, is unduly low. A large amount of capital invested in coal-mining in New Zealand in the past has been lost without making any returns to the owners. (ii.) Profits in Distribution. (See Chapter IV, Section 2, pp. 61-2.) It is assumed that the question of the reasonableness of distributors' profits refers to coal-dealing in existing conditions and with the present methods of distribution. The general conclusion is that, except in the case of those dealers who are engaged in the retail trade on a large scale, the difference between the cost of coal to the dealers and the price received by them affords but a, mere living to those engaged in it. The profits of the retail dealers cannot be assessed as exactly as those of the mining companies, because of the mixed nature of the business conducted by them, but the evidence does not support the charge that they ace unreasonably high. Estimates of the net profits per ton at the several centres are given in Chapter 111, Tables 38, 41, 46-47, 54, 56, 62, and 70, and context.

* The comparison is with the increase of 37 per cent., not that of 41 per cent, (see p. 26), since the mining companies have to pay out of their selling-prices the cost of haulage from mines to shipping ports.